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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>/in/edgar/work/20000609/0000356028-00-000020/0000356028-00-000020.txt : 20000919
<SEC-HEADER>0000356028-00-000020.hdr.sgml : 20000919
ACCESSION NUMBER: 0000356028-00-000020
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20000331
FILED AS OF DATE: 20000609
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COMPUTER ASSOCIATES INTERNATIONAL INC
CENTRAL INDEX KEY: 0000356028
STANDARD INDUSTRIAL CLASSIFICATION: [7372
] IRS NUMBER: 132857434
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
</COMPANY-DATA>
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-09247
FILM NUMBER: 652284
</FILING-VALUES>
BUSINESS ADDRESS:
STREET 1: ONE COMPUTER ASSOCIATES PLAZA
CITY: ISLANDIA
STATE: NY
ZIP: 11788
BUSINESS PHONE: 5163425224
</BUSINESS-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<TEXT>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9247
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 Identification Number)
incorporation or organization)
One Computer Associates Plaza, Islandia, New York 11749
(Address of principal executive offices) (Zip Code)
(631) 342-5224
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of Class) (Exchange on which registered)
Common Stock, par value $.10 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6 1/4% Convertible Subordinated Debentures of On-Line Software International,
Inc.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes __X__ No ____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III to this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant:
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 5, 2000 was $24,733,109,998 based on
a total of 440,188,832 shares held by non-affiliates and the closing price on
the New York Stock Exchange on that date which was $56.19.
Number of shares of stock outstanding at June 5, 2000:
590,849,529 shares of Common Stock, par value $.10 per share.
Documents Incorporated by Reference:
Part III - Proxy Statement to be issued in conjunction with Registrant's Annual
Stockholders' Meeting.
<PAGE>
PART I
Item 1. Business
(a) General Business Overview
Computer Associates International, Inc. (the "Company," "Registrant," or
"CA") is a leading business software company, delivering the end-to-end
infrastructure to enable eBusiness through innovative technology, services, and
education. CA provides mission-critical software solutions for all kinds of
businesses throughout the world. With a portfolio of more than 800 software
products, including enterprise management, database and application development,
as well as the products that provide the infrastructure for eBusiness and
eCommerce over the Internet, and a professional services organization dedicated
to understanding the needs of its customers, CA is committed to meeting the
information technology requirements of businesses in every sector of the
economy.
Built upon a common infrastructure, CA's array of enterprise management,
information management, and business application software solutions are
available for use on a variety of both mainframe and distributed systems.
Because of its independence from hardware manufacturers, the Company provides
clients with integrated solutions that are platform neutral.
CA products can be used on all major hardware platforms, operating systems,
and application development environments for enterprise computing. The operating
environments include OS/390 from International Business Machines ("IBM"), the
UNIX systems from such hardware vendors as Sun Microsystems, Inc. ("Sun"),
Hewlett-Packard Company ("HP"), IBM, Compaq Computer Corporation ("Compaq"), and
Windows NT from Microsoft Corporation.
CA maintains a product philosophy of internally developing products,
exemplified by its flagship product family Unicenter TNG R (The Next
Generation),TM the industry's de facto standard for enterprise management
software, coupled with the acquisition of key technology, the integration of the
two, and the establishment of a network of strategic alliances with key business
partners. The Company's service philosophy is similarly marked by a commitment
to the development of a dedicated internal service staff, the acquisition of
third-party service organizations, the integration of the two, and long-standing
alliances with leading service providers.
Since 1999, CA completed several strategic acquisitions, which included
Computer Management Sciences, Inc. ("CMSI") in March 1999, a custom developer of
information technology solutions. CMSI specialized in Internet development,
business process reengineering, strategy planning, evolutionary downsizing,
rapid application development, object-oriented databases, vendor software
evaluation, and other key technology areas. This acquisition was accounted for
using the purchase method of accounting. See Note 2 of Notes to Consolidated
Financial Statements for additional information concerning acquisitions.
In May 1999, the Company acquired PLATINUM technology International, inc.
("PLATINUM") in a cash transaction. PLATINUM was engaged in the design,
development, marketing, and support of database tools and utilities, tools for
enterprise management, data warehousing, and provided a wide range of
professional services. The acquisition was accounted for using the purchase
method of accounting. See Note 2 of Notes to Consolidated Financial Statements
for additional information concerning acquisitions.
In February 2000, the Company entered into an agreement to acquire Sterling
Software, Inc. ("Sterling") through an exchange of stock. Sterling's solutions
are used to create, control, automate, and manage both traditional and eBusiness
systems. Sterling's portal technology provides access to data stored in
corporate databases in the same way that Internet content portals provide access
to the wealth of content on the Web. The acquisition further expanded CA's broad
array of products and services while accelerating their delivery. The
acquisition, completed on March 31, 2000, was accounted for using the purchase
method of accounting. See Note 2 of Notes to Consolidated Financial Statements
for additional information concerning acquisitions.
As part of the Company's overall eBusiness initiative, CA released
Jasmine R ii this past year. Jasmine ii is the world's first intelligent and
integrated platform for eBusiness. Jasmine ii provides a complete solution for
building, testing, and deploying intelligent eBusiness applications. Along with
Unicenter TNG, which provides management of the eBusiness infrastructure,
including Internet security and storage management, Jasmine ii is becoming a key
solution within CA's eBusiness offerings.
Also during fiscal year 2000, CA launched interBiz TM Solutions("interBiz")
to assist clients, suppliers, and partners in capitalizing on eCommerce business
opportunities. interBiz will use core CA technologies, including Unicenter TNG,
Jasmine ii, 3-D visualization,and Neugents TM neural network pattern recognition
to create a business management framework, named BizWorks,TM as foundation for
inter- and intra-business communication and business application integration.
The Company was incorporated in Delaware in 1974. In December 1981, CA
completed its initial public offering of Common Stock. The Company's Common
Stock is traded on the New York Stock Exchange under the symbol "CA".
<PAGE>
(b) Financial Information About Industry Segments
CA's global business is principally in a single industry segment-the
design, development, marketing, licensing, and support of integrated computer
software products operating on a diverse range of hardware platforms and
operating systems.
See Note 4 of Notes to Consolidated Financial Statements for financial data
pertaining to geographic areas.
(c) Narrative Description of Business
Products
CA offers over 800 enterprise systems management, information management,
application development, eBusiness, and business applications solutions to a
broad spectrum of organizations. The Company's software products and service
offerings enable clients to use their total data processing resources-hardware,
software, and personnel-more efficiently.
The Company provides products that effectively manage the complex,
heterogeneous systems upon which businesses depend. CA's solutions enable
clients to use the latest technologies while preserving their substantial
investments in hardware, software, and staff expertise. By employing a common
infrastructure, the Company's developers create modular software designed to be
continually and consistently improved. This pragmatic approach protects clients'
investments by using scalar, evolutionary change rather than revolutionary
disruption and waste.
CA is the largest independent supplier of software solutions for IBM OS/390
and the acknowledged market leader in systems management. For over 20 years, CA
solutions have enabled our clients to better manage the complex mainframe
environment by providing them with the tools to measure and improve computer
hardware and software performance and programmer productivity. As the
information technology landscape has changed, these solutions have emerged as
leaders in enterprise-wide systems as well as network management.
While supporting the eBusiness enhancements of the most current release of
IBM's OS/390 operating system through CA's systems and data management
solutions, CA's software architecture is specifically designed to help clients
migrate to distributed computing or build new distributed systems. The Company's
integrated distributed systems management solutions manage this complex
environment. Full-function distributed business applications simplify
customization to meet unique business needs on a combination of platforms.
This past fiscal year, CA announced Unicenter R TND TM(The Next Dimension),
the latest version of Unicenter TNG, CA's award-winning enterprise management
solution. By delivering time-based advancements in predictive management,
Unicenter TND will enable clients to harness the dimension of time in order to
optimize availability of their eBusiness environments.
Since its introduction in fiscal year 1997, Unicenter TNG has become the
industry's de facto standard for enterprise management software. Unicenter TNG
is an object-oriented solution that enables organizations to visualize and
control their entire information technology infrastructure-including
applications, databases, systems, and networks-from a business perspective. This
technology establishes a link between an organization's information technology
resources and its business policies. Through Unicenter TNG, an organization can
define its business policies, map these policies to particular resource
management requirements, and then monitor resources for their support of
specific business processes. The flexible Business Process Views TM can be
customized to deliver the information based on specific roles, locations,
resources, and any other dimensions of control. To visualize the complex
interactions and interdependencies of an enterprise's entire distributed
environment,Unicenter TNG employs a Real World Interface TM that incorporates
3-D animation and elements of virtual reality. The revolutionary technology of
Unicenter TND, built on Jasmine ii, provides the platform to manage processes
and transactions at every point in Business-to-Business (B2B) and
Business-to-Consumer (B2C) environments.
Following full-scale delivery in fiscal year 1999 of Neugents, CA's
patented neural network-based technology, clients began actual deployment of
Neugents in their environments. From building intelligent eBusiness applications
with Jasmine ii to ensuring optimal service for eBusiness with Unicenter TNG to
maximizing eBusiness opportunities with CA Services,TM Neugents enable clients
to reduce costs, simplify operational complexity, and improve staff efficiency.
Neugents provide predictive intelligence to virtually all aspects of CA's
end-to-end infrastructure for eBusiness. Neugents are intelligent software
agents that exist throughout various computing environments to recognize certain
patterns and record the resulting transition states. Neugents enable an entirely
new generation of business applications to analyze conditions in business
markets and technical environments, predict changes in those conditions, and
suggest courses of action to capitalize on opportunities and/or avoid potential
problems. When employed with Unicenter TNG, Neugents can proactively prevent
performance and availability problems with a level of precision and rigor
unattainable by conventional trend and resource analysis solutions.
With this year's release of Jasmine ii, CA offers a comprehensive
information infrastructure that enables organizations to use leading-edge
technologies as well as existing data and logic to quickly build, deploy and
<PAGE>
manage a new generation of intelligent eBusiness solutions. These highly visual
Web-enabled applications effectively use a broad spectrum of enterprise
information resources, communication facilities, and end-user devices to deliver
substantial competitive advantages in today's rapidly evolving business
environment. Leveraging CA's patented Neugents technology, Jasmine ii is a
complete eBusiness platform, powering unique and dynamically personalized
Exchanges and Portals. It dramatically speeds time-to-market of B2B, B2C,
Application Service Providers (ASP), and trading exchange applications.
The prevalence of the Internet and electronic communications has increased
the possibility of security breaches of an organization's information systems
and data. For over 20 years, CA clients have relied upon CA's security
solutions, such as CA-Top Secret R and CA-ACF2 R in the OS/390 marketplace, to
protect data from internal and external intrusion. CA's leading-edge security
solutions provide access control, authentication and authorization for complete
cross-platform security and enable organizations to set security policies mapped
to their business objectives. To meet the growing security concerns associated
with the expansion of eBusiness and eCommerce, CA introduced its eTrust TM
offerings during fiscal year 2000. eTrust is a comprehensive set of security
solutions designed to assure privacy of information, certify user identification
and authorization, protect business assets against malicious attacks such as
viruses, and prevent destruction and theft of information. Included are eTrustTM
Access Control,TM eTrust TM Admin, eTrust TM Anti-Virus, eTrust TM Audit, eTrust
TM Desktop Security, and eTrust TM Encryption. In addition, CA provides a wide
range of services, such as the implementation of appropriate protection policies
and procedures, to complement these eTrust products. With its existing mainframe
storage management products, the ARCserve R storage management tools, and the
storage tools recently acquired from Sterling, the Company's storage solutions
deliver a comprehensive integrated management solution for enterprise-wide data
storage. This includes leading-edge backup and recovery for SANs (Storage Area
Networks) and Windows 2000.
For more than 20 years, CA has been the premium provider of systems and
database management solutions for OS/390. CA's OS/390 solutions, including
security scheduling, storage, automation, performance and output management
products, interface with the newest release of IBM's flagship server environment
to better manage this complex mainframe environment.
Professional Services
Through the acquisition of PLATINUM and Sterling as well as through the
addition of specialized professional services companies, the Company continued
expansion of its professional services organization during fiscal year 2000. Now
known as CA Services, it is responsible for providing a broad spectrum of
services ranging from consulting to implementation to comprehensive outsourcing
and custom developing leading-edge IT solutions. These services can improve
implementation and deployment of the Company's solutions to enable eBusiness,
which the Company believes will lead to universal customer satisfaction and
greater follow-on sales.
Sales and Marketing
CA distributes, markets, and supports its products on a worldwide basis
with its own employees and a network of independent value-added resellers
("VARs"), distributors, and dealers. The Company has approximately 5,600 sales
and sales support personnel engaged in promoting the licensing of the Company's
products.
In April 2000, the Company realigned its entire sales organization,
changing its focus from one based primarily on geography to one based on product
orientation. The worldwide sales organization is now aligned into three main
groups, with primary emphasis on the following product areas: OS/390,
distributed enterprise management, and distributed application and information
management. A separate Strategic Accounts group provides additional services to
large clients, including facilities managers. Facilities managers deliver data
processing services using the Company's products to those companies that prefer
to "outsource" their computer processing operations.
The Company also operates through wholly owned subsidiaries located in 44
countries outside the United States. Each of these subsidiaries has sales
executives that market all or most of the Company's products in their respective
territory. Approximately 34% of CA's net revenue in fiscal year 2000 was derived
from operations outside the United States. In addition, the Company's products
are marketed by independent distributors in those limited areas of the world
where it does not have a direct presence. Revenue from independent distributors
accounted for less than 1% of the Company's fiscal year 2000 revenue.
The Company's marketing and marketing services groups produce substantially
all of the user documentation for its products, as well as promotional
brochures, advertising, and other business solicitation materials. The duties of
these groups include the writing of the requisite materials, editing,
typesetting, photocomposition, and printing.
Licensing
CA does not sell or transfer title to its products to its clients. The
products are licensed on a "right to use" basis pursuant to license agreements.
Such licenses generally require that the client use the product only for its
internal purposes at its own computer installation. In addition, the Company
<PAGE>
offers license agreements to facility managers which enable them to use the
Company's software in conjunction with their outsourcing business. Under certain
circumstances, the Company will also license, on a non-exclusive basis, clients
and other third parties as resellers of certain of the Company's products. The
Company is encouraging VARs to actively market the Company's products. VARs
often bundle the Company's products with specialized consulting services to
provide clients with a complete solution. Such VARs generally service a
particular market or sector and provide enhanced user-specific solutions.
CA offers several types of software licenses. Under the standard license
form, the client agrees to pay a license fee for use of the software and either
an annual usage and maintenance fee, or an annual optional maintenance fee for
as long as the client elects to continue receiving maintenance services. Where
maintenance is elected throughout the license term, the maintenance fees
typically approximate 20% of the aggregate license and maintenance fees for the
product. Where applicable, payment of the maintenance fee entitles the client to
receive technical support for the product, as well as to receive all
enhancements and improvements (other than features subject to a separate charge)
to the product developed by the Company during the period covered. A significant
number of the Company's clients elect to license the Company's products under a
variety of installment payment options. These plans primarily incorporate
license fees and optional maintenance fees into annual or monthly payments
ranging from one to ten years.
The Company also offers licenses for products and groups of products based
on the size of an enterprise's computing power as measured in MIPS-millions of
instructions per second. Under this option, the client is free to reallocate
hardware or modify user configurations without incremental costs. Similar
licensing alternatives are available for CA's midrange and UNIX-based software
products. Some of the Company's distributed products, notably the Unicenter TNG
family of products, are licensed on a power unit basis. These licenses are
typically perpetual in nature whereby the client has the option to elect
maintenance (technical support and product enhancements) on an annual basis.
Distributed products sold through third-party VARs, distributors, and dealers
are generally subject to distribution licensing agreements and end-user "shrink
wrap" licenses.
Product revenue for licenses is recognized upon delivery of the product to
the client. Maintenance fees are recognized ratably over the agreed maintenance
term. When the client has elected to pay the license fee in monthly or annual
installments, the present value of the license fee is recognized as product
revenue upon delivery of the product. Maintenance is unbundled from the selling
price and ratably recognized over the term of the agreement. See Note 1 of Notes
to Consolidated Financial Statements for further discussion of
revenue recognition policies.
Under its standard form of license agreement, the Company warrants that its
products will perform in accordance with specifications published in the product
documentation.
Competition and Risks
The computer software business is highly competitive. It is marked by
rapid, substantial technological change, as well as the steady emergence of new
companies and products. In addition, it is affected by such issues as the Year
2000 date change and the introduction by the European Economic and Monetary
Union of the Euro. There are many companies, including IBM, Sun, HP, Compaq, and
other large computer manufacturers, which have substantially greater resources,
as well as the ability to develop and market software programs similar to and
competitive with the products offered by the Company. Competitive products are
also offered by numerous independent software companies, which specialize in
specific aspects of the highly fragmented software industry. Some, like
Microsoft, Oracle Corporation, and SAP AG, are the leading developers and
vendors in their specialized markets.
IBM, HP, Sun, Compaq, and Microsoft are by far the largest suppliers of
systems software, and are the manufacturers of the computer hardware systems
used by most of the Company's clients. Historically, these operating system
manufacturers have modified or introduced new operating systems, systems
software, and computer hardware. Such new products could in the future
incorporate features which are currently performed by the Company's products or
could require substantial modification of the Company's products to maintain
compatibility with these companies' hardware or software. Although the Company
has to date been able to adapt its products and its business to changes
introduced by hardware manufacturers, there can be no assurance that it will be
able to do so in the future.
In the past, licensees using proprietary operating systems were furnished
with "source code," which makes the operating system generally understandable to
programmers, or "object code," which directly controls the hardware, and other
technical documentation. Since the availability of source code facilitated the
development of systems and applications software which must interface with the
operating systems, independent software vendors such as the Company were able to
develop and market compatible software. IBM and other hardware vendors have a
policy of restricting the use or availability of the source code for some of
their operating systems. To date, this policy has not had a material effect on
the Company. However, such restrictions may, in the future, result in higher
research and development costs for the Company in connection with the
enhancement and modification of the Company's existing products and the
development of new products. Although the Company does not expect such
<PAGE>
restrictions will have this effect on its products, there can be no assurance
that such restrictions or other restrictions will not have a material adverse
effect on the Company's business.
The Company anticipates ongoing use of microcode or firmware provided by
hardware manufacturers. Microcode and firmware are essentially software programs
in hardware form and are therefore less flexible than pure software. The Company
believes that such continued use will not have a significant impact on the
Company's operations and that its products will remain compatible with any
changes to such code. However, there can be no assurance that future
technological developments will not have an adverse impact on the Company's
operations.
Although no company competes with CA across its entire software product
line or a significant portion thereof, the Company considers at least 75 firms
to be directly competitive with one or more of the Company's systems software
packages. In database management, applications development, enterprise
management, and applications software for the desktop, distributed, and
mainframe environments, there are hundreds of companies whose primary business
focus is on at least one but not all of these solutions. Certain of these
companies have substantially larger operations than the Company's in these
specific niches. Many companies, large and small, use their own technical
personnel to develop programs similar to those of the Company; these companies
may rightly be seen as competitors of the Company. The Company believes that the
most important considerations for potential purchasers of software packages are:
product capabilities; ease of installation and use; dependability and quality of
technical support; documentation and training; the experience and financial
stability of the vendor; integration of the product line; and, to a lesser
extent, price. Price is a strong factor in the distributed marketplace. As the
distributed market continues to expand and develop, competitors could be
expected to form strategic alliances or acquire other companies to increase
their presence in this market.
The Company's products are designed to improve the productivity and
efficiency of its clients' information processing resources. Accordingly, in a
recessionary environment, the Company's products are often a reasonable economic
alternative to customers faced with the prospect of incurring expenditures to
increase their existing information processing resources. However, a general or
regional slowdown in the world economy could adversely affect the Company's
operations. Additionally, further deterioration of the exchange rate of foreign
currencies against the U.S. dollar may continue to affect the Company's ability
to increase its revenue within those markets.
As the Company grows, it is increasingly dependent upon large dollar
enterprise transactions with individual clients. The size and magnitude of such
transactions have increased over time. There are no assurances that comparable
transactions will occur in subsequent periods.
The Company's future operating results may also be affected by a number of
other factors, including but not limited to: a significant percentage of the
Company's quarterly sales being finalized in the last few days of the period
making financial forecasts especially difficult, which could create a
substantial risk of variances with the actual results; the continued risks of
potential litigation arising from the Year 2000 date change for computer
programs; the emergence of new competitive initiatives resulting from rapid
technological advances; changes in pricing in the market; the risks associated
with new product introductions as well as the uncertainty of marketplace
acceptance of these new or enhanced products from either the Company or its
competitors; risks associated with the entry into new markets at lower profit
margins, such as professional services; the risks associated with integrating
newly acquired businesses and technologies; delays in product delivery; reliance
on mainframe capacity growth; the ability to recruit and retain qualified
personnel; business conditions in the distributed and mainframe software and
hardware markets; the strength of the Company's distribution channels;
uncertainty and volatility associated with Internet and eBusiness related
activities; the ability to update the Company's product offerings to conform
with new governmental rules; use of software patent rights to attempt to limit
competition; fluctuations in foreign currency exchange rates and interest rates;
the volatility of the international marketplace; uncertainties relative to
global economic conditions; the Company's reliance on a single family of
products for a material portion of its sales; the effect of new accounting
pronouncements and interpretations on the Company's revenue recognition
practices; the Company's ability to manage fixed and variable expense growth
relative to revenue growth; and other risks described in the Company's filings
with the Securities and Exchange Commission.
With the acquisition of Sterling on March 31, 2000, and a subsequent
worldwide sales reorganization in April 2000, there can be no assurances that
the distractions and uncertainties caused by these events will not have a
negative effect on the Company's revenue and net income during fiscal year 2001.
Product Protection
The products of the Company are treated as trade secrets which contain
confidential information. CA relies on its contractual agreements with clients
as well as its own security systems and confidentiality procedures for
protection. In addition to obtaining patent protection for new technology, the
Company protects its products, their documentation, and other written materials
under copyright law. The Company also obtains trademark protection for its
various product names. CA from time to time receives notices from third parties
<PAGE>
claiming infringement by the Company's products on third-party proprietary
rights. The Company expects that its software will be subject to such claims
more frequently as the number of products and competitors in the Company's
industry grows and the functionality of products overlap. Such claims could
result in litigation, which could be costly and/or result in licensing
arrangements on terms not favorable to the Company, including the payment of
royalties to third parties. CA's business could be adversely affected by such
litigation and licensing arrangements and by any inability on CA's part to
develop substitute technology.
Clients
No individual client accounted for a material portion of the Company's
revenue during any of the past three fiscal years. Since the majority of the
Company's software is used with relatively expensive computer hardware, most of
its revenue is derived from companies which have the resources to make a
substantial commitment to data processing and their computer installations. The
majority of the world's major companies use one or more of the Company's
software packages. The Company's software products are generally used in a broad
range of industries, businesses, and applications. The Company's clients include
manufacturers, financial service providers, banks, insurance companies,
educational institutions, hospitals, and government agencies. The Company's
products are also sold to and through distributors and VARs.
Product Development
The history of the computer industry has seen rapid changes in hardware and
software technology. The Company must maintain the usefulness of its products as
well as modify and enhance its products to accommodate changes to, and to ensure
compatibility with, hardware and software.
To date, the Company has been able to adapt its products to changes in the
computer industry and, as described more fully in "General Business
Overview-Products," the Company believes that it will be able to do so in the
future. Computer software vendors must also continually ensure that their
products meet the needs of clients in the ever-changing marketplace.
Accordingly, the Company has the policy of continually enhancing, improving,
adapting, and adding new features to its products, as well as developing
additional products. The Company offers a facility for many of its software
products whereby problem diagnosis, program "fixes," and other mainframe
services can be provided online between the client's installation and the
support facilities of the Company. Another service, CA-TCC SM (Total Client
Care),SM provides a major extension to existing support services of the Company
by offering access to the Company's client support database. In addition, the
Company offers support services online via the Internet through its Web Track
facility. These services have contributed to the Company's ability to provide
maintenance more efficiently.
Product development work is primarily done at the Company's facilities in
San Diego, California; Maitland, Florida; Chicago, Illinois; Framingham,
Massachusetts; Mount Laurel, New Jersey; Princeton, New Jersey; Islandia, New
York; Cincinnati, Ohio; Pittsburgh, Pennsylvania; Dallas, Texas; and Herndon,
Virginia. The Company also performs product development in Sydney, Australia;
Vienna, Austria; Brussels, Belgium; Vancouver, Canada; Ditton Park, England;
Paris, France; Darmstadt, Germany; Tel Aviv, Israel; and Milan, Italy. For
fiscal years ended March 31, 2000, 1999, and 1998, product development and
enhancements charged to operations were $568 million, $423 million, and $369
million, respectively. In fiscal years 2000, 1999, and 1998, the Company
capitalized $36 million, $29 million, and $23 million, respectively, of
internally developed software costs.
Certain of the Company's products were acquired from other companies and
individuals. The Company continues to seek synergistic companies, products, and
partnerships. The purchase price of acquired products (such as purchased
software) is capitalized and amortized over the useful life of such purchases or
a period not exceeding seven years.
Employees
As of March 31, 2000, the Company had approximately 21,000 employees. Of
this total, approximately 2,600 were located at its headquarters facility in
Islandia, New York, approximately 10,300 were located at other offices in the
United States, and approximately 8,100 were located at its offices in foreign
countries. Of the total employees, approximately 5,200 were engaged in product
development efforts, 6,700 were part of the Field Services Group, and 5,600 were
engaged in sales and sales support functions. The Company believes its employee
relations are excellent.
(d) Financial Information About Foreign and Domestic Operations and Export
Revenue
See Note 4 of Notes To Consolidated Financial Statements for financial data
pertaining to the geographic distribution of the Company's operations.
Item 2. Properties
The principal properties of the Company are geographically distributed to
meet sales and operating requirements. All of the properties of the Company are
generally considered to be both suitable and adequate to meet current operating
requirements.
The Company leases approximately 260 office facilities throughout the
United States, including two new regional facilities in Herndon, Virginia and
Framingham, Massachusetts totaling approximately 230,000 square feet and 150,000
<PAGE>
square feet, respectively. The Company has approximately 245 office facilities
outside the United States. Expiration dates on material lease obligations range
from fiscal years 2001 to 2023.
The Company owns an 850,000 square-foot Corporate Headquarters in Islandia,
New York, as well as various office facilities in the United States ranging from
1,000 to 250,000 square feet. The Company owns two office facilities in Germany
totaling approximately 120,000 square feet and one office facility in Italy with
approximately 140,000 square feet. In October 1999, the Company completed
construction of its 250,000 square-foot European Headquarters in the United
Kingdom.
The Company owns various computer, telecommunications, and electronic
equipment. It also leases IBM, HP, Sun, Comdisco, Ameritech, El Camino,
Meridian, and DG computers located at the Company's facilities in Islandia, New
York and Chicago, Illinois. This equipment is used for the Company's internal
product development, for technical support efforts and for administrative
purposes. The Company considers its computer and other equipment to be adequate
for its needs. See Note 7 of Notes to Consolidated Financial Statements for
information concerning lease obligations.
Item 3. Legal Proceedings
The Company and certain of its officers are defendants in a number of
shareholder class action lawsuits alleging that a class consisting of all
persons who purchased the Company's stock during the period January 20, 1998
until July 22, 1998 were harmed by misleading statements, representations, and
omissions regarding the Company's future financial performance. These cases have
been consolidated into a single action (the "Shareholder Action") in the United
States District Court for the Eastern District of New York ("New York Federal
Court"). The New York Federal Court has denied the defendants' motion to dismiss
the Shareholder Action, and the parties currently are engaged in discovery.
Although the ultimate outcome and liability, if any, cannot be determined,
management, after consultation and review with counsel, believes that the facts
in the Shareholder Action do not support the plaintiffs' claims and that the
Company and its officers and directors have meritorious defenses.
In addition, three derivative actions alleging misleading statements and
omissions similar to those alleged in the Shareholder Action were brought in the
New York Federal Court on behalf of the Company against a majority of the
Company's directors. An additional derivative action on behalf of the Company,
alleging that the Company issued 14.25 million more shares than were authorized
under the 1995 Key Employee Stock Ownership Plan (the "1995 Plan"), also was
filed in the New York Federal Court. These derivative actions have been
consolidated into a single action (the "Derivative Action") in the New York
Federal Court. The Derivative Action has been stayed. Lastly, a derivative
action on behalf of the Company was filed in the Chancery Court in Delaware (the
"Delaware Action") alleging that 9.5 million more shares were issued to the
three 1995 Plan participants than were authorized under the 1995 Plan. The
Company and its directors who are parties to the Derivative Action and the
Delaware Action have announced that an agreement has been reached to settle the
Delaware Action and the Derivative Action. Under the terms of the proposed
settlement, which is subject to the approval of the Delaware Court of Chancery
and dismissal of related claims by the New York Federal Court, the 1995 Plan
participants will return 4.5 million shares of Computer Associates stock to the
Company, at which time the Company will record a non-cash gain.
The Company, various subsidiaries and certain current and former officers
have been named as defendants in various claims and lawsuits arising in the
normal course of business. The Company believes that the facts do not support
the plaintiffs' claims and intends to vigorously contest each of them.
Item 4. Submission of Matters to Vote of Security Holders
None.
Executive Officers of the Registrant
The name, age, present position, and business experience of all executive
officers of the Company as of June 7, 2000 are listed below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Charles B. Wang (1) 55 Chairman, Chief Executive Officer, and Director
Sanjay Kumar (1) 38 President, Chief Operating Officer, and Director
Russell M. Artzt (1) 53 Executive Vice President-Research and Development, and Director
Ira Zar 38 Executive Vice President-Finance and Chief Financial Officer
Michael A. McElroy 55 Senior Vice President and Secretary
Lisa Savino 34 Vice President and Treasurer
<FN>
(1) Member of the Executive Committee.
</FN>
</TABLE>
Mr. Charles B. Wang has been Chief Executive Officer and a Director of the
Company since June 1976, and Chairman of the Board since April 1980.
<PAGE>
Mr. Kumar joined the Company with the acquisition of UCCEL in August 1987.
He was elected President, Chief Operating Officer and a Director effective
January 1994, having previously served as Executive Vice President-Operations
from January 1993 to December 1993, and Senior Vice President-Planning from
April 1989 to December 1992.
Mr. Artzt has been with the Company since June 1976. He has been Executive
Vice President-Research and Development of the Company since April 1987 and a
Director of the Company since November 1980.
Mr. Zar has been Chief Financial Officer since June 1998. He was named
Executive Vice President in 1999, having previously been a Senior Vice President
of the Company since 1994. Mr. Zar joined the Company in June 1982.
Mr. McElroy was elected Secretary of the Company effective January 1997. He
was named Senior Vice President in 1999, having previously been a Vice President
of the Company since April 1989. He joined the Company in February 1988 and
served as Secretary from April 1988 through April 1991.
Ms. Savino was elected Vice President and Treasurer effective November
1997, having previously served as Assistant Treasurer since April 1995. Ms.
Savino joined the Company in May 1990.
The officers are appointed annually and serve at the discretion of the
Board of Directors.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is listed on the New York Stock Exchange. The
following table sets forth, for the quarters indicated, the quarterly high and
low closing prices on the New York Stock Exchange.
<TABLE>
<CAPTION>
Fiscal Year 2000 Fiscal Year 1999
---------------- ----------------
High Low High Low
<S> <C> <C> <C> <C>
Fourth Quarter............ $75.00 $57.13 $51.50 $32.88
Third Quarter............. $70.38 $52.13 $45.94 $31.44
Second Quarter............ $61.50 $43.63 $61.00 $27.00
First Quarter............. $54.75 $34.19 $61.13 $50.94
</TABLE>
On March 31, 2000, the closing price for the Company's Common Stock on the
New York Stock Exchange was $59.19. The Company currently has approximately
10,000 record stockholders.
The Company has paid cash dividends in July and January of each year since
July 1990 and intends to continue that policy. The Company's most recent
dividend, paid in January 2000, was $.04 per share.
Item 6. Selected Financial Data
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------
INCOME STATEMENT DATA 2000(1)(2) 1999(3) 1998(4) 1997(5) 1996(6)
--------------------------------------------------------------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Contract value (7) .......................... $ 6,766 $ 5,253 $ 4,719 $ 4,040 $ 3,505
Net revenue ................................. 6,103 4,666 4,206 3,680 3,069
Net income (loss) ........................... 696 626 1,169 366 (56)
- - Basic earnings (loss) per common share(8) $ 1.29 $ 1.15 $ 2.14 $ .67 $ (.10)
- - Diluted earnings (loss) per common share(8) 1.25 1.11 2.06 .64 (.10)
Dividends declared per common share(8) ...... .080 .080 .073 .065 .061
</TABLE>
<TABLE>
<CAPTION>
March 31,
--------------------------------------------------------------
BALANCE SHEET AND OTHER DATA 2000(1)(2) 1999(3) 1998(4) 1997(5) 1996(6)
--------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Cash from operations ........................ $ 1,566 $ 1,267 $ 1,040 $ 790 $ 619
Working capital (deficiency) ................ 988 768 379 53 (53)
Total assets ................................ 17,493 8,070 6,706 6,084 5,016
Long-term debt (less current maturities) .... 4,527 2,032 1,027 1,663 945
Stockholders' equity ........................ 7,037 2,729 2,481 1,503 1,482
<FN>
(1) Includes after-tax charges of $645 million related to the acquisition of
PLATINUM in May 1999 and $150 million related to the acquisition of Sterling in
March 2000. See Note 2 of Notes to Consolidated Financial Statements for
additional information.
</FN>
<FN>
(2) Includes an after-tax charge of $32 million related to CHS Electronics, Inc.
</FN>
<FN>
(3)Includes an after-tax charge of $675 million related to the 1995 Key Employee
Stock Ownership Plan.
</FN>
<FN>
(4)Includes an after-tax charge of $21 million related to the Company's
unsuccessful tender offer for Computer Sciences Corporation.
</FN>
<FN>
(5) Includes an after-tax charge of $598 million related to the acquisition of
Cheyenne Software, Inc. in November 1996.
</FN>
<FN>
(6)Includes an after-tax charge of $808 million related to the acquisition of
Legent Corporation in August 1995.
</FN>
<FN>
(7) See Note 1 of Notes to Consolidated Financial Statements for additional
information.
</FN>
<FN>
(8) Adjusted to reflect the three-for-two stock splits effective August 21,
1995, June 19, 1996, and November 5, 1997.
</FN>
</TABLE>
<PAGE>
Item 7. management's Discussion and Analysis of Financial Condition and Results
of Operations
This Annual Report on Form 10-K contains certain forward-looking statements
and information relating to the Company that are based on the beliefs and
assumptions made by the Company's management as well as information currently
available to management. When used in this document, the words "anticipate,"
"believe," "estimate," and "expect," and similar expressions, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, or expected. The Company does not intend to update these
forward-looking statements.
Fiscal Year 2000
Total contract value for the year ended March 31, 2000 increased 29%, or
$1.51 billion, over the prior year. Excluding an approximate $107 million
negative foreign exchange impact, total contract value increased 31% to $6.87
billion. Net revenue increased 31%, or $1.44 billion for the year. The license
revenue increase was primarily attributable to growth in distributed platform
product fees principally Unicenter TNG, a family of integrated business
solutions for monitoring and administering systems management across
multi-platform environments, the addition of PLATINUM products and the demand
for eCommerce solutions. The distributed platform accounted for 50% of the
Company's overall year-to-date contract value, increasing 35%, or $870 million,
over the prior fiscal year. Maintenance increased 18%, or $135 million, over
last year. The increase was primarily due to additional maintenance from prior
year license arrangements, as well as from PLATINUM licenses.
Acquisitions of several services companies, including PLATINUM's services
operations and CMSI, as well as internal growth, increased professional services
revenue by 74%, or $212 million, over the prior year. Professional services for
the year ended March 31, 2000 was negatively impacted by the Company's use of
consultants to supplement its technical resources during and after the
changeover of the date to the year 2000. The consultants were positioned at
large client sites, without charge to the client, to assist with any potential
difficulties attributable to the date change. Such activities were conducted by
the Company during December 1999 and January 2000. The process of reducing low
margin contracts associated with recently acquired companies has negatively
impacted professional services revenue.
Total net revenue in the United States for the year ended March 31, 2000
grew 38% over the prior year. This resulted from continued growth in distributed
platform product sales, OS/390 solutions, the addition of PLATINUM products, and
professional services. On a year-to-date basis, sales in the United States
represented 66% of net revenue for fiscal year 2000, compared to 63% for fiscal
year 1999. On a year-to-date basis, international net revenue, excluding the
$107 million negative foreign exchange impact, increased by $437 million, or
28%, over the prior year. The international growth was supported by the
Asia/Pacific operations, which contributed more than half of the increase this
fiscal year compared to the prior fiscal year.
Price changes did not have a material impact year-to-date in fiscal year
2000 or in the comparable period in fiscal year 1999.
Selling, general, and administrative expenses as a percentage of net
revenue for the year, excluding the charges associated with CHS Electronics,
Inc. ("CHS") of approximately $50 million, decreased to 30% from 31% the prior
year. The decrease was largely attributable to efficiencies realized by
eliminating redundant headcount and overhead expenses as a result of the
PLATINUM integration. This was partially offset by an increase in personnel
costs related to an overall increase in headcount resulting from the expansion
of the Company's Field Services Group (professional services technical
resources), as well as higher spending on marketing associated with a new
television campaign which commenced in the quarter ended December 31, 1999.
