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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 December 31, 1998
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 000-21755
MASTECH CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1802235
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1004 McKee Road 15071
Oakdale, Pennsylvania (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (412) 787-2100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 26, 1999 (based on the closing price of such stock
as reported by NASDAQ on such date) was $507,393,462.
The number of shares of the registrant's Common Stock, par value $.01 per
share, outstanding as of February 26, 1999 was 50,330,605 shares.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this form 10-K [_]
Documents Incorporated By Reference
Portions of the Corporation's Proxy Statement, prepared for the Annual Meeting
of Shareholders scheduled for June 1, 1999, to be filed with the Commission
are incorporated by reference into Part III of this report.
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MASTECH CORPORATION
1998 FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business....................................................... 3
Item 2. Properties..................................................... 14
Item 3. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5. Matters........................................................ 15
Item 6. Selected Financial Data........................................ 16
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operations.......................................... 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..... 24
Item 8. Financial Statements and Supplementary Data.................... 24
Changes in and Disagreements with Accountants on Accounting and
Item 9. Financial Disclosure........................................... 48
PART III
Item 10. Directors and Executive Officers of Registrant................. 49
Item 11. Executive Compensation......................................... 49
Item 12. Security Ownership of Certain Beneficial Owners and Management. 49
Item 13. Certain Relationships and Related Transactions................. 49
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-
Item 14. K.............................................................. 50
2
PART I
ITEM 1. BUSINESS
(a) Summary
Mastech Corporation, a Pennsylvania corporation, incorporated on November
12, 1996 is a worldwide provider of information technology ("IT") services to
large and medium-sized organizations. Mastech Systems, a Pennsylvania
corporation through which the business of the Company has been conducted since
its inception in July 1986, is an indirect, wholly owned subsidiary of Mastech
Corporation. Mastech Corporation, and its direct and indirect wholly owned
subsidiaries shall hereinafter be referred to as "Mastech" or the "Company".
Mastech provides its clients with a single source for a broad range of
applications solutions and services, including client/server design and
development, software modernization services, enterprise resource planning
("ERP") package implementation services, E-Business solutions, customer
interaction management, applications maintenance outsourcing and Year 2000
services. These services are provided in a variety of computing environments
and use leading technologies, including client/server architectures, object-
oriented programming languages and tools, distributed database management
systems and the latest networking and communications technologies. To enhance
its services, Mastech has formed business alliances with leading software
companies such as Oracle, PeopleSoft, SAP, Siebel and Genesys. In addition,
the Company has developed its own proprietary methodologies and tools, under
the name SmartAPPS, that enhance the productivity of the Company's Year 2000
and other services.
(b) Financial Information
The Company's management allocates business resources principally among
three business units; the U.S. Client Services group, the High Value Services
group and the International Client Services group. The financial results and
data applicable to each, as well as their financing requirements (if any) are
set forth in Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes to Consolidated Financial
Statements. Other financial information about the operations of the Company
are found on pages 16 and 17 of this Form 10-K. Services rendered by the
Company's international offices are considered international operations. The
Company has no export revenues.
(c) Services
Mastech provides its clients with a single source for a broad range of IT
applications solutions and services, including: (i) client/server design and
development; (ii) conversion/migration services; (iii) ERP package
implementation services; (iv) E-Business solutions; (v) applications
maintenance outsourcing; and (vi) Year 2000 services. These services are
provided in a variety of computing environments and use leading technologies
including client/server architectures, object-oriented programming languages
and tools, distributed database management systems, groupware and the latest
networking and communications technologies. In addition, the Company has
developed proprietary SmartAPPS methodologies and tools to enhance
productivity.
The Company's revenues are derived from fees paid by clients for
professional services. Historically, a substantial majority of the Company's
projects have been client-managed. On client-managed projects, Mastech
provides professional services as a member of the project team on a time-and-
materials basis. The Company recognizes revenues on time-and-materials
projects as the services are performed. On Mastech-managed projects, Mastech
assumes responsibility for project management and bills the client on a time-
and-materials or fixed-price basis. Fixed-price contracts are recognized by
the percentage of completion method. Revenues generated through offshore
software development centers on U.S. client engagements are included in U.S.
revenues.
The Project Control Office ("PCO"), located in the Company's headquarters,
provides project management oversight for all North American client
engagements. For offshore projects, the PCO is the point of contact
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during client business hours, establishing a clear line of communication with
the project teams in India and the United States. Mastech uses a proprietary
Lotus Notes-based Global Project Tracking System to facilitate project
management and control. The Company also utilizes PC conferencing tools to
conduct "virtual" meetings.
The Company offers many of its services through an existing offshore
software development center in Bangalore, India which is connected via secure,
high-speed satellite links to the Company's headquarters and client sites.
Mastech has increased its offshore capacity by developing additional offshore
software development centers in Pune and Madras, India. Offshore software
development offers clients certain advantages as compared to domestic
development, including: (i) significant cost savings; (ii) faster delivery, as
larger teams can be deployed; (iii) virtual 24-hour project schedules, due to
the time difference between North America and India; and (iv) improved access
to a large pool of IT professionals.
The Company's services are described below:
METHODS/TOOLS SERVICES
- ------------------------------- ---------------------------------------------
Client/Server Design and Development
. Languages: C/C++, Visual . Project management
Basic, Delphi SmallTalk, Java
. Tools: Powerbuilder, Gupta, . Requirements analysis and definition
Developer/2000, Lotus Notes
. DBMS/4GLs: Oracle, Informix, . Evaluation and selection of applications
Sybase, Unify, SQLServer packages
. GUI: Windows, Motif, X- . Prototyping and re-use
Windows, OpenLook
. CASE Tools: Oracle*CASE, IEF, . Data modeling, data warehousing
Bachman
. Applications systems design and development
. Database design and administration
. Systems development and implementation
. Technology education and training
Conversion/Migration
. SmartAPPS Methodology . Project management
and Automated Conversion Tools . Automated tools development
. User interface conversion
. Code conversion and testing
. Control language conversion
. Data migration
. Cutover and implementation
ERP Package Implementation
. Oracle Applications . Project planning
. PeopleSoft . Customization
. SAP R/3 . Integration
. Seibel . Migration
. Genesys . Database design and administration
. J.D. Edwards . Systems support
. Training
. Intranet/Extranet design and implementation
4
METHODS/TOOLS SERVICES
- --------------------------- --------------------------------------------------
E-Business Solutions
. SmartAPPS Net . Intranet/Extranet design and implementation
. Languages: Java, . Consulting services
Javascript, HTML, C++,
CGI
. Tools: NetDynamics, . Enterprise Java application development
ColdFusion, Net.Commerce, and deployment
MS interdevelopment
. DBMS/4GLs: Oracle, . Web-enablement of databases and legacy
Sybase, Progress, systems
Informix, SQL Server
. Methodologies: UML for
Java,
. JavaBeans Component
Framework for Enterprise
Java component
development
Applications Maintenance Outsourcing
. SmartAPPS Maintain . Project planning
Methodology and Tools
. Baseline assessment and service level definition
. Process enhancements
. Modifications/enhancements to functionality
. Interfaces and integration with new systems
. Configuration management
. Documentation and standardization
. Applications productivity improvement
. Trouble-shooting and problem resolution
. 24-hours, 7-days per week emergency support
Year 2000
. SmartAPPS 2000 Impact . Impact analysis
Assessment and Automated
Conversion Tools
. Viasoft . Project planning
. Microfocus Revolve . Year 2000 conversion
. Compliance testing and validation
. Cutover and implementation
Additional Services--Education and Training
Mastech's Education and Training Department provides employees with basic
and advanced courses in key technologies such as Oracle, PowerBuilder,
VisualBasic, Java and ERP packages including Oracle Applications, SAP, J.D.
Edwards, PeopleSoft, Siebel and Genesys. Mastech has expanded its training
programs and courseware to offer them to its clients as a distinct value-added
service. The Company has piloted this service with selected clients and has
received positive feedback.
Sales and Marketing
Mastech sells its services to large and medium-sized organizations through a
sales force of approximately 150 professionals. Previously, the Company's
sales force was organized as four groups. To meet the needs of the marketplace
more effectively, the Company's sales force is currently organized into three
primary groups: (i) the U.S. Client Services group; (ii) the High Value
Services group; and (iii) the International Client Services group. Sales
directors and representatives in each group are highly incentivized to cross-
sell the services of other groups.