Product development and enhancement expenses increased $145 million, or 34%, for
the year compared to last year. There was continued emphasis on adapting and
enhancing products for the distributed processing environment, in particular
Unicenter TNG, Jasmine ii, and Neugents, as well as the broadening of the
Company's eCommerce product offerings, and additional expenses related to
development efforts of products obtained through the acquisition of PLATINUM.
Commissions and royalties as a percentage of net revenue were 5% and 6% for
fiscal years 2000 and 1999, respectively. Depreciation and amortization expense
in the year increased $269 million. The increase was primarily due to the
additional amortization of purchased intangibles associated with the acquisition
of PLATINUM, marginally offset by the scheduled reductions in the amortization
associated with past acquisitions. Net interest expense increased $216 million
for this year compared to last year. The additional interest expense was related
to the increase in average debt outstanding associated with borrowings incurred
to fund the PLATINUM acquisition in the first quarter of fiscal year 2000 and
other smaller acquisitions in the current and prior fiscal years.
The pre-tax income of $1.59 billion for fiscal year 2000 is an increase of
57%, or $580 million, over fiscal year 1999. Excluding special charges of $645
and $150 million for in-process research and development relating to the
<PAGE>
acquisitions of PLATINUM and Sterling, respectively, and approximately $50
million relating to CHS, pre-tax income would be $2.44 billion, a 17% increase
over the prior year exclusive of any special charges. Net income for the year
ended March 31, 2000 was $696 million, an increase of $70 million, or 11%, over
fiscal year 1999. Year-to-date net income, excluding the aforementioned
in-process research and development charges and CHS charge, was $1.52 billion,
an increase of $222 million, or 17%, over last year's net income, exclusive of
the one-time after-tax charge of $675 million associated with the vesting of
20.25 million shares under the 1995 Plan. The Company's consolidated
year-to-date effective tax rate, excluding the purchased research and
development and the 1995 Plan charges, was 37.5% for both fiscal years 2000 and
1999. The addition of non-deductible intangibles from the acquisition of
PLATINUM was offset by a shift in the mix of domestic and foreign income.
Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
totaled $3.37 billion for fiscal year 2000, an increase of 33%, or $841 million,
over fiscal year 1999. This EBITDA total is derived by adding back interest,
depreciation and amortization, and income taxes into the $1.52 billion
year-to-date net income prior to special charges.
Fiscal Year 1999
The Company's fiscal year 1999 total contract value of $5.3 billion
increased 11% over the $4.7 billion in fiscal year 1998. The growth was
primarily attributable to greater contract value from product licensing fees,
the continued demand for less restrictive enterprise licensing pricing options,
and an emphasis placed on professional services. Unicenter TNG, a family of
integrated business solutions for monitoring and administering systems
management across multi-platform environments accounted for approximately 25% of
the Company's overall contract value. Net revenue also increased 11%, or $460
million for the year. Professional services revenue from the Company's
consulting services business and educational programs for fiscal year 1999 grew
by 89%, or $136 million over fiscal year 1998, to $288 million. The growth was
primarily attributable to an increase in billable hours. Maintenance, which is
deferred and ratably recognized over the term of the agreement increased 1%, or
$9 million in fiscal year 1999. Additional maintenance from prior year license
arrangements was partially offset by the ongoing trend of site consolidations
and expanding client/server revenue sold by VARs, which yield lower maintenance.
Total United States and international contract value increased by 9% and 15%,
respectively, for fiscal year 1999 as a result of strong acceptance of the
Company's distributed software solutions. The United States further benefited
from professional services growth. The strengthening of the U.S. dollar
decreased international revenue by $44 million when compared to fiscal year
1998. Price changes did not have a material impact in either year.
Selling, general, and administrative expenses for fiscal year 1999
increased to 31% of net revenue compared to 29% in fiscal year 1998. The
increase was largely attributable to an overall increase in personnel expense.
The Company is continuing its ongoing effort to expand its Global Professional
ServicesTM division and worldwide sales organization. Marketing costs related to
new product introductions including the Enterprise Edition and Workgroup Edition
Solutions also contributed to the increase. The Enterprise Edition products are
the Company's state-of-the-art mid-market solutions addressing security, network
management, asset management, application development, information management,
and eCommerce. The Workgroup Editions provide the same solutions as the
Enterprise Editions with a focus on smaller computing environments. In fiscal
year 1999, new and existing product development and enhancement expenditures
increased $54 million, or 15%. Continued emphasis on adapting and enhancing
products for the distributed environment, in particular Unicenter TNG,
Jasmine,AE Opal,TM the Enterprise and Workgroup Edition Solutions, as well as
broadening of the Company's Internet/intranet product offerings were largely
responsible for the increase. Commissions and royalties were approximately 6% of
total net revenue for both fiscal year 1999 and 1998. Depreciation and
amortization expense decreased $24 million, or 7% in fiscal year 1999 over
fiscal year 1998. The decrease was primarily due to the scheduled reduction in
the amortization associated with The ASK Group, Inc., Legent Corporation, and
Cheyenne Software, Inc. acquisitions, partially offset by the amortization
associated with fiscal year 1999 acquisitions. For fiscal year 1999, net
interest expense was $123 million, a decrease of $20 million over fiscal year
1998. Excluding the one-time charge associated with the Computer Sciences
Corporation ("CSC") tender in fiscal year 1998, net interest expense in fiscal
year 1999 increased $10 million over fiscal year 1998. The increase is
attributable to an increase in average debt outstanding of approximately $500
million, offset by an increase to interest income related to cash proceeds from
the April 1998 Senior Note issuance. Fiscal year 1999 pre-tax profit excluding
the one-time charge of $1,071 million relating to the vesting of 20.25 million
shares under the 1995 Plan was $2.08 billion compared to $1.87 billion in fiscal
year 1998. Net income per share in fiscal year 1999 was $1.11 per share on a
diluted basis. Excluding the charge, net income per share in fiscal year 1999
would have been $2.31, a 12% increase over fiscal year 1998 net income of $2.06
per share. The consolidated effective tax rate for fiscal year 1999, excluding
the charge, and for fiscal year 1998 was approximately 37.5%.
EBITDA totaled $2.53 billion for fiscal year 1999, an increase of 7%, or
$158 million, over fiscal year 1998. This EBITDA total is derived by adding back
interest, depreciation and amortization, and income taxes into the $1.30 billion
year-to-date net income prior to special charges.
A total of 20.25 million restricted shares were made available for grant to
three key executives under the 1995 Plan approved by the stockholders at the
August 1995 Annual Meeting. An initial grant of 6.75 million restricted shares
<PAGE>
was made to the executives at inception of the 1995 Plan. In January 1996, based
on the achievement of a price target for the Company's common stock, 1.35
million shares (20%) of the initial grant vested, subject to continued
employment of the executives through March 31, 2000. Accordingly, the Company
began accruing compensation expense associated with the 1.35 million shares over
the employment period. Annual compensation expense of $7 million was charged
against income for each of the years ended March 31, 1998, 1997, and 1996.
Additional grants of the remaining 13.5 million shares available under the 1995
Plan were made based on the achievement of certain price targets. These
additional grants and the unvested portion of the initial grant vested in May
1998 and are further subject to significant limitations on transfer during the
seven years following vesting. The vesting occurred after the closing price of
the Company's stock on the New York Stock Exchange exceeded $53.33 for 60
trading days within a twelve-month period. A one-time charge of $1,071 million
was recorded in the first quarter of fiscal year 1999.
<TABLE>
<CAPTION>
Selected Quarterly Information
(in millions, except per share amounts)
- ---------------------------------------------------------------------------------------------
2000 Quarterly Results June 30(1) Sept. 30 Dec. 31(2) Mar. 31(3)(4) Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract value(7) ................. $ 1,222 $ 1,605 $ 1,812 $ 2,127 $ 6,766
Net revenue ....................... 1,057 1,465 1,674 1,907 6,103
Percent of annual net revenue ..... 17% 24% 28% 31% 100%
Net (loss) income ................. $ (432) $ 335 $ 401 $ 392 $ 696
- - Basic (loss) earnings per share . (0.80) 0.62 0.74 0.72 1.29
- - Diluted (loss) earnings per share (0.80) 0.60 0.72 0.70 1.25
1999 Quarterly Results June 30(5) Sept. 30 Dec. 31 Mar. 31(6) Total
- ---------------------------------------------------------------------------------------------
Contract value(7) ................. $ 1,047 $ 1,216 $ 1,361 $ 1,629 $ 5,253
Net revenue ....................... 890 1,104 1,220 1,452 4,666
Percent of annual net revenue ..... 19% 24% 26% 31% 100%
Net (loss) income ................. $ (481) $ 294 $ 355 $ 458 $ 626
- - Basic (loss) earnings per share . (0.87) 0.53 0.66 0.85 1.15
- - Diluted (loss) earnings per share (0.87) 0.52 0.64 0.83 1.11
<FN>
(1) Includes an after-tax charge of $645 million related to the acquisition of
PLATINUM.
</FN>
<FN>
(2) Includes an after-tax charge of $23 million related to CHS.
</FN>
<FN>
(3)Includes an after-tax charge of $150 million related to the acquisition of
Sterling.
</FN>
<FN>
(4) Includes an after-tax charge of $9 million related to CHS.
</FN>
<FN>
(5)Includes an after-tax charge of $675 million related to the 1995 Plan.
</FN>
<FN>
(6)Includes an after-tax charge of $21 million related to the Company's
unsuccessful tender offer for CSC.
</FN>
<FN>
(7) See Note 1 of Notes to Consolidated Financial Statements for additional
information.
</FN>
</TABLE>
The Company has traditionally reported lower profit margins in 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 projected revenue for the first half
of the year. Historically, the Company's combined third and fourth quarter
revenue has been greater than that of the first half of the year, as these two
quarters coincide with clients' calendar year budget periods and the culmination
of the Company's annual sales plan. This historically higher second half revenue
has 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 products are designed to improve the productivity and
efficiency of its clients' information processing resources. Accordingly, in a
recessionary environment, the Company's products are often a reasonable economic
alternative to customers faced with the prospect of incurring expenditures to
increase their existing information processing resources. However, a general or
regional slowdown in the world economy could adversely affect the Company's
operations. Additionally, further deterioration of the exchange rate of foreign
currencies against the U.S. dollar may continue to affect the Company's ability
to increase its revenue within those markets.
As the Company grows, it is increasingly dependent upon large dollar
enterprise transactions with individual clients. The size and magnitude of such
transactions have increased over time. There are no assurances that comparable
transactions will occur in subsequent periods.
The Company's future operating results may also be affected by a number of
other factors, including but not limited to: a significant percentage of the
Company's quarterly sales being finalized in the last few days of the period
making financial forecasts especially difficult, which could create a
substantial risk of variances with the actual results; the continued risks of
potential litigation arising from the Year 2000 date change for computer
programs; the emergence of new competitive initiatives resulting from rapid
<PAGE>
technological advances; changes in pricing in the market; the risks associated
with new product introductions as well as the uncertainty of marketplace
acceptance of these new or enhanced products from either the Company or its
competitors; risks associated with the entry into new markets at lower profit
margins, such as professional services; the risks associated with integrating
newly acquired businesses and technologies; delays in product delivery; reliance
on mainframe capacity growth; the ability to recruit and retain qualified
personnel; business conditions in the distributed and mainframe software and
hardware markets; the strength of the Company's distribution channels;
uncertainty and volatility associated with Internet and eBusiness related
activities; the ability to update the Company's product offerings to conform
with new governmental rules; use of software patent rights to attempt to limit
competition; fluctuations in foreign currency exchange rates and interest rates;
the volatility of the international marketplace; uncertainties relative to
global economic conditions; the Company's reliance on a single family of
products for a material portion of its sales; the effect of new accounting
pronouncements and interpretations on the Company's revenue recognition
practices; the Company's ability to manage fixed and variable expense growth
relative to revenue growth; and other risks described in the Company's filings
with the Securities and Exchange Commission.
With the acquisition of Sterling on March 31, 2000, and a subsequent
worldwide sales reorganization in April 2000, there can be no assurances that
the distractions and uncertainties caused by these events will not have a
negative effect on the Company's revenue and net income during fiscal year 2001.
In-Process Research and Development
In the fourth quarter of fiscal year 2000, the Company acquired Sterling in
a stock-for-stock exchange valued at approximately $4.1 billion. In the first
quarter of fiscal year 2000, the Company acquired PLATINUM for approximately
$4.3 billion in cash and assumed liabilities. There were no acquisitions
involving acquired in-process research and development ("IPR&D") charges in
fiscal year 1999. See Note 2 of Notes to Consolidated Financial Statements for
additional information concerning acquisitions.
Acquired IPR&D charges relate to acquisitions of software companies
accounted for under the purchase method, in which a portion of the purchase
price is allocated to acquired in-process technology and is expensed
immediately, since the technological feasibility of the research and development
projects have not yet been achieved and are believed to have no alternative
future use. Independent valuations of Sterling and PLATINUM were performed and
used as an aid in determining the fair value of the identifiable intangible
assets and in allocating the purchase price among the acquired assets, including
the portion of the purchase price attributed to IPR&D which was $150 million and
$645 million for Sterling and PLATINUM, respectively. Assets were identified
through on-site interviews with management and a review of data provided by the
Company and discussions with the acquired companies' management concerning the
acquired assets, technologies in development, costs necessary to complete the
IPR&D, historical financial performance, estimates of future performance, market
potential, and the assumptions underlying these estimates.
The "Income Approach" was utilized for the valuation analysis of IPR&D for
both Sterling and PLATINUM. This approach focuses on the income-producing
capability of the asset and was obtained through review of data provided by the
Company and the acquired companies and analysis of relevant market sizes, growth
factors, and expected trends in technology. The steps followed in applying this
approach included estimating the costs to develop the purchased in-process
technology into commercially viable products, estimating the resulting net cash
flows from such projects, and discounting the net cash flows back to their
present values using a rate of return consistent with the relative risk levels.
The ongoing development projects at Sterling at the time of the purchase
were comprised primarily of application development and information management,
business intelligence, network management, and storage management tools and
solutions. The acquired projects included add-on features, tools and next-
generation versions of COOL, VISION, EUREKA, SAMS,TM and SOLVE R product
families. At the time of acquisition, it was estimated that, on average, 68% of
the development effort had been completed and the remaining development effort
would take approximately 14 months to complete, with a cost of approximately $9
million.
The ongoing development projects at PLATINUM at the time of the purchase
were comprised primarily of application development, database, and enterprise
management tools, and data warehousing solutions. The acquired projects included
add-on features, tools and next generation versions of DB2 Solutions,TM
ProVisionTM Security, ADvantageTM application development, end-to-end data
warehousing, and Internet infrastructure product families. At the time of
acquisition, it was estimated that, on average, 68% of the development effort
had been completed and the remaining development effort would take approximately
12 months to complete, with a cost of approximately $41 million.
The resulting net cash flows from the Sterling and PLATINUM projects were
based on management's estimates of product revenues, cost of goods sold,
operating expenses, R&D costs, and income taxes from such projects. The revenue
projections used to value the IPR&D were based on estimates of relevant market
sizes and growth factors, expected trends in technology, and the nature and
expected timing of new product introductions by the Company and its competitors.
The rate used in discounting the net cash flows from the IPR&D approximated 20%
for both Sterling and PLATINUM. These discount rates, higher than that of the
<PAGE>
Company's cost of capital, are due to the uncertainties surrounding the
successful development of IPR&D. The efforts required to develop the in-process
technology of the acquired companies into commercially viable products
principally relate to the completion of planning, designing, prototyping, and
testing functions that are necessary to establish that the software produced
will meet its design specifications, including technical performance, features,
and function requirements. The Company has reviewed its projections of revenue
and estimated costs of completion and has compared these projections with
results through March 31, 2000. To date, in the aggregate, the projections have
not varied materially from original projections.
If these projects do not continue to be successfully developed, the revenue
and profitability of the Company may be adversely affected in future periods.
Additionally, the value of other intangible assets acquired may become impaired.
Results will also be subject to uncertain market events and risks that are
beyond the Company's control, such as trends in technology, government
regulations, market size and growth, and product introduction by competitors.
Management believes that the assumptions used in the purchased IPR&D valuation
reasonably estimate the future benefits. There can be no assurance that in
future periods actual results will not deviate from current estimates.
Year 2000 Issue
As of the date of this filing, the Company has not incurred any significant
business disruptions nor product interruptions as a result of the Year 2000 date
change. While no such occurrences have developed, Year 2000 issues may not
become apparent as of this date, and therefore there is no assurance that the
Company will not experience future disruptions.
The Company has designed and tested substantially all of its recent product
offerings to be Year 2000 compliant. These products have met rigorous compliance
criteria and have undergone extensive review to detect any Year 2000 failures.
The Company has publicly identified products that have not been and will not be
updated to be Year 2000 compliant and has encouraged clients using these
products to migrate to compliant versions/products. In general, these Year 2000
compliance efforts have been part of the Company's ongoing software development
process. As such, incremental costs are not deemed material and have been
included in product development and enhancement expenses. There can be no
assurances that the Company's compliant products do not contain undetected
problems associated with Year 2000 compliance. Although the Company believes
that its license agreements provide it with protection against liability, the
Company cannot predict whether, or to what extent, any legal claims will be
brought, or whether the Company will suffer any liability as a result of adverse
consequences to its customers. Additionally, the Company adopted a Millennium
WatchSM plan whereby clients around the world were provided with 24-hour on-site
and in-house technical support from December 27, 1999 through January 7, 2000.
The Company extended the schedules of the internal administrative and
facility-related staff to support the infrastructure during the Millennium
Watch. The plan resulted in approximately $8 million of additional expenditures
over the period.
The Company has recognized the significance of the Year 2000 issue as it
relates to its internal systems including IT and non-IT systems,and understands
that the impact extends beyond traditional hardware and software to automated
facility systems and third-party suppliers. The total cost of preparing internal
systems to be Year 2000 compliant has not been and is not expected to be
material to the Company's operations, liquidity, or capital resources. Total
known expenditures, excluding personnel costs of existing staff, related to
internal systems' Year 2000 readiness were approximately $30 million. Such
expenditures commenced in 1996.
Demand for certain of the Company's products was generated by customers who
were replacing or upgrading computer systems to accommodate the Year 2000 date
change. Following the date change, demand for some of the Company's products
diminished.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities increased $851 million
from the March 31, 1999 balance of $536 million to $1,387 million at March 31,
2000. Cash and investments associated with Sterling represented approximately
$475 million of the year-end balance.
Year-to-date cash generated from operations was $1,566 million, an increase
of 24% from the prior year. The Company used its cash from operations primarily
to fund acquisition costs and for debt reduction. The primary source of cash for
the year was higher net income adjusted for non-cash charges. Other sources of
cash included strong collections of outstanding accounts receivable and the
Company's decision, in the fourth quarter, to assign selected existing
installment accounts receivable to a third party. The Company may continue to
explore the use of financing companies as a means of expediting debt reduction,
mitigating interest rate risk, and reducing installment accounts receivable
balances.
As part of its acquisition of PLATINUM in May 1999, the Company terminated
its revolving credit lines and replaced them with $4.5 billion of committed bank
financing. This financing consisted of a $1.5 billion 364-day revolving credit
facility, a $1 billion four-year revolving credit facility and a $2 billion
four-year term loan. Borrowings on these facilities for fiscal year 2000 totaled
$3.620 billion and were used to purchase the outstanding shares of PLATINUM and
fund related shut-down costs. The Company repaid $425 million of this amount
<PAGE>
during the year. At March 31, 2000, $3.195 billion remained outstanding at
various interest rates. Interest is determined based on a bank facility ratings
grid which applies a margin to the prevailing London InterBank Offered Rate
("LIBOR"). In May 2000, the Company renewed the 364-day revolver, for a total of
$4.3 billion in committed bank facilities.
The Company also utilizes other financial markets in order to maintain its
broad sources of liquidity. In fiscal year 1999, the Company issued an aggregate
of $1.75 billion of unsecured Senior Notes. Amounts borrowed, rates and
maturities for each issue were $575 million at 6 1/4% due April 15, 2003, $825
million at 6 3/8% due April 15, 2005, and $350 million at 6 1/2% due April 15,
2008. $256 million also remains outstanding under the Company's 6.77% Senior
Notes, a private placement with final maturity in 2003. In addition, the Company
maintains an 85 million pound sterling denominated credit facility established
to finance construction of its European World Headquarters at Ditton Park in the
United Kingdom. Approximately U.S. $130 million was outstanding under this
facility at March 31, 2000. Upon maturity in June 2000, the Company anticipates
the facility will be converted into a long-term mortgage for the property. In
the first quarter of fiscal year 2001, the Company also expects to implement a
commercial paper program as a means of reducing its borrowing costs and
establishing a presence in a new liquidity market.
Unsecured and uncommitted multicurrency lines of credit are available to
meet any short-term working capital needs for subsidiaries operating outside the
U.S. These lines total U.S. $50 million, of which $14 million was drawn at March
31, 2000.
Debt ratings for the Company's senior unsecured notes and its bank credit
facilities are BBB+ and Baa1 from Standard & Poor's and Moody's Investor
Services, respectively. The Company has also received A2 and P2 ratings from
Standard & Poor's and Moody's Investor Services, respectively, for its
anticipated commercial paper program. Peak borrowings under all debt facilities
during fiscal year 2000 totaled approximately $5.7 billion with a weighted
average interest rate of 6.6%.
To date, the Company has purchased approximately 150 million shares under
its various open market Common Stock repurchase programs. The remaining number
of shares authorized for repurchase is approximately 50 million.
In addition to expansion efforts at its U.S. headquarters in Islandia, New
York, capital resource requirements at March 31, 2000 consisted of lease
obligations for office space, computer equipment, mortgage or loan obligations
and amounts due as a result of product and Company acquisitions. Refer to Notes
6 and 7 of Notes to Consolidated Financial Statements for details concerning
commitments. Additionally, the Company may be required to make tax payments of
approximately $80 million related to the settlement and the return to the
Company of 4.5 million shares of its common stock associated with the 1995 Plan.
See Note 7 of Notes to Consolidated Financial Statements for additional
information. It is expected that existing cash, cash equivalents, marketable
securities, the availability of borrowings under credit lines, and cash provided
from operations will be sufficient to meet ongoing cash requirements.
Item 7(a). Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio, debt, and installment accounts
receivable. The Company has a prescribed methodology whereby it invests its
excess cash in debt instruments of government agencies and high quality
corporate issuers (generally Standard & Poor's single "A" rating and higher). To
mitigate risk, many of the securities have a maturity date within one year, and
holdings of any one issuer excluding the U.S. Government do not exceed 10%.
Periodically, the portfolio is reviewed and adjusted if the credit rating of a
security held has deteriorated. The Company does not utilize derivative
financial instruments.
The Company maintains a blend of both fixed and floating rate debt
instruments. At March 31, 2000, the Company's total outstanding debt
approximated $5.4 billion. Of this amount, approximately $2.1 billion was
comprised of fixed rate obligations; the remaining $3.3 billion was floating
rate debt. If market rates decline, the Company could be required to make
payments on the fixed rate debt that would exceed those based on current market
rates. Each 25 basis point decrease in interest rates would have an associated
annual opportunity cost of approximately $5 million. Each 25 basis point
increase or decrease in interest rates would have an approximately $8 million
annual effect on variable rate debt interest based upon the balances of such
debt at March 31, 2000.
The Company offers financing arrangements with installment payment terms in
connection with its software solution sales. The aggregate contract value
includes an imputed interest element, which can vary with the interest rate
environment. Each 25 basis point increase in interest rates would have an
associated annual opportunity cost of approximately $15 million.
Foreign Currency Exchange Risk
The Company conducts business on a worldwide basis through subsidiaries in
44 countries. The Company is therefore exposed to movement in currency exchange
rates. As part of its risk management strategy and consistent with prior years,
the Company did not enter into any foreign exchange derivative transactions. In
<PAGE>
addition, the Company manages its level of exposure by denominating
international sales and payment of related expenses in the local currency of its
subsidiaries. A 1% decline in all foreign currencies against the U.S. dollar
would have an insignificant effect on the Company's net income.
Equity Price Risk
The Company has a minimal investment in marketable equity securities of
publicly-traded companies. At March 31, 2000, these investments were considered
available-for-sale with any unrealized gains or losses deferred as a component
of stockholders' equity. It is not customary for the Company to make investments
in equity securities as part of its investment strategy.
Item 8. Financial Statements and Supplementary Data
The Financial Statements of the Company are listed in the Index to
Financial Statements filed as part of this Form 10-K and are incorporated herein
by reference.
The Supplementary Data specified by Item 302 of Regulation S-K as it
relates to selected quarterly data is included in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Information on the effects of changing prices is not required.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Reference is made to the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after the end
of the Registrant's fiscal year for information concerning directors, which
information is incorporated herein by reference, and to Part I, page 8 of this
Annual Report on Form 10-K for information concerning executive officers under
the caption "Executive Officers of the Registrant."
Item 11. Executive Compensation
Reference is made to the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after the end
of the Registrant's fiscal year for information concerning executive
compensation, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after the end
of the Registrant's fiscal year for information concerning security ownership of
each person known by the Company to own beneficially more than 5% of the
Company's outstanding shares of Common Stock, of each director of the Company
and all executive officers and directors as a group, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Reference is made to the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after the end
of the Registrant's fiscal year for information concerning certain relationships
and related transactions, which information is incorporated herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) (1) The Registrant's financial statements together with a separate table
of contents are annexed hereto.
(2) Financial Statement Schedules are listed in the separate table of contents
annexed hereto.
(3) Exhibits.
<TABLE>
<CAPTION>
Regulation S-K
Exhibit Number
- --------------
<S> <C> <C>
2.1 Agreement and Plan of Merger Previously filed as Exhibit 99 (c)(1)
dated as of March 29, 1999 among to the Registrant's Tender Offer
the Registrant, HardMetal, Inc. and Statement on Schedule 14D-1 filed
PLATINUM technology International, April 2, 1999, and incorporated
inc. herein by reference.
2.2 Agreement and Plan of Merger dated Previously filed as an Exhibit 2.1 to
as of February 14, 2000 among the the Registrant's Registration
Registrant, Silversmith Acquisition Statement on Form S-4 (Reg. No.
Group, and Sterling Software, Inc. 333-30842), and incorporated herein
by reference.
3.1 Restated Certificate of Previously filed as an Exhibit to
Incorporation. the Company's 10-Q for the fiscal
quarter ended December 31, 1998 and
incorporated herein by reference.
3.2 By-Laws. Previously filed as an Exhibit to the
Company's Form 10-Q for the fiscal
quarter ended December 31, 1998 and
incorporated herein by reference.
4.1 Indenture dated as of March 1, 1987 Previously filed as Exhibit 4.1 to
between On-Line Software Inter- On-Line Software International,
national, Inc. and Manufacturers Inc.'s Registration Statement
Hanover Trust Company with respect on Form S-2 (No. 33-12488)and
to the 6 1/4% Convertible incorporated herein by reference.
Subordinated Debentures due 2002
of the Company's wholly-owned
subsidiary.
4.2 Supplemental Indenture dated as of Previously filed as Exhibit A to the
September 25, 1991 between On-Line Company's Annual Report on Form 10-K
Software International, Inc. and for the fiscal year ended March 31,
Manufacturers Hanover Trust Company 1992 (File No. 0-10180) and
with respect to the 6 1/4%Convertible incorporated herein by reference.
Subordinated Debentures due 2002 of
the Company's wholly-owned subsidiary.
4.3 Certificate of Designation of Series Previously filed as Exhibit 3 to the
One Junior Participating Preferred Company's Current Report on Form
Stock, Class A of the Company. 8-K dated June 18, 1991 and
incorporated herein by reference.
4.4 Rights Agreement dated as of Previously filed as Exhibit 4 to the
June 18, 1991 between the Company Company's Current Report on Form
and Manufacturers Hanover Trust 8-K dated June 18, 1991 and
Company. incorporated herein by reference.
4.5 Amendment No. 1 dated May 17, Previously filed as Exhibit C to
1995 to Rights Agreement dated as the Company's Annual Report on
of June 18, 1991. Form 10-K for the fiscal year ended
March 31, 1995 and incorporated
herein by reference.
<PAGE>
Regulation S-K
Exhibit Number
- --------------
4.6 Indenture with respect to the Previously filed as Exhibit 4(f)to
Company's $1.75 billion Senior the Company's Annual Report on Form
Notes, dated April 24,1998 between 10-K for the fiscal year ended March
the Company and The Chase 31, 1998 and incorporated herein by
Manhattan Bank, as Trustee. reference.
10.1 1981 Incentive Stock Option Plan. Previously filed as Exhibit 10.5 to
the Company's Registration Statement
on Form S-1 (Registration 2-74618)
and incorporated herein by reference.
10.2 1987 Non-Statutory Stock Option Plan. Previously filed as Appendix C to
the Company's definitive Proxy
Statement dated July 1, 1987 and
incorporated herein by reference.
10.3 Amendment No. 1 to the 1987 Non- Previously filed as Exhibit C to the
Statutory Stock Option Plan dated Company's Annual Report on Form
October 20, 1993. 10-K for the fiscal year ended March
31, 1994 and incorporated herein by
reference.
10.4 1991 Stock Incentive Plan, as Previously filed as Exhibit 1 to the
amended. Company's Form 10-Q for the fiscal
quarter ended September 30, 1997
and incorporated herein by reference.
10.5 1993 Stock Option Plan for Non- Previously filed as Annex 1 to the
Employee Directors. Company's definitive Proxy Statement
dated July 7, 1993 and incorporated
herein by reference.
10.6 Amendment No. 1 to the 1993 Stock Previously filed as Exhibit E to the
Option Plan for Non-Employee Company's Annual Report on Form
Directors dated October 20, 1993. 10-K for the fiscal year ended March
31, 1994 and incorporated herein
by reference.
10.7 1994 Annual Incentive Compensation Previously filed as Exhibit A to the
Plan, as amended. Company's definitive Proxy Statement
dated July 7, 1995 and incorporated
herein by reference.
10.8 1995 Key Employee Stock Ownership Previously filed as Exhibit B to the
Plan. Company's definitive Proxy Statement
dated July 7, 1995 and incorporated
herein by reference.
<PAGE>
Regulation S-K
Exhibit Number
- --------------
10.9 Credit Agreement dated as of May Previously filed as Exhibit 10.1 to
26, 1999 among the Company, the the Company's current report on Form
Banks, which are parties thereto, 8-K dated May 28, 1999 and
and Credit Suisse First Boston, as incorporated herein by reference.
agent, with respect to $3 billion
Term and Revolving Loan.
10.10 Credit Agreement dated as of May Previously filed as Exhibit 10.2 to
26, 1999 among the Company, the the Company's current report on Form
Banks, which are parties thereto, 8-K dated May 28, 1999 and
and Credit Suisse First Boston, as incorporated herein by reference.
Agent, with respect to $1.5 billion
364-day Revolving Loan.
10.11 Credit Agreement dated as of May Filed herewith.
24, 2000 among the Company, the
Banks, which are parties thereto,
and Credit Suisse First Boston, as
Agent, with respect to $1.3 billion
364-day Revolving Loan.
10.12 1996 Deferred Stock Plan for Previously filed as Exhibit D to the
Non-Employee Directors. Company's Annual Report on Form 10-K
for the fiscal year ended March 31,
1996 and incorporated herein by
reference.
10.13 Amendment No. 1 to the 1996 Previously filed on Exhibit A
Deferred Stock Plan for to the Company's Proxy Statement
Non-Employee Directors. dated July 6, 1998 and incorporated
herein by reference.
10.14 1998 Incentive Award Plan. Previously filed on Exhibit B to the
Company's Proxy Statement dated July
6, 1998 and incorporated herein by
reference.
10.15 Year 2000 Employee Stock Previously filed on Exhibit A to the
Purchase Plan. Company's Proxy Statement dated July
12, 1999 and incorporated herein by
reference.
21 Subsidiaries of the Registrant. Filed herewith.
23.1 Consent of KPMG LLP. Filed herewith.
23.2 Consent of Ernst & Young LLP. Filed herewith.
27 Financial Data Schedules. Filed electronically only.
</TABLE>
<PAGE>
(b) Reports on Form 8-K.
None.
(c) Exhibits: See Index to Exhibits.
(d) Financial Statement Schedules: The response to this portion of Item 14 is
submitted as a separate section of this report.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, as amended,
the undersigned Registrant hereby undertakes as set forth in the following
paragraph, which undertaking shall be incorporated by reference into
Registrant's Registration Statements on Form S-8 Nos. 333-32942 (filed March 21,
2000), 333-31284 (filed February 28, 2000), 333-83147 (filed July 19, 1999),
333-80883 (filed June 17, 1999), 333-79727 (filed June 1, 1999), 333-62055
(filed August 21, 1998), 333-19071 (filed December 31, 1996), 33-64377 (filed
November 17, 1995), 33-53915 (filed May 31, 1994), 33-53572 (filed October 22,
1992), 33-34607 (filed April 27, 1990), 33-18322 (filed December 4, 1987),
33-20797 (filed December 19, 1988), 2-92355 (filed July 23, 1984), 2-87495
(filed October 28, 1983), and 2-79751 (filed October 6, 1982).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
<PAGE>
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.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By /s/ CHARLES B. WANG
--------------------
Charles B. Wang
Chairman
Chief Executive Officer
By /s/ IRA H. ZAR
-------------------
Ira H. Zar
Executive Vice President
Principal Financial and Accounting Officer
Dated: June 7, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
Name Title
---- -----
/s/ CHARLES B. WANG Chairman, Chief Executive
- ------------------------ Officer, and Director
Charles B. Wang
/s/ RUSSELL M. ARTZT Director
- ------------------------
Russell M. Artzt
/s/ ALFONSE M. D'AMATO Director
- ------------------------
Alfonse M. D'Amato
/s/ WILLEM F.P. de VOGEL Director
- ------------------------
Willem F.P. de Vogel
/s/ RICHARD A. GRASSO Director
- ------------------------
Richard A. Grasso
/s/ SHIRLEY STRUM KENNY Director
- ------------------------
Shirley Strum Kenny
/s/ SANJAY KUMAR Director
- ------------------------
Sanjay Kumar
/s/ ROEL PIEPER Director
- ------------------------
Roel Pieper
Dated: June 7, 2000
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
ISLANDIA, NEW YORK
--------------------------
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
-------------------------
YEAR ENDED MARCH 31, 2000
Page
The following consolidated financial statements of
Computer Associates International, Inc. and subsidiaries
are included in Item 8:
Reports of Independent Auditors............................... 23
Consolidated Statements of Operations-Years
Ended March 31, 2000, 1999, and 1998......................... 25
Consolidated Balance Sheets-March 31, 2000 and 1999......... 26
Consolidated Statements of Stockholders' Equity-Years
Ended March 31, 2000, 1999, and 1998.......................... 28
Consolidated Statements of Cash Flows-Years Ended March
31, 2000, 1999, and 1998....................................... 29
Notes to Consolidated Financial Statements.................... 30
The following consolidated financial statement schedule of Computer
Associates International, Inc. and subsidiaries is included in Item 14(d):
Schedule II-Valuation and Qualifying Accounts.................. 42
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Computer Associates International, Inc.
We have audited the accompanying consolidated balance sheet of Computer
Associates International, Inc. and subsidiaries as of March 31, 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. Our audit also included the financial statement
schedule as of and for the year ended March 31, 2000 listed in the Index at Item
14(a). These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Computer Associates International, Inc. and subsidiaries at March 31, 2000, and
the consolidated results of their operations and their cash flows for the year
ended March 31, 2000, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule as
of, and for the year ended March 31, 2000, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
KPMG LLP
New York, New York
May 10, 2000
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Computer Associates International, Inc.
We have audited the accompanying consolidated balance sheet of Computer
Associates International, Inc. and subsidiaries as of March 31, 1999 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended March 31, 1999 and 1998. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and the schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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
Computer Associates International, Inc. and subsidiaries at March 31, 1999 and
the consolidated results of their operations and their cash flows for the
years ended March 31, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States. 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
New York, New York
May 26, 1999
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C>
License and other ............................. $4,726 $3,636 $3,321
Maintenance ................................... 877 742 733
Professional services ......................... 500 288 152
NET REVENUE ----- ----- -----
(Contract value, $6,766, $5,253, and $4,719) 6,103 4,666 4,206
Costs and Expenses:
Selling, general and administrative ........... 1,889 1,451 1,238
Product development and enhancements .......... 568 423 369
Commissions and royalties ..................... 328 263 233
Depreciation and amortization ................. 594 325 349
Purchased research and development ............ 795 - -
1995 Stock Plan charge ........................ - 1,071 -
----- ----- -----
TOTAL OPERATING COSTS ......................... 4,174 3,533 2,189
Income before other expenses .................. 1,929 1,133 2,017
Interest expense, net ......................... 339 123 143
----- ----- -----
Income before income taxes .................... 1,590 1,010 1,874
Income taxes .................................. 894 384 705
----- ----- -----
NET INCOME .................................... $ 696 $ 626 $1,169
===== ===== =====
BASIC EARNINGS PER SHARE ...................... $ 1.29 $ 1.15 $ 2.14
===== ===== =====
Basic weighted-average shares
used in computation* ........................ 539 545 546
DILUTED EARNINGS PER SHARE .................... $ 1.25 $ 1.11 $ 2.06
===== ===== =====
Diluted weighted-average shares
used in computation* ........................ 557 562 566
<FN>
*Share amounts adjusted for the three-for-two stock split effective November 5,
1997.
</FN>
<FN>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(Dollars in millions)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .............................. $ 1,307 $ 399
Marketable securities .................................. 80 137
Trade and installment accounts receivable, net ......... 2,175 2,021
Deferred income taxes .................................. 318 -
Other current assets ................................... 112 74
----- -----
TOTAL CURRENT ASSETS ................................... 3,992 2,631
INSTALLMENT ACCOUNTS RECEIVABLE, net, due after one year 3,812 2,844
PROPERTY AND EQUIPMENT
Land and buildings ..................................... 528 468
Equipment, furniture, and improvements ................. 800 571
----- -----
1,328 1,039
Allowance for depreciation and amortization ............ 499 441
----- -----
TOTAL PROPERTY AND EQUIPMENT ........................... 829 598
PURCHASED SOFTWARE PRODUCTS, net of accumulated
amortization of $1,726 and $1,476 ..................... 2,598 221
GOODWILL AND OTHER INTANGIBLE ASSETS, net of
accumulated amortization of $521 and $281 ............. 6,032 1,623
OTHER ASSETS ........................................... 230 153
------ ------
TOTAL ASSETS ........................................... $17,493 $ 8,070
====== ======
<FN>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(Dollars in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Loans payable and current portion of long-term debt .......... $ 919 $ 492
Accounts payable ............................................. 232 153
Salaries, wages, and commissions ............................. 183 193
Accrued expenses and other liabilities ....................... 1,201 338
Taxes, other than income taxes ............................... 131 95
Federal, state, and foreign income taxes payable ............. 338 312
Deferred income taxes ........................................ - 280
----- -----
TOTAL CURRENT LIABILITIES ................................... 3,004 1,863
LONG-TERM DEBT, net of current portion ....................... 4,527 2,032
DEFERRED INCOME TAXES ........................................ 2,365 1,034
DEFERRED MAINTENANCE REVENUE ................................. 560 412
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, 1,100,000,000 shares authorized,
630,920,576 shares issued .................................. 63 63
Additional paid-in capital ................................... 3,902 1,141
Retained earnings ............................................ 4,121 3,468
Accumulated other comprehensive loss ......................... (280) (180)
Treasury stock, at cost-- 41,528,439 shares for 2000 and
95,217,954 shares for 1999 ................................. (769) (1,763)
----- -----
TOTAL STOCKHOLDERS' EQUITY ................................. 7,037 2,729
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 17,493 $ 8,070
====== ======
<FN>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Treasury Stockholders'
Stock(1) Capital(1) Earnings Income(Loss) Stock Equity
-------- --------- -------- ----------- ------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 ........ $ 63 $ 497 $ 1,757 $ (27) $ (787) $ 1,503
Net income ....................... 1,169 1,169
Translation adjustment
in 1998 ........................ (84) (84)
-----
Comprehensive income ............. 1,085
Dividends declared
($.073 per share)(1) ........... (40) (40)
Exercise of common stock
options and other .............. 18 7 59 84
401(k) discretionary contribution 8 4 12
Purchases of treasury
stock .......................... (163) (163)
----- ----- ----- ----- ----- -----
Balance at March 31, 1998 ........ 63 523 2,886 (104) (887) 2,481
Net income ....................... 626 626
Translation adjustment
in 1999 ........................ (84) (84)
Unrealized gain on
equity securities .............. 8 8
----
Comprehensive income ............. 550
Dividends declared
($.080 per share) .............. (44) (44)
Exercise of common stock
options and other .............. 604 211 815
401(k) discretionary contribution 14 3 17
Purchases of treasury
stock .......................... (1,090) (1,090)
----- ----- ----- ----- ----- -----
Balance at March 31, 1999 ........ 63 1,141 3,468 (180) (1,763) 2,729
Net income ....................... 696 696
Translation adjustment
in 2000 ........................ (91) (91)
Reclassification adjustment
included in net income ......... (9) (9)
----
Comprehensive income ............. 596
Dividends declared
($.080 per share) .............. (43) (43)
Exercise of common stock
options and other .............. 9 117 126
Business acquisitions ............ 2,742 867 3,609
401(k) discretionary contribution 10 10 20
----- ----- ----- ----- ----- -----
Balance at March 31, 2000 ........ $ 63 $ 3,902 $ 4,121 $ (280) $ (769) $ 7,037
===== ===== ===== ===== ===== =====
<FN>
(1) Amounts adjusted for the three-for-two stock split effective November 5, 1997.
</FN>
<FN>
See Notes To Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................... $ 696 $ 626 $ 1,169
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................................... 594 325 349
Provision for deferred income taxes ................................ 412 107 141
Charge for purchased research and development ...................... 795 - -
Compensation expense related to stock and pension plans ............ 30 778 21
Increase in noncurrent installment accounts receivable, net (1,039) (422) (377)
Increase in deferred maintenance revenue ........................... 113 43 41
Foreign currency transaction loss-before taxes ..................... 5 11 15
Charge for investment write-off .................................... 50 - -
Gain on sale of property and equipment ............................. (5) (14) -
Changes in other operating assets and liabilities,
net of effects of acquisitions:
Decrease (increase) in trade and installment receivables ......... 83 (169) (409)
Other changes in operating assets and liabilities ................ (168) (18) 90
----- ----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................ 1,566 1,267 1,040
INVESTING ACTIVITIES:
Acquisitions, primarily purchased software, marketing rights,
and intangibles, net of cash acquired .............................. (3,049) (610) (41)
Settlements of purchase accounting liabilities ....................... (429) (57) (20)
Purchases of property and equipment .................................. (198) (222) (84)
Proceeds from sale of property and equipment ......................... 12 38 -
Purchases of marketable securities ................................... (95) (2,703) (42)
Sales of marketable securities ....................................... 189 2,639 39
Increase in capitalized development costs and other .................. (36) (29) (23)
----- ----- -----
NET CASH USED IN INVESTING ACTIVITIES ............................... (3,606) (944) (171)
FINANCING ACTIVITIES:
Dividends ............................................................ (43) (44) (40)
Purchases of treasury stock .......................................... - (1,090) (163)
Proceeds from borrowings ............................................. 3,672 2,141 23
Repayments of borrowings ............................................. (776) (1,216) (630)
Exercise of common stock options and other ........................... 96 38 62
----- ----- -----
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ................. 2,949 (171) (748)
INCREASE IN CASH AND CASH EQUIVALENTS
BEFORE EFFECT OF EXCHANGE
RATE CHANGES ON CASH ................................................. 909 152 121
Effect of exchange rate changes on cash .............................. (1) (4) (13)
----- ----- -----
INCREASE IN CASH AND CASH EQUIVALENTS ................................ 908 148 108
CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR ......................... 399 251 143
----- ----- -----
CASH AND CASH EQUIVALENTS-END OF YEAR ................................ $ 1,307 $ 399 $ 251
===== ===== =====
<FN>
See Notes To Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Significant Accounting Policies
Description of Business: Computer Associates International, Inc. and
subsidiaries (the "Company") designs, develops, markets, licenses, and supports
a wide range of integrated computer software solutions.
Principles of Consolidation: Significant intercompany items and
transactions have been eliminated in consolidation.
Basis of Revenue Recognition: Product license fee revenue is recognized
after acceptance by the client, delivery of the product, and when the collection
of the resulting receivables is reasonably assured. Maintenance revenue, whether
bundled with product license or priced separately, is recognized ratably over
the maintenance period. When offered separately from license agreements,
maintenance agreements with clients are typically one year in duration, with
associated deferred maintenance reflected as an obligation. The Company
experienced maintenance renewal rates on such contracts in excess of 85%.
Maintenance when bundled with a license term is either separately defined and
renewable annually at the option of the client or is deferred based upon renewal
rates. License arrangements generally provide the customer with extended payment
terms. If, during the original payment term, the customer purchases additional
products valued in excess of the original arrangement, all licenses are
aggregated into one arrangement and reflected as contract value. Accounts
receivable resulting from product sales with extended payment terms are
discounted to present value. The amounts of the discount credited to revenue for
the years ended March 31, 2000, 1999, 1998 were $529 million, $408 million, and
$356 million, respectively.
Professional services revenues are derived from the Company's consulting
services business and educational programs. These revenues are comprised of both
time and material contracts and to a lesser extent fixed-price contracts. Time
and material contract revenues are recognized as services are performed. Fixed
price contract revenue are recognized based on the percentage-of-completion
method.
Marketable Securities: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
The Company has evaluated its investment policies consistent with Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and determined that all of its
investment securities are to be classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in Stockholders' Equity under the caption "Accumulated
Other Comprehensive Income (Loss)." The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in selling, general, and administrative expenses. The
cost of securities sold is based on the specific identification method. Interest
and dividends on securities classified as available-for-sale are included in
interest income.
Concentration of Credit Risk: Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
marketable securities and accounts receivable. The Company's marketable
securities consist primarily of high quality securities with limited exposure to
any single instrument. The Company's accounts receivable balances have limited
exposure to concentration of credit risk due to the diverse client base and
geographic areas covered by operations.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The fair value of the Company's cash and
cash equivalents, trade and installment accounts receivable, accounts payable,
accrued expenses, and deferred maintenance amounts approximate their carrying
value. See Note 6 for the fair value related to the Company's debt.
Property and Equipment: Land, buildings, equipment, furniture, and
improvements are stated at cost. Depreciation and amortization are provided over
the estimated useful lives of the assets by the straight-line method. Building
and improvements are generally estimated to have 30-40 year lives and the
remaining property and equipment are estimated to have 5-7 year lives.
Intangibles: Excess of cost over net assets acquired is being amortized by
the straight-line method over the expected period of benefit, between 10 and 20
years. Unamortized goodwill at March 31, 2000 and 1999 was $5,572 million and
$1,623 million, respectively. Costs of purchased software, acquired rights to
market software products, and software development costs (costs incurred after
development of a working model or a detailed program design) are capitalized and
amortized by the straight-line method over 5-7 years, commencing with product
release. Unamortized capitalized development costs included in other assets at
March 31, 2000 and 1999 were $87 million and $72 million, respectively.
Amortization of capitalized development costs was $21 million, $18 million, and
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 1 - Significant Accounting Policies (Continued)
$15 million for the fiscal years ended March 31, 2000, 1999, and 1998,
respectively.
The carrying values of intangible assets and other long-lived assets,
including investments, are reviewed on a regular basis for the existence of
facts or circumstances, both internally and externally, that may suggest
impairment. The Company performs undiscounted cash flow analyses to determine if
an impairment exists. If an impairment is determined to exist, any related
impairment loss is calculated based on fair value.
Net Income per Share: Basic earnings per share is computed by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income by the sum
of the weighted-average number of common shares outstanding for the period plus
the assumed exercise of all dilutive securities, such as stock options.
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C>
Net income ....................................... $ 696 $ 626 $1,169
Diluted Earnings Per Share*
Weighted-average shares outstanding and
common share equivalents ..................... 557 562 566
---- ---- ----
Diluted Earnings Per Share ....................... $1.25 $1.11 $ 2.06
---- ---- ----
Diluted Share Computation:
Weighted-average common shares outstanding ... 539 545 546
Weighted-average stock options outstanding,net 18 17 20
---- ---- ----
Weighted-average shares outstanding and
common share equivalents ..................... 557 562 566
==== ==== ====
<FN>
*Share and per share amounts adjusted to reflect the three-for-two stock split
effective November 5, 1997.
</FN>
</TABLE>
Statement of Cash Flows: Interest payments for the years ended March 31,
2000, 1999, and 1998 were $319 million, $107 million, and $157 million,
respectively. Income taxes paid for these fiscal years were $368 million, $280
million, and $470 million, respectively.
Translation of Foreign Currencies: In translating financial statements of
foreign subsidiaries, all assets, and liabilities are translated using the
exchange rate in effect at the balance sheet date. All revenue, costs, and
expenses are translated using an average exchange rate. Net income includes
exchange losses of approximately $3 million in 2000, $7 million in 1999, and $9
million in 1998.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
Reclassifications: Certain prior years' balances have been reclassified to
conform with the current year's presentation.
Comprehensive Income: SFAS No. 130 establishes rules for reporting and
displaying comprehensive income and its components. Comprehensive income
includes foreign currency translation adjustments and unrealized gains or losses
on the Company's available-for-sale securities. The components of comprehensive
income, net of applicable tax, for the years ended March 31, 2000, 1999, and
1998, are included in the Statements of Stockholders' Equity.
New Accounting Pronouncements
Software Revenue Recognition: In October 1997, the Accounting Standards
Executive Committee ("AcSEC") issued Statement of Position ("SOP") 97-2
"Software Revenue Recognition," as amended in 1998 by SOP 98-4 and further
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 1 -- Significant Accounting Policies (Continued)
amended more recently by SOP 98-9, which is effective for transactions entered
into in fiscal years beginning after March 15, 1999. These SOPs provide guidance
on applying generally accepted accounting principles in recognizing revenue on
software transactions, requiring deferral of part or all of the revenue related
to a specific contract depending on the existence of vendor-specific objective
evidence and the ability to allocate the total contract value to all elements
within the contract. Effective for the quarter ending June 30, 1999, the Company
implemented the guidelines of these SOPs. Based on the current interpretation,
there was no material impact on the overall maintenance deferral; however, as
additional implementation guidelines become available, there may be
unanticipated changes in the Company's revenue recognition practices including,
but not limited to, changes in the period over which revenue is recognized up to
and including recognition of revenue over the contract term. The future
implementation guidelines and interpretations may also require the Company to
further change its business practices in order to continue to recognize a
substantial portion of its software revenue when the product is delivered. These
changes may extend sales cycles, increase administrative costs, or otherwise
adversely affect existing operations and results of operations. In December
1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101. This SAB
provides further guidance on revenue recognition. The Company is currently in
the process of evaluating the impact of SAB 101 which is effective for the
quarter ended June 30, 2000 to ensure it is in compliance. As additional
guidance becomes available, the Company may be required to change the period in
which revenue is recognized, which may have a negative impact on the Company's
prospective reported revenue.
Note 2 -- Acquisitions
The Company completed several acquisitions during fiscal years 2000 and
1999 that were accounted for using the purchase method of accounting. The
allocation of purchase price is based upon estimates which may be revised within
one year of acquisition as additional information becomes available. It is
anticipated that the final allocation of purchase price will not differ
materially from the preliminary allocation.
On March 31, 2000, the Company acquired Sterling Software, Inc.
("Sterling") and merged one of its wholly owned subsidiaries into Sterling, at
which time Sterling became a wholly owned subsidiary of the Company. The
shareholders of Sterling received 0.5634 shares of the Company's common stock
for each share of Sterling common stock. The Company issued approximately 46.8
million shares of common stock with an approximate fair value of $3.3 billion.
In addition, the Company assumed options to acquire common stock and incurred
acquisition related liabilities of approximately $290 million and $473 million,
respectively, for an aggregate purchase price of approximately $4.1 billion.
Sterling was a developer and provider of systems management, business
intelligence, and application development software products and services, as
well as a supplier of specialized information technology services for sectors of
the federal government.
On May 28, 1999, the Company acquired the common stock and the options to
acquire the common stock of PLATINUM technology International, inc. ("PLATINUM")
in a cash transaction of approximately $3.6 billion, which was paid from
drawings under the Company's $4.5 billion credit agreements. In addition, the
Company assumed debt and incurred acquisition-related liabilities of
approximately $200 million and $451 million, respectively, for an aggregate
purchase price of approximately $4.3 billion. PLATINUM was engaged in providing
software products in the areas of database management, eCommerce, application
infrastructure management, decision support, data warehousing, and knowledge
management, as well as year 2000 reengineering and other consulting services.
The purchase price for the Sterling and PLATINUM acquisitions have been
allocated to assets acquired and liabilities assumed based on their fair values
at the dates of acquisition as follows:
<TABLE>
<CAPTION>
Sterling PLATINUM
-------- --------
(in millions)
<S> <C> <C>
Cash and cash equivalents ......... $ 476 $ 57
Deferred income taxes, net ........ (338) -
Other assets, net ................. 69 95
In-process research and development 150 645
Purchased software products ....... 1,532 972
Goodwill and other intangibles(1) . 2,178 2,486
----- -----
Purchase Price .................... $ 4,067 $ 4,255
===== =====
<FN>
(1)Includes an allocation for the assembled workforce, customer relationships,
and trademarks/trade names of $142 million and $337 million for Sterling and
PLATINUM, respectively.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 2 -- Acquisitions (Continued)
An independent analysis using future product cash flow forecasts and
percentage of product development completion assumptions was utilized to value
the in-process research and development amounts which had not reached the
working model stage and had no alternative future use. Accordingly, $645 million
and $150 million were expensed as non-recurring charges in fiscal year 2000
related to the PLATINUM and Sterling acquisitions, respectively.
The following table reflects unaudited pro-forma combined results of the
operations of the Company, PLATINUM, and Sterling on the basis that the
acquisitions had taken place at the beginning of the fiscal year for all periods
presented:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999
---- ----
(in millions, except per share amounts)
<S> <C> <C>
Contract value ..................................... $ 7,745 $ 6,961
Net revenue ........................................ 7,082 6,374
Net loss ........................................... (59) (50)
Basic loss per share ............................... $ (.10) $ (.08)
Shares used in computation ......................... 586 592
Diluted loss per share ............................. $ (.10) $ (.08)
Shares used in computation ............... ......... 586 592
</TABLE>
The following table reflects unaudited pro-forma combined results of the
operations of the Company, PLATINUM, and Sterling on the basis that the
acquisitions had taken place at the beginning of the fiscal year for all periods
presented. All special charges, net of taxes, including the purchased research
and development charge for PLATINUM and Sterling in fiscal year 2000 of $645 and
$150 million, respectively, the non-cash charge of $32 million related to CHS
Electronics, Inc. ("CHS") recorded in fiscal year 2000, the one-time charge of
$675 million relating to the 1995 Key Employee Stock Ownership Plan (the "1995
Plan") recorded in fiscal year 1999, and all special charges recorded by
PLATINUM and Sterling in fiscal years 2000 and 1999 have been excluded from all
periods presented:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999
---- ----
(in millions, except per share amounts)
<S> <C> <C>
Contract value ..................................... $7,745 $6,961
Net revenue ........................................ 7,082 6,374
Net income ......................................... 1,412 893
Basic earnings per share ........................... $ 2.41 $ 1.51
Shares used in computation ......................... 586 592
Diluted earnings per share ......................... $ 2.34 $ 1.47
Shares used in computation ......................... 604 609
</TABLE>
In management's opinion, the pro-forma combined results of operations are
not indicative of the actual results that would have occurred had the
acquisitions been consummated at the beginning of fiscal year 2000 or of future
operations of the combined entities under the ownership and operation of the
Company.
On March 9, 1999, the Company acquired more than 98% of the issued and
outstanding shares of common stock of Computer Management Sciences, Inc.
("CMSI") and on March 19, 1999, merged CMSI into one of its wholly owned
subsidiaries. The aggregate purchase price of approximately $400 million was
funded from drawings under the Company's credit agreements and cash from
operations. CMSI was engaged in providing custom developed information
technology solutions to a Fortune 1000 client base.
During fiscal years 2000 and 1999, the Company acquired several other
consulting businesses and product technologies in addition to the ones described
above which, either individually or collectively, are not material to the
financial statements taken as a whole. The excess of cost over net assets
acquired is being amortized on a straight-line basis over the expected period to
be benefited. The Consolidated Condensed Statements of Operations reflect the
results of operations of the companies since the effective dates of the
purchases.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 2 -- Acquisitions (Continued)
At March 31, 1999, liabilities related to acquisitions totaled $134
million. During the current fiscal year, the Company established additional
reserves of $451 million, $473 million, and $12 million related to PLATINUM,
Sterling, and other acquisitions, respectively. Reductions totaling $302 million
were made against these reserves, including compensation-related payments of
$133 million, duplicate facility and other settlements of $96 million, and
goodwill adjustments of $73 million.
At March 31, 2000, the Company estimated future liabilities in connection
with acquisitions to be $768 million. These included compensation-related
liabilities ($392 million) and other acquisition-related expenditures including
duplicate facilities ($376 million). This balance was included in the "Accrued
expenses and other liabilities" line item on the accompanying Consolidated
Balance Sheet.
Note 3 -- Investments
The following is a summary of marketable securities classified as
"available-for-sale" securities as required by SFAS 115:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999
---- ----
(in millions)
<S> <C> <C>
Debt/Equity Securities:
Cost ....................... $ 80 $124
Gross unrealized gains ..... - 13
---- ----
Estimated fair value ....... $ 80 $137
==== ====
</TABLE>
For the year ended March 31, 2000, the Company recorded an approximate $50
million loss within selling, general, and administrative expenses due to an
other than temporary decline in the fair value of an investment in CHS. For the
years ended March 31, 1999 and 1998, net realized gains were $1 million and $3
million, respectively.
The amortized cost and estimated fair value based on published closing
prices of securities at March 31, 2000, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties.
<TABLE>
<CAPTION>
March 31, 2000
Estimated
Fair
Cost Value
---- -----
Available-for-Sale: (in millions)
<S> <C> <C>
Due in one year or less ....... $26 $26
Due in one through three years 32 32
Due in three through five years 19 19
Due after five years .......... 3 3
--- ---
$80 $80
=== ===
</TABLE>
Note 4 -- Segment and Geographic Information
The Company is principally engaged in the design, development, marketing,
licensing, and support of integrated computer software products operating on a
diverse range of hardware platforms and operating systems. Accordingly, the
Company considers itself to be operating in a single industry segment. The
Company's chief operating decision maker reviews financial information presented
on a consolidated basis, accompanied by disaggregated information about revenue,
by geographic region for purposes of assessing financial performance and making
operating decisions.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 4 -- Segment and Geographic Information (Continued)
The following table presents information about the Company by geographic area
for the years ended March 31, 2000, 1999, and 1998:
<TABLE>
<CAPTION>
United States Europe(a) Other(a) Eliminations Total
------------- -------- ------- ------------ -----
(in millions)
<S> <C> <C> <C> <C> <C>
March 31, 2000:
- ---------------
Contract Value:
To unaffiliated customers ........................... $ 4,535 $ 1,331 $ 900 - $ 6,766
Between geographic areas (b) ........................ 452 - - $ (452) -
----- ----- ---- ---- -----
Contract Value ............................... 4,987 1,331 900 (452) 6,766
Net Revenue:
To unaffiliated customers ........................... $ 4,038 $ 1,238 $ 827 - $ 6,103
Between geographic areas (b) ........................ 452 - - $ (452) -
----- ----- ---- ---- -----
Net Revenue .................................. 4,490 1,238 827 (452) 6,103
Identifiable assets .................................. 16,006 1,091 985 (589) 17,493
Total liabilities .................................... 9,381 882 782 (589) 10,456
March 31, 1999:
- ---------------
Contract Value:
To unaffiliated customers ........................... $ 3,262 $ 1,272 $ 719 - $ 5,253
Between geographic areas (b) ........................ 451 - - $ (451) -
----- ----- ---- ---- -----
Contract Value 3,713 1,272 719 (451) 5,253
Net Revenue:
To unaffiliated customers ........................... $ 2,921 $ 1,096 $ 649 - $ 4,666
Between geographic areas (b) ........................ 451 - - $ (451) -
----- ----- ---- ---- -----
Net Revenue 3,372 1,096 649 (451) 4,666
Identifiable assets .................................. 6,835 1,112 610 (487) 8,070
Total liabilities .................................... 4,474 909 445 (487) 5,341
March 31, 1998:
- ---------------
Contract Value:
To unaffiliated customers ........................... $ 2,994 $ 1,104 $ 621 - $ 4,719
Between geographic areas (b) ........................ 373 - - $ (373) -
----- ----- ---- ---- -----
Contract Value 3,367 1,104 621 (373) 4,719
Net Revenue:
To unaffiliated customers ........................... $ 2,702 $ 909 $ 595 - $ 4,206
Between geographic areas (b) ........................ 373 - - $ (373) -
----- ----- ---- ---- -----
Net Revenue 3,075 909 595 (373) 4,206
Identifiable assets .................................. 5,326 1,375 499 (494) 6,706
Total liabilities .................................... 3,373 986 360 (494) 4,225
<FN>
(a) The Company operates wholly owned subsidiaries in Canada and 43 foreign
countries located in the Middle East, Africa, Europe (23), South America (6),
and the Pacific Rim (12). Contract value and net revenue are allocated to a
geographic area based on the location of the sale.
</FN>
<FN>
(b) Represents royalties from foreign subsidiaries generally determined as a
percentage of certain amounts invoiced to customers.
</FN>
</TABLE>
No single customer accounted for 10% or more of total revenues in fiscal years
2000, 1999, or 1998.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 5 -- Trade and Installment Accounts Receivable
Trade and installment accounts receivable consist of the following:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(in millions)
<S> <C> <C>
Current receivables ..................... $ 3,846 $ 3,153
Less:Allowance for uncollectible amounts. (350) (204)
Unamortized discounts .............. (662) (463)
Deferred maintenance fees .......... (560) (465)
Deferred professional services ..... (99) -
----- -----
$ 2,175 $ 2,021
===== =====
Non-current receivables ................. $ 5,960 $ 4,565
Less:Allowance for uncollectible amounts. (60) (60)
Unamortized discounts .............. (1,046) (735)
Deferred maintenance fees .......... (1,042) (926)
----- -----
$ 3,812 $ 2,844
===== =====
</TABLE>
Installment accounts receivable represent amounts collectible on long-term
financing arrangements and include fees for product licenses, upgrades,
maintenance, and professional services contracts. Installment receivables are
generally financed over three to six years and are recorded net of unamortized
discounts, deferred maintenance fees, and allowances for uncollectible amounts.
As of March 31, 2000, on a cumulative basis, approximately 36%, 55%, 70%, 85%,
and 90% of trade and installment accounts receivable come due within fiscal
years ended 2001 through 2005, respectively.
The provisions for uncollectible amounts for the years ended March 31,
2000, 1999, and 1998 were $77 million, $75 million, and $71 million,
respectively, and were included in the "Selling, general, and administrative"
line item on the accompanying Consolidated Statement of Operations.
Note 6 --Debt
At March 31, 1999, the Company had $325 million in short-term debt
outstanding under its $1.5 billion five-year and $1.1 billion 364-day credit
facilities. On May 26, 1999, the Company terminated these facilities and
obtained $4.5 billion of committed bank financing for the acquisition of
PLATINUM. The facilities consisted of a $1.5 billion 364-day revolver, a $1.0
billion four-year revolver, and a $2.0 billion four-year term loan. The
facilities provide for interest based upon the prevailing London InterBank
Offered Rate ("LIBOR") subject to a margin determined by a bank facility ratings
grid. The Company is also required to maintain certain financial ratios. The
amount drawn under these facilities at March 31, 2000 was $3.195 billion and the
effective interest rate on this debt was approximately 7.02%. In May 2000, the
Company renewed the 364-day revolver for $1.3 billion, for a total of $4.3
billion in committed bank facilities.
The Company also maintains an 85 million pound sterling revolver that was
used to finance construction of the Company's European Headquarters at Ditton
Park, Slough, in the United Kingdom. The facility requires the Company to
maintain certain financial conditions, and borrowing costs and fees are based
upon achievement of certain financial ratios. The credit facility's interest is
calculated at LIBOR for pound sterling plus a margin. At March 31, 2000 and
1999, 79 million pound sterling (approximately U.S. $130 million) and 49 million
pound sterling (approximately U.S. $81 million) were outstanding at interest
rates of 6.3% and 6.1%, respectively. On February 22, 2000, the maturity of this
facility was extended to June 2000 while the Company completes its refinance
into a long-term mortgage for the property.
At March 31, 2000 and March 31, 1999, the Company had the following
unsecured, fixed-rate interest Senior Note obligations outstanding:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(in millions)
<S> <C> <C>
6.77% Senior Notes due 2003 .................................. $256 $320
6.25% Senior Notes due 2003 .................................. $575 $575
6.375% Senior Notes due 2005 ................................. $825 $825
6.5% Senior Notes due 2008 ................................... $350 $350
</TABLE>
Debt ratings for the Company's senior unsecured notes and bank credit
facilities are Baa1 and BBB+ from Moody's Investment Services and Standard &
Poor's, respectively.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 6 --Debt (Continued)
Unsecured and uncommitted multicurrency credit facilities of $50 million
are also available to meet any short-term working capital requirements and can
be drawn upon, up to a predefined limit, by most subsidiaries. Under these
multicurrency facilities, approximately $14 million and $3 million were drawn at
March 31, 2000 and 1999, respectively.
At March 31, 2000 and 1999, the Company had various other fixed rate debt
obligations outstanding. These obligations carried annual interest rates ranging
from 6% to 7 1/2% and approximated $35 and $52 million, respectively.
The Company conducts an ongoing review of its capital structure and debt
obligations as part of its risk management strategy. To date, the Company has
not entered into any form of derivative transactions related to its debt
instruments. At March 31, 2000, the fair value of the Company's debt was
approximately $100 million less than its carrying value.
The maturities of outstanding debt for the next five fiscal years are as
follows: 2001-$919 million, 2002-$331 million, 2003-$2,310 million, 2004-$640
million, and 2005-$826 million.
Interest expense for the years ended March 31, 2000, 1999, and 1998 was
$352 million, $154 million, and $147 million, respectively.
Note 7 -- Commitments and Contingencies
The Company leases real estate and certain data processing and other
equipment with lease terms expiring through 2023. The leases are operating
leases and generally provide for renewal options and additional rentals based on
escalations in operating expenses and real estate taxes. The Company has no
material capital leases. The Company has completed construction of a facility in
the United Kingdom with all costs paid as of March 31, 2000.
Rental expense under operating leases for the years ended March 31, 2000,
1999, and 1998, was $205 million, $135 million, and $140 million, respectively.
Future minimum lease payments are: 2001-$181 million; 2002-$148 million;
2003-$116 million; 2004-$87 million; 2005-$74 million; and thereafter-$242
million.
The Company and certain of its officers are defendants in a number of
shareholder class action lawsuits alleging that a class consisting of all
persons who purchased the Company's stock during the period January 20, 1998
until July 22, 1998 were harmed by misleading statements, representations, and
omissions regarding the Company's future financial performance. These cases have
been consolidated into a single action (the "Shareholder Action") in the United
States District Court for the Eastern District of New York ("New York Federal
Court"). The New York Federal Court has denied the defendants' motion to dismiss
the Shareholder Action, and the parties currently are engaged in discovery.
Although the ultimate outcome and liability, if any, cannot be determined,
management, after consultation and review with counsel, believes that the facts
in the Shareholder Action do not support the plaintiffs' claims and that the
Company and its officers and directors have meritorious defenses.
In addition, three derivative actions alleging misleading statements and
omissions similar to those alleged in the Shareholder Action were brought in the
New York Federal Court on behalf of the Company against a majority of the
Company's directors. An additional derivative action on behalf of the Company,
alleging that the Company issued 14.25 million more shares than were authorized
under the 1995 Key Employee Stock Ownership Plan (the "1995 Plan"), also was
filed in the New York Federal Court. These derivative actions have been
consolidated into a single action (the "Derivative Action") in the New York
Federal Court. The Derivative Action has been stayed. Lastly, a derivative
action on behalf of the Company was filed in the Chancery Court in Delaware (the
"Delaware Action") alleging that 9.5 million more shares were issued to the
three 1995 Plan participants than were authorized under the 1995 Plan. The
Company and its directors who are parties to the Derivative Action and the
Delaware Action have announced that an agreement has been reached to settle the
Delaware Action and the Derivative Action. Under the terms of the proposed
settlement, which is subject to the approval of the Delaware Court of Chancery
and dismissal of related claims by the New York Federal Court, the 1995 Plan
participants will return 4.5 million shares of Computer Associates stock to the
Company, at which time the Company will record a non-cash gain.
The Company, various subsidiaries and certain current and former officers
have been named as defendants in various claims and lawsuits arising in the
normal course of business. The Company believes that the facts do not support
the plaintiffs' claims and intends to vigorously contest each of them.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 8 -- Income Taxes
The amounts of income before income taxes attributable to domestic and foreign
operations are as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions)
<S> <C> <C> <C>
Domestic.......... $1,452 $ 748 $1,611
Foreign .......... 138 262 263
----- ----- -----
$ 1,590 $1,010 $1,874
===== ===== =====
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions)
Current:
<S> <C> <C> <C>
Federal......... $ 401 $ 171 $ 446
State........... 25 17 44
Foreign......... 56 89 74
---- ---- ----
482 277 564
---- ---- ----
Deferred:
Federal......... 381 106 119
State........... 26 4 12
Foreign......... 5 (3) 10
---- ---- ----
412 107 141
---- ---- ----
Total:
Federal......... 782 277 565
State........... 51 21 56
Foreign......... 61 86 84
---- ---- ----
$894 $384 $705
==== ==== ====
</TABLE>
The provision for income taxes is reconciled to the tax provision computed at
the federal statutory rate as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998
---- ---- ----
(in millions)
<S> <C> <C> <C>
Tax expense at U.S. federal statutory rate ............ $ 556 $ 353 $ 656
Increase (reduction) in tax expense resulting from:
Purchased research and development .................. 278 - -
Nondeductable amortization of excess cost over
net assets acquired ............................... 83 23 21
Effect of international operations, including foreign
sales corporation ................................. (72) (29) (42)
Other, net .......................................... 16 23 34
State taxes, net of federal tax benefit ............. 33 14 36
---- ---- ----
$894 $384 $705
==== ==== ====
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 8 -- Income Taxes (Continued)
Deferred income taxes reflect the impact of temporary differences between the
carrying amounts of assets and liabilities recognized for financial reporting
purposes and the amounts recognized for tax purposes. The tax effect of the
temporary differences are as follows:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(in millions)
<S> <C> <C>
Deferred tax assets ............... $ 523 $ -
----- ----
Deferred tax liabilities:
Modified accrual basis accounting $1,716 $1,249
Purchased software .............. 854 65
----- -----
Total deferred tax liabilities .... $2,570 $1,314
----- -----
Net deferred tax liability ........ $2,047 $1,314
===== =====
</TABLE>
No provision has been made for federal income taxes on unremitted earnings of
the Company's foreign subsidiaries (approximately $411 million at March 31,
2000), since the Company plans to permanently reinvest all such earnings.
Note 9 -- Stock Plans
The Company has a 1981 Incentive Stock Option Plan (the "1981 Plan")
pursuant to which options to purchase up to 27 million shares of Common Stock of
the Company were available for grant to employees (including officers of the
Company). The 1981 Plan expired on October 23, 1991. Therefore, from and after
that date no new options can be granted under the 1981 Plan. Pursuant to the
1981 Plan, the exercise price could not be less than the Fair Market Value
("FMV") of each share at the date of grant. Options granted thereunder may be
exercised in annual increments commencing one year after the date of grant and
become fully exercisable after the expiration of five years. All options expire
ten years from date of grant unless otherwise terminated. All of the 283,000
options which are outstanding under the 1981 Plan were exercisable at March 31,
2000 at $2.22-$2.26 per share.
The Company has a 1987 Non-Statutory Stock Option Plan (the "1987 Plan")
pursuant to which options to purchase up to 17 million shares of Common Stock of
the Company may be granted to select officers and key employees of the Company.
Pursuant to the 1987 Plan, the exercise price shall not be less than the FMV of
each share at the date of the grant. The option period shall not exceed 12
years. Each option may be exercised only in accordance with a vesting schedule
established by the Stock Option and Compensation Committee. As of March 31,
2000, 155,375 shares of the Company's Common Stock were available for future
grants. All of the 6.5 million options which are outstanding under the 1987 Plan
were exercisable as of that date. These options are exercisable at $2.22-$4.26
per share.
The Company's 1991 Stock Incentive Plan (the "1991 Plan") provides that
stock appreciation rights and/or options, both qualified and non-statutory, to
purchase up to 67.5 million shares of Common Stock of the Company may be granted
to employees (including officers of the Company) under conditions similar to the
1981 Plan. As of March 31, 2000, no stock appreciation rights have been granted
under this plan and 59.9 million options have been granted. At March 31, 2000,
12.0 million of the 33.9 million options which are outstanding under the 1991
Plan were exercisable. These options are exercisable at $4.26-$51.69 per share.
The 1993 Stock Option Plan for Non-Employee Directors (the "1993 Plan")
provides for non-statutory options to purchase up to a total of 337,500 shares
of Common Stock of the Company to be available for grant to each member of the
Board of Directors who is not otherwise an employee of the Company. Pursuant to
the 1993 Plan, the exercise price shall be the FMV of the shares covered by the
option at the date of grant. The option period shall not exceed ten years, and
each option may be exercised in whole or in part on the first anniversary date
of its grant. As of March 31, 2000, 195,750 options have been granted under this
plan. 115,000 of the 149,000 options which are outstanding under the 1993 Plan
were exercisable as of that date. These options are exercisable at $7.59-$51.44
per share.