The U.S. Client Services group is divided into geographic regions, each of
which is directed by a Manager or Regional Director. Each region includes
multiple new business development managers. These individuals use a
proprietary database of several thousand prospects to telemarket Mastech's
services nationally. The Company subsequently sends interested prospective
clients a written proposal providing information about the Company,
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its approach and methodology, schedules, team members, pricing and terms.
Mastech leverages the mobility of its software professionals and its cost-
effective telephone selling model to service all areas of the United States.
Each geographic region also includes Corporate Account Managers who are
responsible for selling Mastech's services to existing clients. These
managers, Regional Directors and senior management meet frequently on a
direct, face-to-face basis with clients.
The U.S. Client Services group also focuses on developing national and
global relationships with major systems integrators such as EDS, IBM, KPMG,
Ernst & Young and Oracle. Mastech assists these integrators in meeting their
customers' needs by providing specialized technical expertise and
complementary capabilities such as offshore development.
The High Value Services group manages engagements and provides IT
professionals trained in ERP package implementation services. This group works
directly with end-user clients and also as partners with both the ERP software
vendors and systems integrators on teamed implementation efforts. This group
is also responsible for securing and managing Mastech-managed engagements and
Year 2000 services.
The International Client Services group operates through offices in nine
different countries. Each office is supervised by a Country Manager and
supported by dedicated sales personnel that sell directly to new clients using
an approach similar to the Company's U.S. sales approach. Additionally, these
offices focus on leveraging Mastech's existing relationships with its U.S.-
based multinational clients. These relationships are particularly strong with
global systems integrators and often provide a foundation on which each of
Mastech's international offices can build.
Mastech's marketing organization works closely with the sales organization
to constantly improve results by supporting it with market research to assist
in strategic planning and tactical decision making, trade show selection and
exhibit planning, marketing literature, advertising and public relations
support. The marketing organization develops messages and positioning for such
activities by analyzing market trends and competitors' activities.
Clients
Substantially all of the Company's clients are large and medium-sized
organizations. During the year ended December 31, 1998, the Company provided
services to over 900 clients worldwide in a diverse range of industries. The
Company's strategy is to maximize its client retention rate and secure follow-
on engagements by providing high-quality services and client responsiveness. A
significant number of the Company's clients have selected Mastech on a
recurring basis to provide additional services.
The Company is a preferred vendor for several large organizations, including
Associates Bancorp, Bank of America, EDS and IBM Year 2000 Global Services. As
a preferred vendor, the Company is one of a limited number of service
providers to these organizations, enabling it to sell its services more
effectively. The Company is aggressively pursuing additional preferred vendor
arrangements in order to obtain new or additional business from large and
medium-sized organizations. These contracts generally result in lower margins
due to negotiated discounts, but are expected to generate higher revenues with
lower selling costs.
6
Organizations to which the Company has provided, or is providing, services
include:
Consumer Products Manufacturing Telecommunications Transportation
- ----------------- ---------------- ------------------ ---------------------
Philip Morris Ford Motor AirTouch Carnival Cruise Lines
Sears General Electric Ameritech Royal Caribbean
Wal-Mart Hitachi AT&T Union Pacific
Circuit City Intel MCI J. B. Hunt
K-Mart U.S. Cellular
Kellogg America Online
Gateway
Financial Integrators &
Health Care Services Vendors
- ------------------------ --------------- -------------
Blue Cross/Blue Shield Bank of America Cap Gemini
Kaiser Foundation Health Citibank EDS
Merck The Hartford Ernst & Young
NationsBank IBM
Oracle
Sabre Group
Unisys
During the year ended December 31, 1998, approximately 23% of the Company's
revenues were derived from its top five clients (EDS, IBM, General Electric,
Sabre Group and Unisys Corporation). EDS accounted for approximately 11% of
the Company's revenues for the year ended December 31, 1998.
Human Resources
The Company's success depends in large part on its ability to attract,
develop, motivate and retain highly skilled IT professionals. The Company has
over 80 full-time employees dedicated to recruiting IT professionals and
managing its human resources. The Company recruits in a number of countries,
including India, the U.S., Canada, The U.K., Singapore, Australia, the
Philippines, Russia, Bulgaria, Brazil, Sri Lanka and South Africa. The Company
advertises in leading newspapers and trade magazines. In addition, the
Company's employees are a valuable recruiting tool and are actively involved
in referring new employees and screening candidates for new positions. Mastech
uses a standardized global selection process which includes interviews, tests
and reference checks.
The Company's Resource Managers use a proprietary system to manage the
employees and candidates in the Company's talent pool. This system enables the
Company to quickly identify appropriate IT professionals for various client
engagements. This database, which currently holds profiles on several thousand
IT professionals, catalogs individual technical profiles and stores
information pertaining to each individual's location, availability, mobility
and other factors.
The Company has a focused retention strategy that includes career planning,
training, benefits and an incentive plan. The Company's benefits package
includes Company-subsidized health insurance, group life insurance, a long-
term disability plan, Company-subsidized health club memberships and tuition
reimbursement. The Company intends to continue to use stock options as part of
its recruitment and retention strategy. The Company also has an extensive
training infrastructure. The Company's Education and Training Department
trains employees on a variety of platforms and helps them transition from
legacy to client/server skills by providing cross-platform training in new
technologies. The Company is implementing an intranet to allow its employees
to access its courseware and computer-based training modules via the Internet
so that the training is available to all employees worldwide at their
individual convenience and pace.
Mastech's IT professionals typically have Master's or Bachelor's degrees in
Computer Science or another technical discipline and two to ten years of IT
experience. As of December 31, 1998, the Company had approximately 4,700
employees comprised of 4,000 IT professionals, 229 sales and recruiting
personnel and
7
approximately 500 general and administrative personnel. As of December 31,
1998, approximately 37% of the Company's worldwide workforce was working under
H-1B temporary work permits in the United States. See "Risk Factors--
Government Regulation of Immigration." In addition, the Company uses
independent contractors to support client engagements. As of December 31,
1998, the Company had approximately 800 independent contractors working on
client engagements.
Competition
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Five" accounting firms,
systems consulting and implementation firms, applications software firms,
service groups of computer equipment companies, general management consulting
firms, programming companies and temporary staffing firms. Many of these
competitors have substantially greater financial, technical and marketing
resources and greater name recognition than the Company. In addition, there is
a risk that clients may elect to increase their internal IT resources to
satisfy their applications solutions needs. The Company believes that the
principal competitive factors in the IT services industry include the range of
services offered, technical expertise, responsiveness to client needs, speed
in delivering IT solutions, quality of service and perceived value. The
Company believes that it competes favorably with respect to these factors.
Intellectual Property Rights
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company enters into
confidentiality agreements with its employees and limits distribution of
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of
proprietary information or that the Company will be able to detect
unauthorized use and take appropriate steps to enforce its intellectual
property rights.
Software developed by the Company in connection with a client engagement is
typically assigned to the client. In limited situations, the Company may
retain ownership or obtain a license from its client, which permits Mastech or
a third party to market the software for the joint benefit of the client and
Mastech or for the sole benefit of Mastech.
Recent Developments
On January 29, 1999, the Company acquired Global Resource Management ("GRM")
of Jacksonville, Florida. GRM provides information technology consulting and
support services to large companies for mission-critical projects. The Company
has expertise in network support and industry-specific solutions in the
telecommunications, healthcare and insurance industries. GRM will continue its
operations in Jacksonville as part of Mastech's southeast operations, which
are headquartered in Atlanta.
On January 9, 1999, the Company acquired Direct Resources Scotland Limited
of Edinburgh, Scotland, an IT services firm focusing on the financial services
industry. Direct Resources will be headquartered in Edinburgh as part of the
Company's European operations which are operated through Mastech's London
office.
On January 4, 1999, the Company acquired all the issued and outstanding
capital stock of the Amber Group, an SAP services company which provides
integrated consulting, development, implementation and training. The
transaction was a stock purchase and will be accounted for as a pooling of
interests. The Amber Group works exclusively with SAP systems, helping its
clients achieve efficiency in financials, logistics, and human resources among
others.
On October 26, 1998, the Company acquired International MIS, Inc. ("IMIS"),
a business and information technology consulting firm based in San Francisco,
California. IMIS provides the financial industry with high-level project
management and business analysis consulting services.