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 9 -- Stock Plans (Continued)
The following table summarizes the activity under these plans (shares in
millions):
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ----------------- ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Beginning of year . 41.0 $ 21.67 42.6 $ 19.36 40.2 $ 13.96
Granted ........... 7.1 51.87 4.7 36.56 8.9 37.58
Acquisition ....... 7.2 31.07 - - - -
Exercised ......... (6.9) 14.53 (3.9) 9.60 (5.8) 10.46
Terminated ........ (.8) 30.54 (2.4) 29.32 (.7) 15.82
---- ---- ----
End of year ....... 47.6 28.39 41.0 21.67 42.6 19.36
Options exercisable
at end of year ... 22.9 $ 15.68 19.3 $ 10.85 16.7 $ 7.84
</TABLE>
The following table summarizes information about these plans at March 31, 2000
(shares in millions):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- -----------------------
Weighted-
Average Weighted-
Range of Remaining Average Weighted-
Exercise Contractual Exercise Average
Price Shares Life Price Shares Exercise Price
- --------------- ------ --------- ------ ------ -------------
<S> <C> <C> <C> <C> <C>
$ 2.22 - $10.00 12.3 2.8 years $ 5.63 12.3 $ 5.63
10.01 - 20.00 5.7 5.2 years 19.21 3.6 19.20
20.01 - 30.00 7.3 6.3 years 27.00 4.2 25.58
30.01 - 40.00 8.7 7.2 years 35.66 1.5 34.77
40.01 - 50.00 6.4 6.8 years 45.60 1.3 46.10
50.01 - 78.63 7.2 9.3 years 51.99 - -
---- ----
47.6 22.9
</TABLE>
If the Company had elected to recognize compensation expense based on the
fair value of stock plans as prescribed by SFAS No. 123, net income and net
income per share would have been adjusted to the pro-forma amounts in the table
below:
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999(1) 1998
---- ------ ----
(in millions, except per share amounts)
<S> <C> <C> <C>
Net income-as reported ............. $ 696 $ 626 $1,169
Net income-pro-forma ............... 608 1,128 1,085
Basic earnings per share ........... $ 1.29 $ 1.15 $ 2.14
Basic earnings per share-pro-forma . 1.13 2.07 1.99
Diluted earnings per share ......... $ 1.25 $ 1.11 $ 2.06
Diluted earnings per share-pro-forma 1.12 2.06 1.94
<FN>
(1) Includes the effect of the 1995 Plan charge under SFAS No. 123.
</FN>
</TABLE>
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Note 9 -- Stock Plans (Continued)
The weighted-average fair value at date of grant for options granted in
2000, 1999, and 1998 were $27.98, $19.04, and $20.44, respectively. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model. The following weighted average assumptions
were used for option grants in 2000, 1999, and 1998, respectively; dividend
yields of .15%, .22%, and .22%; expected volatility factors of .50; risk-free
interest rates of 5.6%, 4.5%, and 6.2% and an expected life of six years. The
compensation expense and pro-forma net income may not be indicative of amounts
to be included in future periods.
Under the 1998 Incentive Award Plan (the "1998 Plan"), a total of four
million Phantom Shares, as defined in the 1998 Plan, are available for grant to
certain of the Company's employees from time to time through March 31, 2008. As
of March 31, 2000 there were approximately 1.8 million Phantom Shares
outstanding. Each Phantom Share is equivalent to one share of the Company's
common stock. Vesting is contingent upon attainment of specific criteria,
including an annual Target Closing Price ("Price") for the Company's common
stock and the participant's continued employment. The Price is based on the
average closing price of the Company's common stock on the New York Stock
Exchange for the ten days up to and including March 31st of each fiscal year.
The Price was met on March 31, 2000 and the Company began to recognize a
non-cash charge over the employment period (approximately $3 million for the
year ended March 2000). If additional tranches vest, the annual non-cash charge
will increase. Since the price of the Phantom Shares is undetermined, the
incremental expense is unknown.
During fiscal year 2000, the Company established the Year 2000 Employee
Stock Purchase Plan, (the "Purchase Plan") for all eligible employees. Under the
terms of the Purchase Plan, employees may elect to withhold between 1% and 25%
of their base pay through regular payroll deductions, subject to Internal
Revenue Code limitations. Shares of the Company's common stock may be purchased
at six-month intervals at 85% of the lower of the FMV on the first or the last
day of each six-month period. The Purchase Plan became effective January 1, 2000
and the first purchase of shares will be made on June 30, 2000. At March 31,
2000, 30 million shares were reserved for future issuance.
All references to the number of shares and share prices have been adjusted
to reflect a three-for-two stock split effective November 5, 1997.
Note 10 -- Profit Sharing Plan
The Company maintains a profit sharing plan, the Computer Associates
Savings Harvest Plan ("CASH Plan"), for the benefit of employees of the Company.
The CASH Plan is intended to be a qualified plan under Section 401(a) of the
Internal Revenue Code of 1986 (the "Code") and contains a qualified cash or
deferred arrangement as described under Section 401(k) of the Code. Pursuant to
the CASH Plan, eligible participants may elect to contribute a percentage of
their annual gross salary. Matching contributions to the CASH Plan for the year
ended March 31, 2000 were approximately $10 million and for each of the years
ended March 31, 1999 and 1998 were approximately $6 million and $5 million,
respectively. In addition, the Company may make discretionary contributions to
the CASH Plan. Discretionary contributions to the CASH Plan for the year ended
March 31, 2000 were approximately $25 million, and for each of the years ended
March 31, 1999 and 1998 approximated $20 million and $17 million, respectively.
Note 11 -- Rights Plan
Each outstanding share of the Company's Common Stock carries a stock
purchase right issued under the Company's Rights Agreement, dated June 18, 1991
and amended May 17, 1995 (the "Rights Agreement"). Under certain circumstances,
each right may be exercised to purchase one one-thousandth of a share of Series
One Junior Participating Preferred Stock, Class A, for $300. Under certain
circumstances, following (i) the acquisition of 20% or more of the Company's
outstanding Common Stock by an Acquiring Person (as defined in the Rights
Agreement), (ii) the commencement of a tender offer or exchange offer which
would result in a person or group owning 20% or more of the Company's
outstanding common stock, or (iii) the determination by the Company's Board of
Directors and a majority of the Disinterested Directors (as defined in the
Rights Agreement) that a 15% stockholder is an Adverse Person (as defined in the
Rights Agreement), each right (other than rights held by an Acquiring Person or
Adverse Person) may be exercised to purchase common stock of the Company or a
successor company with a market value of twice the $300 exercise price. The
rights, which are redeemable by the Company at one cent per right, expire in
June 2001.
<PAGE>
<TABLE>
<CAPTION>
Schedule II
COMPUTER ASSOCIATES INTERNATIONAL, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts(a) Deductions(b) of period
- ----------- --------- -------- ---------- ------------ ---------
(in millions)
<S> <C> <C> <C> <C> <C>
Reserves and allowances
deducted from assets to
which they apply:
Allowance for uncollectible amounts
Year ended March 31, 2000 $264 $ 77 $ 171 $ 102 $410
Year ended March 31, 1999 $246 $ 75 $ 2 $ 59 $264
Year ended March 31, 1998 $227 $ 71 $ 2 $ 54 $246
<FN>
(a) Reserves of acquired companies.
</FN>
<FN>
(b) Write-offs of amounts against allowance provided.
</FN>
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>2
<FILENAME>0002.txt
<TEXT>
<TABLE>
<CAPTION>
Exhibit A
Subsidiaries of the Registrant
Name of Subsidiary Jurisdiction of Incorporation
<S> <C>
ACCPACAEInternational, Inc. Delaware
Computer Associates Caribbean, Inc. Puerto Rico
C.A. Computer Associates GmbH Germany
C.A. Computer Associates Israel Ltd. Israel
C.A. Computer Associates S.A. Spain
C.A. Foreign, Inc. Delaware
Computer Associates India PVT. Limited India
C.A. Islandia Realty, Inc. New York
CA Management, Inc. Delaware
CA Real Estate, Inc. Delaware
CA Research, Inc. Delaware
Computer Associates Services, Inc. Delaware
Computer Associates Think, Inc. Delaware
Computer Associates AG Switzerland
Computer Associates Canada Company Canada
Computer Associates CIS Ltd. Russia
Computer Associates de Argentina S.A. Argentina
Computer Associates do Brasil Ltda. Brazil
Computer Associates de Chile Ltd. Chile
Computer Associates de Colombia S.A. Colombia
Computer Associates de Mexico, S.A. de C.V. Mexico
Computer Associates de Venezuela, C.A. Venezuela
Computer Associates Finland OY Finland
Computer Associates Hellas Sole Partner LLC Greece
Computer Associates, Inc. Delaware
Computer Associates International (China) Ltd. China
Computer Associates International G.m.b.H. Austria
Computer Associates CZ, s.r.o. The Czech Republic
Computer Associates International Limited Hong Kong
Computer Associates Japan Ltd. Japan
Computer Associates Korea Ltd. Korea
Computer Associates Bilgisayar Yazilim Pazarlama Ltd. Sti. Turkey
Computer Associates (M) Sdn. Bhd. Malaysia
Computer Associates Middle East WLL Bahrain
Computer Associates Norway A/S Norway
Computer Associates (N.Z.) Ltd. New Zealand
Computer Associates Plc United Kingdom
Computer Associates Products Nederland B.V. The Netherlands
Computer Associates Pte. Ltd. Singapore
Computer Associates Pty. Ltd. Australia
Computer Associates Real Estate BV The Netherlands
Computer Associates S.A. Belgium
Computer Associates S.A. France
Computer Associates Scandinavia A/S Denmark
Computer Associates Africa (Pty.) Ltd. South Africa
Computer Associates S.p.A. Italy
Computer Associates Sp. z o.o. Poland
Computer Associates Sucursal en Portugal Portugal
Computer Associates Sweden AB Sweden
Computer Associates Taiwan Ltd. Taiwan
Computer Associates (Thailand) Co. Ltd. Thailand
Philippine Computer Associates International, Inc. Philippines
PLATINUM technology International, inc. Delaware
Sterling Software, Inc. Delaware
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>0003.txt
<TEXT>
Consent of Independent Auditors
The Board of Directors and Stockholders
Computer Associates International, Inc.:
We consent to incorporation by reference in the registration statements (Nos.
333-32942, 333-31284, 333-83147, 333-80883, 333-79727, 333-62055, 333-19071,
33-64377, 33-53915, 33-53572, 33-34607, 33-18322, 33-20797, 2-92355, 2-87495 and
2-79751) on Form S-8 of Computer Associates International, Inc. of our report
dated May 10, 2000, relating to the consolidated balance sheet of Computer
Associates International, Inc. and subsidiaries as of March 31, 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year ended March 31, 2000, and the related financial statement
schedule, which report appears in the March 31, 2000, annual report on Form 10-K
of Computer Associates International, Inc.
/S/KPMG LLP
New York, New York
June 8, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>4
<FILENAME>0004.txt
<TEXT>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-32942; 333-31284; 333-83147; 333-80883; 333-79727; 333-62055;
333-19071; 33-53915; 33-64377 and 33-53572; 33-34607, 33-18322, 2-92355, 2-87495
and 2-79751; and 33-20797) of Computer Associates International, Inc. and
subsidiaries and related prospectuses of our report dated May 26, 1999, with
respect to the consolidated financial statements and schedule of Computer
Associates International, Inc. included in its Annual Report on Form 10-K for
the year ended March 31, 2000, filed with the Securities and Exchange
Commission.
/S/ERNST & YOUNG LLP
New York, New York
June 8, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>AMENDED AND RESTATED CREDIT AGREEMENT
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CONFORMED COPY
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[Computer Associates Logo]
COMPUTER ASSOCIATES INTERNATIONAL, INC.
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$1,300,000,000
AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
dated as of May 24, 2000
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BANK OF AMERICA, N.A.
and
CHASE SECURITIES, INC.,
as Co-Syndication Agents
THE BANK OF NOVA SCOTIA,
as the Documentation Agent
CREDIT SUISSE FIRST BOSTON,
as the Administrative Agent
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INTERPRETATION........................................................................2
Section 1.1 Defined Terms...............................................................................2
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Section 1.2 Computation of Time Periods................................................................14
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Section 1.3 Accounting Terms...........................................................................14
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Section 1.4 No Presumption Against Any Party...........................................................14
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Section 1.5 Use of Certain Terms.......................................................................14
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Section 1.6 Headings and References....................................................................14
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Section 1.7 Independence of Provisions.................................................................14
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ARTICLE 2. AMOUNT AND TERMS OF REVOLVING COMMITMENTS............................................................15
Section 2.1 Revolving Commitments......................................................................15
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Section 2.2 Procedure for Borrowing of Revolving Loans.................................................15
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Section 2.3 Termination of Revolving Commitments.......................................................16
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Section 2.4 Use of Proceeds............................................................................16
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Section 2.5 Extensions of Termination Date for Revolving Commitments...................................16
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ARTICLE 3. AMOUNT AND TERMS OF SWINGLINE SUB-FACILITY...........................................................17
Section 3.1 Swingline Commitment.......................................................................17
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Section 3.2 Procedure for Swingline Borrowing; Refunding of Swingline Loans............................17
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ARTICLE 4. AMOUNT AND TERMS OF LETTER OF CREDIT SUB-FACILITY....................................................18
Section 4.1 L/C Commitment.............................................................................18
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Section 4.2 Procedure for Issuance of Letter of Credit.................................................19
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Section 4.3 Fees and Other Charges.....................................................................19
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Section 4.4 L/C Participations.........................................................................20
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Section 4.5 Reimbursement Obligation of the Borrower...................................................21
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Section 4.6 Obligations Absolute.......................................................................21
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Section 4.7 Letter of Credit Payments..................................................................22
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Section 4.8 Applications...............................................................................22
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ARTICLE 5. CAF ADVANCES.........................................................................................22
Section 5.1 CAF Advances...............................................................................22
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Section 5.2 Procedure for CAF Advance Borrowing........................................................22
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Section 5.3 CAF Advance Payments.......................................................................25
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Section 5.4 Evidence of Debt...........................................................................26
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Section 5.5 Certain Restrictions.......................................................................26
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ARTICLE 6. MONEY MARKET ADVANCES................................................................................26
Section 6.1 Procedure for Borrowing of Money Market Advances...........................................26
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Section 6.2 Evidence of Money Market Advances..........................................................27
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Section 6.3 Acceleration of Money Market Advances......................................................27
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Section 6.4 Prepayment of Money Market Advances........................................................27
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Section 6.5 Money Market Advances are Not Loans........................................................28
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ARTICLE 7. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF CREDIT................................................28
Section 7.1 Repayment of Loans; Evidence of Debt.......................................................28
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Section 7.2 Facility Fee, etc. ........................................................................29
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Section 7.3 Termination or Reduction of Revolving Commitments..........................................29
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Section 7.4 Optional Prepayments.......................................................................30
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Section 7.5 Mandatory Prepayments and Commitment Reductions............................................30
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Section 7.6 Conversion and Continuation Options........................................................30
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Section 7.7 Limitations on Eurodollar Tranches.........................................................31
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Section 7.8 Interest Rates and Payment Dates...........................................................31
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Section 7.9 Computation of Interest and Fees...........................................................32
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Section 7.10 Inability to Determine Interest Rate......................................................32
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Section 7.11 Pro Rata Treatment and Payments...........................................................33
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Section 7.12 Increased Costs and Capital Requirements..................................................34
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Section 7.13 Taxes.....................................................................................36
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Section 7.14 Indemnity.................................................................................39
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Section 7.15 Additional Action in Certain Events.......................................................39
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ARTICLE 8. CONDITIONS OF COMMITMENTS............................................................................40
Section 8.1 Conditions Precedent to Closing Date.......................................................40
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Section 8.2 Conditions Precedent to Each Extension of Credit...........................................41
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ARTICLE 9. REPRESENTATIONS AND WARRANTIES.......................................................................41
Section 9.1 Organization of Credit Parties.............................................................41
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Section 9.2 Authorization of Credit Documents..........................................................41
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Section 9.3 Government Approvals.......................................................................42
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Section 9.4 No Conflicts...............................................................................42
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Section 9.5 Enforceability.............................................................................42
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Section 9.6 Title to Property..........................................................................42
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Section 9.7 Compliance with Law........................................................................42
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Section 9.8 No Litigation..............................................................................42
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Section 9.9 Subsidiaries...............................................................................43
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Section 9.10 Financial Information.....................................................................43
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Section 9.11 Margin Regulations........................................................................43
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Section 9.12 ERISA.....................................................................................43
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Section 9.13 Investment Company Act....................................................................43
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Section 9.14 Taxes.....................................................................................43
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ARTICLE 10. COVENANTS OF CREDIT PARTIES.........................................................................44
Section 10.1 Affirmative Covenants.....................................................................44
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Section 10.2 Negative Covenants........................................................................47
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ARTICLE 11. EVENTS OF DEFAULT...................................................................................50
ARTICLE 12. RELATIONSHIP OF ADMINISTRATIVE AGENT AND BANKS......................................................52
Section 12.1 Authorization and Action..................................................................52
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Section 12.2 Administrative Agent's Reliance, Etc. ....................................................53
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Section 12.3 Administrative Agent and Affiliates.......................................................54
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Section 12.4 Bank Credit Decision......................................................................54
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Section 12.5 Indemnification...........................................................................54
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Section 12.6 Successor Administrative Agent............................................................55
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ARTICLE 13. MISCELLANEOUS.......................................................................................55
Section 13.1 Notices...................................................................................55
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Section 13.2 Successors and Assigns....................................................................56
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Section 13.3 Amendments and Related Matters............................................................56
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Section 13.4 Costs and Expenses; Indemnification.......................................................57
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Section 13.5 Oral Communications.......................................................................58
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Section 13.6 Entire Agreement..........................................................................58
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Section 13.7 Governing Law.............................................................................58
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Section 13.8 Severability..............................................................................58
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Section 13.9 Counterparts..............................................................................58
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Section 13.10 Confidentiality..........................................................................58
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Section 13.11 Assignments and Participations...........................................................59
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Section 13.12 Waiver of Trial by Jury..................................................................62
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Section 13.13 Choice of Forum and Service of Process...................................................63
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Section 13.14 Remedies.................................................................................63
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Section 13.15 Right of Set-Off.........................................................................63
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Section 13.16 Effectiveness............................................................................64
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SCHEDULES
Schedule 1 Commitment Schedule and Addresses
Schedule 2 Material Subsidiaries
EXHIBITS
Exhibit A Form of Assignment and Acceptance Agreement
Exhibit B Form of Compliance Certificate
Exhibit C-1 Form of Notice of Borrowing (Drawings)
Exhibit C-2 Form of Notice of Borrowing (Continuations)
Exhibit C-3 Form of Notice of Borrowing (Conversions)
Exhibit D Form of Opinion of General Counsel to the Borrower
Exhibit E-1 Form of Revolving Credit Note
Exhibit E-2 Form of Swingline Note
Exhibit F-1 Form of CAF Advance Request
Exhibit F-2 Form of CAF Advance Offer
Exhibit F-3 Form of CAF Advance Confirmation
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AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 24,
2000, is made by and among:
(a) COMPUTER ASSOCIATES INTERNATIONAL, INC., a Delaware corporation (the
"Borrower");
(b) the Banks (as hereinafter defined);
(c) each of the Managing Agents and Co-Agents listed on the signature pages
hereto (in such capacity, the "Co-Agents");
(d) BANK OF AMERICA, N.A. and CHASE SECURITIES INC., as co-syndication
agents (in such capacity, the "Co-Syndication Agents");
(e) THE BANK OF NOVA SCOTIA, as documentation agent (in such capacity, the
"Documentation Agent"); and
(f) CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity,
the "Administrative Agent") for the Banks.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower is a party to the Credit Agreement,
dated as of May 26, 1999, the ("Existing Agreement"), with the banks and other
financial institutions parties thereto, the Co-Agents named therein, the
Co-Syndication Agents named therein and the Administrative Agent;
WHEREAS, the Borrower has requested that the Existing
Agreement be amended as set forth herein;
WHEREAS, each of the parties hereto is agreeable to the
requested amendments, but only upon the terms and subject to the conditions set
forth herein, and each of the parties hereto, for convenience of reference, has
agreed to restate the Existing Agreement as so amended;
WHEREAS, each of the Lenders and the other parties hereto are
agreeable to the terms and provisions of the Existing Agreement as amended and
restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties to the Existing Agreement agree that the
Existing Agreement shall be and hereby is amended and restated to read in its
entirety as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION
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2
Section 1.1 Defined Terms. As used herein, the following
terms shall have the following meanings:
"Administrative Agent" has the meaning assigned to that term
in the preamble hereto.
"Affiliate" means, as to any Person, any other Person directly
or indirectly controlling or controlled by or under common control with
such Person.
"Agency Office" means the office of the Administrative Agent
designated on the Commitment Schedule (which office initially shall be
located in the City of New York), or such other office of the
Administrative Agent as the Administrative Agent may from time to time
designate by notice to the Borrower and the Banks.
"Agreement" means this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Facility Fee Rate" means, at any date, the rate
per annum set forth below opposite the Public Debt Rating notified to
the Administrative Agent by the Borrower pursuant to Section
10.1(h)(vii) most recently prior to such date:
Public Debt Ratings Rate
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A-/A3 or better 0.100%
BBB+/Baa1 0.125%
BBB/Baa2 0.150%
BBB-/Baa3 0.175%
Less than BBB-/Baa3 0.200%
"Applicable Lending Office" means, with respect to each Bank,
the office of such Bank from time to time designated by such Bank to
the Borrower and the Administrative Agent as the office (or offices)
from which such Bank is funding its Loans hereunder.
"Application" means an application, in such form as the
Issuing Bank may specify from time to time, requesting the Issuing Bank
to open a Letter of Credit.
"Assignee" has the meaning ascribed thereto in Section 13.11.
"Assignment and Acceptance Agreement" means an assignment and
acceptance agreement, in compliance with Section 13.11 and
substantially in the form of Exhibit A hereto.
"Available Revolving Commitment" means, as to any Revolving
Bank at any time, an amount equal to the excess, if any, of (a) such
Revolving Bank's Revolving
<PAGE>
3
Commitment then in effect over (b) such Revolving Bank's Revolving
Extensions of Credit then outstanding.
"Bank" means a Revolving Bank, the Issuing Bank or the
Swingline Bank, as the context shall require; collectively, the
"Banks."
"Bank Holding Company" means any Person that directly or
indirectly controls any Bank.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City (or, in the case
of matters relating to Eurodollar Rate Loans or LIBO Rate CAF Advances,
on which commercial banks in New York City or London, England) are
authorized or required by law to close.
"Base Rate" means a fluctuating rate per annum which is at all
times equal to the higher of (a) the rate per annum publicly announced
by Credit Suisse First Boston from time to time as its base lending
rate for commercial loans in Dollars in the United States or (b) the
Federal Funds Rate plus a margin of 0.50 percentage points, the Base
Rate to change as and when such rates change. The base lending rate is
not necessarily the lowest rate of interest charged by Credit Suisse
First Boston in connection with extensions of credit.
"Base Rate Loan" means any Loan during any period that such
Loan is bearing interest at a rate based upon the Base Rate.
"Borrower" has the meaning assigned to that term in the
preamble hereto.
"Borrowing Date" means any Banking Day during the Commitment
Period which is specified by the Borrower as a date on which the
Borrower requests the relevant Banks to make Loans (including, without
limitation, CAF Advances) or issue a Letter of Credit hereunder.
"CAF Advance" means each CAF Advance made pursuant to Section
5.1.
"CAF Advance Availability Period" means the period from and
including the Closing Date to and including the date which is 14 days
prior to the Termination Date.
"CAF Advance Confirmation" means each confirmation by the
Borrower of its acceptance of CAF Advance Offers, which confirmation
shall be substantially in the form of Exhibit F-3 and shall be
delivered to the Administrative Agent by facsimile transmission.
"CAF Advance Interest Payment Date" means as to each CAF
Advance, each interest payment date specified by the Borrower for such
CAF Advance in the related CAF Advance Request.
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4
"CAF Advance Maturity Date" means as to any CAF Advance, the
date specified by the Borrower pursuant to Section 5.2 in its
acceptance of the related CAF Advance Offer.
"CAF Advance Offer" means each offer by a Revolving Bank to
make CAF Advances pursuant to a CAF Advance Request, which offer shall
contain the information specified in Exhibit F-2 and shall be delivered
to the Administrative Agent by telephone, immediately confirmed by
facsimile transmission.
"CAF Advance Request" means each request by the Borrower for
Revolving Banks to submit bids to make CAF Advances, which request
shall contain the information in respect of such requested CAF Advances
specified in Exhibit F-1 and shall be delivered to the Administrative
Agent in writing, by facsimile transmission, or by telephone,
immediately confirmed by facsimile transmission.
"Closing Date"means the date upon which the conditions
precedent set forth in Section 8.1 shall have been satisfied, which
date shall be May 24, 2000.
"Co-Agent" has the meaning assigned to that term in the
preamble hereto.
"Commitment" means, as to any Bank, the obligation of such
Bank to make Loans to and/or issue or participate in Letters of Credit
issued on behalf of the Borrower hereunder in an aggregate principal
and/or face amount at any one time outstanding not to exceed the amount
set forth opposite such Bank's name as its Commitment on the Commitment
Schedule, as the same may be reduced from time to time in accordance
with the terms hereof and otherwise subject to adjustment for the
effect of any one or more Assignment and Acceptance Agreements to which
such Bank may be a party.
"Commitment Period" means the period from and including the
Closing Date to the Termination Date (or such earlier date upon which
the Commitments shall terminate).
"Commitment Schedule" means the schedule attached as Schedule
1 hereto.
"Compliance Certificate" means a certificate of, and duly
executed by, a Responsible Officer of the Borrower in the form of
Exhibit B hereto.
"Confidential Information Memorandum" means the Confidential
Information Memorandum, dated April 2000, distributed with respect to
the Borrower in connection with the syndication of the Commitments.
"Consolidated EBITDA" means, for any period, the amount equal
to the Consolidated Net Income of the Borrower and its consolidated
Subsidiaries for such period plus, to the extent deducted in
calculating such Consolidated Net Income for such period, all taxes,
Consolidated Interest Expense, depreciation, amortization and other
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5
non-cash expenses and charges (including the write-offs of purchased
research and development charges) of the Borrower and its consolidated
Subsidiaries (determined on a consolidated basis in conformity with
GAAP) for such period.
"Consolidated Interest Expense" means, with respect to the
Borrower and its consolidated Subsidiaries for any period, the amount
which would be deducted for such period on account of interest expense
on the aggregate principal amount of their Debt in the determination of
Consolidated Net Income for such period.
"Consolidated Net Income" means, for any period, the net
income of the Borrower and its consolidated Subsidiaries, determined on
a consolidated basis in conformity with GAAP.
"Co-Syndication Agents" has the meaning assigned to that term
in the preamble hereto.
"Credit Documents" means this Agreement, any Notes and any
Applications.
"Debt" means, without duplication, (i) indebtedness for
borrowed money, (ii) obligations to pay the deferred purchase price of
property or services (other than trade payables arising in the ordinary
course of business which are not overdue), (iii) obligations as lessee
under leases which shall have been or should be, in accordance with
GAAP, recorded as capital leases, (iv) obligations evidenced by bonds,
debentures, notes, or equivalent instruments, (v) reimbursement
obligations in respect of drawings made under letters of credit, (vi)
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 (v) above and (vii) withdrawal liability incurred
under ERISA to any Multiemployer Plan; provided, however, that, the
term "Debt" shall not include, to the extent otherwise includable
therein, deferred taxes and deferred maintenance revenue.
"Directive" means any Law, and any directive, guideline or
requirement of any governmental authority (whether or not having the
force of law), but, if not having the force of law, the compliance with
which is in accordance with the general practice of the Person to whom
the Directive is addressed or applies.
"Documentation Agent" has the meaning assigned to that term in
the preamble hereto.
"Dollar" and "$" mean the lawful currency of the United States
of America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
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6
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a group of which the Borrower is a
member and which is under common control with the Borrower within the
meaning of the regulations under Section 414 of the IRC.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D promulgated by the Board of Governors of the Federal
Reserve System, as in effect from time to time or any successor
Directive.
"Eurodollar Base Rate" means, for each Interest Period for
each Eurodollar Rate Loan, the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m. (London, England time)
on the date which is two Banking Days prior to the beginning of the
relevant Interest Period (as specified in the applicable Notice of
Borrowing) by reference to the "British Bankers' Association Interest
Settlement Rates" for a representative amount of deposits in Dollars
(as set forth by any service selected by the Administrative Agent which
has been nominated by the British Bankers' Association as an authorized
information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period; provided that, to the extent that
an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, the "Eurodollar Base Rate" shall be the
interest rate per annum determined by the Administrative Agent to be
the average of the rates per annum at which a representative amount of
deposits in Dollars are offered for such relevant Interest Period to
major banks in the London interbank market in London, England by Credit
Suisse First Boston at approximately 11:00 a.m. (London time) on the
date which is two Banking Days prior to the beginning of such Interest
Period.
"Eurodollar Rate" means, with respect to each day during each
Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum
determined for such day in accordance with the following formula:
Eurodollar Base Rate
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1.00 - Eurodollar Rate Reserve Percentage
"Eurodollar Rate Loan" means any Loan that bears interest at
a rate based upon the Eurodollar Rate.
"Eurodollar Rate Margin" means, at any date, the rate per
annum set forth below opposite the Public Debt Rating notified to the
Administrative Agent by the Borrower pursuant to Section 10.1(h)(vii)
most recently prior to such date:
Public Debt Ratings Rate
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A-/A3 or better 0.900%
BBB+/Baa1 1.000%
BBB/Baa2 1.100%
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7
BBB-/Baa3 1.325%
Less than BBB-/Baa3 1.550%
"Eurodollar Rate Reserve Percentage" for each day for each
Eurodollar Rate Loan means the reserve percentage applicable on such
day 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) with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities having a term equal to the Interest
Period then in effect with respect to such Eurodollar Rate Loan.
"Eurodollar Tranche" means all Eurodollar Rate Loans which
have current Interest Periods beginning on the same date and ending on
the same later date (whether or not such Loans shall originally have
been made on the same day).
"Event of Default" has the meaning specified in Article 11.
"Excluded Taxes" has the meaning ascribed thereto in Section
7.13(a).
"Existing Agreement" has the meaning ascribed thereto in the
recitals hereto.
"Existing $3 Billion Agreement" means that certain $3 Billion
Credit Agreement, dated as of May 26, 1999, among the Borrower, the
banks and other financial institutions parties thereto, the Co-Agents
named therein, the Co-Syndication Agents named therein and Credit
Suisse First Boston, as administrative agent, as the same may be
amended, supplemented or otherwise modified from time to time.
"Federal Funds Rate" means, for any day, 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 on the next succeeding Banking Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day
which is a Banking Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it.
"Fixed Rate CAF Advance" means any CAF Advance made pursuant
to a Fixed Rate CAF Advance Request.
"Fixed Rate CAF Advance Request" means any CAF Advance Request
requesting the Revolving Banks to offer to make CAF Advances at a fixed
rate (as opposed to a rate composed of the LIBO Rate plus (or minus) a
margin).
"Funding Office" means the office specified from time to time
by the Administrative Agent as its funding office by notice to the
Borrower and the Banks.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time (except that for purposes
of Section 10.2(f) and (g), GAAP shall
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8
be determined on the basis of such principles used in the preparation
of the audited financial statements delivered for the fiscal year ended
on March 31, 2000). In the event that any "Accounting Change" (as
defined below) shall occur and such change results in a change in the
method of calculation of financial covenants, standards or terms in
this Agreement, then the Borrower and the Administrative Agent agree to
enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such Accounting Changes as
if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Borrower,
the Administrative Agent and the Required Banks, all financial
covenants, standards and terms in this Agreement shall continue to be
calculated or construed as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or
opinion by the Financial Accounting Standards Board of the American
Institute of Certified Public Accountants or, if applicable, the SEC.
"Granting Bank" has the meaning ascribed thereto in Section
13.11(f).
"Interest Period": with respect to any Eurodollar Rate Loan,
means:
(a) initially, the period commencing on the borrowing
or conversion date, as the case may be, with respect to such
Eurodollar Rate Loan and ending one, two, three, six, nine or
twelve months thereafter, as selected by the Borrower in its
Notice of Borrowing or notice of conversion, as the case may
be, given with respect thereto; and
(b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Rate Loan and ending one, two, three, six, nine or
twelve months thereafter, as selected by the Borrower in its
Notice of Borrowing delivered to the Administrative Agent with
respect thereto;
provided that, the foregoing provisions relating to Interest Periods
are subject to the following:
(w) if any Interest Period pertaining to a Eurodollar
Rate Loan would otherwise end on a day that is not a Banking
Day, such Interest Period shall be extended to the next
succeeding Banking Day unless the result of such extension
would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the
immediately preceding Banking Day;
(x) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date;
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9
(y) any Interest Period pertaining to a Eurodollar
Rate Loan that begins on the last Banking Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day of a
calendar month; and
(z) the Borrower shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar Rate
Loan during an Interest Period for such Loan.
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time.
"Issuing Bank" means Credit Suisse First Boston or such other
Revolving Bank as may be mutually agreed upon by the Borrower and the
Administrative Agent, in its capacity as issuer of any Letter of
Credit.
"Laws" means all federal, state, local or foreign laws, rules,
regulations and treaties, all judgments, awards, orders, writs,
injunctions or decrees issued by any federal, state, local or foreign
authority, court, tribunal, agency or other governmental authority, or
by any arbitrator, all permits, licenses, approvals, franchises,
notices, authorizations and similar filings, by or with any federal,
state, local or foreign governmental authority and all consent decrees
or regulatory agreements with any federal, state, local or foreign
governmental authority.
"L/C Fee Payment Date" means the last Banking Day of each
March, June, September and December.
"L/C Obligations" means at any time, an amount equal to the
sum of (a) the aggregate then undrawn and unexpired amount of then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 4.5.
"L/C Participants" means the collective reference to all the
Revolving Banks other than the Issuing Bank.
"Letters of Credit" has the meaning ascribed thereto in
Section 4.1(a).
"LIBO Rate" means, in respect of any LIBO Rate CAF Advance,
the London interbank offered rate for deposits in Dollars for the
period commencing on the date of such CAF Advance and ending on the CAF
Advance Maturity Date with respect thereto which appears on Telerate
Page 3750 as of 11:00 A.M., London time, two Banking Days prior to the
beginning of such period.
"LIBO Rate CAF Advance" means any CAF Advance made pursuant to
a LIBO Rate CAF Advance Request.
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10
"LIBO Rate CAF Advance Request" means any CAF Advance Request
requesting the Revolving Banks to offer to make CAF Advances at an
interest rate equal to the LIBO Rate plus (or minus) a margin.
"Liens" means any mortgage, pledge, hypothecation, assignment
for purposes of security, "blocked" account arrangement, encumbrance,
lien (statutory or other), charge or other security interest or any
preference, priority or other security agreement or preferential
arrangement (including, without limitation, any conditional sale or
other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
"Loan" means a Revolving Loan, a Swingline Loan, a CAF Advance
or a Money Market Loan, as the context shall require.
"Majority Banks" means the Banks holding Revolving Commitments
which collectively constitute more than 50% of the Total Revolving
Commitments; provided that, as of any time either (i) when an Event of
Default pursuant to clause (a) of Article 11 has occurred and is
continuing or (ii) after the last day of the Commitment Period, the
term "Majority Banks" shall mean the Banks holding more than 50% of the
Total Revolving Extensions of Credit. Notwithstanding the foregoing,
(x) for purposes of declaring the Loans and other extensions of credit
to be due and payable pursuant to Article 11, the outstanding CAF
Advances of the Revolving Banks shall be included in their respective
Revolving Extensions of Credit in determining the "Majority Banks" and
(y) for purposes of determining the "Majority Banks" at any date, the
outstanding Letters of Credit and Swingline Loans shall be deemed to be
held ratably by all Revolving Banks.
"Margin Stock" shall have the meaning assigned to such term
pursuant to Regulations T, U and X of the Board of Governors of the
Federal Reserve System.
"Material Adverse Effect" means any event, development or
circumstance that has had or could reasonably be expected to have a
material adverse effect on (a) the business, assets, property or
condition (financial or otherwise) of the Borrower and its Subsidiaries
taken as a whole, or (b) the validity or enforceability of any of the
Credit Documents or the Existing $3 Billion Agreement or the rights and
remedies of the Administrative Agent and the Banks thereunder.
"Material Subsidiary" means, at any date, any Subsidiary of
the Borrower which (a) holds any capital stock of the Borrower, (b) in
the aggregate with its Subsidiaries, has consolidated revenues for the
period of four consecutive fiscal quarters most recently ended which
are in excess of 3% of the consolidated revenues of the Borrower and
its Subsidiaries taken as a whole for such period or (c) in the
aggregate with its Subsidiaries, has consolidated assets at such date
which are material to the business of the Borrower and its Subsidiaries
taken as a whole.
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11
"Money Market Loan" means a loan by a Bank to the Borrower
pursuant to Article 6.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which 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.
"Notes" has the meaning specified in Section 7.1(e).
"Notice of Borrowing" means (a) with respect to a request for
a borrowing hereunder, a request in the form of Exhibit C-1 hereto, (b)
with respect to a request for continuation of a Eurodollar Rate Loan
hereunder, a request in the form of Exhibit C-2 hereto and (c) with
respect to a request for conversion of or to a Eurodollar Rate Loan
hereunder, a request in the form of Exhibit C-3 hereto, in each case
delivered by the Borrower to the Administrative Agent hereunder.
"Other Taxes" has the meaning ascribed thereto in Section
7.13(b).
"Person" means an individual, partnership, limited liability
company, 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.
"Plan" means a single employer plan, as defined in Section
4001(a)(15) of ERISA, which either (i) is maintained for employees of
the Borrower or an ERISA Affiliate and no Person other than the
Borrower and its ERISA Affiliate, (ii) 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 (iii) was so maintained 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.