8
RISK FACTORS
Recruitment and Retention of IT Professionals
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends upon its ability to attract,
develop, motivate and retain highly skilled IT professionals and project
managers, who possess the technical skills and experience necessary to deliver
the Company's services. Qualified IT professionals are in great demand
worldwide and are likely to remain a limited resource for the foreseeable
future. There can be no assurance that qualified IT professionals will
continue to be available to the Company in sufficient numbers, or that the
Company will be successful in retaining current or future employees. Failure
to attract or retain qualified IT professionals in sufficient numbers could
have a material adverse effect on the Company's business, operating results
and financial condition. Historically, the Company has done most of its
recruiting outside of the countries where the client work is performed.
Accordingly, any perception among the Company's IT professionals, whether or
not well founded, that the Company's ability to assist them in obtaining
temporary work visas and permanent residency status has been diminished, could
lead to significant employee attrition. In the first eight months of 1996, the
Company experienced a higher than normal rate of employee attrition because
the Company was experiencing delays in securing the first-stage approval for
permanent residency status for its foreign employees working in the U.S. This
attrition resulted in the Company incurring increased costs for IT
professionals and a reduction in its revenue growth. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
Government Regulation of Immigration
The Company recruits its IT professionals on a global basis and, therefore,
must comply with the immigration laws in the countries in which it operates,
particularly the United States. As of December 31, 1998, approximately 37% of
the Company's worldwide workforce were working under H-1B temporary work
permits in the United States. Government regulation limits the number of new
H-1B permits that may be approved in a fiscal year. On October 22, 1998, the
"American Competitiveness and Workforce Improvement Act" was signed into law.
The H-1B annual quota for fiscal year 1999 was increased from 65,000 to
115,000. The quota for fiscal years 2000 and 2001 will be 115,000 and 107,500
respectively. If the Company is unable to obtain H-1B visas for its employees
in sufficient quantities or at a sufficient rate for a significant period of
time, the Company's business, operating results and financial condition could
be adversely affected.
Variability of Quarterly Operating Results
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, employee hiring, attrition
and utilization rates and the mix of time-and-materials projects versus fixed-
price projects during the quarter. The Company recognizes revenues on time-
and-materials projects as the services are performed, while revenues on fixed-
price projects are recognized using the percentage of completion method.
Although fixed-price projects have not contributed significantly to revenues
and profitability to date, operating results may be adversely affected in the
future by cost overruns on fixed-price projects. Because a high percentage of
the Company's expenses are relatively fixed, variations in revenues may cause
significant variations in operating results. Additionally, the Company
periodically incurs cost increases due to both the hiring of new employees and
strategic investments in its infrastructure in anticipation of future
opportunities for revenue growth. No assurances can be given that quarterly
results will not fluctuate, causing a material adverse effect on the Company's
business and financial condition.
Increasing Significance of Non-U.S. Operations and Risks of International
Operations
The Company's international consulting and offshore software development
operations are important elements of its growth strategy. The Company opened
offices in Canada and Singapore in 1995, Japan and the
9
U.K. in 1996, and Australia, the Netherlands and the Middle East during 1997.
During 1998, the Company opened offices in Switzerland and South Africa and
closed the office in the Middle East. These operations depend greatly upon
business, immigration and technology transfer laws in those countries, and
upon the continued development of technology infrastructure. There can be no
assurance that the Company's international operations will be profitable or
support the Company's growth strategy. The risks inherent in the Company's
international business activities include unexpected changes in regulatory
environments, foreign currency fluctuations, tariffs and other trade barriers,
difficulties in managing international operations and potential foreign tax
consequences, including repatriation of earnings and the burden of complying
with a wide variety of foreign laws and regulations. The failure of Mastech to
manage growth, attract and retain personnel, manage major development efforts,
profitably deliver services, or a significant interruption of the Company's
ability to transmit data via satellite, could have a material adverse impact
on the Company's ability to successfully maintain and develop its
international operations and could have a material adverse effect on the
Company's business, operating results and financial condition.
Although the Company's ownership of a U.S. trademark registration covering
the service mark "Mastech" gives the Company the presumption of ownership in
the U.S. of the "Mastech" mark for the services identified in the
registration, there can be no assurance that the Company is entitled to use
the designation "Mastech" in all international operations and there is the
possibility that third parties have superior rights to the "Mastech" mark (or
similar marks) outside the U.S.
Exposure to Regulatory and General Economic Conditions in India
A significant element of the Company's business strategy is to increase the
utilization of its offshore software development centers in India. Mastech has
utilized an offshore software development center in Bangalore for
approximately two years and has opened two more centers in Pune and Madras,
India during 1998. The Company also operates recruiting and training centers
in India. The Indian government exerts significant influence over its economy.
In the recent past, the Indian government has provided significant tax
incentives and relaxed certain regulatory restrictions in order to encourage
foreign investment in certain sectors of the economy, including the technology
industry. Certain of these benefits that directly affect the Company include,
among others, tax holidays (temporary exemptions from taxation on operating
income), liberalized import and export duties and preferential rules on
foreign investment and repatriation. To be eligible for certain of these tax
benefits, the Company must continue to meet certain conditions. A failure to
meet such conditions in the future could result in the cancellation of the
benefits. There can be no assurance that such tax benefits will be continued
in the future at their current levels. Changes in the business or regulatory
climate of India could have a material adverse effect on the Company's
business, operating results and financial condition.
Although wage costs in India are significantly lower than in the U.S. and
elsewhere for comparably skilled IT professionals, wages in India are
increasing at a faster rate than in the U.S. In the past, India has
experienced significant inflation and shortages of foreign exchange, and has
been subject to civil unrest and acts of terrorism. Changes in inflation,
interest rates, taxation or other social, political, economic or diplomatic
developments affecting India in the future could have a material adverse
effect on the Company's business, operating results and financial condition.
Intense Competition
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Five" accounting firms,
systems consulting and implementation firms, applications software firms,
service groups of computer equipment companies, general management consulting
firms, programming companies and temporary staffing firms. Many of these
competitors have substantially greater financial, technical and marketing
resources and greater name recognition than the Company. There are relatively
few barriers to entry into the Company's markets and the Company may face
10
additional competition from new entrants into its markets. In addition, there
is a risk that clients may elect to increase their internal IT resources to
satisfy their applications solutions needs. Further, the IT services industry
is undergoing consolidation which may result in increasing pressure on
margins. These factors may limit the Company's ability to increase prices
commensurate with increases in compensation. There can be no assurance that
the Company will compete successfully with existing or new competitors.
Concentration of Revenues; Risk of Termination
The Company has in the past derived, and may in the future derive, a
significant portion of its revenues from a relatively limited number of
clients. The Company's five largest clients represented approximately 23%, 24%
and 23% of revenues for the years ended December 31, 1998, 1997 and 1996,
respectively. EDS accounted for approximately 11%, 11% and 7% of the Company's
revenues for the years ended December 31, 1998, 1997 and 1996, respectively.
Most of the Company's projects are terminable by the client without penalty.
An unanticipated termination of a major project could result in the loss of
substantial anticipated revenues and could require the Company to maintain or
terminate a significant number of unassigned IT professionals, resulting in a
higher number of unassigned IT professionals and/or significant termination
expenses. The loss of any significant client or project could have a material
adverse effect on the Company's business, operating results and financial
condition.
Management of Growth
The Company's business has experienced rapid growth over the years that
could strain the Company's managerial and other resources. Revenues have grown
to $390.9 million in 1998 from $97.5 million in 1994. The number of employees
(excluding independent contractors) has grown to over 4,700 as of December 31,
1998. The Company's continued growth depends on adding key managers,
increasing its international operations, adding service lines and growing its
offshore infrastructure. The Company has broadened its range of services to
include client/server design and development, software modernization services,
enterprise resource planning ("ERP") package implementation services, E-
Business solutions, customer interaction management, applications maintenance
outsourcing and Year 2000 services. The Company opened offices in Canada and
Singapore in 1995, Japan and the U.K. in 1996, and Dallas, Texas, Australia,
the Netherlands and the Middle East during 1997. During 1998, the Company
opened offices in Switzerland and South Africa and closed the office in the
Middle East. In addition, the Company's offshore software development center
in Bangalore has been operational for over two years and centers in Pune and
Madras, India became operational during 1998. Effective management of these
growth initiatives will require the Company to continue to improve its
operational, financial and other management processes and systems. The failure
to manage growth effectively could have a material adverse effect on the
Company's business, operating results and financial condition.