"Public Debt Rating" means, at any date, the higher of the
ratings then assigned by S&P and Moody's to the senior, unsecured,
long-term Debt for borrowed money of the Borrower which is not
guaranteed by any other Person or otherwise subject to credit
enhancement; provided that if the ratings assigned by S&P and the
Moody's are more than one level apart, the Public Debt Rating shall
mean the rating which is one level above the lower of such S&P rating
or Moody's rating, as applicable, and provided further that if such
lower rating is BBB- or below (in the case of the S&P rating) or Baa3
or below (in the case of the Moody's rating), the Public Debt Rating
shall mean the lower of the rating assigned by S&P and Moody's.
"Refunded Swingline Loans" has the meaning ascribed thereto in
Section 3.2(b).
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12
"Refunding Date" has the meaning ascribed thereto in Section
3.2(c).
"Register" has the meaning ascribed thereto in Section 7.1(c).
"Reimbursement Obligation" means the obligation of the
Borrower to reimburse the Issuing Bank pursuant to Section 4.5 for
amounts drawn under Letters of Credit.
"Reportable Event" has the meaning assigned to that term in
Title IV of ERISA.
"Responsible Officer" means the president, chief executive
officer, chief operating officer, chief financial officer, executive
vice president, treasurer, or controller of the Borrower and such other
officer of the Borrower designated by a Responsible Officer of the
Borrower by notice delivered to the Administrative Agent.
"Revolving Bank" means each bank or other financial
institution from time to time that has a Revolving Commitment or that
holds Revolving Extensions of Credit in accordance with the terms
hereof.
"Revolving Commitment" means, as to any Revolving Bank, the
obligation of such Revolving Bank, if any, to make Revolving Loans and
participate in Swingline Loans and Letters of Credit in an aggregate
principal and/or face amount not to exceed the amount set forth under
the heading "Revolving Commitment" opposite such Revolving Bank's name
on Schedule 1 or in the Assignment and Acceptance pursuant to which
such Revolving Bank became a party hereto, as the same may be changed
from time to time pursuant to the terms hereof. The original amount of
the Total Revolving Commitments is $1,300,000,000.
"Revolving Extensions of Credit" means, as to any Revolving
Bank at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Loans held by such Revolving Bank
then outstanding, (b) such Revolving Bank's Revolving Percentage of the
L/C Obligations then outstanding and (c) such Revolving Bank's
Revolving Percentage of the aggregate principal amount of Swingline
Loans then outstanding.
"Revolving Loans" has the meaning assigned to that term in
Section 2.1.
"Revolving Percentage" means, as to any Revolving Bank at any
time, the percentage which such Revolving Bank's Revolving Commitment
then constitutes of the Total Revolving Commitments (or, at any time
after the Revolving Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Revolving
Bank's Revolving Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Loans then outstanding).
"S&P" means Standard and Poor's Ratings Service.
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13
"SPC" has the meaning ascribed thereto in Section 13.11(f).
"Subsidiary" means, as to any Person, any now existing or
hereafter organized corporation, partnership or other entity (a) in
which such Person, directly or indirectly, owns beneficially or of
record equity securities (or securities currently convertible into
equity securities) which give such Person directly or indirectly, upon
conversion, exercise or otherwise, the power to elect a majority of the
board of directors or other managers of such corporation, partnership
or other entity, or (b) the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries,
by such Person.
"Swingline Bank" means Credit Suisse First Boston, in its
capacity as the lender of Swingline Loans.
"Swingline Commitment" means the obligation of the Swingline
Bank to make Swingline Loans pursuant to Section 3.1.
"Swingline Loans" has the meaning ascribed thereto in Section
3.1.
"Swingline Participation Amount" has the meaning ascribed
thereto in Section 3.2(c).
"Tax Credit" has the meaning ascribed thereto in Section
7.13(i).
"Taxes" has the meaning ascribed thereto in Section 7.13(a).
"Termination Date" means May 23, 2001.
"Test Ratio" means, for any period, the ratio (determined by
reference to the consolidated financial statements of the Borrower and
its Subsidiaries most recently required to be delivered pursuant to
Section 10.1(h)(i) or (ii), as the case may be) of (a) the total Debt
of Borrower and its Subsidiaries on a consolidated basis on the last
day of such period to (b) Consolidated EBITDA of the Borrower and its
Subsidiaries for such period.
"Total Revolving Commitments" means, at any time, the
aggregate amount of the Revolving Commitments then in effect.
"Total Revolving Extensions of Credit" means, at any time, the
aggregate amount of the Revolving Extensions of Credit of the Revolving
Banks outstanding at such time plus the aggregate principal amount of
CAF Advances then outstanding.
"Type" means, with respect to any Loan, a Base Rate Loan or a
Eurodollar Rate Loan.
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14
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
Section 1.2 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" and the words "to" and "until"
mean "to but excluding".
Section 1.3 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
Section 1.4 No Presumption Against Any Party. Neither this
Agreement nor any uncertainty or ambiguity herein shall be construed or resolved
against any Bank or the Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by each of the
parties and their counsel and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
Section 1.5 Use of Certain Terms. Unless the context of this
Agreement requires otherwise, the plural includes the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting,
and "or" has the inclusive meaning of the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and other similar terms of this Agreement refer
to this Agreement as a whole and not exclusively to any particular provision of
this Agreement.
Section 1.6 Headings and References. Section and other
headings are for reference only, and shall not affect the interpretation or
meaning of any provision of this Agreement. Unless otherwise provided,
references to Articles, Sections, Schedules, and Exhibits shall be deemed
references to Articles, Sections, Schedules and Exhibits of this Agreement.
References to this Agreement and any other Credit Document include this
Agreement and other Credit Documents as the same may be modified, amended,
restated or supplemented from time to time pursuant to the provisions hereof or
thereof. A reference to a Person includes the successors and assigns of such
Person, but such successors and assigns shall have rights under this Agreement
only to the extent permitted hereby.
Section 1.7 Independence of Provisions. All agreements and
covenants hereunder and under the other Credit Documents shall be given
independent effect such that if a particular action or condition is prohibited
by the terms of any such agreement or covenant, the fact that such action or
condition would be permitted within the limitations of another agreement or
covenant shall not be construed as allowing such action to be taken or condition
to exist.
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15
ARTICLE 2. AMOUNT AND TERMS OF REVOLVING COMMITMENTS
Section 2.1 Revolving Commitments. Subject to the terms and
conditions hereof, each Revolving Bank severally agrees to make revolving credit
loans ("Revolving Loans") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount that will not cause (a) the
sum of the Revolving Extensions of Credit of any Revolving Bank and the
aggregate principal amount of Money Market Loans made by such Revolving Bank to
exceed the Revolving Commitment then in effect for such Revolving Bank or (b)
the Total Revolving Extensions of Credit to exceed the Total Revolving
Commitments. During the Commitment Period the Borrower may use the Revolving
Commitments by borrowing, prepaying the Revolving Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Loans may from time to time be Eurodollar Rate Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 7.6.
Section 2.2 Procedure for Borrowing of Revolving Loans. The
Borrower may borrow under the Revolving Commitments during the Commitment Period
on any Banking Day, provided that the Borrower shall give the Administrative
Agent irrevocable notice of such borrowing (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time), (a) three Banking
Days prior to the requested Borrowing Date, in the case of Eurodollar Rate
Loans, or (b) one Banking Day prior to the requested Borrowing Date, in the case
of Base Rate Loans. Such notice shall be in the form of a Notice of Borrowing,
substantially in the form of Exhibit C-1 hereto, which has been duly completed
and executed by the Borrower and shall specify (i) the amount and Type of
Revolving Loans to be borrowed, (ii) the requested Borrowing Date, (iii) in the
case of Eurodollar Rate Loans, the respective amounts of each such Type of Loan
and the respective lengths of the initial Interest Period therefor and (iv)
unless the Administrative Agent previously has been notified in writing thereof,
the Borrower's remittance instructions. Each borrowing under the Revolving
Commitments shall be in an amount equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof (or, if then aggregate Available Revolving
Commitments are less than $10,000,000, such lesser amount; provided that such
lesser amount must be borrowed as a Base Rate Loan); provided, that the
Swingline Bank may request, on behalf of the Borrower, borrowings under the
Revolving Commitments that are Base Rate Loans in other amounts pursuant to
Section 3.2(b). Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Bank thereof. Each
Revolving Bank will make the amount of its pro rata share of each borrowing
available to the Administrative Agent for the account of the Borrower at the
Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Revolving Banks and in like funds as received by the Administrative
Agent.
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16
Section 2.3 Termination of Revolving Commitments. On the last
day of the Commitment Period, the Revolving Commitments shall terminate and all
amounts outstanding thereunder shall be immediately due and payable.
Section 2.4 Use of Proceeds. The proceeds of the Revolving
Loans shall be used by the Borrower and its Subsidiaries for working capital
purposes and other general corporate purposes.
Section 2.5 Extensions of Termination Date for Revolving
Commitments. The Borrower may from time to time request that the Revolving Banks
and the Administrative Agent agree in writing to extend the Termination Date
then in effect for the Revolving Commitments to the 364th day after the Response
Date (as defined below); such request shall be received by the Administrative
Agent (which shall promptly notify the Revolving Banks thereof) at least 45 days
prior to the Termination Date then in effect. If on the 29th day prior to the
Termination Date then in effect (such 29th day being the "Response Date"), or on
such date thereafter as to which the Borrower agrees, the Administrative Agent
receives from any Revolving Bank a written acceptance of the Borrower's request,
then, effective on such 29th day or such other day, the Termination Date for the
Revolving Commitments then in effect will be so extended as to each Revolving
Bank who accepts the Borrower's request but shall not be extended as to any
other Revolving Bank; if no Revolving Bank delivers such an acceptance, then the
Borrower's request shall be deemed denied and the Termination Date for the
Revolving Commitments then in effect shall not be extended as to the
Administrative Agent or any Revolving Bank. The Administrative Agent shall
promptly notify the Borrower of the acceptances received by it. To the extent
that the Termination Date for the Revolving Commitments in effect at any time is
not extended as to any Revolving Bank pursuant to this Section 2.5 or by other
written agreement executed by such Revolving Bank before such Termination Date,
the Revolving Commitment of such Revolving Bank hereunder shall automatically
terminate in whole on the then existing Termination Date without any further
notice or other action by the Borrower, such Revolving Bank or any other Person.
It is understood that the Revolving Banks and the Administrative Agent shall
have no obligation whatsoever to agree to any request made by the Borrower for
the extension of the Termination Date for the Revolving Commitments. If a
Revolving Bank declines the Borrower's extension request, the Borrower may, at
its option: (a) designate an alternate bank (which need not be an existing Bank)
to purchase an assignment of such Bank's Revolving Commitment and all other
amounts payable to such Bank under this Agreement for a price equal to the
aggregate outstanding principal amount of the Loans (other than CAF Advances)
owing to such Revolving Bank and all accrued interest and other amounts owing on
account thereof (in which event such Bank shall cooperate in good faith with the
Borrower and such alternate bank in order to effect the prompt assignment of the
Revolving Commitment of, and amounts owing to, such Revolving Bank), or (b)
during such time as no Event of Default, or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both, has occurred and is continuing, repay all amounts (other than CAF
Advances) owing to such Revolving Bank and terminate its Revolving Commitment.
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17
ARTICLE 3. AMOUNT AND TERMS OF SWINGLINE SUB-FACILITY
Section 3.1 Swingline Commitment. Subject to the terms and
conditions hereof, the Swingline Bank agrees that it shall make swingline loans
(the "Swingline Loans") available to the Borrower from time to time during the
Commitment Period under the Revolving Commitments; provided that (i) the sum of
the aggregate then-outstanding principal amount of the Swingline Loans and the
aggregate then-outstanding amount of the L/C Obligations would not exceed
$200,000,000 and (ii) the Borrower shall not request, and the Swingline Bank
shall not make, any Swingline Loan if, after giving effect to the making of such
Swingline Loan, the Total Revolving Extensions of Credit would exceed the Total
Revolving Commitments. During the Commitment Period, the Borrower may use the
Swingline Commitment by borrowing, repaying and reborrowing, all in accordance
with the terms and conditions hereof. Swingline Loans shall be made and
maintained only as Base Rate Loans.
Section 3.2 Procedure for Swingline Borrowing; Refunding of
Swingline Loans. (a) Whenever the Borrower desires that the Swingline Bank make
Swingline Loans it shall give the Swingline Bank irrevocable telephonic notice
confirmed promptly in writing (which telephonic notice must be received by the
Swingline Bank not later than 1:00 P.M., New York City time, on the proposed
Borrowing Date). Such notice shall be in the form of a Notice of Borrowing,
substantially in the form of Exhibit C-1 hereto, which has been duly completed
and executed by the Borrower and shall specify (i) the amount to be borrowed,
(ii) the requested Borrowing Date and (iii) unless the Swingline Bank previously
has been notified in writing thereof, the Borrowers' remittance instructions.
Each borrowing under the Swingline Commitment shall be in an amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof. Not later than
3:00 P.M., New York City time, on the Borrowing Date specified in a notice in
respect of Swingline Loans, the Swingline Bank shall make available to the
Administrative Agent at the Funding Office an amount in immediately available
funds equal to the amount of the Swingline Loan to be made by the Swingline
Bank. The Administrative Agent shall make the proceeds of such Swingline Loan
available to the Borrower on such Borrowing Date by depositing such proceeds in
the account of the Borrower with the Administrative Agent on such Borrowing Date
in immediately available funds.
(b) The Swingline Bank, at any time and from time to time in
its sole and absolute discretion may, on behalf of the Borrower (which hereby
irrevocably directs the Swingline Bank to act on its behalf), on one Banking
Day's notice given by the Swingline Bank no later than 3:00 P.M., New York City
time, request each Revolving Bank to make, and each Revolving Bank hereby agrees
to make, a Revolving Loan, in an amount equal to such Revolving Bank's Revolving
Percentage of the aggregate amount of the Swingline Loans (the "Refunded
Swingline Loans") outstanding on the date of such notice, to repay the Swingline
Bank. Each Revolving Bank shall make the amount of such Revolving Loan available
to the Administrative Agent at the Funding Office in immediately available
funds, not later than 12:00 Noon, New York City time, one Banking Day after the
date of such notice. The proceeds of such Revolving Loans shall be immediately
made available by the Administrative Agent to the Swingline Bank for application
by the Swingline Bank to the repayment of the Refunded Swingline Loans.
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(c) If prior to the time a Revolving Loan would have otherwise
been made pursuant to Section 3.2(b), one of the events described in clause (f)
or (g) of Article 11 shall have occurred and be continuing with respect to the
Borrower or if for any other reason, as determined by the Swingline Bank in its
sole discretion, Revolving Loans may not be made as contemplated by Section
3.2(b), each Revolving Bank shall, on the date such Revolving Loan was to have
been made pursuant to the notice referred to in Section 3.2(b) (the "Refunding
Date"), purchase for cash an undivided participating interest in then
outstanding Swingline Loans by paying to the Swingline Bank an amount (the
"Swingline Participation Amount") equal to (i) such Revolving Bank's Revolving
Percentage times (ii) the sum of the aggregate principal amount of Swingline
Loans then outstanding that were to have been repaid with such Revolving Loans.
(d) Whenever, at any time after the Swingline Bank has
received from any Revolving Bank such Bank's Swingline Participation Amount, the
Swingline Bank receives any payment on account of the Swingline Loans, the
Swingline Bank will distribute to such Revolving Bank its Swingline
Participation Amount (appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Revolving Bank's participating
interest was outstanding and funded and, in the case of principal and interest
payments, to reflect such Revolving Bank's pro rata portion of such payment if
such payment is not sufficient to pay the principal of and interest on all
Swingline Loans then due); provided, however, that in the event that such
payment received by the Swingline Bank is required to be returned, such
Revolving Bank will return to the Swingline Bank any portion thereof previously
distributed to it by the Swingline Bank.
(e) Each Revolving Bank's obligation to make the Revolving
Loans referred to in Section 3.2(b) and to purchase participating interests
pursuant to Section 3.2(c) shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Bank or the Borrower may
have against the Swingline Bank, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of an Event of Default or the
failure to satisfy any of the other conditions specified in Article 8; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
any breach of this Agreement or any other Credit Document by the Borrower, any
of its Subsidiaries or any other Revolving Bank; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
ARTICLE 4. AMOUNT AND TERMS OF LETTER OF CREDIT SUB-FACILITY
Section 4.1 L/C Commitment. (a) Subject to the terms and
conditions hereof, each Issuing Bank, in reliance on the agreements of the other
Revolving Banks set forth in Section 4.4(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower on any Banking Day during
the Commitment Period in such form as may be approved from time to time by the
Issuing Bank; provided that such Issuing Bank shall have no obligation to issue
any Letter of Credit if, after giving effect to such issuance, (i) the sum of
the aggregate then-outstanding principal amount of the Swingline Loans and the
aggregate then-outstanding amount of the L/C Obligations would exceed
$200,000,000 or (ii) the Total Revolving
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19
Extensions of Credit would be in excess of the Total Revolving Commitment. Each
Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later
than the earlier of (x) the first anniversary of its date of issuance and (y)
the date that is five Banking Days prior to the Termination Date, provided that
any Letter of Credit with a one-year term may provide for the renewal thereof
for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) No Issuing Bank shall at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Law.
Section 4.2 Procedure for Issuance of Letter of Credit. The
Borrower may from time to time request that the applicable Issuing Bank issue a
Letter of Credit by delivering to such Issuing Bank at its address for notices
specified herein an Application therefor, completed to the satisfaction of such
Issuing Bank, and such other certificates, documents and other papers and
information as such Issuing Bank may request. Upon receipt of any Application,
such Issuing Bank will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and, after confirming with the
Administrative Agent that the provisions of the proviso to the first sentence of
Section 4.1 are then satisfied, shall promptly (and, in any event, within five
Banking Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) issue
the Letter of Credit requested thereby (but in no event shall such Issuing Bank
be required to issue any Letter of Credit earlier than two Banking Days after
its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed to by such Issuing Bank and the Borrower. Such Issuing Bank shall
furnish a copy of such Letter of Credit to the Borrower promptly following the
issuance thereof and shall promptly furnish to the Administrative Agent, which
shall in turn promptly furnish to the Revolving Banks, notice of the issuance of
each Letter of Credit (including the amount thereof); provided that, with
respect to commercial Letters of Credit, the Administrative Agent need not
furnish such notice of issuance to the Revolving Banks more frequently than once
per calendar quarter.
Section 4.3 Fees and Other Charges. (a) The Borrower will pay
a fee on all outstanding Letters of Credit for each day at a per annum rate
equal to the Eurodollar Rate Margin then in effect with respect to Eurodollar
Rate Loans hereunder times the aggregate undrawn face amounts of such Letters of
Credit on such day. Such fee shall be payable to the Administrative Agent, for
the account of the Revolving Banks, quarterly in arrears on each L/C Fee Payment
Date after the issuance date. In addition, the Borrower shall pay to the
relevant Issuing Bank for its own account a fronting fee of 0.25% per annum on
the undrawn and unexpired amount of each Letter of Credit, payable quarterly in
arrears on each L/C Fee Payment Date after the Issuance Date.
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(b) In addition to the foregoing fees, the Borrower shall pay
or reimburse the relevant Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by such Issuing Bank in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
Section 4.4 L/C Participations. (a) Each Issuing Bank
irrevocably agrees to grant and hereby grants to each L/C Participant, and, to
induce each Issuing Bank to issue Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from each Issuing Bank, on the terms and conditions hereinafter
stated, for such L/C Participant's own account and risk an undivided interest
equal to such L/C Participant's Revolving Percentage in such Issuing Bank's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each draft paid by such Issuing Bank thereunder. Each L/C Participant
unconditionally and irrevocably agrees with each Issuing Bank that, if a draft
is paid under any Letter of Credit for which such Issuing Bank is not reimbursed
in full by the Borrower in accordance with the terms of this Agreement, such L/C
Participant shall pay to such Issuing Bank upon demand at such Issuing Bank's
address for notices specified herein an amount equal to such L/C Participant's
Revolving Percentage of the amount of such draft, or any part thereof, that is
not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to an Issuing Bank pursuant to Section 4.4(a) in respect of any unreimbursed
portion of any payment made by such Issuing Bank under any Letter of Credit is
paid to such Issuing Bank within three Banking Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Rate during the period from and including the date such payment is
required to the date on which such payment is immediately available to such
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
4.4(a) is not made available to the relevant Issuing Bank by such L/C
Participant within three Banking Days after the date such payment is due, such
Issuing Bank shall be entitled to recover from such L/C Participant, on demand,
such amount with interest thereon calculated from such due date at the rate per
annum applicable to Base Rate Loans hereunder. A certificate of the relevant
Issuing Bank submitted to any L/C Participant with respect to any amounts owing
under this Section shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after an Issuing Bank has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with Section 4.4(a), such Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by such Issuing Bank), or any payment of interest on account thereof, such
Issuing Bank will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by such
Issuing Bank shall be required to be returned by such Issuing Bank, such L/C
Participant shall return to such Issuing Bank the portion thereof previously
distributed by such Issuing Bank to it.
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21
Section 4.5 Reimbursement Obligation of the Borrower. The
Borrower agrees to reimburse each Issuing Bank on each date on which such
Issuing Bank notifies the Borrower (or on the immediately following Banking Day
if the Issuing Bank notifies the Borrower after 11:00 A.M., New York City time)
of the date and amount of a draft presented under any Letter of Credit issued
and paid by such Issuing Bank (a "Reimbursement Notice") for the amount of (a)
such draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by such Issuing Bank in connection with such payment (the amounts
described in the foregoing clauses (a) and (b) in respect of any drawing,
collectively, the "Payment Amount"). Each such payment shall be made to such
Issuing Bank at its address for notices specified herein in lawful money of the
United States of America and in immediately available funds. Interest shall be
payable on each Payment Amount from the date of the applicable drawing until
payment in full at the rate set forth in (i) until the third Banking Day
following the date of the applicable drawing, Section 7.8(b) and (ii)
thereafter, Section 7.8(c). Each drawing under any Letter of Credit shall
(unless (x) an event of the type described in clause (f) or (g) of Article 11
shall have occurred and be continuing with respect to the Borrower, in which
case the procedures specified in Section 4.4 for funding by L/C Participants
shall apply or (y) the Borrower notifies the Administrative Agent and the
Issuing Bank on the date of the Borrower's receipt of the relevant Reimbursement
Notice that the Borrower intends to provide the reimbursement contemplated by
this Section 4.5 with other sources of funds) constitute a request by the
Borrower to the Administrative Agent for a borrowing pursuant to Section 2.2 of
Base Rate Loans (or, at the option of the Borrower, a borrowing pursuant to
Section 3.2 of Swingline Loans) in the amount of such drawing. The Borrowing
Date with respect to such borrowing shall be the first date on which a borrowing
of Revolving Credit Loans (or, if applicable, Swingline Loans) could be made,
pursuant to Section 2.2 (or, if applicable, Section 3.2), if the Administrative
Agent had received a notice of such borrowing at the time the Administrative
Agent delivers the applicable Reimbursement Notice.
Section 4.6 Obligations Absolute. The Borrower's obligations
under this Article 4 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
that the Borrower may have or have had against the relevant Issuing Bank, any
beneficiary of a Letter of Credit or any other Person. The Borrower also agrees
with each Issuing Bank that such Issuing Bank shall not be responsible for, and
the Borrower's Reimbursement Obligations under Section 4.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. No Issuing Bank
shall be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit issued by it, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
such Issuing Bank. The Borrower agrees that any action taken or omitted by an
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in
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22
the Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of such Issuing Bank to the
Borrower.
Section 4.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the relevant Issuing Bank
shall promptly notify the Borrower of the date and amount thereof. The
responsibility of such Issuing Bank to the Borrower in connection with any draft
presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are substantially in
conformity with such Letter of Credit.
Section 4.8 Applications. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent with the
provisions of this Article 4, the provisions of this Article 4 shall apply.
ARTICLE 5. CAF ADVANCES
Section 5.1 CAF Advances. Subject to the terms and conditions
of this Agreement, the Borrower may borrow CAF Advances from time to time under
the Total Revolving Commitment on any Banking Day during the CAF Advance
Availability Period. CAF Advances may be borrowed in amounts such that the Total
Revolving Extensions of Credit at any time shall not exceed the Total Revolving
Credit Commitments at such time. Within the limits and on the conditions
hereinafter set forth with respect to CAF Advances, the Borrower from time to
time may borrow, repay and reborrow CAF Advances.
Section 5.2 Procedure for CAF Advance Borrowing. (a) The
Borrower shall request CAF Advances by delivering a CAF Advance Request to the
Administrative Agent, not later than 12:00 Noon (New York City time) four
Banking Days prior to the proposed Borrowing Date (in the case of a LIBO Rate
CAF Advance Request), and not later than 10:00 A.M. (New York City time) one
Banking Day prior to the proposed Borrowing Date (in the case of a Fixed Rate
CAF Advance Request). Each CAF Advance Request in respect of any Borrowing Date
may solicit bids for CAF Advances on such Borrowing Date in an aggregate
principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and having not more than three alternative CAF Advance Maturity Dates.
The CAF Advance Maturity Date for each CAF Advance shall be the date set forth
therefor in the relevant CAF Advance Request, which date shall be (i) not less
than 14 days after the Borrowing Date therefor, in the case of a Fixed Rate CAF
Advance, (ii) one, two, three or six months (or such longer period as the
Borrower may elect in the relevant CAF Advance Request) after the Borrowing Date
therefor, in the case of a LIBO CAF Advance and (iii) not later than the
Termination Date, in the case of any CAF Advance. The Administrative Agent shall
notify each Revolving Bank by facsimile transmission of the contents of each CAF
Advance Request received by the Administrative Agent.
(b) In the case of a LIBO Rate CAF Advance Request, upon
receipt of notice from the Administrative Agent of the contents of such CAF
Advance Request, each Revolving
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23
Bank may elect, in its sole discretion, to offer irrevocably to make one or more
CAF Advances at the applicable LIBO Rate plus (or minus) a margin determined by
such Revolving Bank in its sole discretion for each such CAF Advance. Any such
irrevocable offer shall be made by delivering a CAF Advance Offer to the
Administrative Agent, before 10:30 A.M. (New York City time) on the day that is
three Banking Days before the proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date and the aggregate maximum amount of CAF Advances for all
CAF Advance Maturity Dates which such Revolving Bank would be willing
to make (which amounts may, subject to Section 5.1, exceed such
Revolving Bank's Revolving Commitment); and
(ii) the margin above or below the applicable LIBO Rate at
which such Revolving Bank is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 11:00 A.M. (New York
City time) on the date which is three Banking Days before the proposed Borrowing
Date of the contents of each such CAF Advance Offer received by it. If the
Administrative Agent, in its capacity as a Revolving Bank, shall elect, in its
sole discretion, to make any such CAF Advance Offer, it shall advise the
Borrower of the contents of its CAF Advance Offer before 10:15 A.M. (New York
City time) on the date which is three Banking Days before the proposed Borrowing
Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon
receipt of notice from the Administrative Agent of the contents of such CAF
Advance Request, each Revolving Bank may elect, in its sole discretion, to offer
irrevocably to make one or more CAF Advances at a rate of interest determined by
such Revolving Bank in its sole discretion for each such CAF Advance. Any such
irrevocable offer shall be made by delivering a CAF Advance Offer to the
Administrative Agent before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance
Maturity Date, and the aggregate maximum amount for all CAF Advance
Maturity Dates, which such Revolving Bank would be willing to make
(which amounts may, subject to Section 5.1, exceed such Revolving
Bank's Revolving Commitment; and
(ii) the rate of interest at which such Revolving Bank is
willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 10:00 A.M. (New York
City time) on the proposed Borrowing Date of the contents of each such CAF
Advance Offer received by it. If the Administrative Agent, in its capacity as a
Revolving Bank, shall elect, in its sole discretion, to make any such CAF
Advance Offer, it shall advise the Borrower of the contents of its CAF Advance
Offer before 9:15 A.M. (New York City time) on the proposed Borrowing Date.
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24
(d) Before 12:00 Noon (New York City time) three Banking Days
before the proposed Borrowing Date (in the case of CAF Advances requested by a
LIBO Rate CAF Advance Request) and before 11:00 A.M. (New York City time) on the
proposed Borrowing Date (in the case of CAF Advances requested by a Fixed Rate
CAF Advance Request), the Borrower, in its absolute discretion, shall:
(i) cancel such CAF Advance Request by giving the
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a CAF
Advance Confirmation by facsimile transmission) (A) subject to the
provisions of Section 5.2(e), accept one or more of the offers made by
any Revolving Bank or Revolving Banks pursuant to Section 5.2(b) or
Section 5.2(c), as the case may be, and (B) reject any remaining offers
made by Revolving Banks pursuant to Section 5.2(b) or Section 5.2(c),
as the case may be.
(e) The Borrower's acceptance of CAF Advances in response to
any CAF Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance
Maturity Date specified by any Revolving Bank in its CAF Advance Offer
shall not exceed the maximum amount for such CAF Advance Maturity Date
specified in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all CAF
Advance Maturity Dates specified by any Revolving Bank in its CAF
Advance Offer shall not exceed the aggregate maximum amount specified
in such CAF Advance Offer for all such CAF Advance Maturity Dates;
(iii) the Borrower may not accept offers for CAF Advances for
any CAF Advance Maturity Date in an aggregate principal amount in
excess of the maximum principal amount requested in the related CAF
Advance Request; and
(iv) if the Borrower accepts any of such offers, it must
accept offers based solely upon pricing for each relevant CAF Advance
Maturity Date and upon no other criteria whatsoever, and if two or more
Revolving Banks submit offers for any CAF Advance Maturity Date at
identical pricing and the Borrower accepts any of such offers but does
not wish to (or, by reason of the limitations set forth in Section 5.1,
cannot) borrow the total amount offered by such Revolving Banks with
such identical pricing, the Borrower shall accept offers from all of
such Revolving Banks in amounts allocated among them pro rata according
to the amounts offered by such Revolving Banks (with appropriate
rounding, in the sole discretion of the Borrower, to assure that each
accepted CAF Advance is an integral multiple of $1,000,000); provided
that if the number of Revolving Banks that submit offers for any CAF
Advance Maturity Date at identical pricing is such that, after the
Borrower accepts such offers pro rata in accordance with the foregoing
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25
provisions of this paragraph, the CAF Advance to be made by any such
Revolving Bank would be less than $5,000,000 principal amount, the
number of such Revolving Banks shall be reduced by the Administrative
Agent by lot until the CAF Advances to be made by each such remaining
Revolving Bank would be in a principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof.
(f) If the Borrower notifies the Administrative Agent that a
CAF Advance Request is cancelled pursuant to Section 5.2(d)(i), the
Administrative Agent shall give prompt telephone notice thereof to the Revolving
Banks.
(g) If the Borrower accepts pursuant to Section 5.2(d)(ii) one
or more of the offers made by any Revolving Bank or Revolving Banks, the
Administrative Agent promptly shall notify each Revolving Bank which has made
such an offer of (i) the aggregate amount of such CAF Advances to be made on
such Borrowing Date for each CAF Advance Maturity Date and (ii) the acceptance
or rejection of any offers to make such CAF Advances made by such Revolving
Bank. Before 12:00 Noon (New York City time) on the Borrowing Date specified in
the applicable CAF Advance Request, each Revolving Bank whose CAF Advance Offer
has been accepted shall make available to the Administrative Agent at its office
set forth in Section 13.1 the amount of CAF Advances to be made by such
Revolving Bank, in immediately available funds. The Administrative Agent will
make such funds available to the Borrower as soon as practicable on such date at
such office of the Administrative Agent. As soon as practicable after each
Borrowing Date, the Administrative Agent shall notify each Revolving Bank of the
aggregate amount of CAF Advances advanced on such Borrowing Date and the
respective CAF Advance Maturity Dates thereof.
Section 5.3 CAF Advance Payments. (a) The Borrower shall pay
to the Administrative Agent, for the account of each Revolving Bank which has
made a CAF Advance, on the applicable CAF Advance Maturity Date the then unpaid
principal amount of such CAF Advance. The Borrower shall not have the right to
prepay any principal amount of any CAF Advance without the consent of the
Revolving Bank to which such CAF Advance is owed.
(b) The Borrower shall pay interest on the unpaid principal
amount of each CAF Advance from the Borrowing Date to applicable CAF Advance
Maturity Date at the rate of interest specified in the CAF Advance Offer
accepted by the Borrower in connection with such CAF Advance (calculated on the
basis of a (i) 360-day year for actual days elapsed, in the case of LIBO Rate
CAF Advances and (ii) 365/6-day year for actual days elapsed, the case of Fixed
Rate CAF Advances), payable on each applicable CAF Advance Interest Payment
Date.
(c) If any principal of, or interest on, any CAF Advance shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such CAF Advance shall, without limiting any rights of any Revolving
Bank under this Agreement, bear interest from the date on which such payment was
due at a rate per annum which is 2% above the rate which would otherwise be
applicable to such CAF Advance until the stated CAF Advance Maturity Date of
such CAF Advance, and for each day thereafter at a rate per annum which is 2%
above
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26
the Base Rate, in each case until paid in full (as well after as before
judgment). Interest accruing pursuant to this paragraph (c) shall be payable
from time to time on demand.
Section 5.4 Evidence of Debt. The Borrower unconditionally
promises to pay to the Administrative Agent, for the account of each Revolving
Bank that makes a CAF Advance, on the CAF Advance Maturity Date with respect
thereto, the principal amount of such CAF Advance. The Borrower further
unconditionally promises to pay interest on each such CAF Advance for the period
from and including the Borrowing Date of such CAF Advance on the unpaid
principal amount thereof from time to time outstanding at the applicable rate
per annum determined as provided in, and payable as specified in, Section
5.3(b). Each Revolving Bank shall maintain in accordance with its usual practice
appropriate records evidencing indebtedness of the Borrower to such Revolving
Bank resulting from each CAF Advance of such Revolving Bank from time to time,
including the amounts of principal and interest payable and paid to such
Revolving Bank from time to time in respect of such CAF Advance. The
Administrative Agent shall maintain the Register pursuant to Section 7.1(c), and
a record therein for each Revolving Bank, in which shall be recorded (i) the
amount of each CAF Advance made by such Revolving Bank, the CAF Advance Maturity
Date thereof, the interest rate applicable thereto and each CAF Advance Interest
Payment Date applicable thereto, and (ii) the amount of any sum received by the
Administrative Agent hereunder from the Borrower on account of such CAF Advance.
The entries made in the Register and the records of each Revolving Bank
maintained pursuant to this Section 5.4 shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Revolving Bank or the Administrative Agent to maintain the
Register or any such record, or any error therein, shall not in any manner
affect the obligation of the Borrower to repay (with applicable interest) the
CAF Advances made by such Revolving Bank in accordance with the terms of this
Agreement.
Section 5.5 Certain Restrictions. A CAF Advance Request may
request offers for CAF Advances to be made on not more than one Borrowing Date
and to mature on not more than three CAF Advance Maturity Dates. No CAF Advance
Request may be submitted earlier than five Banking Days after submission of any
other CAF Advance Request.
ARTICLE 6. MONEY MARKET ADVANCES
Section 6.1 Procedure for Borrowing of Money Market Advances.
(a) The Borrower (directly or through an agent or representative) may at any
time and from time to time request any one or more of the Banks to make offers
to make Money Market Loans to the Borrower on any Banking Day during the
Commitment Period in the manner set forth below. Each such Bank may, but shall
have no obligation to, make such offer, and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Article 6.
(b) In the event that the Borrower desires to borrow a Money
Market Loan from a Bank, the Borrower (directly or through an agent or
representative) shall request that such
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27
Bank provide a quotation to the Borrower of the terms under which such Bank
would be willing to provide such Money Market Loan.
(c) In the event that the Borrower elects to accept a Bank's
offer for a Money Market Loan, the Borrower (directly or through an agent or
representative) shall provide telephonic notice to such Bank of its election by
no later than 90 minutes after the time that such offer was received by the
Borrower. The failure of the Borrower to provide such notice of acceptance in a
timely manner shall be deemed to constitute a rejection of the offer of such
Bank. Any Money Market Loan to be made by a Bank pursuant to this Article 6
shall be made by the Bank crediting an account specified by the Borrower with
the amount of such advance in same day funds promptly upon receipt of the
Borrower's timely acceptance of the offer of such Bank with respect to such
Money Market Loan.
(d) Each Bank that shall make a Money Market Loan pursuant to
this Section 6.1 shall promptly notify the Administrative Agent of the amount
and term of such Money Market Loan.
Section 6.2 Evidence of Money Market Advances. The Borrower
agrees to forward to the Bank with respect to a Money Market Loan written
evidence of such Money Market Loan by providing, on the date upon which such
Money Market Loan is made, documents, in form and substance reasonably
acceptable to both the Borrower and such Bank, executed and delivered by a duly
authorized officer of the Borrower, confirming the amount so borrowed, the rate
of interest applicable thereto and the maturity thereof (with such Money Market
Loan being due and payable on such date of maturity); provided that the failure
of the Borrower to provide such documents shall not impair the obligation of the
Borrower to repay any Money Market Loan borrowed by it. All borrowings pursuant
to this Article shall bear interest at the rate (or upon the basis, as the case
may be) quoted to the Borrower by the relevant Bank in its quotation described
in Section 6.1(b) above, regardless of any change in the interest rate between
the time of quoting and the time of borrowing.
Section 6.3 Acceleration of Money Market Advances. Upon the
occurrence and during the continuance of an Event of Default, each Bank that has
Money Market Loans outstanding may declare its Money Market Loans (with any
applicable interest thereon) to be immediately due and payable without the
consent of, or notice to, any other Bank; provided that if such event is an
Event of Default specified in clause (f) or (g) of Article 11 with respect to
the Borrower, such Bank's Money Market Loans (and any applicable interest
thereon) shall automatically become immediately due and payable.
Section 6.4 Prepayment of Money Market Advances. In the event
that the availability under any Revolving Bank's Revolving Commitment has been
reduced on account of Money Market Loans made by it to a level that is
insufficient to permit such Revolving Bank to lend its ratable share of any
Revolving Loan requested to be made hereunder, the Borrower shall repay such
Revolving Bank's outstanding Money Market Loans simultaneously with or prior to
the borrowing of such Revolving Loans (which repayment may be financed with
proceeds of such Revolving Loans and shall be subject to the provisions of
Section 7.14) by the amount
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28
necessary to cause its Available Revolving Commitment (before giving effect to
the borrowing of such Revolving Loan, but after giving effect to the application
of proceeds thereof) to be at least equal to its ratable share of any such
Revolving Loan.
Section 6.5 Money Market Advances are Not Loans. (a) The
Borrower and any Bank may at any time and from time to time enter into written
agreements that provide for procedures for soliciting and extending Money Market
Loans that differ from those specified in this Article 6 (other than the
provisions of Sections 6.1(d), 6.4 and 6.5(b) hereof, which shall apply to each
Money Market Loan). As between the Borrower and such Bank such agreements shall
supersede the provisions of such paragraphs to the extent specified therein.
(b) Notwithstanding anything to the contrary contained herein,
Money Market Loans shall be deemed not to be extensions of credit under this
Agreement or under the Notes and the rights and obligations of the Borrower in
respect of Money Market Loans shall be deemed not to be rights and obligations
of the Borrower hereunder or under the Notes; provided that Money Market Loans
shall be considered to be extensions of credit under this Agreement for purposes
of calculating the availability under any Revolving Bank's Revolving Commitment.
ARTICLE 7. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF CREDIT
Section 7.1 Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of the appropriate Revolving Bank or the Swingline Bank, as the case
may be, (i) the then unpaid principal amount of each Revolving Loan of such
Revolving Bank on the Termination Date (or on such earlier date on which the
Loans become due and payable in accordance with the terms of this Agreement) and
(ii) the then unpaid principal amount of each Swingline Loan of the Swingline
Bank on the Termination Date (or on such earlier date on which the Loans become
due and payable in accordance with the terms of this Agreement). The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 7.8.
(b) Each Bank shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Bank resulting from each Loan of such Bank from time to time, including the
amounts of principal and interest payable and paid to such Bank from time to
time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower,
shall maintain at its Agency Office register (the "Register") for the
recordation of the names and addresses of the Banks, and the Register shall
contain a subaccount therein for each Bank, in which shall be recorded (i) the
amount of each Loan made hereunder and any Note evidencing such Loan, the Type
of such Loan and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Bank hereunder and (iii) both the amount of any sum received by
the Administrative Agent
<PAGE>
29
hereunder from the Borrower and each Bank's share thereof. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Banks shall treat each Person whose
name is recorded in the Register as the owner of the Loans, L/C Obligations and
any Notes evidencing such Loans recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Bank (with respect to any entry relating to such Bank's Loans and other
extensions of credit) at any reasonable time and from time to time upon
reasonable prior notice.
(d) The entries made in the Register and the accounts of each
Bank maintained pursuant to Section 7.1(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Bank or the Administrative Agent to maintain the Register or any
such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Bank in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Bank (which request shall be delivered to
Administrative Agent (A) within 45 days following the date hereof, in the case
of a Bank which is a party hereto on the date hereof, (B) within 30 days
following the recording of the relevant Assignment and Acceptance Agreement, in
the case of any Assignee or (C) in either case, within any longer period as the
Administrative Agent and the Borrower shall agree), the Borrower will execute
and deliver to such Bank a promissory note of the Borrower evidencing any
Revolving Loans or Swingline Loans, as applicable, of such Bank, substantially
in the forms of Exhibit E-1 or E-2, respectively (collectively, the "Notes"),
with appropriate insertions as to date and principal amount; provided that
(unless the Borrower and the Administrative Agent otherwise agree) no Notes
shall be delivered to the Banks until the date which is 90 days after the date
hereof.
Section 7.2 Facility Fee, etc. (a) The Borrower hereby agrees
to pay to the Administrative Agent, for the ratable account of the Revolving
Banks, a facility fee for each day in the amount equal to the Applicable
Facility Fee Rate in effect on such day times the amount of the Total Revolving
Commitments (regardless of the utilization thereof) on such day. Such facility
fee shall accrue from and after the Closing Date and shall be payable quarterly,
in arrears, on each L/C Fee Payment Date and on the Termination Date.
(b) The Borrower agrees to pay to the Administrative Agent the
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Administrative Agent.
Section 7.3 Termination or Reduction of Revolving Commitments.
The Borrower shall have the right, upon not less than three Banking Days' notice
to the Administrative Agent, to terminate the Revolving Commitments or, from
time to time, to reduce the amount of the Revolving Commitments; provided that
no such termination or reduction of Revolving Commitments shall be permitted if,
after giving effect thereto and to any prepayments of the Revolving Loans and
Swingline Loans made on the effective date thereof, (x) the Total
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Revolving Extensions of Credit would exceed the Total Revolving Commitments or
(y) the Available Revolving Commitment of any Revolving Bank would be less than
zero. Any such reduction shall be in an amount equal to $10,000,000, or a whole
multiple of $1,000,000 in excess thereof, and shall reduce permanently the
Revolving Commitments then in effect.
Section 7.4 Optional Prepayments. The Borrower may at any time
and from time to time prepay the Loans (other than CAF Advances, which may be
prepaid only with the consent of the Revolving Bank to which such CAF Advance is
owed), in whole or in part, without premium or penalty, upon irrevocable notice
delivered to the Administrative Agent at least three Banking Days prior thereto
in the case of Eurodollar Rate Loans and at least one Banking Day prior thereto
in the case of Base Rate Loans, which notice shall specify (a) the date and
amount of prepayment, (b) whether the prepayment is of Eurodollar Rate Loans or
Base Rate Loans and (c) if such prepayment is of Eurodollar Rate Loans and the
Borrower so elects, the particular Eurodollar Tranches to be so prepaid;
provided, that if a Eurodollar Rate Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto, the Borrower shall also pay
any amounts owing pursuant to Section 7.14. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Bank thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of
Revolving Loans that are Base Rate Loans and Swingline Loans) accrued interest
to such date on the amount prepaid. Partial prepayments of Revolving Loans shall
be in an aggregate principal amount of $10,000,000 or a whole multiple of
$1,000,000 in excess thereof. Partial prepayments of Swingline Loans shall be in
an aggregate principal amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof.
Section 7.5 Mandatory Prepayments and Commitment Reductions.
On the last day of the Commitment Period, the Commitments shall terminate and
(unless such termination occurs pursuant to Article 11 of this Agreement, in
which case the provisions of such Article 11 shall govern) all principal,
interest and other amounts owing hereunder shall be immediately due and payable.
Section 7.6 Conversion and Continuation Options. (a) Subject
to the provisions of Section 7.7, the Borrower may elect from time to time to
convert any amount of Eurodollar Rate Loans to Base Rate Loans by delivering a
Notice of Borrowing (substantially in the form of Exhibit C-3) to Agent prior to
12:00 Noon, New York City time, at least one Banking Day prior to the requested
date of conversion. Subject to the provisions of Section 7.7, the Borrower may
elect from time to time to convert any amount of Base Rate Loans (other than
Swingline Loans) to Eurodollar Rate Loans by delivering a Notice of Borrowing
(substantially in the form of Exhibit C-3) to Agent prior to 12:00 Noon, New
York City time, at least three Banking Days' prior to the requested date of
conversion. Any such Notice of Borrowing with respect to a conversion to
Eurodollar Rate Loans shall be irrevocable and shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
Notice of Borrowing, Agent shall promptly notify each affected Bank thereof. All
or any part of outstanding Eurodollar Rate Loans and Base Rate Loans may be
converted as provided herein, provided that no Base Rate Loan may be converted
into a Eurodollar Rate Loan when any Event of Default has
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31
occurred and is continuing and the Administrative Agent has or the Majority
Banks have determined that such a conversion is not appropriate.
(b) Subject to the provisions of Section 7.7, any Eurodollar
Rate Loan may be continued as such upon the expiration of then current Interest
Period with respect thereto by the Borrower delivering a Notice of Borrowing
(substantially in the form of Exhibit C-2) to the Administrative Agent, prior to
12:00 Noon (New York City time) on the third Banking Day prior to the last day
of then current Interest Period, specifying the length of the next Interest
Period to be applicable to such Loans, provided that no Eurodollar Rate Loan may
be continued as such when any Event of Default has occurred and is continuing
and the Administrative Agent has or the Majority Banks have determined that such
a continuation is not appropriate and provided, further, that if the Borrower
shall fail to give such notice or if such continuation is not permitted such
Eurodollar Rate Loans shall be automatically converted to Base Loans on the last
day of such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each affected Bank thereof.
Section 7.7 Limitations on Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions and continuations of Eurodollar Rate Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, (a) after giving effect thereto, the
aggregate principal amount of the Eurodollar Rate Loans comprising each
Eurodollar Tranche shall be equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof and (b) no more than 15 Eurodollar Tranches shall
be outstanding at any one time.
Section 7.8 Interest Rates and Payment Dates. (a) Each
Eurodollar Rate Loan shall bear interest for each day during each Interest
Period with respect thereto at a rate per annum equal to the Eurodollar Rate
determined for such day plus the Eurodollar Rate Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate.
(c) (i) If all or a portion of the principal amount of any
Loan or Reimbursement Obligation shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to (x) in the case of the Loans, the rate
that would otherwise be applicable thereto pursuant to the foregoing provisions
of this Section plus 2% or (y) in the case of Reimbursement Obligations, the
rate applicable to Base Rate Loans plus 2%, and (ii) if all or a portion of any
interest payable on any Loan or Reimbursement Obligation or any facility fee or
other amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum equal to the rate then applicable to Base Rate Loans plus
2%, in each case, with respect to clauses (i) and (ii) above, from the date of
such non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on (i) with respect
to any Base Rate Loan, the last day of each March, June, September and December
to occur while such Loan is
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32
outstanding and the Termination Date, (ii) with respect to any Eurodollar Rate
Loan having an Interest Period of three months or shorter, the last day of such
Interest Period, (iii) with respect to any Eurodollar Rate Loan having an
Interest Period longer than three months, each day that is three months, or a
whole multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period and (iv) as to any Loan (other than any Revolving
Credit Loan that is a Base Rate Loan and any Swingline Loan), the date of any
repayment or prepayment made in respect thereof. Notwithstanding the foregoing,
interest accruing pursuant to paragraph (c) of this Section shall be payable
from time to time on demand.
Section 7.9 Computation of Interest and Fees. (a) Interest
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to Base Rate Loans the rate
of interest on which is calculated on the basis of the Prime Rate, the interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed. Fees and other amounts payable hereunder
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Banks of each determination of
a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Banks of the effective date and the amount of each
such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Banks in the absence of manifest
error. The Administrative Agent shall, at the request of the Borrower, deliver
to the Borrower a statement showing the quotations used by the Administrative
Agent in determining any interest rate pursuant to Section 7.8(a).
Section 7.10 Inability to Determine Interest Rate. If prior
to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Banks which will hold a majority in principal amount of the Loans
to which such Interest Period is to apply that the Eurodollar Rate
determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Banks (as conclusively
certified by such Banks) of making or maintaining their affected Loans
during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Banks as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Rate Loans under the relevant Facility
requested to be made on the first day of such Interest Period
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33
shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that
were to have been converted on the first day of such Interest Period to
Eurodollar Rate Loans shall be continued as Base Rate Loans and (z) any
outstanding Eurodollar Rate Loans under the relevant Facility shall be
converted, on the last day of then-current Interest Period, to Base Rate Loans.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Rate Loans under the relevant Facility shall be made or continued as
such, nor shall the Borrower have the right to convert Loans under the relevant
Facility to Eurodollar Rate Loans.
Section 7.11 Pro Rata Treatment and Payments. (a) Each
borrowing by the Borrower from the Banks hereunder, each payment by the Borrower
on account of any facility fee and any reduction of the Commitments of the Banks
shall be made pro rata according to the respective Revolving Percentages of the
relevant Banks.
(b) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Revolving Loans shall be made pro
rata according to the respective outstanding principal amounts of the Revolving
Loans then held by the Revolving Banks.
(c) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the relevant Banks, at the Funding Office, in Dollars
and in immediately available funds. The Administrative Agent shall distribute
such payments to the relevant Banks promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on the Eurodollar Rate
Loans) becomes due and payable on a day other than a Banking Day, such payment
shall be extended to the next succeeding Banking Day. If any payment on a
Eurodollar Rate Loan becomes due and payable on a day other than a Banking Day,
the maturity thereof shall be extended to the next succeeding Banking Day unless
the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Banking Day. In the case of any extension of any payment of principal
pursuant to the preceding two sentences, interest thereon shall be payable at
then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified
in writing by any Bank prior to a borrowing that such Bank will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Bank is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Bank shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Rate for the period until such
Bank makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Bank with respect to
any amounts owing under this paragraph shall be conclusive in the absence of
manifest error. If such Bank's share of such borrowing is not made available to
the Administrative Agent
<PAGE>
34
by such Bank within three Banking Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to Base Rate Loans under the relevant
Facility, on demand, from the Borrower. The failure of any Bank to make the Loan
to be made by it on any date shall not relieve any other Bank of its obligation,
if any, hereunder to make its Loan on such date, but no Bank shall be
responsible for the failure of any other Bank to make any Loan to be made by
such other Bank.
(e) Unless the Administrative Agent shall have been notified
in writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Banks their respective pro rata shares of
a corresponding amount. If such payment is not made to the Administrative Agent
by the Borrower within three Banking Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Bank to
which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Rate. Nothing herein shall be deemed to limit the rights
of the Administrative Agent or any Bank against the Borrower.
Section 7.12 Increased Costs and Capital Requirements. (a) In
the event that at any time or from time to time after the date of this
Agreement, any Directive, or a change in any existing or future Directive
(including any change resulting from the operation of any transitional or
phase-in requirements), or in the interpretation or application thereof by any
governmental or judicial authority, or any action pursuant thereto, or
compliance by the Administrative Agent or any Bank or any Bank Holding Company
with any request or Directive imposed or modified by any central bank or by any
other financial, monetary or other governmental authority:
(i) shall (A) impose, increase, modify or apply any reserve
(including basic, supplemental, marginal and emergency reserves, but
excluding reserve requirements which are expressly included in the
determination of any interest rate pursuant to the provisions hereof),
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities with or for the account of,
or credit extended by, or any other acquisition of funds by, any office
of the Administrative Agent, any Bank or any Bank Holding Company; or
(B) impose on the Administrative Agent, any Bank or any Bank Holding
Company any fee, charge, tax (other than "Taxes," "Other Taxes," and
"Excluded Taxes" subject to the provisions of Section 7.13) or
condition with respect to this Agreement, any Note, any Application,
any Letter of Credit, any Commitment or any part thereof, or any sums
outstanding or payable hereunder or thereunder; and the result of any
of the foregoing is to increase the cost to the Administrative Agent,
any Bank or any Bank Holding Company of making or maintaining such
Commitment, or any Eurodollar Rate Loan or Letter of Credit or to
reduce the amount of any sum received or receivable with respect to
such Commitment, any Eurodollar Rate Loan, any Letter of Credit or any
interest, fees or other sums payable hereunder or under any Note by an
amount deemed by such Bank to be
<PAGE>
35
material, then within ten Banking Days following demand by the
Administrative Agent or such Bank (which demand, if any, shall be made
within six months following the occurrence of the event or circumstance
giving rise to such increased cost or reduced amount receivable), the
Borrower shall pay with respect to any affected Commitment (including
Eurodollar Rate Loans or Letters of Credit thereunder), promptly for
the account of the Administrative Agent or such Bank, such additional
amount or amounts as the Administrative Agent or such Bank, in good
faith, certifies in writing to the Borrower (together with sufficient
detail to quantify such additional amount) shall compensate the
Administrative Agent, such Bank or Bank Holding Company for the amount
of such increased cost or reduced amount receivable, such certification
to be conclusive and binding for all purposes hereof absent manifest
error; or
(ii) shall impose, modify or deem applicable any capital
adequacy or similar requirement (including without limitation a request
or requirement which affects the manner in which any Bank or any Bank
Holding Company allocates capital resources to its commitments,
including its obligations hereunder) and as a result thereof, in the
sole opinion of such Bank, the rate of return on capital of such Bank
or Bank Holding Company as a consequence of its obligations hereunder
or in respect of any Letter of Credit is or will be reduced to a level
below that which such Bank or Bank Holding Company could have achieved
but for such circumstances by an amount deemed by such Bank to be
material, then and in each such case upon notice to the Borrower
through the Administrative Agent (which notice, if any, shall be made
within six months following the occurrence of the event or circumstance
giving rise to such reduced rate of return), the Borrower shall pay to
such Bank such additional amount or amounts as shall compensate such
Bank for such reduction in rate of return for (A) any Eurodollar Rate
Loans outstanding under any Interest Period commencing after such
notification, (B) any Letters of Credit with respect to the period
after the end of the calendar month in which such notification was
given and (C) any portion of the affected Bank's Commitment outstanding
with respect to the period after the end of the calendar month in which
such notification was given. If a Bank determines that it may be
entitled to claim any additional amounts pursuant to this Section
during the next succeeding Interest Period or month, as the case may
be, it shall promptly notify, through the Administrative Agent, the
Borrower and each other Bank of the event by reason of which it has
become so entitled together with sufficient detail to quantify such
additional amount. A certificate as to any such additional amount or
amounts submitted by a Bank, through the Administrative Agent, to the
Borrower and the other Banks shall, in the absence of manifest error,
be final and conclusive. In determining such amount, a Bank may use any
reasonable averaging and attribution methods.
(b) Any Bank claiming any additional amounts payable pursuant
to this Section shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office, if the making of such a
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36
change would avoid the need for or reduce the amount of, any such additional
amounts which would otherwise be payable hereunder and would not, in the
reasonable judgment of such Bank, be otherwise disadvantageous to such Bank.
(c) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreement and obligations of the Borrower
contained in this Section 7.12 shall survive the payment in full of the amounts
owing hereunder and under the Notes and the termination of this Agreement.
Section 7.13 Taxes. (a) Subject to clause (e) below, any and
all payments by the Borrower hereunder shall be made 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) in the case of each Bank and the Administrative Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Bank or the Administrative Agent (as the case may
be) is organized or any political subdivision thereof, (ii) in the case of each
Bank with respect to payments made hereunder, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such Bank's Applicable
Lending Office, or any political subdivision thereof and (iii) in the case of
each Bank and the Administrative Agent, taxes imposed by the United States by
means of withholding taxes if and to the extent that such withholding taxes
shall be in effect and shall be applicable on the date hereof under current laws
and regulations (including judicial and administrative interpretations thereof)
to payments to be made for the account of such Bank's Applicable Lending office,
or to the Administrative Agent (all taxes described in subclauses (i), (ii) and
(iii) being referred to as "Excluded Taxes" and all taxes, levies, imposts,
deductions, charges, withholdings and liabilities not described in subclauses
(i), (ii) and (iii) being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Bank or the Administrative Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Bank or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had not such
deductions been made, (ii) the Borrower shall make such deductions, and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law (and shall be
entitled to any "Tax Credit" with respect to such payment pursuant to clause (i)
of this Section).
(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 (other than Excluded Taxes) which arise from any payment made
hereunder or from the execution, delivery or registration or filing or recording
of, or otherwise with respect to, this Agreement or document delivered hereunder
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Bank and the
Administrative 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) paid by such Bank or the Administrative
Agent (as the case may be) and any liability (including penalties, interest and
<PAGE>
37
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 Bank or the Administrative Agent (as the
case may be) makes written demand therefor. If, in the reasonable opinion of the
Borrower or such Bank, any amount has been paid with respect to Taxes or Other
Taxes which are not correctly or legally asserted, such Bank will cooperate with
the Borrower (such cooperation to be without expense or liability to such Bank)
in seeking to obtain a refund of such amount; provided, that, such Bank shall
not be required to cooperate in seeking to obtain a refund unless (i) if such
Bank reasonably requests, the Borrower has delivered to such Bank an opinion of
independent tax counsel selected by the Borrower and reasonably acceptable to
such Bank to the effect that there is a reasonable possibility of success, (ii)
such Bank has received from the Borrower satisfactory indemnification for any
liability, loss, cost or expense arising out of or relating to the effort to
obtain such refund, and (iii) the Borrower shall have indemnified such Bank for
the payment of such Taxes or Other Taxes pursuant to this clause (c). Each Bank
and the Administrative Agent, as the case may be, will promptly (within 30 days)
notify the Borrower of the assertion of any liability by any taxing authority
with respect to Taxes or Other Taxes and any payment by such Bank or the
Administrative Agent of such Taxes or Other Taxes; provided, that, the failure
to give such notice shall not relieve the Borrower of its obligations hereunder
to make indemnification for any such liability except that the Borrower shall
not be liable for penalties or interest (x) accruing after such 30 day period
until such time as it receives the notice contemplated above, after which time
it shall be liable for interest and penalties accruing after such receipt or (y)
to the extent that such penalties or interest arise as a direct result of such
failure to give notice.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will (as to Taxes paid by it) furnish to the Administrative Agent, at
the Agency Office, the original or a certified copy of a receipt or other
evidence satisfactory to the Administrative Agent of payment thereof.
(e) On or before the Closing Date in the case of each Bank
originally a party hereto, or on or before the effective date of the Assignment
and Acceptance Agreement pursuant to which it became a Bank in the case of an
Assignee, and within 30 days following the first day of each calendar year or if
otherwise reasonably requested from time to time by the Borrower or the
Administrative Agent, each Bank organized under the laws of a jurisdiction
outside the United States shall provide the Administrative Agent and the
Borrower with three counterparts of each of the forms prescribed by the Internal
Revenue Service (Form 1001 or 4224, or successor form(s), as the case may be) of
the United States certifying as to such Bank's (if applicable) status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to such Bank hereunder. Unless the Borrower
and the Administrative Agent have received within 10 days after the Borrower or
the Administrative Agent requests such forms or other documents satisfactory to
them indicating that payments hereunder are not subject to United States
withholding tax, the Borrower or the Administrative Agent (if not withheld by
the Borrower) shall withhold taxes from such payments at the applicable
statutory rate, without any obligation to "gross-up" or make such Bank or the
Administrative Agent whole under clause (a) of this Section, provided, however,
that, the Borrower shall have the obligation to make such Bank or the
Administrative Agent whole and to "gross-up" under clause (a) of this Section,
if the
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38
failure to so deliver such forms or make such statements (other than the forms
and statements required to be delivered on or made prior to the Closing Date or
on the effective date of the Assignment and Acceptance Agreement in the case of
an Assignee) is the result of the occurrence of an event (including, without
limitation, any change in Law) which (alone or in conjunction with other events)
renders such forms inapplicable, that would prevent such Bank or the
Administrative Agent from making the statements contemplated by such forms or
which removes or reduces an exemption (whether partial or complete) from
withholding tax previously available to such Bank or the Administrative Agent.
Each Bank (and the Administrative Agent, if applicable) will promptly notify the
Borrower of the occurrence (when known to it) of an event contemplated by the
foregoing proviso. Upon request of the Borrower, each Bank which is organized
under the laws of the United States or any State thereof shall provide the
Borrower and the Administrative Agent with two duplicates of a duly completed
Form W-9 or successor form.
(f) Any Bank claiming any additional amounts payable pursuant
to this Section shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office, if the making of such a change
would avoid the need for or reduce the amount of, any such additional amounts
which may thereafter accrue and would not, in the reasonable judgment of such
Bank, be otherwise disadvantageous to such Bank.
(g) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreement and obligations of the Borrower
contained in this Section 7.13 shall survive the payment in full of the amounts
owing hereunder and under the Notes (and the termination of this Agreement) for
a period expiring concurrently with the expiration of the statute of limitations
applicable to claims made by the tax authorities to collect Taxes or Other
Taxes.
(h) Each Bank (and the Administrative Agent with respect to
payments to the Administrative Agent for its own account) agrees that (i) it
will take all reasonable actions by all usual means to maintain all exemptions,
if any, available to it from the United States withholding taxes (whether
available by treaty, existing administrative waiver, by virtue of the location
of any Bank's Applicable Lending Office or otherwise) and (ii) otherwise
cooperate with the Borrower to minimize amounts payable by the Borrower under
this Section; provided, however, that, each Bank and the Administrative Agent
shall not be obligated by reason of this clause (h) to disclose any information
regarding its tax affairs or tax computations or to reorder its tax or other
affairs or tax or other planning.
(i) If any Bank shall receive a credit or refund from a taxing
authority with respect to, and actually resulting from, an amount of Taxes or
Other Taxes actually paid to or on behalf of such Bank by the Borrower (a "Tax
Credit"), such Bank shall promptly notify the Borrower of such Tax Credit. If
such Tax Credit is received by such Bank in the form of cash, such Bank shall
promptly pay to the Borrower the amount so received with respect to the Tax
Credit. If such Tax Credit is not received by such Bank in the form of cash,
such Bank shall pay the amount of such Tax Credit not later than the time
prescribed by applicable Law for filing the return (including extensions of
time) for such Bank's taxable period which includes the period in
<PAGE>
39
which such Bank receives the economic benefit of such Tax Credit. In any event,
the amount of any Tax Credit payable by a Bank to the Borrower pursuant to this
clause (i) shall not exceed the actual amount of cash refunded to, or credits
received and usable by, such Bank from a taxing authority. In determining the
amount of any Tax Credit, a Bank may use such apportionment and attribution
rules as such Bank customarily employs in allocating taxes among its various
operations and income sources and such determination shall be conclusive absent
manifest error. The Borrower further agrees promptly to return to a Bank the
amount paid to the Borrower with respect to a Tax Credit by such Bank if such
Bank is required to repay, or is determined to be ineligible for, a Tax Credit
for such amount.
Section 7.14 Indemnity. The Borrower agrees to indemnify each
Bank and to hold each Bank harmless from any loss or expense that such Bank may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Rate Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of or conversion from Eurodollar Rate Loans after the Borrower has
given a notice thereof in accordance with the provisions of this Agreement or
(c) the making of a prepayment of Eurodollar Rate Loans (including, without
limitation, any prepayment made pursuant to the provisions of Section 7.5 or
7.15) on a day that is not the last day of an Interest Period with respect
thereto. The amount to be so indemnified by the Borrower shall be (x) paid to
each Bank, through the Administrative Agent, within ten Banking Days following
demand by such Bank and (y) shall be the amount equal to the excess of (i) the
amount of interest that would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Eurodollar Rate Margin included therein, if
any) over (ii) the amount of interest (as reasonably determined by such Bank)
that would have accrued to such Bank on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Bank shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
<PAGE>
40
Section 7.15 Additional Action in Certain Events. If any event
or condition described in Section 7.12 or 7.13 has occurred and is continuing
that increases the cost to the Borrower of the Loans, Commitments or Letters of
Credit by any Bank or Banks, the Borrower may (after paying any accrued amounts
required to be paid pursuant to Section 7.12 or 7.13 hereof for the period prior
to the taking of such action) either:
(a) require any Bank so affected by such event or condition to
transfer or assign, in whole (but not in part), without recourse, its
Commitment and Loans hereunder in accordance with the provisions of
Section 13.11(a) to one or more Assignees (which need not be existing
Banks hereunder) identified to it by the Borrower; provided that (x) no
Bank shall be required to assign all or any portion of its Commitments
and Loans pursuant to this Section 7.15 unless and until such Bank
shall have received from such Assignees one or more payments which, in
an aggregate, are at least equal to the aggregate outstanding principal
amount of the Loans (other than CAF Advances) owing to such Bank and
all accrued interest and other amounts owing on account thereof and (y)
any CAF Advances owing to such Bank shall (at the election of the
Borrower) either remain outstanding in accordance with their terms (in
which case the Borrower shall remain liable for any such amounts
required to be paid pursuant to Section 7.12 or 7.13) or be prepaid by
the Borrower (together with accrued interest through the date of
prepayment and, in the case of a LIBO Rate CAF Advance, any "breakage"
costs resulting from such prepayment); or
(b) prepay in full the Loans and terminate the Commitment of
any Bank so affected by such event or condition, upon giving the
Administrative Agent and such Bank or Banks at least five Banking Days'
prior irrevocable notice thereof specifying the date of prepayment and,
upon such prepayment and termination, the Commitment of such affected
Bank shall be terminated; provided that no such prepayment and
termination shall be permitted (x) during such time as an Event of
Default (or event which, with the giving of notice or lapse of time or
both, would constitute an Event of Default) has occurred and is
continuing or (y) if, after giving effect thereto (and to the related
reallocation of participating interests in Swingline Loans and L/C
Obligations) the Total Revolving Extensions of Credit exceed the Total
Revolving Commitments then in effect. Any such prepayment hereunder
shall be made by the Borrower, without premium, together with interest
thereon and any other amounts payable hereunder, on the date specified
in such notice.
ARTICLE 8. CONDITIONS OF COMMITMENTS
Section 8.1 Conditions Precedent to Closing Date. The
agreement of each Bank to make the initial extension of credit requested to be
made by it hereunder is subject to the satisfaction, prior to or concurrently
with the making of such extension of credit on the Closing Date, of the
following conditions precedent:
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41
(a) Definitive Documentation. The Administrative Agent shall
have received counterparts hereof, duly executed and delivered by the
Borrower and each Lender.
(b) Legal Opinion. The Administrative Agent shall have
received a favorable opinion of Steven M. Woghin, General Counsel to
the Borrower, substantially in the form of Exhibit D hereto.
(c) Fees. The Banks, the Co-Syndication Agents, the
Documentation Agent and the Administrative Agent shall have received
all fees required to be paid on or before the Closing Date and all
expenses for which invoices have been presented to the Borrower at
least three Banking Days before the Closing Date.
Promptly following the Closing Date, the Administrative Agent shall deliver (or
cause to be delivered) to each Bank a copy of each document, instrument and
agreement provided to the Administrative Agent by the Borrower pursuant to this
Section 8.1.
Section 8.2 Conditions Precedent to Each Extension of Credit.
The Commitment of each Bank to make each extension of credit (including, without
limitation, the initial extensions of credit) shall be subject to the further
conditions precedent that, on the date of such extension of credit, the
following statements shall be true (and the delivery of a Notice of Borrowing
shall be deemed to constitute a representation and warranty by Borrower that on
the date of such extension of credit such statements are true):
(a) The representations and warranties contained in
Article 9 of this Agreement are correct in all material respects on and
as of the date of such extension of credit, before and after giving
effect to such extension of credit, and to any other extensions of
credit to be made contemporaneously therewith, and to the application
of the proceeds therefrom, as though made on and as of such date
(except to the extent that such representations and warranties are
specifically limited to a prior date, in which case such
representations and warranties shall be true and correct in all
material respects on and as of such prior date).
(b) No event has occurred and is continuing, or would
result from such extension of credit or from any other extensions of
credit to be made contemporaneously therewith, or from the application
of the proceeds therefrom, which constitutes, or with the lapse of time
or the giving of notice or both would constitute, an Event of Default.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Banks to enter into
this Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Bank that:
<PAGE>
42
Section 9.1 Organization of Credit Parties. Each of the
Borrower and each Material Subsidiary of the Borrower is duly organized and
existing under the Laws of the jurisdiction of its formation, and is properly
qualified to do business and in good standing in, and where necessary to
maintain its rights and privileges has complied with the fictitious name statute
of, every jurisdiction where the failure to maintain such qualification, good
standing or compliance could reasonably be expected to materially adversely
affect the Borrower's ability to perform its obligations hereunder.
Section 9.2 Authorization of Credit Documents. The execution,
delivery and performance of this Agreement and all other Credit Documents to
which the Borrower is a party are within the Borrower's corporate powers and
have been duly authorized. This Agreement has been validly executed and
delivered on behalf of the Borrower.
Section 9.3 Government Approvals. (a) No consent, exemption or
other action by, or notice to or filing with, any governmental authority or
other Person is necessary in connection with the execution, delivery,
performance or enforcement of this Agreement or any other Credit Document, other
than (i) any consents, exemptions, actions, notices or filings which have been
obtained and remain in full force and effect or (ii) for which the failure to
make or obtain would not be reasonably likely to have a Material Adverse Effect.
Section 9.4 No Conflicts. The execution, delivery and
performance of this Agreement and the other Credit Documents to which the
Borrower and its Subsidiaries are parties, and the consummation of the
transactions contemplated hereby and thereby, will not (a) violate (i) the
certificate of incorporation or by-laws of the Borrower, (ii) any material Law
or (iii) any provision of any contract, agreement, indenture or instrument to
which the Borrower or any Material Subsidiary is a party or by which any of its
properties is bound, other than any such provision the violation of which would
not reasonably be expected to have a Material Adverse Effect or (b) result in
the creation or imposition of any Lien, except Liens permitted under Section
10.2(a) hereof.
Section 9.5 Enforceability. This Agreement, each Note (if any)
and any Application is a legal, valid and binding agreement of the Borrower,
enforceable against the Borrower in accordance with its terms, subject to
bankruptcy and similar laws affecting the enforcement of creditors' rights
generally and subject to the availability of equitable remedies where equitable
remedies are sought.
Section 9.6 Title to Property. Each of the Borrower and each
Material Subsidiary of the Borrower has good and marketable title to its
properties and assets (other than those properties and assets the loss of which
would not reasonably be expected to have a Material Adverse Effect) free and
clear of all Liens or rights of others, except for Liens permitted by Section
10.2(a).
Section 9.7 Compliance with Law. Each of the Borrower and each
Material Subsidiary is in compliance with all applicable Laws (including,
without limitation, those
<PAGE>
43
relating to hazardous materials or wastes or hazardous or toxic substances),
where the failure to maintain such compliance could reasonably be expected to
have a Material Adverse Effect.
Section 9.8 No Litigation. Except as disclosed in the notes to
the Borrower's financial statements referred to in Section 9.10, there is no
litigation, investigation or proceeding (including, without limitation, those
alleging violation of any applicable Law relating to hazardous materials or
wastes, or hazardous or toxic substances) of or before any arbitrator or any
governmental or judicial authority which is pending or, to the knowledge of the
Borrower, threatened against the Borrower or any of its properties or assets, or
any Subsidiary of the Borrower or any of its property or assets, and no
preliminary or permanent injunction or order by a state or Federal Court has
been entered in connection with any Credit Document or any of the transactions
contemplated hereby, which (in any such case) could reasonably be expected to
have a Material Adverse Effect.
Section 9.9 Subsidiaries. Schedule 2 to this Agreement sets
forth a complete and correct description of all Material Subsidiaries of the
Borrower on the date hereof.
Section 9.10 Financial Information. The most recent financial
statements of the Borrower delivered pursuant to Section 10.1(h), and all other
financial information and data furnished in writing by the Borrower to the
Administrative Agent or the Banks in connection with the transaction
contemplated hereby are complete in all material respects, and such financial
statements have been prepared in accordance with GAAP consistently applied and
fairly present in all material respects the consolidated financial position and
results of operations of the Borrower as of the date thereof (subject, in the
case of interim financial statements, to normal year-end audit adjustments).
When compared to such financial position and results of operation on the date of
such most recent financial statements, there has been no material adverse change
in the Borrower's consolidated financial position or ability to perform its
obligations under this Agreement and the Notes. Neither the Borrower nor any
Subsidiary has any contingent obligations, liabilities for taxes or other
outstanding financial obligations which are not disclosed in such statements,
information and data, other than (i) those which, if due and payable by the
Borrower and its Subsidiaries, would not have a Material Adverse Effect, (ii)
those which have been disclosed to the Administrative Agent and the Banks in
writing and (iii) amounts owing hereunder.
Section 9.11 Margin Regulations. (a) The Borrower and its
Subsidiaries are not engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock and (b) no proceeds of any Loan will be
used in a manner which would violate, or result in a violation of, such
Regulation T, U, or X.
Section 9.12 ERISA. There are no Plans (other than as
permitted by Section 10.2(h)) or Multiemployer Plans.
Section 9.13 Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. The Borrower is
not a "holding company" or a
<PAGE>
44
"subsidiary" of a "holding company" as defined in the Public Utility Holding
Company Act of 1935, as amended.
Section 9.14 Taxes. The Borrower and each of its Material
Subsidiaries has filed or caused to be filed all United States federal and other
material tax returns which to the knowledge of the Borrower are required to be
filed, and has paid all taxes shown to be due and payable on said returns or any
material assessments made against it or any of its property and all other
material taxes, fees and other charges imposed on it or on any of its property
by any governmental authority (other than those the amount or validity of which
is currently being contested in good faith by appropriate proceedings and with
respect to which reserves and conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); and, to the
knowledge of the Borrower, no claims are being asserted with respect to any such
taxes, fees or other charges which could reasonably be expected to have a
Material Adverse Effect.
ARTICLE 10. COVENANTS OF CREDIT PARTIES
Section 10.1 Affirmative Covenants. So long as any principal
or interest shall be owing hereunder, any Letter of Credit remains outstanding
or any of the Commitments shall remain available hereunder, the Borrower will,
unless the Majority Banks shall otherwise consent in writing:
(a) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Material Subsidiaries to pay and discharge, before the same
shall become delinquent, (i) all material taxes, assessments and
governmental charges or levies imposed upon it or upon its property,
and (ii) all lawful claims which, if unpaid, might by Law become a Lien
upon its property (other than, in the case of this clause (ii) only,
those Liens which are permitted pursuant to Section 10.2(a)); provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, charge or claim
which is being contested in good faith and by proper proceedings and as
to which adequate reserves have been established.