Rapid Technological Change; Dependence on New Solutions
The IT services industry is characterized by rapid technological change,
evolving industry standards, changing client preferences and new product
introductions. The Company's success will depend in part on its ability to
develop IT solutions that keep pace with changes in the IT services industry.
There can be no assurance that the Company will be successful in addressing
these developments on a timely basis or that, if these developments are
addressed, the Company will be successful in the marketplace. In addition,
there can be no assurance that products or technologies developed by others
will not render the Company's services noncompetitive or obsolete. The
Company's failure to address these developments could have a material adverse
effect on the Company's business, operating results and financial condition.
A significant number of organizations are attempting to migrate business
applications from a mainframe environment to advanced technologies, including
client/server architectures. As a result, the Company's ability to remain
competitive will be dependent on several factors, including its ability to
help existing employees maintain or develop mainframe skills and to train and
hire employees with skills in advanced technologies. The Company's failure to
hire, train and retain employees with such skills could have a material
adverse impact on the Company's business. The Company's ability to remain
competitive will also be dependent on its ability to
11
design and implement, in a timely and cost-effective manner, effective
transition strategies for clients moving from the mainframe environment to
client/server or other advanced architectures. The failure of the Company to
design and implement such transition strategies in a timely and cost-effective
manner could have a material adverse effect on the Company's business,
operating results and financial condition.
Dependence on Principals
The success of the Company is highly dependent on the efforts and abilities
of Sunil Wadhwani and Ashok Trivedi, the Company's Co-Chairman and Chief
Executive Officer and the Company's Co-Chairman and President, respectively.
Although Messrs. Wadhwani and Trivedi have entered into employment agreements
containing noncompetition, nondisclosure and nonsolicitation covenants, these
contracts do not guarantee that they will continue their employment with the
Company or that such covenants will be enforceable. The loss of the services
of either of these key executives for any reason could have a material adverse
effect on the Company's business, operating results and financial condition.
Risk of Preferred Vendor Contracts
The Company is a party to several "preferred vendor" contracts and is
seeking additional similar contracts in order to obtain new or additional
business from large or medium-sized clients. Clients enter into these
contracts to reduce the number of vendors and obtain better pricing in return
for a potential increase in the volume of business to the preferred vendor.
While these contracts are expected to generate higher volumes, they generally
result in lower margins. Although the Company attempts to lower costs to
maintain margins, there can be no assurance that the Company will be able to
sustain margins on such contracts. In addition, the failure to be designated a
preferred vendor, or the loss of such status, may preclude the Company from
providing services to existing or potential clients, except as a
subcontractor, which could have a material adverse effect on the Company's
business, operating results and financial condition.
Growth Through Business Combinations
As an integral part of its business strategy, the Company intends to
continue to expand by acquiring information technology businesses. The Company
continuously evaluates potential business combinations and aggressively
pursues attractive transactions. From December 1997, through February 1999,
the Company completed seven business combinations. The success of this
strategy depends not only upon the Company's ability to identify and acquire
businesses on a cost-effective basis, but also upon its ability to integrate
acquired operations into its organization effectively, to retain and motivate
key personnel and to retain clients of acquired businesses. There can be no
assurance that the Company will be able to identify, acquire or profitably
manage additional businesses or successfully integrate any acquired businesses
into the Company without substantial expenses, delays or other operational or
financial problems. Further, acquisitions may involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, unanticipated events or circumstances and legal
liabilities and amortization of acquired intangible assets, some or all of
which could have a material adverse effect on the Company's business,
operating results and financial condition. Client satisfaction or performance
problems at a single acquired firm could have a material adverse impact on the
reputation of the Company as a whole. In addition, there can be no assurance
that acquired businesses, if any, will achieve anticipated revenues and
earnings. Additionally, the Company experiences competition for business
combinations. The failure of the Company to manage its acquisition strategy
successfully could have a material adverse effect on the Company's business,
operating results and financial condition.
Intellectual Property Rights
The Company's success depends in part upon certain methodologies and tools
it uses in designing, developing and implementing applications systems and
other proprietary intellectual property rights. The Company is also developing
proprietary conversion tools, specifically tools tailored to address the Year
2000 problem. The Company relies upon a combination of nondisclosure and other
contractual arrangements and trade secret, copyright and trademark laws to
protect its proprietary rights and the proprietary rights of third parties
from whom the Company licenses intellectual property. The Company enters into
confidentiality agreements with its employees
12
and limits distribution of proprietary information. There can be no assurance
that the steps taken by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.
Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of litigation alleging infringement of third-party
intellectual property rights. Any such claims could require the Company to
spend significant sums in litigation, pay damages, develop non-infringing
intellectual property or acquire licenses to the intellectual property which
is the subject of asserted infringement.
Risks Associated With Year 2000 Services
The Company earned approximately 10%, 7% and 3% of its revenues from Year
2000 engagements in the years ended December 31, 1998, 1997 and 1996,
respectively. During this period, many of the Company's clients have needed to
repair or replace their legacy systems because of Y2K issues. The Company
believes this has favorably impacted the demand for its services and products.
Mastech expects that the demand for its services related to the Y2K problem
will diminish significantly over time and will eventually disappear. The
Company also believes that as companies focus on Y2K issues, other less
critical projects have not been and may not be initiated or may be suspended.
Although the Company provides a broad range of information technology
services, Mastech believes that the reduction in demand for its services that
may result from these Y2K related factors could have an adverse impact on its
future financial performance.
Fixed-Price Projects
The Company undertakes certain projects billed on a fixed-price basis, which
is distinguishable from the Company's principal method of billing on a time-
and-materials basis. The failure of the Company to complete such projects
within budget would expose the Company to risks associated with cost overruns,
which could have a material adverse effect on the Company's business,
operating results and financial condition.
Potential Liability to Clients
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. Although the Company attempts to contractually limit
its liability for damages arising from errors, mistakes, omissions or
negligent acts in rendering its services, there can be no assurance that its
attempts to limit liability will be successful. The Company's failure or
inability to meet a clients' expectations in the performance of its services
could result in a material adverse change to the client's operations and
therefore could give rise to claims against the Company or damage the
Company's reputation, adversely affecting its business, operating results and
financial condition.
Price Volatility
The market price of the Company's Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, the Company's prospects, changes in earnings estimates by securities
analysts and by economic, financial and other factors and market conditions
that can effect the capital markets generally, the industry segment of which
the Company is a part, the Nasdaq National Market, including the level of, and
fluctuations in, the trading prices of stocks generally and sales of
substantial amounts of the Company's Common Stock in the market, or the
perception that such sales could occur, and by other events that are difficult
to predict and beyond the Company's control. In addition, the securities
markets have experienced significant price and volume fluctuations from time
to time in recent years that have often been unrelated or disproportionate to
the operating performance of particular companies. These broad fluctuations
may adversely affect the market price of the Company's Common Stock.
13
ITEM 2. PROPERTIES
The Company leases 56,850 square feet of office space in the Pittsburgh
suburb of Oakdale, Pennsylvania which serves as its corporate headquarters.
The Company's senior management, administrative personnel, human resources and
sales and marketing functions are housed in this facility. This lease expires
on May 31, 2001 and provides for two additional options to extend the lease
for consecutive five-year terms. During the fourth quarter of 1998, the High
Value Services Division moved into its new offices located outside Pittsburgh,
Pennsylvania. This facility provides an additional 25,000 square feet of
office space. The lease term expires March 31, 2004. The Company is currently
exploring leasing additional space at its headquarters and at other locations.
The Company and its affiliates have sales offices located outside Dallas TX,
San Francisco CA, Atlanta GA, Hartford CT, New York, NY, Philadelphia, PA and
Raleigh, NC.
The Company has sales offices in several countries in order to develop
business internationally. The Company and its affiliates currently lease
office space in the Netherlands, Canada, United Kingdom, Japan, Singapore,
Switzerland, Australia, India, and South Africa. These locations allow the
Company to respond quickly to the needs of its international clients and to
recruit qualified IT professionals in these markets.
Mascot Systems leases approximately 4,500 square feet of office space on one
floor of an office building located in Bangalore, India. The lease has a ten-
year term expiring in February 2008, with a rent revision clause every March.