(b) Maintenance of Insurance. Maintain, and cause each of its
Material Subsidiaries to maintain, or cause to be maintained for each
of its Material Subsidiaries, with responsible and reputable insurance
companies or associations (or through reasonable and customary programs
of self-insurance) insurance in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the
Borrower or any such Material Subsidiary operates.
(c) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each Material Subsidiary to preserve and maintain,
(i) its corporate existence, rights (charter and statutory), and
franchises, and (ii) in the case of the Borrower, ownership and control
by the Borrower of all Material Subsidiaries, and will continue, and
cause each Material Subsidiary to continue, in the business of
designing and licensing the use of
<PAGE>
45
computer software products and related technology and others directly
related thereto and employ all of its and their respective assets in
such business and others directly related thereto; provided, however,
that nothing contained in this Section 10.1(c) shall be deemed to
prohibit any merger or consolidation permitted pursuant to Section
10.2(b) or any asset sale permitted by Section 10.2(d).
(d) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with the requirements of all applicable Laws
noncompliance with which could reasonably be expected to have a
Material Adverse Effect.
(e) Visitation Rights. At any time and from time to time
during normal business hours and subject to reasonable advance notice
under the circumstances, permit the Administrative Agent or any of the
Banks or any agents or representatives thereof, to examine (at the
location where normally kept) and make abstracts from the records and
books of account of, and visit the properties of the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with any of their respective officers or
directors and discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with its independent certified public
accountants and permit such accountants to disclose to the
Administrative Agent or any of the Banks any and all financial
statements and other reasonably requested information of any kind that
they may have with respect to the Borrower and its Subsidiaries.
(f) Keeping of Books. Keep, and cause each of its Material
Subsidiaries to keep, proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the
assets and business of the Borrower and its Subsidiaries in a form such
that the Borrower may readily produce no less frequently than at the
end of each of its fiscal quarters, financial statements on a
consolidated basis in accordance with GAAP consistently applied
(subject, in the case of the first three fiscal quarters of each fiscal
year, to year end audit adjustments).
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Material Subsidiaries to maintain and preserve, all
of its material properties which are used or useful in the conduct of
its business in good working order and condition, ordinary wear and
tear excepted, including all material copyrights, trademarks, service
marks, mask works, trade names, brands, patent rights, processes,
designs and other material intellectual property, and all registrations
and applications for registration thereof, and any licenses with
respect to any of the foregoing which are used or useful in the conduct
of its business.
(h) Reporting Requirements. Furnish to the Administrative
Agent and each Bank:
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46
(i) Quarterly Financial Statements of the
Borrower. As soon as available and in any event within 60 days
after the end of each of the first three fiscal quarters of
each fiscal year of the Borrower, consolidated balance sheets
of the Borrower and its Subsidiaries as of the end of such
quarter and consolidated statements of income and cash flow of
the Borrower and its Subsidiaries for the period commencing at
the beginning of such fiscal year and ending with the end of
such quarter, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by a Responsible
Officer of the Borrower as having been prepared in accordance
with GAAP consistently applied, together with a Compliance
Certificate as of the end of such fiscal quarter;
(ii) Annual Financial Statements of the Borrower.
As soon as available and in any event within 105 days after
the end of each fiscal year of the Borrower, the consolidated
balance sheets of the Borrower and its Subsidiaries as of the
end of such fiscal year and the consolidated statements of
income and retained earnings and the consolidated statements
of cash flow of the Borrower and its Subsidiaries for such
fiscal year, in the case of such consolidated financial
statements, certified, without material qualifications or
limitations as to scope of the audit, by KPMG LLP or other
independent public accountants of recognized standing
acceptable to the Majority Banks, as having been prepared in
accordance with GAAP, consistently applied, together with a
Compliance Certificate as of the end of such fiscal year;
(iii) Notice of Defaults. As soon as possible and
in any event within five Banking Days after a Responsible
Officer of the Borrower reasonably could be expected to have
obtained knowledge thereof, notice of the occurrence of each
Event of Default and each event which, with the giving of
notice or lapse of time, or both, would constitute an Event of
Default, continuing on the date of such statement, together
with a statement of a Responsible Officer of the Borrower
setting forth details of such Event of Default or event and
the action which the Borrower has taken and proposes to take
with respect thereto;
(iv) Shareholder Reports and SEC Filings.
Promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its security
holders, and copies of all reports and registration statements
(other than the Exhibits thereto, which the Borrower shall be
required to provide to the Administrative Agent or a Bank only
upon written request therefor) which the Borrower files with
the Securities and Exchange Commission or any national
securities exchange;
(v) PBGC Notices. Promptly and in any event
within two Banking Days after receipt thereof by the Borrower
or any of its ERISA Affiliates from the Pension Benefit
<PAGE>
47
Guaranty Corporation, copies of each notice received by the
Borrower or any such ERISA Affiliate of the intention of the
Pension Benefit Guaranty Corporation to terminate any Plan or
to have a trustee appointed to administer any Plan;
(vi) Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board,
bureau, agency, or instrumentality domestic or foreign, which
is pending or (to the knowledge of the Borrower) threatened
against the Borrower or any of its Subsidiaries or any of its
properties or assets which would reasonably be expected to
have a Material Adverse Effect;
(vii) Public Debt Rating. Within three Banking
Days following the occurrence of any change therein, a
certificate of a Responsible Officer of the Borrower setting
forth the new Public Debt Rating of the Borrower;
(viii) Additional Information. Such other
information respecting the condition or operations, financial
or otherwise, of the Borrower or any Subsidiary as the
Majority Banks may from time to time reasonably request; and
(ix) Significant Events. Promptly upon any
Responsible Officer of the Borrower obtaining knowledge
thereof, a written statement from a Responsible Officer of the
Borrower describing the details of any circumstance or event
which has had or would reasonably be expected to have a
Material Adverse Effect.
Section 10.2 Negative Covenants. So long as any principal or
interest shall be owing hereunder or any of the Commitments shall remain
available hereunder, the Borrower will not, without the written consent of the
Majority Banks:
(a) Liens. Create, incur, assume or suffer to exist any Lien
upon or with respect to any of its assets or property, or permit any
Material Subsidiary so to do, except: (i) Liens, if any, in favor of
the Administrative Agent and the Banks collectively; (ii) Liens arising
in connection with workers' compensation, unemployment insurance and
other social security legislation; (iii) Liens in existence on the date
hereof which secure obligations disclosed in the financial statements
referred to in Section 9.10 or in the notes thereto; (iv) Liens placed
or existing at the time of any acquisition of property being acquired
by the Borrower or such Material Subsidiary; (v) Liens for property
taxes not yet due and payable and Liens for taxes not yet due or that
are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of
the Borrower or such Material Subsidiary, as the case may be, in
accordance with GAAP; (vi) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business that are not overdue for more than 30 days or that
are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of
the Borrower or such Material Subsidiary, as the case may be, in
accordance with GAAP; (vii) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance
<PAGE>
48
bonds and other obligations of a like nature incurred in the ordinary
course of business; (viii) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business
that, in the aggregate, are not substantial in amount, and that do not
in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the
Borrower and its Subsidiaries; (ix) Liens in favor of the United States
of America or any other governmental agencies or entities for amounts
paid to the Borrower or any of its Subsidiaries as progress payments
under government contracts entered into by it; (x) Liens on assets of
Persons that become Subsidiaries after the date hereof, provided that
such Liens exist at the time the respective Persons become Subsidiaries
and are not created in anticipation thereof; (xi) Liens securing Debt
of the Borrower or any Material Subsidiary incurred to finance the
acquisition or improvement of fixed or capital assets or assumed in
connection with the acquisition of such fixed or capital assets,
provided that (A) such Liens shall be created substantially
simultaneously with the acquisition or improvement of such fixed or
capital assets, (B) such Liens do not at any time encumber any property
or assets other than the fixed or capital assets (and improvements
thereon) financed by such Debt, (C) the amount of Debt secured thereby
is not increased, (D) the amount of Debt initially secured thereby is
not more than 100% of the purchase price of such fixed or capital asset
or the cost of such improvement and (E) to the extent that the amount
of Debt initially secured thereby with respect to any single
transaction or related series of transactions exceeds $125,000,000, the
assets so acquired do not constitute all or substantially all of the
assets of the seller and its affiliates taken as a whole or of any
business unit thereof; (xii) Liens on accounts receivable of the
Borrower and its Subsidiaries to secure Debt incurred thereby on
account of accounts receivables financings; (xiii) Liens granted in any
extension, renewal, or replacement of any of the permitted Liens
described above; provided, however, that the principal amount of Debt
secured thereby shall not exceed the principal amount of Debt so
secured at the time such Lien was originally granted, and that such
extension, renewal or replacement shall be limited to all or part of
the property which secured the Lien so extended, renewed or replaced
(plus improvements and construction on such property), (xiv) Liens on
Margin Stock and (xv) other Liens which secure Debt of the Borrower and
its Material Subsidiaries in an aggregate principal amount not to
exceed $350,000,000 at any one time outstanding.
(b) Merger and Consolidation. Enter into any merger or
consolidation or permit any Material Subsidiary so to do, except that,
during such time as no Event of Default (or event which with the giving
of notice or lapse of time, or both, would constitute an Event of
Default) has occurred and is continuing, (i) the Borrower or any of its
Subsidiaries may merge or consolidate with any other Person (other than
the Borrower or any of its Subsidiaries, as to which the provisions of
clauses (ii) and (iii) below shall apply); provided that the Borrower
or such Subsidiary is the surviving entity thereof, (ii) the Borrower
may merge or consolidate with any wholly-owned Subsidiary; provided
that the Borrower is the surviving entity thereof and (iii) any
wholly-owned Subsidiary of the Borrower may merge or consolidate with
another wholly-owned Subsidiary of the Borrower (it being understood
that, for purposes of this clause (iii) only, the existence of
directors' and other nominees' qualifying shares which are not held,
directly or indirectly,
<PAGE>
49
by the Borrower shall not, in itself, cause a Subsidiary to fail to be
wholly-owned by the Borrower).
(c) Obligations to be Pari Passu. Permit its obligations under
this Agreement and the Notes to rank at any time less than pari passu
as to priority of payment and in all other respects with all other
unsecured and unsubordinated Debt of the Borrower.
(d) Sale of Assets. Sell, lease or otherwise transfer or
dispose, or permit any Material Subsidiary of the Borrower to sell,
lease or otherwise transfer or dispose, of any assets which are
material to the conduct of the business of the Borrower and its
Subsidiaries taken as a whole, other than the sale, transfer or other
disposition of (i) assets from the Borrower to any of its wholly-owned
Subsidiaries or from any wholly-owned Subsidiary of the Borrower to the
Borrower or any other wholly-owned Subsidiary thereof, (ii) accounts
receivable of the Borrower and its Subsidiaries in connection with the
consummation of a receivables financing permitted by Section
10.2(a)(xii) and (iii) Margin Stock which is sold, transferred or
otherwise disposed of for not less than its fair market value.
(e) Fiscal Year. Change its fiscal year.
(f) Interest Coverage. Permit the ratio of (i) Consolidated
EBITDA of the Borrower and its Subsidiaries for any period of four
consecutive fiscal quarters to (ii) Consolidated Interest Expense of
the Borrower and its Subsidiaries for such period, to be less than 4.0
to 1.0.
(g) Leverage Ratio. Permit the Test Ratio for any period of
four consecutive fiscal quarters to be greater than 3.25 to 1.0.
(h) ERISA Plans. Create, permit or suffer to exist any Plan or
Multiemployer Plan, or permit any ERISA Affiliate to do so; provided,
however, that the Borrower may permit an ERISA Affiliate to maintain a
Plan if, but only to the extent that, all of the following conditions
are satisfied: (i) such ERISA Affiliate became an ERISA Affiliate after
the date of this Agreement; (ii) such Plan was in existence on the date
the ERISA Affiliate maintaining or contributing to it became an ERISA
Affiliate; (iii) such Plan is terminated, and the Borrower shall have
applied for any necessary approvals to effect a distribution of all
assets of such Plan, within 180 days of the date upon which such ERISA
Affiliate became an ERISA Affiliate and all of the assets of such Plan
are distributed within 180 days after the Borrower receives all such
approvals; (iv) the aggregate liabilities under Subtitle D of Title IV
of ERISA of the Borrower and its ERISA Affiliates with respect to such
Plans does not, at any time after the date upon which such ERISA
Affiliate becomes an ERISA Affiliate, exceed $25,000,000; (v) no demand
by the Pension Benefit Guaranty Corporation under ERISA sections 4062,
4063, or 4064 is outstanding against such ERISA Affiliate on the date
it becomes an ERISA Affiliate; and (vi) no lien described in ERISA
section 4068 upon the assets of such ERISA Affiliate is in existence on
the date it becomes an ERISA Affiliate.
<PAGE>
50
(i) Dividends. To the extent that any Event of Default (or
event which with the giving of notice or lapse of time, or both, would
constitute an Event of Default) has occurred and is continuing or would
result therefrom, declare or pay, or permit any Subsidiary which is not
wholly-owned by the Borrower (other than directors' and other nominees'
qualifying shares) to declare or pay, any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make
any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of:
(x) any shares of any class of equity interests of
the Borrower;
(y) any warrants or options to purchase any such
equity interests; or
(z) any subordinated Debt of the Borrower or any of
its Subsidiaries;
whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or
property or in obligations of the Borrower or any Subsidiary.
ARTICLE 11. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall
occur and be continuing:
(a) Payments. The Borrower shall fail to pay any principal of
any of the Loans when the same becomes due and payable, or the Borrower
shall fail to pay interest or other sum due under this Agreement or any
Note or any Reimbursement Obligation within five Banking Days of the
date when the same becomes due and payable; or
(b) Representations and Warranties. Any representation or
warranty made or stated to be deemed to be made by the Borrower under
any Credit Document or in any Compliance Certificate or Borrowing
Certificate shall prove to have been incorrect in any material respect
when made or deemed to be made; or
(c) Covenants. The Borrower or any of its Subsidiaries shall
fail to perform or observe (i) any term, covenant or agreement
contained in Section 10.2(f) or (g) of this Agreement or (ii) any other
term, covenant or agreement contained in this Agreement (other than any
failure to pay, which is subject to clause (a) above) and (in the case
of this clause (ii) only) any such failure shall remain unremedied for
30 days after written notice thereof shall have been given to the
Borrower by the Administrative Agent or Banks holding at least 10% of
the Total Revolving Commitments; or
(d) Other Debts. The Borrower or any of its Material
Subsidiaries shall, either singly or in combination, fail to pay Debt
in excess of $25,000,000 in the aggregate
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51
(excluding Debt specified in clause (a) above) for the Borrower and all
such Material Subsidiaries or Debt owing under the Existing $3 Billion
Agreement, 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 Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event, shall occur and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(e) Judgments and Orders. Any judgment or order for the
payment of money in excess of $25,000,000 shall be rendered by a court
of competent jurisdiction against the Borrower or any of its Material
Subsidiaries and such judgment shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof;
or
(f) Insolvency or Voluntary Proceedings. The Borrower or any
of its Material Subsidiaries is generally not paying or admits in
writing its inability to pay its debts as such debts become due, or
files any petition or action for relief under any bankruptcy,
reorganization, insolvency, or moratorium Law or any other Law for the
relief of, or relating to, debtors, now or hereafter in effect, or
makes any general assignment for the benefit of creditors, or takes any
corporate action in furtherance of any of the foregoing; or
(g) Involuntary Proceedings. An involuntary petition is filed
against the Borrower or any Material Subsidiary under any bankruptcy
statute now or hereafter in effect, or a custodian, receiver, trustee,
assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any substantial
part of the property of the Borrower or any of its Material
Subsidiaries, and (i) such petition or appointment is not set aside or
withdrawn or otherwise ceases to be in effect within 60 days from the
date of said filing or appointment, or (ii) an order for relief is
entered against the Borrower or such Material Subsidiary with respect
thereto; or
(h) Change of Control. Any Person or "group" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended) (i) shall have acquired beneficial ownership of 20%
or more of any outstanding class of capital stock of the Borrower
having ordinary voting power in the election of directors of the
Borrower (other than any such Person or "group" which owns such amount
of capital stock on the date of this Agreement) or (ii) shall obtain
the power (whether or not exercised) to elect a majority of the
Borrower's directors, except for any Person that held such interest or
had such power (as the case may be) continuously from a date which was
prior to the date of this Agreement;
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52
then, and in any such event:
(A) if such event is an event specified in clause (f) or (g)
of this Article 11 with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of then outstanding
Letters of Credit shall have presented the documents required
thereunder) and the Notes shall immediately become due and payable;
(B) if such event is any other Event of Default, either or
both of the following actions may be taken: (i) with the consent of the
Majority Banks, the Administrative Agent may, or upon the request of
the Majority Banks, the Administrative Agent shall, by notice to the
Borrower declare the Commitments to be terminated forthwith, whereupon
the Commitments shall immediately terminate; and (ii) with the consent
of the Majority Banks, the Administrative Agent may, or upon the
request of the Majority Banks, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether
or not the beneficiaries of then outstanding Letters of Credit shall
have presented the documents required thereunder) and the Notes to be
due and payable forthwith, whereupon the same shall immediately become
due and payable; and
(C) in either such event, the Administrative Agent shall upon
the request, or may with the consent, of the Majority Banks take such
actions hereunder and exercise such rights and remedies pursuant hereto
as the Administrative Agent may deem appropriate.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Credit Documents. Amounts held in such cash collateral account shall
be applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After all
such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of the Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of the within security interest in such cash
collateral account.
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53
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
ARTICLE 12. RELATIONSHIP OF ADMINISTRATIVE AGENT AND BANKS
Section 12.1 Authorization and Action. (a) Each Bank hereby
appoints and authorizes the Administrative Agent, as administrative agent on
behalf of such Bank, to take such action and to exercise such powers hereunder
as are delegated to the Administrative Agent by the terms thereof, together with
such powers as are reasonably incidental thereto. As to any (x) matters
requiring or permitting an approval, consent, waiver, election or other action
by a specified portion of Banks, (y) matters as to which, notwithstanding any
delegation of authority to the Administrative Agent, the Administrative Agent
has requested and received instructions from the Majority Banks, and (z) matters
not expressly provided for hereby, the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting only (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Banks (or, in the
case of matters described in clause (x) above, the specified portion of the
Banks), and such instructions shall be binding upon all Banks; provided,
however, that the Administrative Agent shall not be required to take any action
which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement or applicable Law. The Administrative Agent agrees to
give to each Bank prompt notice of each notice given to it by the Borrower
pursuant to the terms hereof.
(b) Each Bank hereby appoints (i) each Co-Agent as a co-agent
on behalf of such Bank (ii) each Co-Syndication Agent as a co-syndication agent
on behalf of such Bank and (iii) the Documentation Agent as a documentation
agent on behalf of such Bank. Notwithstanding anything to the contrary contained
in this Agreement, the parties hereto hereby agree that no Co-Agent,
Co-Syndication Agent or Documentation Agent shall have any rights, duties or
responsibilities in its capacity as Co-Agent, Co-Syndication Agent or
Documentation Agent, as the case may be, and that no Co-Agent, Co-Syndication
Agent or Documentation Agent shall have the authority to take any action
hereunder in its capacity as such.
Section 12.2 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents, attorneys or
employees shall be liable 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 limiting the generality of the
foregoing, the Administrative Agent: (i) may treat each Bank as the holder of
the right to payment of its outstanding Loans until the Administrative Agent
receives and accepts (together with any required transfer fee) an Assignment and
Acceptance Agreement signed by such Bank and its Assignee in form satisfactory
to the Administrative Agent and otherwise in accordance with the provisions of
this Agreement; (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 if such
counsel, accountants or other experts are selected without gross negligence or
willful misconduct on the part of the
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54
Administrative Agent; (iii) makes no warranty or representation to any Bank and
shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement; (iv) except to the
extent specifically required under this Agreement, 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 Bank 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 telegram,
cable or telex) believed by it in good faith to be genuine and signed or sent by
the proper party or parties unless such action by the Administrative Agent
constitutes gross negligence or willful misconduct on its part.
Section 12.3 Administrative Agent and Affiliates. With respect
to its Commitment, the Loans made by it and the obligations of the Borrower owed
to it under this Agreement and the Notes as a Bank and with respect to any
Letter of Credit issued or participated in by it, the Administrative Agent shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Administrative Agent; and the term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include the
Administrative Agent in its individual capacity. The Administrative Agent 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 the Administrative
Agent were not the Administrative Agent and without any duty to account therefor
to the Banks.
Section 12.4 Bank Credit Decision. Each Bank acknowledges that
(a) it has, independently and without reliance upon the Administrative Agent or
any other Bank and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement, (b) it will, independently and without reliance upon the
Administrative Agent or any other Bank 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 and (c) the
Administrative Agent has no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information
(other than obtained under the provisions of this Agreement) with respect
thereto, whether coming into its possession before the date hereof or at any
time thereafter.
Section 12.5 Indemnification. Each Bank agrees to indemnify
the Administrative Agent, each Co-Syndication Agent and the Documentation Agent
(to the extent not reimbursed by the Borrower), ratably according to the ratio
of such Bank's Commitments to the Commitments of all Banks, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent, the Co-Syndication Agent or the Documentation Agent in any
way relating to or arising out of
<PAGE>
55
this Agreement or any action taken or omitted by the Administrative Agent,
Co-Syndication Agent or the Documentation Agent, as the case may be, hereunder,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent, Co-Syndication Agent or the
Documentation Agent, as the case may be. Without limiting the foregoing, each
Bank agrees to reimburse the Administrative Agent promptly upon demand for such
Bank's ratable share (based on the proportion of all Commitments held by such
Bank) of any out-of-pocket expenses (including reasonable counsel fees) incurred
by the Administrative 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 Administrative Agent is not reimbursed for such expenses by the Borrower.
The provisions of this Section 12.5 shall survive termination of this Agreement.
Section 12.6 Successor Administrative Agent. The
Administrative Agent may resign at any time as the Administrative Agent under
this Agreement by giving 30 days' prior written notice thereof to the Banks and
the Borrower. Upon any such resignation, the Majority Banks shall have the right
to appoint a successor Administrative Agent thereunder (which successor
Administrative Agent shall be reasonably acceptable to the Borrower). If no
successor Administrative Agent shall have been so appointed by the Majority
Banks, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall (a) be either (i) a commercial bank organized
under the laws of the United States of America or of a state thereof or (ii) an
office of a commercial bank organized under the laws of a jurisdiction outside
of the United States which is located within the United States and is regulated
by the bank regulatory authorities of the United States or of a state thereof
and (b) have a combined capital and surplus of at least $500,000,000. Unless and
until a successor Administrative Agent shall have been appointed as above
provided, the retiring Administrative Agent shall serve as a caretaker
Administrative Agent unless dismissed by the Majority Banks. Upon the acceptance
of any appointment as the Administrative Agent under this Agreement by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from all duties and obligations of the Administrative
Agent arising thereafter under this Agreement. After any retiring Administrative
Agent's resignation or removal as the Administrative Agent under this Agreement,
the provisions of this Article 12 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent
hereunder.
ARTICLE 13. MISCELLANEOUS
Section 13.1 Notices. Except as provided in Article 6 with
respect to the matters therein specified, all notices, demands, instructions,
requests, and other communications required
<PAGE>
56
or permitted to be given to, or made upon, any party hereto shall be in writing
and (except for financial statements and other related informational documents
to be furnished pursuant hereto which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by overnight courier, or by
prepaid telex, telecopy, or telegram (with messenger delivery specified) and
shall be deemed to be given for purposes of this Agreement on the day that such
writing is received by the Person to whom it is to be sent pursuant to the
provisions of this Agreement. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section, notices,
demands, requests, instructions, and other communications in writing shall be
given to or made upon each party hereto at the address (or its telex or
telecopier numbers, if any) set forth (x) in the case of any Bank on the date
hereof, (y) as its address for notices on Schedule 1 hereto, in the case of any
Assignee, set forth in the relevant Assignment and Acceptance Agreement and (z)
in the case of the Borrower, beneath its signature hereto.
Section 13.2 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that (a) the Borrower shall not assign this
Agreement or any of the rights of the Borrower hereunder or under any Note
without the prior written consent of all Banks and the Administrative Agent (the
giving of such consent to be in each Bank's and the Administrative Agent's sole
and absolute discretion), and any such purported assignment without such consent
shall be absolutely void, and (b) no Bank shall assign this Agreement or any of
the rights or obligations of such Bank hereunder or under any Note except in
accordance with Section 13.11.
Section 13.3 Amendments and Related Matters. Neither this
Agreement or any other Credit Document, nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the provisions of
this Section 13.3. The Majority Banks and the Borrower may, or (with the written
consent of the Majority Banks) the Administrative Agent and the Borrower may,
from time to time, (a) enter into written amendments, supplements or
modifications hereto and to the other Credit Documents (including amendments and
restatements hereof or thereof) for the purpose of adding any provisions to this
Agreement or the other Credit Documents or changing in any manner the rights of
the Banks or of the Borrower hereunder or thereunder or (b) waive, on such terms
and conditions as may be specified in the instrument of waiver, any of the
requirements of this Agreement or the other Credit Documents or any Event of
Default (or event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default) and its consequences; provided, however,
that no such waiver and no such amendment, supplement or modification shall:
(i) forgive all or any part of the principal amount or extend
the final scheduled date of maturity of any Loan or Reimbursement
Obligation, reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Commitment of
any Bank, in each case without the consent of each Bank directly
affected thereby;
(ii) amend, modify or waive any provision of this Section or
reduce any percentage specified in the definition of Majority Banks,
consent to the assignment or
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57
transfer by the Borrower of any of its rights and obligations under
this Agreement and the other Credit Documents, in each case without the
consent of all Banks;
(iii) amend, modify or waive any provision of Article 3
without the written consent of the Swingline Bank;
(iv) amend, modify or waive any provision of Section 7.11
without the consent of each Bank directly affected thereby; or
(v) amend, modify or waive any provision of Article 4 without
the consent of the Issuing Bank.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Borrower, the Banks,
the Administrative Agent and all future holders of the Loans and other
extensions of credit hereunder. In the case of any waiver, the Borrower, the
Banks and the Administrative Agent shall be restored to their former position
and rights hereunder and under the other Credit Documents, and any Event of
Default (or event which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default) waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Event of
Default (or event which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default), or impair any right consequent thereon.
Any such waiver, amendment, supplement or modification shall be effected by a
written instrument signed by the parties required to sign pursuant to the
foregoing provisions of this Section; provided, that delivery of an executed
signature page of any such instrument by facsimile transmission shall be
effective as delivery of a manually executed counterpart thereof.
Section 13.4 Costs and Expenses; Indemnification. (a)
Expenses. The Borrower agrees to pay on demand (i) all reasonable costs and
expenses of the Administrative Agent in connection with the preparation,
execution, delivery, modification and amendment of this Agreement, the Notes and
the other documents to be delivered hereunder, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and (ii) all reasonable costs and expenses of the
Administrative Agent and the Banks, if any (including, without limitation,
reasonable fees and expenses of in-house or outside counsel), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
and restructuring of this Agreement, the Notes and the other documents to be
delivered hereunder.
(b) Indemnification. The Borrower agrees to indemnify the
Administrative Agent, each Co-Syndication Agent, the Documentation Agent, each
Bank and each officer, director, Affiliate, employee, agent or representative of
the Administrative Agent, a Co-Syndication Agent, the Documentation Agent, or a
Bank ("Bank Indemnitees") and hold each Bank Indemnitee harmless from and
against any and all liabilities, losses, damages, costs, and expenses of any
kind (including the reasonable fees and disbursements of counsel for any Bank
Indemnitee) ("Losses") in connection with any investigative, administrative, or
judicial proceeding, whether or not such Bank Indemnitee shall be designated a
party thereto (but if not a
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58
party thereto, then only with respect to such proceedings where such Bank
Indemnitee (i) is subject to legal process (whether by subpoena or otherwise) or
other compulsion of law, (ii) believes in good faith that it may be so subject,
or (iii) believes in good faith that it is necessary or appropriate for it to
resist any legal process or other compulsion of law which is purported to be
asserted against it), which may be incurred by any Bank Indemnitee, relating to
or arising out of this Agreement or any of the other Credit Documents, any of
the transactions contemplated hereby or thereby, or any actual or proposed use
of proceeds of Loans or other extensions of credit hereunder; provided, however,
that the foregoing will not apply to any Losses of a Bank Indemnitee to the
extent they are found by a final decision of a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of such Bank
Indemnitee.
(c) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreement and obligations of the
Borrower contained in this Section 13.4 shall survive the payment in full of the
amounts owing hereunder and the termination of this Agreement; provided that,
from and after the date upon which this Agreement is terminated, any request for
indemnity must be provided to the Borrower within six months following the
occurrence of the event giving rise thereto (or, if the amount of such claim is
not then reasonably determinable, within six months after such amount becomes
reasonably determinable).
Section 13.5 Oral Communications. The Administrative Agent
may, but is not required to, accept and act upon oral communications which it
reasonably believes to be from a Responsible Officer of the Borrower (or any
other natural person designated by such a Responsible Officer). Any oral
communication from the Borrower to the Administrative Agent (including telephone
communications) hereunder shall be immediately confirmed in writing by the
Borrower, but in the event of any conflict between any such oral communication
and the written confirmation thereof, such oral communication shall control if
the Administrative Agent has acted thereon prior to actual receipt of written
confirmation. The Borrower shall indemnify the Administrative Agent and hold the
Administrative Agent harmless from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
attorneys' fees) which arise out of or are incurred in connection with the
making of Loans or taking other action in reliance upon oral communications,
except that the Administrative Agent shall not be indemnified against its own
gross negligence or willful misconduct.
Section 13.6 Entire Agreement. This Agreement and the other
Credit Documents are intended by the parties hereto to be a final and complete
expression of all terms and conditions of their agreement with respect to the
subject matter thereof and supersede all oral negotiations and prior writings in
respect to the subject matter hereof.
Section 13.7 Governing Law. THIS AGREEMENT AND EACH OTHER
CREDIT DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF
THE STATE OF NEW YORK.
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59
Section 13.8 Severability. The illegality or unenforceability
of any provision of this Agreement or any other Credit Document shall not in any
way affect or impair the legality or enforceability of the remaining provisions
of this Agreement or such Credit Document.
Section 13.9 Counterparts. This Agreement may be executed in
as many counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement or any other Credit Document (including,
without limitation, any amendment, waiver, supplement or other modification
hereto) by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 13.10 Confidentiality. Unless otherwise required by
any Directive, the Administrative Agent and each Bank agrees not to disclose to
unrelated third parties information clearly marked as "Confidential" provided to
it pursuant to this Agreement, the other Credit Documents or any Compliance
Certificate, except that there shall be no obligation of confidentiality in
respect of (i) any information which may be generally available to the public or
becomes available to the public through no fault of the Administrative Agent or
such Bank; (ii) communications with actual or prospective participants, or
Assignees which undertake in writing to be bound by this Section 13.10; (iii)
any communications with the Administrative Agent or any Bank; (iv) the
Administrative Agent's or any Bank's directors, officers, employees and other
representatives and agents, and directors, officers, employees and other
representatives and agents of its Affiliates, legal counsel, auditors, internal
bank examiners and regulatory authorities having jurisdiction over such Bank,
and to the extent necessary or advisable in its judgment other experts or
consultants retained by it, if in the case of a person or entity other than a
director, officer, employee, legal counsel, auditor or internal bank examiner,
the Administrative Agent or such Bank obtains from such person or entity an
undertaking in writing as to confidentiality substantially identical to this
undertaking and (v) information which is compelled to be disclosed pursuant to
legal process or court order (provided that, to the extent practicable and
permitted by applicable Laws, prompt notice of such compulsion shall be given to
the Borrower in order to permit the Borrower to defend against such disclosure).
The Administrative Agent and each Bank shall be further permitted to disclose
any such confidential information to the extent relevant (in the reasonable
judgment of the Administrative Agent or such Bank, as the case may be) in
connection with any litigation in which the Borrower is an opposing party
(provided that the Administrative Agent or such Bank, as the case may be, shall
request that the court or other relevant judicial authority take action to
maintain the confidentiality of such information).
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60
Section 13.11 Assignments and Participations. (a) Assignments.
Each Bank may, upon at least five Banking Days' notice to the Administrative
Agent and the Borrower assign to one or more financial institutions (an
"Assignee") all or a portion of its rights and obligations under this Agreement
and its Note (including, without limitation, all or a portion of its Commitment,
and the Loans); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of the assigning Bank's rights and
obligations under the relevant Commitment and Note being assigned (it being
understood that any such assignment need not be of a ratable share of the
Commitments and Notes held by the assigning Bank), (ii) unless the
Administrative Agent and the Borrower otherwise consent, the aggregate amount of
the Commitments and (without duplication) Loans of the assigning Bank being
assigned pursuant to each such assignment to an assignee which is not then a
Bank hereunder or an affiliate thereof (determined as of the date of the
Assignment and Acceptance Agreement with respect to such assignment) shall not
be less than $5,000,000 and, unless such assigning Bank is assigning its entire
Revolving Credit Commitment, shall not reduce the aggregate amount of the
Commitments retained by such Bank to less than $5,000,000, (iii) each such
assignment shall be to a financial institution, (iv) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
approval, acceptance and recording an Assignment and Acceptance Agreement,
together with (except in the case of any assignment made pursuant to Section
7.15, in which event no such fee shall be due) a processing and recordation fee
of $3,500, and (v) except in the case of an assignment to an assignee which is a
Bank or an affiliate thereof, or an assignment which is made when an Event of
Default is continuing, the Borrower shall consent to such assignment, which
consent shall not be unreasonably withheld. Upon such execution, delivery,
approval, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance Agreement, (x) the Assignee thereunder shall
be a party hereto as a Bank and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance
Agreement, have the rights and obligations of a Bank hereunder and (y) the Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance Agreement,
relinquish its rights and be released from its obligations under this Agreement
and its Note (and, in the case of an Assignment and Acceptance Agreement,
covering all or the remaining portion of an assigning Bank's rights and
obligations under this Agreement and its Note, such Bank shall cease to be a
party hereto). Notwithstanding anything to the contrary contained herein, no
Assignee shall be entitled to receive compensation under Section 7.12 or 7.13
hereof to the extent that circumstances giving rise to such payment were in
effect on the date of the relevant assignment.
(b) Effect of Assignment. By executing and delivering an
Assignment and Acceptance Agreement, a Bank assignor thereunder and the Assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as expressly provided in such Assignment and Acceptance
Agreement, such assigning Bank 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 any other Credit Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other Credit Document or any other instrument or
document furnished pursuant hereto; (ii) such assigning Bank makes no
representation or warranty and assumes no
<PAGE>
61
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations hereunder or
any other instrument or document furnished pursuant hereto or with respect to
the taxability of payments to be made hereunder; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 9.10 and Section 10.1(h) and such
other Credit Documents and other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance Agreement; (iv) such Assignee will, independently and
without reliance upon the Administrative Agent, such assigning Bank or any other
Bank 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 appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (vi) 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 it as a Bank.
(c) Recording of Assignments. The Administrative Agent shall
maintain at its Agency Office a copy of each Assignment and Acceptance Agreement
delivered to and accepted by it. The records of the Administrative Agent as to
the names and addresses of the Banks and the Commitments of, and principal
amount of the Loans owing to, each Bank from time to time shall be conclusive
and binding for all purposes, absent manifest error. The Borrower and the
Administrative Agent and the Banks may treat each Person indicated by the
records of the Administrative Agent to be a Bank hereunder as such for all
purposes of this Agreement. Upon request of the Borrower or any Bank from time
to time, the Administrative Agent shall inform the Borrower or such Bank, as the
case may be, of the identities of the Banks hereunder.
(d) Assignments Recorded. Upon its receipt of an Assignment
and Acceptance Agreement executed by an assigning Bank and an Assignee, the
Administrative Agent shall, if such Assignment and Acceptance Agreement has been
properly completed, and subject to the Borrower's consent as above provided and
payment by the parties thereto of the requisite processing and recordation fee
(i) accept such Assignment and Acceptance Agreement and (ii) record the
information contained therein in its records.
(e) Participations. Each Bank may sell participations to one
or more Persons in or to all or a portion of its rights and obligations under
this Agreement and its Note (including, without limitation, all or a portion of
its Commitments and the Loans and other extensions of credit owing to it);
provided, however, that (i) such Bank's obligations under this Agreement and its
Note(s) (including, without limitation, its Commitments to the Borrower
hereunder) shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Bank shall remain the owner of such Loans and other extensions of
credit for all purposes of this Agreement and its Note(s), and (iv) the
Borrower, the Administrative Agent, and the Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and its Note(s), provided, further, to the
extent of any such participation (unless otherwise stated therein
<PAGE>
62
and subject to the preceding and succeeding provisos), the assignee or purchaser
of such participation shall, to the fullest extent permitted by law, have the
same rights and benefits hereunder as it would have if it were a Bank hereunder;
and provided, further, that each such participation shall be granted pursuant to
an agreement providing that the purchaser thereof shall not have the right to
consent or object to any action by the selling Bank (who shall retain such
right) other than an action which would (i) reduce principal of or interest on
any Loan or fees payable hereunder in which such purchaser has an interest, or
(ii) postpone any date fixed for payment of principal of or interest on any such
Loan or such fees; and provided, further, that notwithstanding anything to the
contrary in this clause (e), the provisions of Sections 7.12 and 7.13 hereof
shall apply to the purchasers of participations only to the extent, if any, that
the Bank selling such participation would be entitled to request additional
amounts under such Sections if such Bank had not sold or assigned such
participation.