Mascot Systems also leases a 32,500-square-foot office building located in
Bangalore. This lease has a ten-year term expiring in October 2006.
Additionally, Mascot Systems leases approximately 9,000 square feet of space
for its facilities located in Bangalore and Chennai, India. The lease
agreement has a ten-year term expiring in February 2008, with a rent revision
clause every March.
Scott Systems leases, for its training facilities, approximately 2,100
square feet of office space on one floor of an office building located in
Mumbai (Bombay, India). The leased space is divided into five separately owned
suites owned individually by the controlling shareholders. The lease expires
in March 2003. Scott Systems also leases 7,500 square feet of office space in
Pune, India. This lease expires in August 2007.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any litigation
that is expected to have a material adverse effect on the Company or its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the fourth
quarter of 1998.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock has been traded on the Nasdaq National Market under the
symbol MAST since December 17, 1996. The following table sets forth, for the
periods indicated, the range of high and low closing sale prices for the
Common Stock as reported on the Nasdaq National Market. The information
provided below has been restated to reflect the two-for-one stock split
(record date was close of business on Friday, March 27, 1998).
High Low
---- ----
1998
- ----
First Quarter............................................... $29 1/2 $15 15/16
Second Quarter.............................................. $29 29/32 $17 13/16
Third Quarter............................................... $29 1/8 $20 1/4
Fourth Quarter.............................................. $28 3/4 $16 3/8
1997
- ----
First Quarter............................................... $10 15/16 $7 1/2
Second Quarter.............................................. $11 7/8 $5 3/4
Third Quarter............................................... $17 1/2 $11 3/16
Fourth Quarter.............................................. $17 7/16 $13 5/16
On February 26, 1999, the Company had 133 registered holders of record of
the Common Stock.
The Company intends to retain earnings to fund growth and the operation of
its business, and therefore has not declared dividends during 1998 and 1997.
Additionally, the Company does not anticipate paying any cash dividends in the
foreseeable future. Future cash dividends, if any, will be at the discretion
of the Company's Board of Directors and will depend upon, among other things,
the Company's future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and such other
factors as the Board of Directors may deem relevant. The Company's ability to
pay dividends is subject to the requirement of its revolving credit facility
with PNC Bank, National Association that the Company satisfy certain financial
covenants. The Company distributed approximately $6.3 million of the proceeds
from the initial public offering to the controlling shareholders as part of
the S-corporation termination. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
In December 1996, Mastech completed the initial public offering of its
Common Stock (Registration Number 33-14169). The net proceeds to the Company
from the sale of the 3,400,000 pre-split shares of Common Stock offered by the
Company (after deducting underwriting discounts, commissions and offering
expenses paid by the Company) were approximately $45.6 million. The Company
submitted its initial Form SR for filing with the Securities and Exchange
Commission on March 20, 1997 reporting for the period from December 16, 1996
(the effective date of the Company's registration statement for its initial
public offering) through March 16, 1997. The following table reflects, as of
December 31, 1998, and for each of the previous quarterly periods an estimate
of the amount of net offering proceeds used by the Company and the purpose for
which they were used:
15
(dollars in thousands)
12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 Total
-------- ------- ------- ------- -------- ------- ------- ------- -------- -------
Tax payments............ $ -- $3,000 $1,900 $2,800 $ 3,100 $2,300 $-- $-- $ -- $13,100
Other working capital
item................... 820 2,180 950 -- 3,900 1,200 -- -- -- 9,050
---- ------ ------ ------ ------- ------ --- --- ------ -------
Total working capital
items.................. 820 5,180 2,850 2,800 7,000 3,500 -- -- -- 22,150
==== ====== ====== ====== ======= ====== === === ====== =======
S-corporation dividend.. -- -- 6,300 -- -- -- -- -- -- 6,300
Subsidiary loans........ -- -- -- 4,050 -- 3,000 -- -- -- 7,050
Acquisitions............ -- -- -- -- 3,000 -- -- -- 7,100 10,100
---- ------ ------ ------ ------- ------ --- --- ------ -------
$820 $5,180 $9,150 $6,850 $10,000 $6,500 $-- $-- $7,100 $45,600
==== ====== ====== ====== ======= ====== === === ====== =======
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(dollars in thousands, except per share data)
Income Statement Data (1):
Revenues.................. $390,871 $240,448 $162,939 $137,201 $97,531
Gross profit.............. 128,693 72,763 43,671 39,218 26,362
Income from operations
(2)...................... 53,782 26,105 13,456 18,473 11,281
Interest (income) expense,
net...................... (3,321) (1,193) 331 169 323
Merger-related expenses
(3)...................... 3,212 -- -- -- --
Income before income
taxes.................... 53,891 27,298 13,125 18,304 10,958
Provision for income taxes
(4)...................... 20,459 11,231 4,136 -- --
--------- --------- --------- --------- --------
Net income................ $ 33,432 $ 16,067 $ 8,989 $ 18,304 $ 10,958
========= ========= ========= ========= ========
Basic earnings per common
share (5)................ $ 0.68 $ 0.36
========= =========
Diluted earnings per
common share (5)......... $ 0.67 $ 0.35
========= =========
Pro forma income taxes
(4)...................... 5,291 7,222 4,385
--------- --------- --------
Pro forma net income (4).. $ 3,698 $ 11,082 $ 6,573
========= ========= ========
Pro forma basic and
diluted earnings per
share (4) (5)............ $ 0.09 $ 0.29 $ 0.17
========= ========= ========
Basic average common
shares (5)............... 48,997 45,251 39,194 38,130 38,130
Diluted average common
shares (5)............... 49,830 45,720 39,200 38,130 38,130
December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Balance Sheet Data:
Cash and cash equivalents. $ 36,455 $ 82,924 $ 46,566 $ 3,026 $ 4,267
Investments............... 47,153 -- -- -- --
Working capital........... 130,191 110,928 48,625 14,068 13,524
Total assets.............. 215,781 162,060 89,038 36,143 31,648
Total shareholders'
equity................... 158,207 119,426 49,588 14,613 13,896
- --------
(1) Amounts presented above have been restated to reflect the Company's
acquisition of all of the shares of Quantum Information Resources
("Quantum") in a business combination that was accounted for under the
pooling-of-interests method.
16
(2) Income from operations for the year ended December 31, 1996 reflects a
non-recurring charge of $875,000 incurred pursuant to an agreement with an
executive to pay, as compensation for past services, an amount equal to
the value of 109,200 shares of Common Stock at the initial public offering
price of $7.50 per share. The Company has reflected this payment along
with the applicable tax withholdings as a non-recurring charge. For the
years ended December 31, 1997 and 1998, income from operations reflect
non-recurring charges of $518,000 and $258,000, respectively, relating to
the amortization of deferred compensation for this same executive.
(3) The Company incurred merger-related costs related to the acquisition of
Quantum and charged these costs to expense during the second quarter of
1998.
(4) The Company's S-corporation status terminated on December 16, 1996 in
connection with the Company's initial public offering of Common Stock,
thereby subjecting the Company's income to federal and state taxes at the
corporate level. Pro forma net income and pro forma net income per share
reflect federal and state taxes (assuming an approximate 40% effective tax
rate) as if the Company had been taxed as a C-corporation for all periods
presented. See Note 13 of Notes to Consolidated Financial Statements for
information concerning the computation of pro forma net income per common
share. In connection with the Company's conversion from S-corporation
status to C-corporation status, the Company recorded a provision for
income taxes of $3.9 million in the fourth quarter of 1996.
(5) In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Earnings per share for
the pro forma periods were not impacted by the adoption of this Statement.
See Note 13 of Notes to Consolidated Financial Statements for information
concerning the computation of basic and diluted earnings per common share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-K contains certain "forward-looking statements" (statements
which are not historical facts) such as statements about future financial
performance, capital expenditures, liquidity sources and needs, the Year 2000
problem and certain other operations matters. Words or phrases denoting the
anticipated results of future events--such as "anticipate," "believe,"
"estimate," "expect," "will likely," "are expected to," "will continue,"
"project," and similar expressions that denote uncertainty--are intended to
identify such forward-looking statements. These forward-looking statements are
subject to several risks and uncertainties, and the Company's actual future
results may differ significantly from those stated in any forward-looking
statements. While it is impossible to identify each factor and event that
could affect the Company's results, variations in the Company's revenues and
operating results occur from time to time as a result of a number of factors,
such as the significance of client engagements commenced and completed during
a quarter or a year, the number of working days in a quarter or a year,
employee hiring, retention, and utilization rates, acceptance and
profitability of the Company's services in new territories, integration of
companies acquired, competition, general economic conditions and economic
conditions specific to the information technology industry, which are
discussed in this Form 10-K under the caption "Risk Factors". Many of these
factors are beyond the Company's ability to predict or control. As a result of
these and other factors, quarterly revenues and operating results are
difficult to forecast, and the Company may experience significant quarterly
and yearly variations in operating results.