(f) Funding by Special Purpose Funding Vehicles. Anything
herein to the contrary notwithstanding, any Bank (a "Granting Bank") may grant
to a special purpose funding vehicle ("SPC") of such Granting Bank, identified
as such in writing from time to time by the Granting Bank to the Administrative
Agent and the Borrower, the option to provide to the Borrower all or any part of
any Loan that such Granting Bank otherwise would be obligated to make to the
Borrower, provided that (i) nothing herein shall constitute a commitment by any
SPC to make any Loan and (ii) if an SPC elects not to exercise such option to
make a Loan or otherwise fails to provide all or any part thereof, the Granting
Bank shall remain obligated to make such Loan pursuant to the terms hereof. The
making of a Loan by an SPC hereunder shall be deemed to constitute a utilization
of the Commitment of the Granting Bank to the same extent, and as if, such Loan
were made by the Granting Bank. Each party hereto hereby agrees that no SPC
shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the related Granting Bank).
In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceedings under
the laws of the United States or any State thereof with respect to obligations
arising hereunder or under any other Credit Document. In addition,
notwithstanding anything to the contrary contained in Section 13.10 or this
Section 13.11, any SPC may (i) with notice to, but without the prior written
consent of, the Borrower or the Administrative Agent and without paying any
processing fee therefor, assign all or a portion of its interests in any Loans
to its Granting Bank and (ii) disclose (subject to a written agreement by the
recipient to maintain the confidentiality thereof) any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of a surety, guarantee or credit or liquidity enhancement to such SPC.
The provisions of Sections 7.12 and 7.13 hereof shall apply to an SPC only to
the extent, if any, that the relevant Granting Bank would be entitled to request
additional amounts under such Sections if the SPC had not undertaken the funding
obligation of such Granting Bank.
<PAGE>
63
(g) Assignment to Federal Reserve Bank. Anything herein to the
contrary notwithstanding, each Bank shall have the right to assign or pledge
from time to time any or all of its Commitment, Loans or other rights hereunder
to any Federal Reserve Bank.
Section 13.12 Waiver of Trial by Jury. THE BORROWER, THE
BANKS, AND THE ADMINISTRATIVE AGENT, TO THE MAXIMUM EXTENT THEY MAY LEGALLY DO
SO, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS
AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR RELATED
TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS
AGREEMENT, OR THE OTHER CREDIT DOCUMENTS, THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE, OR ENFORCEMENT HEREOF OR THEREOF, OR THE TRANSACTIONS RELATED
HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT
THEY MAY LEGALLY DO SO, THE BORROWER, THE BANKS AND THE ADMINISTRATIVE AGENT
HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING
SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.12 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER
OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
Section 13.13 Choice of Forum and Service of Process. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth under its signature
hereto or at such other address of which the Administrative Agent shall
have been notified pursuant thereto;
(c) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
<PAGE>
64
(d) consents that any action or proceeding described in
Section 13.13(a) may be brought in the Courts of the State of New York,
the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof, and waives any
objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead
or claim the same.
Section 13.14 Remedies. The remedies provided to the
Administrative Agent and the Banks herein are cumulative and are in addition to,
and not in lieu of, any remedies provided by law. To the maximum extent
permitted by law, remedies may be exercised by the Administrative Agent or any
Bank successively or concurrently, and the failure to exercise any remedy shall
not constitute a waiver thereof, nor shall the single or partial exercise of any
remedy preclude any other or further exercise of such remedy or any other right
or remedy.
Section 13.15 Right of Set-Off. Upon the occurrence and during
the continuance of any Event of Default, each Bank 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 Bank
to or for the credit or the account of the Borrower against an equivalent amount
of the amounts owing to such Bank hereunder which are then due and payable,
irrespective of whether or not such Bank shall have made any demand under this
Agreement. Each Bank agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application is made by such
Bank, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Bank under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Bank may have.
Section 13.16 Effectiveness. This Agreement shall become
effective on the date (which date shall occur on or before the Closing Date)
upon which the Administrative Agent shall have received counterparts of this
Agreement, duly executed by the Borrower and the Banks listed on the signature
pages hereof.
<PAGE>
65
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.
COMPUTER ASSOCIATES INTERNATIONAL,
INC., a Delaware corporation
By
-----------------------------------------------
Title:
Address for Notices:
One Computer Associates Plaza
Islandia, New York, 11788-7000
Attn: Treasurer
Telecopier: (631) 342-4854
with a copy (other than in the case of
administrative notices) to:
Attn: General Counsel
Telecopier: (631) 342-4866
CREDIT SUISSE FIRST BOSTON, as the
Administrative Agent
By
-----------------------------------------------
Title:
By
-----------------------------------------------
Title:
<PAGE>
66
CREDIT SUISSE FIRST BOSTON, as the Lead
Arranger and a Bank
By
--------------------------------------------
Title:
By
--------------------------------------------
Title:
BANK OF AMERICA, N.A., as a Co-
Syndication Agent and a Bank
By
--------------------------------------------
Title:
THE CHASE MANHATTAN BANK, as a
Bank
By
--------------------------------------------
Title:
BANK OF NOVA SCOTIA, as the
Documentation Agent and a Bank
By
--------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as a Managing Agent and a Bank
By
--------------------------------------------
Title:
<PAGE>
BANQUE NATIONALE DE PARIS, NEW
YORK, as a Managing Agent and a Bank
By
-----------------------------------------------
Title:
By
-----------------------------------------------
Title:
FUJI BANK LIMITED, NEW YORK, as a
Managing Agent and a Bank
By
-----------------------------------------------
Title:
HSBC BANK USA, as a Managing Agent and a
Bank
By
-----------------------------------------------
Title:
HYPO VEREINSBANK, as a Managing Agent
and a Bank
By
-----------------------------------------------
Title:
By
-----------------------------------------------
Title:
MELLON BANK, N.A., as a Managing Agent
and a Bank
By
-----------------------------------------------
Title:
<PAGE>
68
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, New York Branch, as a
Managing Agent and a Bank
By
-------------------------------------------------------
Title:
By
-------------------------------------------------------
Title:
BANCA COMMERCIALE ITALIANA, New
York Branch, as a Co-Agent and a Bank
By
-------------------------------------------------------
Title:
By
-------------------------------------------------------
Title:
CREDIT LYONNAIS, New York Branch, as a
Co-Agent and a Bank
By
-------------------------------------------------------
Title:
DAI-ICHI KANGYO BANK, as a Co-Agent
and a Bank
By
-------------------------------------------------------
Title:
ROYAL BANK OF CANADA, as a Co-Agent
and a Bank
By
-------------------------------------------------------
Title:
<PAGE>
WACHOVIA BANK, N.A. as a Co-Agent and a
Bank
By
-------------------------------------------
Title:
COMMERZBANK AKTIENGESELLSCHAFT
By
-------------------------------------------
Title:
By
-------------------------------------------
Title:
BANCA NAZIONALE DEL LAVORO S.p.A.-
NEW YORK BRANCH
By
-------------------------------------------
Title:
By
-------------------------------------------
Title:
ABN-AMRO BANK N.V.
By
-------------------------------------------
Title:
By
-------------------------------------------
Title:
BB L INTERNATIONAL (U.K.) LIMITED
By
-------------------------------------------
Title:
<PAGE>
70
BANK ONE, N.A.(Main Office Chicago)
By
-------------------------------------------
Title:
FIRST UNION NATIONAL BANK
By
-------------------------------------------
Title:
FLEET BOSTON FINANCIAL
By
-------------------------------------------
Title:
SUMITOMO BANK LIMITED
By
-------------------------------------------
Title:
LANDESBANK SACHSEN GIROZENTRALE
By
-------------------------------------------
Title:
SANPAOLO IMI S.p.A
By
--------------------------------------------
Title:
By
--------------------------------------------
Title:
<PAGE>
COMMERICA BANK
By
--------------------------------------------
Title:
SUNTRUST BANK
By
--------------------------------------------
Title:
BANK HAPOALIM B.M.
By
--------------------------------------------
Title:
By
--------------------------------------------
Title:
MITSUBISHI TRUST AND BANKING CORPORATION
By
--------------------------------------------
Title:
ARAB BANK PLC
By
---------------------------------------------
Title:
<PAGE>
72
BANCO COMERCIAL PORTUGES
By
------------------------------------------
Title:
BANK OF TAIWAN, NEW YORK AGENCY
By
------------------------------------------
Title:
CAISSE DES DEPOTS
By
------------------------------------------
Title:
FIRST COMMERCIAL BANK
By
------------------------------------------
Title:
HUA NAN COMMERCIAL BANK LIMITED
By
------------------------------------------
Title:
<PAGE>
MALAYAN BANKING BERHAD
By
------------------------------------------
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By
------------------------------------------
Title:
KREDIETBANK
By
------------------------------------------
Title:
By
------------------------------------------
Title:
BANCA POPOLARE DI MILANO, NEW
YORK BRANCH
By
------------------------------------------
Title:
By
------------------------------------------
Title:
<PAGE>
74
DG BANK
DEUTSCHE GENOSSENSCHAFTSBANK
AG, NEW YORK BRANCH
By
-------------------------------------------
Title:
By
-------------------------------------------
Title:
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By
-------------------------------------------
Title:
BANK OF HAWAII
By
-------------------------------------------
Title:
CITIC KA WAH BANK LIMITED
By
-------------------------------------------
Title:
TAIPEIBANK
By
-------------------------------------------
Title:
<PAGE>
SUMMIT BANK
By
------------------------------------------
Title:
INTERNATIONAL COMMERCIAL BANK
OF CHINA
By
------------------------------------------
Title:
BANCO ESPIRITO SANTO E COMERCIAL
DE LISBOA, NASSAU BRANCH
By
------------------------------------------
Title:
By
------------------------------------------
Title:
BW CAPITAL MARKETS, INC.
By
------------------------------------------
Title:
By
-------------------------------------------
Title:
CHIAO TUNG BANK CO., LTD., NEW
YORK AGENCY
By
-------------------------------------------
Title:
<PAGE>
76
CHUGOKU BANK, LTD
By
-------------------------------------------
Title:
NORTH FORK BANK
By
-------------------------------------------------------
Title:
BANK PEKAO
By
-------------------------------------------------------
Title:
ALLIED IRISH BANK, PLC.
By
-------------------------------------------------------
Title:
RZB FINANCE LLC
By
-------------------------------------------------------
Title:
<PAGE>
Schedule 1
Commitment Schedule
A. Agency Office: 11 Madison Avenue
New York, New York 10010
Attention: Syndications Agency
Telecopier: (212) 325-8304
B. Banks: (Listed Below)
<TABLE>
<CAPTION>
Bank Revolving Commitment Address for Notices
---- -------------------- -------------------
<S> <C> <C>
Credit Suisse First Boston $85,000,000 11 Madison Avenue
New York, NY 10010
Attn: Chris Hogan
Telecopier: 212-325-8309
Bank of America, N.A. $85,000,000 901 Main Street
Dallas, TX 75202
Attn: Sharon Ellis
Telecopier: 214-209-0980
The Chase Manhattan Bank $85,000,000 395 N. Service Road
Melville, NY 11747
Attn: Phyllis Sawyer
Telecopier: 631-755-0141
Bank of Nova Scotia $85,000,000 One Liberty Plaza
New York, NY 10006
Attn: Roger Chu
Telecopier: 212-225-5090
Bank of Tokyo-Mitsubishi $60,000,000 1251 Avenue of the Americas
Trust Company New York, NY 10020
Attn: Tom Fennessey
Telecopier: 212-782-6440
Banque Nationale de Paris, $60,000,000 499 Park Avenue
New York New York, NY 10022
Attn: Rick Pace
Telecopier: 212-415-9606
</TABLE>
<PAGE>
2
<TABLE>
<S> <C> <C>
Fuji Bank Limited, New York $60,000,000 Two World Trade Center
79th Floor
New York, NY 10048
Attn: Thomas Esposito
Telecopier: 212-321-9407
HSBC Bank USA $60,000,000 140 Broadway, 4th Floor
New York, NY 10005
Attn: Diane Zieske
Telecopier: 212-658-5109
Hypo Vereinsbank $60,000,000 150 East 42nd Street
New York, NY 10017
Attn: Marianne Weinzinger
Telecopier: 212-672-5530
Mellon Bank N.A. $60,000,000 1735 Market Street
7th Floor
Philadelphia, NY 19103
Attn: Kristen Bells
Telecopier: 215-553-4899
West LB $60,000,000 1211 Avenue of the Americas
23rd Floor
New York, NY 10019
Attn: Walter Duffy, III
Telecopier: 212-852-6148
Banca Commerciale Italiana $40,000,000 One William Street
New York Branch New York, NY 10004
Attn: John Michalisin
Telecopier: 212-809-9780
Credit Lyonnais $40,000,000 1301 Avenue of the Americas
New York, NY 10019
Attn: Judy Domkowski
Telecopier: 212-459-3179
Dai-Ichi Kangyo Bank $40,000,000 One World Trade Center
Suite 4911
New York, NY 10048
Attn: Nelson Chang
Telecopier: 212-524-0579
</TABLE>
<PAGE>
3
<TABLE>
<S> <C> <C>
Royal Bank of Canada $40,000,000 One Liberty Plaza
New York, NY 10006-1404
Attn: Stephanie Babich
Telecopier: 212-428-6460
Wachovia Bank, N.A. $40,000,000 191 Peachtree Street NE
Atlanta, GA 30303
Attn: William Christie
Telecopier: 404-332-6898
Commerzbank $27,000,000 Two World Financial Center
Aktiengesellschaft New York, NY 10281-1050
Attn: Andrew Lusk
Telecopier: 212-266-7530
Banca Nazionale del Lavoro, $26,000,000 555 West Monroe Street
S.P.A. - New York Branch Suite 3490
Chicago, IL 60603
Attn: Anthony Betti
Telecopier: 312-444-9410
ABN-AMRO Bank N.V. $25,000,000 One Post Office Square
39th Floor
Bell Atlantic Tower
Boston, MA 02109-4000
Attn: Natalie Smith
Telecopier: 617-988-7910
BBL International (U.K.) $17,000,000 630 Fifth Avenue, 6th Floor
Limited New York, NY 10111
Attn: Kathy Moss
Telecopier: 212-333-5786
Bank One N.A. $17,000,000 153 West 51st Street, 6th Floor
(Main Office Chicago) New York, NY 10019
Attn: Andrea Kantor
Telecopier: 212-373-1180
First Union National Bank $17,000,000 50 Main Street
White Plains, NY 10606
Attn: Joe Markey
Telecopier: 914-286-5001
Fleet Boston Financial $17,000,000 300 Broad Hollow Road
Melville, NY 11747-4850
Attn: Jed Pomerantz
Telecopier: 516-547-7815
</TABLE>
<PAGE>
4
<TABLE>
<S> <C> <C>
Sumitomo Bank limited $17,000,000 277 Park Avenue
New York, NY 10172
Attn: Ed McColly
Telecopier: 212-224-4384
Landesbank Sachsen Girozentrale $15,000,000 Humboldtstrasse 25
Leipzig, Germany 04105
Attn: Suzanna Englehart
Telecopier: 011-49-341-979-3309
SanPaolo IMI S.p.A $10,000,000 245 Park Avenue, 35th Floor
New York, NY 10167
Attn: Robert Wurster
Telecopier: 212-692-3178
Comerica Bank, Detroit $10,000,000 One Detroit Center
500 Woodward Avenue
Mail Code 3328
Detroit, MI 48226-3280
Attn: Joel Gordon
Telecopier: 313-222-3330
SunTrust Bank $10,000,000 711 Fifth Avenue, 16th Floor
New York, NY 10022
Attn: Eric Skillins
Telecopier: 212-371-9386
Bank Hapoalim B.M. $10,000,000 1177 Avenue of the Americas
12th Floor
New York, NY 10036-2790
Attn: Marc Bosc
Telecopier: 212-782-2187
Mitsubishi Trust and Banking $10,000,000 520 Madison Avenue
Corporation 26th Floor
New York, NY 10022
Attn: Tara Van Tassell
Telecopier: 212-644-6825
Arab Bank PLC $7,500,000 520 Madison Avenue
2nd Floor
New York, NY 10022
Attn: Samer Tamimi
Telecopier: 212-593-4632
</TABLE>
<PAGE>
5
<TABLE>
<S> <C> <C>
Banco Comercial Portuges $7,500,000 International Division
RUA Alexandre Herculano 50
1100 Lisbon Port
Lisbon, Portugal 1269-055
Attn: Shekar Chatterjee
Telecopier: 011-35-121-3125-966
Bank of Taiwan, New York Agency $7,500,000 1 World Trade Center
Suite 5323
New York, NY 10048
Attn: Kurt Shih
Telecopier: 212-775-9026
Caisse Des Depots $7,500,000 Nine West 57th Street
16th Floor
New York, NY 10019
Attn: Celine Scemama
Telecopier: 212-891-6123
First Commercial Bank. $7,500,000 Two World Trade Center
Suite 7868
New York, NY 10048
Attn: May Lu
Telecopier: 212-432-6590
Hua Nan Commercial Bank Ltd. $7,500,000 Two World Trade Center
Suite 2846
New York, NY 10048
Attn: Cindy Yang
Telecopier: 212-912-1050
Malayan Banking Berhad $7,500,000 1295 State Street
Springfield, MA 01111
Attn: Akmar Wallace
Telecopier: 212-302-0109
The Tokai Bank, Limited $7,500,000 55 East 52nd Street
New York Branch New York, NY 10055
Attn: Sam Rosen
Telecopier: 212-832-1428
Kredietbank $5,500,000 125 West 55th Street
New York, NY 10019
Attn: Robert Surdam, Jr.
Telecopier: 212-541-0793
</TABLE>
<PAGE>
6
<TABLE>
<S> <C> <C>
Banca Popolare di Milano, $5,500,000 375 Park Avenue, 9th Floor
New York Branch New York, NY 10152
Attn: James Chatman
Telecopier: 212-387-0177
DG Bank $5,000,000 609 Fifth Avenue
Deutsche Genossenshaftsbank AG New York, NY 10017
Attn: Sabina Wendt
Telecopier: 212-745-1556
Erste Bank Der Oesterreichischen $4,500,000 280 Park Avenue
Sparkassen AG West Building
New York, NY 10017
Attn: Arcinee Hovanessian
Telecopier: 212-984-5627
Bank of Hawaii $4,000,000 1850 North Central Avenue
Phoenix, AZ 85004
Attn: Donna Parker
Telecopier: 602-257-2444
Citic Ka Wah Bank Limited $4,000,000 11 East Broadway
New York, NY 10038
Attn: Aaron Fong
Telecopier: 212-791-3776
TaipeiBank $4,000,000 One World Trade Center
New York, NY 10048
Attn: Terence Cheng
Telecopier: 212-775-1866
Summit Bank $3,000,000 301 Carnegie Center
Princeton, NJ 08543
Attn: William Holland
Telecopier: 609-734-9125
International Commercial Bank of China $2,000,000 2 North LaSalle St.
Suite 1803
Chicago, IL 60602
Attn: Shihming Huang
Telecopier: 312-278-2402
Banco Espirito Santo e Comercial $2,000,000 320 Park Avenue, 29th Floor
de Lisboa New York, NY 10022
Attn: Andrew Orsen
Telecopier: 212-750-3999
</TABLE>
<PAGE>
7
<TABLE>
<S> <C> <C>
BW Capital Markets, Inc. $2,000,000 630 Fifth Avenue
Suite 1919
New York, NY 10111
Attn: Adele Savoretti
Telecopier: 212-218-1816
Chiao Tung Bank Co., Ltd. $2,000,000 One World Financial Center
New York Agency 200 Liberty Street
New York, NY 10281
Attn: Ifen Lee
Telecopier: 212-285-2922
Chugoku Bank, LTD $2,000,000 One World Trade Center
New York, NY 10048
Attn: Masakazu Oki
Telecopier: 212-321-3367
North Fork Bank $2,000,000 275 Broad Hollow Road
Melville, NY 11747
Attn: Robert Dunwoody
Telecopier: 631-844-9776
Bank Pekao $2,000,000 470 Park Avenue South
15th Floor
New York, NY 10016
Attn: Barry Henry
Telecopier: 212-679-5910
Allied Irish Bank, Plc. $1,500,000 AIB International Centre
IFSC
Dublin, Ireland
Attn: Michael Doyle
Telecopier: 0113531-668-2508
RZB Finance LLC $1,000,000 1133 Avenue of the Americas
16th Floor
New York, NY 10036
Attn: Klaus Hein
Telecopier: 212-944-2093
$1,300,000,000
--------------
</TABLE>
<PAGE>
Schedule 2
----------
Material Subsidiaries
---------------------
Name Jurisdiction
---- ------------
CA Computer Associates Holding GmbH Germany
Computer Associates Plc United Kingdom
CA Foreign, Inc. Delaware
Computer Associates Holding 1 BV The Netherlands
Computer Associates Holding 2 BV The Netherlands
Computer Associates Properties Holding Limited United Kingdom
Computer Associates Holding Limited United Kingdom
Computer Associates Canada Company Nova Scotia
Computer Associates Japan Ltd Japan
CA Computer Associates Limited United Kingdom
<PAGE>
Exhibit A
FORM OF
ASSIGNMENT AND ACCEPTANCE AGREEMENT
-----------------------------------
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 24, 2000 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and between Computer
Associates International, Inc., a Delaware corporation ("Borrower"), the banks
and other financial institutions parties thereto (the "Banks"), the Co-Agents
named therein, the Co-Syndication Agents named therein, the Documentation Agent
named therein and Credit Suisse First Boston, as administrative agent for the
Banks (in such capacity, "the Administrative Agent"). Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor")
and the Assignee identified on Schedule l hereto (the "Assignee") agree as
follows:
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date (as defined below), the interest described in Schedule 1
hereto (the "Assigned Interest") in and to the Assignor's rights and obligations
under the Credit Agreement with respect to those credit facilities contained in
the Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) 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 with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Credit Document or any
other instrument or document furnished pursuant thereto, other than that the
Assignor has not created any adverse claim upon the interest being assigned by
it hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any of its Subsidiaries or
any other obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Credit Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to Section 9.10 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Bank 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 the Credit Agreement, the
other Credit Documents or any other instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Administrative Agent to take
such action as administrative agent on its behalf and to exercise such powers
and discretion under the Credit Agreement, the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Bank
<PAGE>
2
including, if it is organized under the laws of a jurisdiction outside the
United States, its obligations pursuant to Section 7.13 of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall
be the Effective Date of Assignment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this Assignment and Acceptance, it
will be delivered to the Administrative Agent for acceptance by it and recording
by the Administrative Agent pursuant to the Credit Agreement, effective as of
the Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Banking Days after the date of such
acceptance and recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date. The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Bank thereunder
and under the other Credit Documents and shall be bound by the provisions
thereof and (b) the Assignor shall, to the extent provided in this Assignment
and Acceptance, relinquish its rights and be released from its obligations under
the Credit Agreement.
7. 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 as of the date first above written by
their respective duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
- ------------------------ ------------------ ----------------------------------
Credit Principal
Facility Assigned Amount Assigned Commitment Percentage Assigned 1/
$ . %
--- ---------
- -------------------------------------- --------------------------------------
[Name of Assignee] [Name of Assignor]
By: By:
Title: Title:
Address for Notices:
- -------------------------------------- --------------------------------------
Accepted: [Consented To:
CREDIT SUISSE FIRST BOSTON, as COMPUTER ASSOCIATES INTERNATIONAL,
Administrative Agent INC.
By: By:
Title: Title:]
- ----------------------
1/Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all Banks.
<PAGE>
Exhibit B
---------
FORM OF
COMPLIANCE CERTIFICATE
----------------------
To the Banks and the Administrative Agent
Referenced Below
The undersigned hereby certifies that:
1. This Compliance Certificate is being delivered pursuant to
Section 10.1(h) of that certain Amended and Restated Credit Agreement, dated as
of May 24, 2000 (as the same may have been amended to the date hereof, the
"Credit Agreement"), by and between Computer Associates International, Inc., a
Delaware corporation ("Borrower"), the banks and other financial institutions
parties thereto (the "Banks"), the Co-Agents named therein, the Co-Syndication
Agents named therein, the Documentation Agent named therein and Credit Suisse
First Boston, as administrative agent for the Banks (in such capacity, "the
Administrative Agent"). Any and all initially capitalized terms used herein have
the meanings ascribed thereto in the Credit Agreement unless otherwise
specifically defined herein.
2. The undersigned is a Responsible Officer of the Borrower
with the title set forth below his signature hereon.
3. The undersigned has reviewed the terms of the Credit
Agreement and the other Credit Documents with a view toward determining whether
the Borrower has complied with the terms thereof in all material respects, has
made, or has caused to be made under his supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its Subsidiaries as
of _______, ____, and such review has disclosed that, as of such date, no event
has occurred and is continuing which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
4. The ratio of (i) Consolidated EBITDA of the Borrower and
its Subsidiaries to (ii) Consolidated Interest Expense of the Borrower and its
Subsidiaries for purposes of the calculation of compliance with the covenant set
forth in Section 10.2(f) is ________ to 1.0, as demonstrated in reasonable
detail by the calculations set forth on Schedule I hereto.
5. The Test Ratio for purposes of the calculation of
compliance with the covenant set forth in Section 10.2(g) is ________ to 1.0, as
demonstrated in reasonable detail by the calculations set forth on Schedule I
hereto.
I hereby certify the foregoing information to be true and
correct in all material respects and execute this Compliance Certificate this
____ day of _________, ____.
Name:
Title:
<PAGE>
Exhibit C-1
-----------
FORM OF
NOTICE OF BORROWING (DRAWINGS)
------------------------------
Credit Suisse First Boston, as
administrative agent under the Credit
Agreement referenced below
This Notice of Borrowing is given pursuant to Section 2.2 or
Section 3.2, as applicable, of that certain Amended and Restated Credit
Agreement, dated as of May 24, 2000 (as the same may have been amended to the
date hereof, the "Credit Agreement"), by and between Computer Associates
International, Inc., a Delaware corporation, the banks and other financial
institutions parties thereto (the "Banks"), the Co-Agents named therein, the
Co-Syndication Agents named therein, the Documentation Agent named therein and
Credit Suisse First Boston, as administrative agent (in such capacity, the "the
Administrative Agent") for the Banks. Any and all initially capitalized terms
used herein have the meanings ascribed thereto in the Credit Agreement unless
otherwise specifically defined herein.
The undersigned hereby (one checked as applicable) :
[ ] gives the Administrative Agent irrevocable
notice
[ ] confirms its irrevocable telephonic notice
to the Administrative Agent
that it requests the making of a (one checked as applicable):
[ ] Revolving Loan
[ ] Swingline Loan
under the Credit Agreement as follows:
1. Date of Loan. The requested date of the proposed Loan is
, .
- ---------- ----------
2. Amount of Loan. The requested aggregate amount of the
proposed Loan is: $ .
----------
3. Rate Option and Interest Period. The requested rate
option and (if applicable) Interest Period for the proposed Loan is ((a) or (b)
checked as applicable):
[ ] (a) The Eurodollar Rate 1/, as described
below:
<TABLE>
<CAPTION>
Tranche A Tranche B Tranche C
- ----------------------- ----------------------- -----------------------
<S> <C> <C>
Principal Amount: $ Principal Amount: $ Principal Amount: $
------- ------- -------
Interest Period (one checked as Interest Period (one checked as Interest Period (one checked as
applicable): applicable): applicable):
[ ] 1 month [ ] 1 month [ ] 1 month
[ ] 2 months [ ] 2 months [ ] 2 months
[ ] 3 months [ ] 3 months [ ] 3 months
[ ] 6 months [ ] 6 months [ ] 6 months
[ ] 9 months [ ] 9 months [ ] 9 months
[ ] 12 months [ ] 12 months [ ] 12 months
</TABLE>
[ ] (b) The Base Rate, with respect to
$ of the proposed Loan.
----------
- --------------------
1/ Not available for Swingline Loans
<PAGE>
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By
Its
Dated:
-----------------------
<PAGE>
Exhibit C-2
-----------
FORM OF
NOTICE OF BORROWING (CONTINUATIONS)
-----------------------------------
Credit Suisse First Boston, as
administrative agent under the Credit
Agreement referenced below
This Notice of Borrowing is given pursuant to Section 7.6 of
that certain Amended and Restated Credit Agreement, dated as of May 24, 2000 (as
the same may have been amended to the date hereof, the "Credit Agreement"), by
and between Computer Associates International, Inc., a Delaware corporation, the
banks and other financial institutions parties thereto (the "Banks"), the
Co-Agents named therein, the Co-Syndication Agents named therein, the
Documentation Agent named therein and Credit Suisse First Boston, as
administrative agent (in such capacity, the "the Administrative Agent") for the
Banks. Any and all initially capitalized terms used herein have the meanings
ascribed thereto in the Credit Agreement unless otherwise specifically defined
herein.
The undersigned hereby (one checked as applicable):
[ ] gives the Administrative Agent irrevocable notice
[ ] confirms its irrevocable telephonic notice to the
Administrative Agent
that it requests the continuation of a Eurodollar Rate Loan under the Credit
Agreement as follows:
1. Maturity Date. The last day of the Interest Period
presently applicable to such Eurodollar Rate Loan is , .
---------- ----
2. Amount to be Continued. The requested aggregate
amount of such Eurodollar Rate Loan to be continued is: $ .
--------
3. Interest Period. The Interest Period for the
proposed continuation is:
<TABLE>
<CAPTION>
Tranche A Tranche B Tranche C
- ----------------------- ----------------------- -----------------------
<S> <C> <C>
Principal Amount: $_______ Principal Amount: $_______ Principal Amount: $_______
Interest Period (one checked as Interest Period (one checked as Interest Period (one checked as
applicable): applicable): applicable):
[ ] 1 month [ ] 1 month [ ] 1 month
[ ] 2 months [ ] 2 months [ ] 2 months
[ ] 3 months [ ] 3 months [ ] 3 months
[ ] 6 months [ ] 6 months [ ] 6 months
[ ] 9 months [ ] 9 months [ ] 9 months
[ ] 12 months [ ] 12 months [ ] 12 months
</TABLE>
Dated: , . COMPUTER ASSOCIATES INTERNATIONAL,
---------- ------ INC.
By
Its
<PAGE>
Exhibit C-3
-----------
FORM OF
NOTICE OF BORROWING (CONVERSIONS)
---------------------------------
Credit Suisse First Boston, as
administrative agent under the Credit
Agreement referenced below
This Notice of Borrowing is given pursuant to Section 7.6 of
that certain Amended and Restated Credit Agreement, dated as of May 24, 2000 (as
the same may have been amended to the date hereof, the "Credit Agreement"), by
and between Computer Associates International, Inc., a Delaware corporation, the
banks and other financial institutions parties thereto (the "Banks"), the
Co-Agents named therein, the Co-Syndication Agents named therein, the
Documentation Agent named therein and Credit Suisse First Boston, as
administrative agent (in such capacity, the "the Administrative Agent") for the
Banks. Any and all initially capitalized terms used herein have the meanings
ascribed thereto in the Credit Agreement unless otherwise specifically defined
herein.
The undersigned hereby (one checked as applicable):
[ ] gives the Administrative Agent
irrevocable notice
[ ] confirms its irrevocable telephonic
notice to the Administrative Agent
that it requests the continuation of a Eurodollar Rate Loan under the Credit
Agreement as follows: 2/
A. Conversion from Base Rate Loan to Eurodollar Rate Loan.
1. Date of Conversion. The date upon which such
conversion is to occur is , .
---------- ------
2. Amount to be Converted. The requested aggregate
amount of such Base Rate Loan to be converted into a Eurodollar Rate Loan is:
$ .
----------
3. Interest Period. The Interest Period for the
proposed conversion to a Eurodollar Rate Loan is:
<TABLE>
<CAPTION>
Tranche A Tranche B Tranche C
- ----------------------- ----------------------- -----------------------
<S> <C> <C>
Principal Amount: $_______ Principal Amount: $_______ Principal Amount: $_______
Interest Period (one checked as Interest Period (one checked as Interest Period (one checked as
applicable): applicable): applicable):
[ ] 1 month [ ] 1 month [ ] 1 month
[ ] 2 months [ ] 2 months [ ] 2 months
[ ] 3 months [ ] 3 months [ ] 3 months
[ ] 6 months [ ] 6 months [ ] 6 months
[ ] 9 months [ ] 9 months [ ] 9 months
[ ] 12 months [ ] 12 months [ ] 12 months
</TABLE>
B. Conversion from Eurodollar Rate Loan to Base Rate Loan.
1. Date of Conversion. The date upon which such
conversion is to occur is , .
---------- --------
2. Maturity Date. The last day of the Interest Period
presently applicable to such Eurodollar Rate Loan is _________, ____, and the
Interest Period presently applicable thereto is _____ months.
- --------------------
2/Insert Part A and/or B, as applicable.
<PAGE>
3. Amount to be Converted. The requested aggregate
amount of such Eurodollar Rate Loan to be converted into a Base Rate Loan
is: $ .
----------
Dated: , .
---------- -------
COMPUTER ASSOCIATES INTERNATIONAL,
INC.
By
Its
<PAGE>
EXHIBIT E-1
-----------
FORM OF REVOLVING LOAN
PROMISSORY NOTE
---------------
$ New York, New York
--------------------------- May 24, 2000
FOR VALUE RECEIVED, the undersigned, COMPUTER ASSOCIATES INTERNATIONAL,
INC., a Delaware corporation (the "Borrower"), hereby unconditionally promises
to pay to the order of (the "Bank") at the office of Credit Suisse First Boston,
located at 11 Madison Avenue, New York, New York 10010, in lawful money of the
United States of America and in immediately available funds, on the Termination
Date (or such earlier date upon which such amounts may become due and payable
pursuant to the terms of the Credit Agreement described below) the principal
amount of (a) DOLLARS ($ ), or, if less, (b) the aggregate unpaid principal
amount of all Revolving Loans made by the Bank to the Borrower pursuant to
Section 2.1 of the Credit Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in the Credit Agreement, together with all fees and costs
payable by the Borrower under the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Loan made pursuant to the Credit Agreement and the date and amount of
each payment or prepayment of principal thereof, each continuation thereof, each
conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Rate Loans, the length of each Interest Period with respect thereto.
The failure to make any such endorsement shall not affect the obligations of the
Borrower in respect of such Revolving Loan.
This Note (a) is one of the promissory notes referred to in the Amended
and Restated Credit Agreement dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Borrower, the Bank, the other banks and financial institutions from
time to time parties thereto, the Co-Agents named therein, the Co-Syndication
Agents named therein, the Documentation Agent named therein and Credit Suisse
First Boston, as administrative agent, (b) is subject to the provisions of the
Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind, except for those
expressly provided for in the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By:
Title:
<PAGE>
SCHEDULE A
to Promissory Note
------------------
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Amount Amount of Base Rate
Converted to Amount of Principal of Loans Converted to
Date Amount of Base Rate Loans Base Rate Loans Base Rate Loans Repaid Eurodollar Rate Loans
- -----------------------------------------------------------------------------------------------------------------------
<S> <S> <S> <S> <S>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------ ------------------
Unpaid Principal
Balance of Base Rate
Date Loans Notation Made By
- ------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
to Promissory Note
------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR RATE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Amount of Amount Converted Interest Period and Amount of Principal Amount of Eurodollar
Eurodollar Rate to Eurodollar Rate Eurodollar Rate with of Eurodollar Rate Rate Loans Converted
Date Loans Loans Respect Thereto Loans Repaid to Base Rate Loans
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------
Unpaid Principal
Balance of Notation
Date Eurodollar Rate Loans Made By
- ----------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E-2
FORM OF SWINGLINE LOAN
PROMISSORY NOTE
$200,000,000.00 New York, New York
May 24, 2000
FOR VALUE RECEIVED, the undersigned, COMPUTER ASSOCIATES
INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), hereby
unconditionally promises to pay to the order of CREDIT SUISSE FIRST BOSTON (the
"Bank"), at its office located at 11 Madison Avenue, New York, New York 10010,
in lawful money of the United States of America and in immediately available
funds, on the Termination Date (or such earlier date upon which such amounts may
become due and payable pursuant to the terms of the Credit Agreement described
below) the principal amount of (a) TWO HUNDRED MILLION DOLLARS
($200,000,000.00), or, if less, (b) the aggregate unpaid principal amount of all
Swingline Loans made by the Bank to the undersigned pursuant to Section 3.1 of
the Credit Agreement. The Borrower further agrees to pay interest in like money
at such office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the Credit Agreement,
together with all fees and costs payable by the Borrower under the Credit
Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date and amount of each Swingline
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. The failure to make any such
endorsement shall not affect the obligations of the Borrower in respect of such
Swingline Loan.
This Note (a) is one of the promissory notes referred to in the
Amended and Restated Credit Agreement dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Borrower, the Bank, the other banks and financial institutions from
time to time parties thereto, the Co-Agents named therein, the Co-Syndication
Agents named therein, the Documentation Agent named therein and Credit Suisse
First Boston, as administrative agent, (b) is subject to the provisions of the
Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind, except for those
expressly provided for in the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
COMPUTER ASSOCIATES INTERNATIONAL,
INC.
By:
Title:
<PAGE>
Schedule A to
Swingline Note
LOANS AND REPAYMENT OF SWINGLINE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Date Amount of Loans Amount of Principal Unpaid Principal Notation Made