Overview
Mastech Corporation was incorporated in Pennsylvania on November 12, 1996.
Mastech Systems, a Pennsylvania corporation through which the business of the
Company has been conducted since its inception in July 1986, is an indirect,
wholly owned subsidiary of the Company. In December 1996, Mastech completed
the initial public offering of its Common Stock, and in December 1997,
completed a secondary offering of its Common Stock. Subsequent to the initial
public offering, Mascot Systems and Scott Systems, both of which are
corporations organized under the laws of India, became wholly owned
subsidiaries of Mastech Systems.
Mastech's revenues are derived from fees paid by clients for professional
services. Historically, a substantial majority of the Company's projects have
been client-managed. On client-managed projects, Mastech provides
17
professional services as a member of the project team on a time-and-materials
basis. The Company recognizes revenues on time-and-materials projects as the
services are performed. On Mastech-managed projects, Mastech assumes
responsibility for project management and bills the client on a time-and-
materials or fixed-price basis. Revenues on fixed-price contracts are
recognized by the percentage of completion method. Revenues generated through
offshore software development centers on U.S. Client engagements are included
in U.S. revenues.
Mastech's most significant cost is its personnel expense, which consists
primarily of salaries and benefits of the Company's billable personnel. The
number of information technology ("IT") professionals assigned to projects may
vary depending on the size and duration of each engagement. Moreover, project
terminations, completions and scheduling delays may result in periods when
personnel are not assigned to active projects. Mastech manages its personnel
costs by closely monitoring client needs and basing personnel increases on
specific project engagements. While the number of IT professionals may be
adjusted to reflect active projects, the Company must maintain a sufficient
number of professionals to respond to demand for the Company's services on
both existing projects and new engagements.
The Company has incurred significant incremental expenses to help ensure
that the Company has both an adequate number of skilled IT professionals and
the infrastructure necessary to sustain the Company's growth. These
expenditures were incurred in connection with: (i) the development of
additional service offerings, including Year 2000 conversion services and ERP
package implementation services; (ii) the establishment of a recruiting
division to recruit IT professionals in the U.S. and worldwide; (iii) the
opening of foreign sales offices to provide better access to the global
market; (iv) the development of three offshore software development centers in
India; (v) the hiring of additional managers to support a larger organization;
(vi) the relocation of the Company's headquarters to larger, more efficient
office space; and (vii) the establishment of a training center to improve the
skill levels of new and current employees. While these expenses have increased
the Company's selling, general and administrative expenses, the Company
believes that the revenues expected to be derived as a result of these
expenditures have not yet been fully realized.
Mastech sells its services to large and medium-sized organizations. The
Company's sales force is organized to meet the needs of the marketplace
through three primary groups: (i) the U.S. Client Services group; (ii) the
High Value Services group; and (iii) the International Client Services group.
The U.S. Client Services group is divided into geographic regions, each of
which is directed by a Manager or Regional Director. Each region includes
multiple new business development managers. These individuals use a
proprietary database of several thousand prospects to telemarket Mastech's
services nationally. The Company subsequently sends interested prospective
clients a written proposal providing information about the Company, its
approach and methodology, schedules, team members, pricing and terms.
The U.S. Client Services group also focuses on developing national and
global relationships with major systems integrators such as EDS, IBM, KPMG,
Ernst & Young and Oracle. Mastech assists these integrators in meeting their
customers' needs by providing specialized technical expertise and
complementary capabilities such as offshore development.
The High Value Services group provides IT professionals trained in ERP
implementations, E-business consulting, network services, and Year 2000
services, in addition to managing engagements in the aforementioned services.
Additionally, this group provides services through offshore software
development centers which are connected via secure, high-speed satellite links
to the Company's headquarters and client sites. This group works directly with
the end-user clients and also partners with a wide array of software
companies, ranging from ERP to supply-chain and custom-interaction vendors,
and systems integrators on teamed implementation efforts.
The International Client Services group operates through offices in nine
different countries. Each office is supervised by a Country Manager and
supported by dedicated sales personnel who sell directly to new clients
18
using an approach similar to the Company's U.S. sales approach. Additionally,
these offices focus on leveraging Mastech's existing relationships with its
U.S.-based multinational clients.
Financial results for the years ended December 31, 1997 and 1996 have been
restated to reflect the acquisition of Quantum in a business combination that
was accounted for as a pooling of interests.
Results of Operations
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
Year Ended
December 31,
-------------------
1998 1997 1996
----- ----- -----
Revenues................................................... 100.0% 100.0% 100.0%
Cost of Revenues........................................... 67.1 69.7 73.2
----- ----- -----
Gross Profit............................................... 32.9 30.3 26.8
Selling, general and administrative........................ 19.1 19.2 18.0
Non-recurring charges...................................... 0.1 0.2 0.5
----- ----- -----
Income from operations..................................... 13.8 10.9 8.3
Interest (income) expense, net............................. (0.8) (0.5) 0.2
Merger-related expenses.................................... 0.8 -- --
----- ----- -----
Income before income taxes................................. 13.8 11.4 8.1
----- ----- -----
Provision for income taxes................................. 5.2 4.7 2.5
----- ----- -----
Net income................................................. 8.6% 6.7% 5.5%
===== ===== =====
- --------
Note: Percentages may not add due to rounding.
1998 Compared to 1997
Revenues. The Company's revenues increased 62.6%, or $150.4 million, to
$390.9 million in 1998 from $240.4 million in 1997. Of this growth in
revenues, the U.S. Client Services group, High Value Services group, and the
International Client Services group contributed $37.3 million, $81.1 million
and $32.0 million, respectively, to this increase. The increases in U.S.
Client Services group and High Value Services group can be attributed to
additional services provided to existing clients and continued market
penetration. The Company's client base grew to over 900 during 1998 from
approximately 600 in 1997. The increase in the International Client Services
group is primarily the result of increased market penetration in Australia and
Europe.
Gross Profit. Gross profit consists of revenues less cost of revenues. Cost
of revenues consists primarily of salaries and employee benefits for billable
IT professionals and the associated travel and relocation costs of these
professionals, as well as the cost of the independent contractors used by the
Company. Gross profit increased 76.9% to $128.7 million in 1998 from $72.8
million in 1997. Gross profit as a percentage of revenues increased to 32.9%
in 1998 from 30.3% in 1997. The primary reason for the increase in gross
profits as a percentage of revenues was higher margins in the High Value
Services and U.S. Client Services groups. The number of IT professionals
(including independent contractors) used by the Company increased to over
4,800 as of December 31, 1998 from approximately 3,500 as of December 31,
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of costs associated with the Company's sales
and marketing efforts, executive management, finance and human resource
functions, facilities and telecommunication costs and other general overhead
expenses. Selling, general and administrative expenses increased 61.8%, or
$28.6 million, to $74.7 million in 1998 from $46.1 million in 1997. The
increase in selling, general and administrative expenses reflects the
Company's continued investment
19
in infrastructure and in the initiatives required to implement the Company's
marketing strategies. These costs include the development of additional
service offerings, the expansion of its global recruiting capabilities, the
opening of additional international offices, the establishment of training
centers and the continued expansion of its offshore software development
centers. As a percentage of revenues, selling, general and administrative
expenses remained relatively unchanged at 19.1% and 19.2% for 1998 and 1997,
respectively.
Interest and Other (Income) Expense, Net. Other income was $3.3 million in
1998 compared to other income of $1.2 million in 1997. The increase of $2.1
million in other income was the result of increased interest income from
higher levels of interest bearing funds.
Merger-related expenses. The Company incurred $3.2 million of merger-related
costs and expenses in connection with the Quantum acquisition during the year
ended December 31, 1998.
Income taxes. Provision for income taxes was $20.5 million, or an effective
tax rate of 38% for the year ended December 31, 1998 compared to $11.2
million, or an effective tax rate of 41% for the year ended December 31, 1997.
The primary factors contributing to the reduction in the effective tax rate
included a reduction in state income taxes and foreign income taxes, tax-
exempt interest income generated by the Company's municipal bond portfolio and
the tax holiday for the Company's Indian operations, offset by the effect of
non-deductible one-time acquisition charges.
Outlook. The Company believes that the IT services industry remains strong
and growth oriented. Furthermore, the Company believes that the breadth of the
services and solutions that it offers positions it to continue to increase its
revenues and operating profits in 1999. The Company anticipates that it will
experience a shift in the demand for certain of its services in 1999 as a
result of Year 2000 (Y2K) related factors. Although Y2K related projects
represented only 10% of Company revenues in 1998, the Company believes that as
customers focus on completing their Y2K readiness efforts in 1999, the demand
for other IT services may be affected. The Company believes that the
percentage of revenues derived from Y2K, has peaked and will continue to
decline, as a percentage of total revenues, in 1999. Reductions or shifts in
the timing or demand for Company services could result in fluctuations in the
Company's quarterly revenues or operating results and could result in
differences between actual and expected results.
1997 Compared to 1996
Revenues. The Company's revenues increased 47.6%, or $77.5 million, to
$240.4 million in 1997 from $162.9 million in 1996. The U.S. Client Services
group, High Value Services group and the International Client Services group
contributed $16.9 million, $48.0 million and $12.6 million, respectively, to
this increase. The growth in U.S. Client Services and High Value Services was
primarily attributable to successful market penetration and additional
services provided to existing clients. International growth was primarily the
result of successful market penetration in Europe. Furthermore, in the first
eight months of 1996, the Company experienced a higher than normal rate of
employee attrition because the Company was experiencing delays in securing the
first stage approval for permanent residency status for some of its
professionals. This attrition resulted in increased costs for IT professionals
and reduced revenue growth during 1996.
Gross Profit. Gross profit consists of revenues less cost of revenues. Cost
of revenues consists primarily of salaries and employee benefits for billable
IT professionals and the associated travel and relocation costs of these
professionals, as well as the cost of the independent contractors used by the
Company. Gross profit increased 66.6% to $72.8 million in 1997 from $43.7
million in 1996. Gross profit as a percentage of revenues increased to 30.3%
in 1997 from 26.8% in 1996. The primary reasons for the increase in gross
profits as a percentage of revenues were higher margins in the High Value
Services and U.S. Client Services groups.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of costs associated with the Company's sales
and marketing efforts, executive management, finance and human resource
functions, facilities and telecommunication costs and other general overhead
expenses. Selling, general
20
and administrative expenses increased 57.3%, or $16.8 million, to $46.1
million in 1997 from $29.3 million in 1996. As a percentage of revenues,
selling, general and administrative expenses increased to 19.2% in 1997 from
18.0% in 1996.
The increase in selling, general and administrative expenses reflects the
Company's continued investment in infrastructure and in the initiatives
required to implement the Company's marketing strategies. These costs include
the development of additional service offerings, the expansion of its global
recruiting capabilities, the opening of additional international offices, the
establishment of training centers and the continued expansion of its offshore
software development centers.
Interest and Other (Income) Expense, Net. Other income was $1.2 million in
1997 compared to other expense of $331,000 in 1996. This increase in other
income was the result of increased interest income from the investment of the
net proceeds from the Company's public offerings of Common Stock. This
increase in interest income was, however, partially offset by an increase in
interest expense charged on borrowings outstanding under the Company's
revolving credit facilities, principally to support the Company's Indian
operations. These borrowings increased the Company's interest expense to
$858,000 in 1997 from $511,000 in 1996.
Income taxes. Provision for income taxes was $11.2 million, or an effective
tax rate of 41% for the year ended December 31, 1997 compared to $4.1 million
in 1996. Due to the S- to C-corporation conversion, a comparison of 1997 with
1996 is not meaningful. The tax provision for 1996 is composed primarily of
the tax associated with the termination of the Company's Subchapter S-
corporation status at the time of the initial public offering in December
1996.
Liquidity and Capital Resources
Effective December 3, 1998, the Company entered into a new $75.0 million
revolving credit facility with PNC Bank, National Association (the "Credit
Facility"). This Credit Facility bears interest at a rate per annum equal to a
base rate (which is adjusted by a change in the prime rate or the Federal
Funds Effective Rate at the Company's option) that is equal to the sum of the
Euro-rate plus an applicable Euro-rate margin. The Credit Facility contains
certain restrictive covenants and financial ratio requirements which would
limit distributions to shareholders and additional borrowings. There were no
borrowings outstanding under this arrangement as of December 31, 1998. This
Credit Facility replaced a previously existing $25.0 million revolving credit
facility also with PNC Bank, National Association. Average outstanding
borrowings under this arrangement were approximately $161,000 for the year
ended December 31, 1998.
In December 1997, the Company completed the registration of 3,000,000 (pre-
split) shares of the Company's Common Stock for sale to the public. Of this
total, 1,800,000 (pre-split) shares were newly issued by the Company, and
1,200,000 (pre-split) shares were sold by selling shareholders. The Company
did not receive any part of the proceeds from the sale of shares by the
selling shareholders. The net proceeds to the Company of the offering were
approximately $51.3 million, after deducting underwriting discounts,
commissions and offering expenses paid by the Company. In addition, the net
proceeds to the Company, generated from Mastech's initial public offering in
December 1996, were approximately $45.6 million, after deducting underwriting
discounts and commissions and offering expenses paid by the Company.
The Company has and will use these proceeds to develop new services, to
expand existing operations, including offshore software development
operations, for possible acquisitions of related businesses, and for general
corporate purposes, including working capital. Management currently
anticipates that the proceeds from these offerings together with the existing
sources of liquidity and cash generated from operations will be sufficient to
satisfy its existing cash needs at least through the next twelve months.
During 1997, the Company used the initial public offering proceeds to pay
approximately $900,000 of corporate income taxes related to the termination of
its status as an S-corporation. In April 1997, the Company also paid a
dividend of approximately $6.3 million of undistributed S-corporation earnings
due the controlling shareholders for the periods prior to Mastech becoming a
public company.
21
Historically, the Company has financed its working capital requirements
through internally generated funds and with the proceeds from the
aforementioned offerings. The Company's financial statements reflect cash
flows provided by operations of approximately $35.1 million for 1998, cash
flows used by operations of $3.5 million for 1997, and cash flows provided by
operations of approximately $11.7 million for 1996. The Company's cash
provided by operations prior to the initial public offering does not reflect
any income tax expense due to the Company's prior status as an S-corporation.
Prior to the initial public offering, the Company made S-corporation
distributions to its shareholders and in 1997 made the final S-corporation
distributions.
Cash used from investing activities of $77.7 million for the year ended
December 31, 1998 was primarily due to the net purchase of investments of
$47.3 million. These investments are classified as available-for-sale and
recorded at fair value. Additionally, the Company made several key
acquisitions during 1998 totaling $19.2 million.
Capital expenditures for 1998, 1997 and 1996 were approximately $11.1
million, $5.9 million and $3.1 million, respectively. During 1998 and 1997,
the Company spent approximately $5.8 million and $2.8 million, respectively,
on computer and related equipment to support its technical, consulting and
administrative functions. The Company also spent approximately $3.4 million
and $1.3 million in 1998 and 1997, respectively, in connection with the
buildout and other development of the infrastructure for its offshore software
development and training facilities in India. During the next twelve months,
the Company expects to incur approximately $500,000 in remaining costs to
license and implement its new management information system. Of this amount, a
portion of the cost will be expensed.
As of December 31, 1997, Mascot Systems had aggregate borrowings of
approximately $1.7 million outstanding under revolving credit agreements with
ICICI Banking Corporation Limited and IndusInd Bank Limited, both of India.
Interest rates charged on these borrowings ranged from 18.75% to 19.25% per
year. These borrowings were repaid in full by the Company in May 1998.
The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing
basis, the Company attempts to minimize any effects of inflation on its
operating results by controlling operating costs and, whenever possible,
seeking to ensure that billing rates reflect increases in costs due to
inflation.
The Company invoices its clients in the local currency of the country in
which the client is located. Gains and losses as a result of fluctuations in
foreign currency exchange rates have not had a significant impact on results
of operations.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits--an amendment of FASB
Statements No. 87, 88, and 106," revises employers' disclosures about pension
and other postretirement benefit plans. It does not change the measurement or
recognition of those plans. The Company currently has no pension benefit plans
for its employees, and as such will not be subject to the disclosure
requirements of this Statement.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133 is effective for periods after June 15, 1999.
Management does not anticipate that the adoption of this statement will have a
significant effect on the Company's financial position.
Other Matters
Year 2000
The Year 2000 ("Y2K") problem refers to problems which may occur because
some computer systems currently record years in a two-digit format. These
computer systems may have difficulty recognizing or
22
processing date information after December 31, 1999. The Y2K problem may also
occur with embedded chips. The Company has been working to evaluate the
potential effect of the Y2K problem on the Company's operations.
Internal Systems
The Company developed a plan to evaluate its key internal computer systems.
The plan consisted of the following four phases: Inventory;
Evaluation/Assessment of Y2K Risk; Remediation and Testing. The Company has
completed all phases of evaluation for the internal financial and operational
systems located at the corporate headquarters of the Company. Based upon
written documentation and information available on vendor websites, certain
testing procedures for business critical hardware and software were developed
and implemented by the Company. An independent third party reviewed both
vendor information and testing results and conducted other tests to validate
work performed. As a result of this, the Company does not believe that the
internal computer systems at its corporate headquarters will experience
significant Y2K problems.
The Company has also completed the evaluation of the internal financial and
operational systems of its other U.S. locations and international operations,
excluding certain systems involving operations of companies recently acquired
by the Company. The Company is currently evaluating the internal financial and
operational systems of the companies recently acquired and expects to complete
this evaluation by June 30, 1999.
Cost of Year 2000 Compliance Efforts
The Company does not expect to incur substantial costs with respect to its
Y2K compliance efforts and the Company has not deferred other information
technology projects as a result of the Y2K problem. To date, the Company has
incurred expenses totaling $123,000 and anticipates that its total expenses
will not exceed $250,000 These figures are primarily reflective of the costs
associated with the use of third parties to review and validate work performed
and the costs assessing Y2K problems relating to or arising with respect to
third parties. The cost estimates do not include the cost of internal efforts
by Company personnel. The Company has not separately accounted for these
internal costs.
Third Party Relationships
The Company has contacted its key vendors regarding their Y2K compliance
efforts. Although the Company has received some information from its vendors
regarding their Y2K compliance efforts, there can be no assurance that the
Company will not experience disruptions in its ability to conduct its business
because of Y2K problems experienced by the Company's vendors.
In addition, the Company has contacted its key customers regarding their Y2K
compliance efforts. Although the Company has received some information from
its customers regarding their Y2K compliance efforts, there can be no
assurance that such customers will not experience disruptions in their
business which would result in material adverse affects to the Company. One
example of a worst case scenario would be a failure in the accounting systems
of a significant number of the Company's key clients due to the Y2K problem
that resulted in a delay in the payment of invoices issued by the Company for
services and expenses.
Potential Liability to Third Parties
The Company has participated in Y2K remediation projects for some of its
customers. Although the Company has no reason to believe that any such work
will result in litigation against the Company, it is possible that the Company
could be materially adversely affected by litigation in connection with the
Y2K remediation services provided by the Company.
The Company's policy has been to attempt to include provisions in client
contracts that, among other things, disclaim implied warranties, limit the
duration of express warranties, limit the Company's liability to
23
predetermined amounts, and disclaim any liability arising from third-party
software that is implemented, or installed by the Company. The Company also
maintains insurance to protect against potential liability in connection with
Y2K remediation services provided by the Company. There can be no assurance
that the Company will be able to obtain the desired contractual protections in
agreements or that any such contractual provisions will prevent clients from
asserting claims against the Company with respect to the Y2K issue. There also
can be no assurance that the contractual protections, if any, obtained by the
Company or the insurance coverage will operate to protect the Company from, or
adequately limit the amount of, any liability arising from claims asserted
against the Company.
Contingency Plan
The Company is developing a contingency plan to address various situations
which may result if the Company experiences Y2K problems. The plan will
include identification of major systems, dependencies on third parties and
resources and strategies necessary to restore operations or work around
failures. It is expected that the contingency plan will be completed by April
30, 1999 and approved by the Board of Directors on June 1, 1999. There can be
no assurance that the contingency plan developed by the Company will
adequately protect the Company from internal Y2K problems or prevent service
interruption or failures experienced by customers and suppliers from having a
material adverse effect on the Company.
Demand for Year 2000 Services
Many of the Company's clients have needed to repair or replace their legacy
systems because of Y2K issues. The Company believes this has favorably
impacted the demand for its services and products. Mastech expects that the
demand for its related Y2K problem will diminish significantly over time and
will eventually disappear. The Company also believes that as companies focus
on Y2K issues, other less critical projects have not been and may not be
initiated or may be suspended. Although the Company provides a broad range of
information technology services, Mastech believes that the reduction in demand
for its services that may result from these Y2K-related factors could have an
adverse impact on its future performance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On June 30, 1998, the Company entered into a foreign exchange contract with
PNC Bank, National Association to hedge its foreign exchange exposure on
certain intercompany debt. This contract matured on each of September 30, 1998
and December 31, 1998 and was extended for an additional three months each
time. The Company realized interim gains on the contract extensions at each of
September 30 and December 31. Gains or losses are recognized under hedge
accounting in Shareholder's Equity as Currency Translation Adjustment. Such
gains and losses are essentially offset in Currency Translation Adjustment by
gains or losses on the translation of the related debt. In December, the
contract was extended to March 31, 1999.
The outstanding contract is the far end of a swap for the sale by the
Company of 7 million Canadian dollars at 1.54875 (US $4,519,774). It is the
intention of the Company to continue to extend the contract on a quarterly
basis until ultimate repayment of the intercompany loan. If the Canadian
dollar weakens resulting in a higher USD/CAD exchange rate than 1.54875 on
March 31, 1999, the Company will record an interim gain upon extension of the
contract. If the Canadian dollar strengthens resulting in a lower USD/CAD
exchange rate than 1.54875 on March 31, 1999, the Company will record an
interim loss upon extension of the contract. At December 31, 1998, the USD/CAD
exchange rate was 1.5303.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data required by this item are
filed as part of this Form 10-K. See Index to Consolidated Financial
Statements on page 26 of this Form 10-K.
24
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Mastech Corporation
have been prepared by management, who is responsible for their integrity and
objectivity. The statements have been prepared in conformity with generally
accepted accounting principles and necessarily include amounts based on
management's best estimates and judgments.
Management has established and maintains a system of internal controls
designed to provide reasonable assurance that assets are safeguarded and that
the Company's financial records reflect authorized transactions of the
Company. The system of internal controls includes widely communicated
statements of policies and business practices that are designed to require all
employees to maintain high ethical standards in the conduct of Company
affairs. The internal controls are augmented by organizational arrangements
that provide for appropriate delegation of authority and division of
responsibility.
The Company's consolidated financial statements have been audited by Arthur
Andersen LLP, independent public accountants, whose report thereon appears on
page 27 of this Form 10-K. As part of its audit of the Company's 1998
financial statements, Arthur Andersen LLP considered the Company's system of
internal controls to the extent it deemed necessary to determine the nature,
timing and extent of its audit tests. Management has made available to Arthur
Andersen LLP the Company's financial records and related data.
The Board of Directors pursues its responsibility for the Company's
financial reporting and accounting practices through its Audit Committee, a
majority of the members of which are independent directors. The Audit
Committee's duties include recommending to the Board of Directors the
independent public accountants to audit the Company's financial statements,
reviewing the scope and results of the independent public accountants'
activities and reporting the results of the committee's activities to the
Board of Directors. The independent public accountants have met with the Audit
Committee, with and without the presence of management representatives, to
discuss the results of their audit work and their comments on the adequacy of
internal accounting controls, and the quality of financial reporting. The
independent public accountants have direct access to the Audit Committee.
Sunil Wadhwani
Co-Chairman, Chief Executive Officer and Director
Jeffrey A. McCandless
Vice President, Finance and Chief Financial Officer
March 10, 1999
25
MASTECH CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants.................................. 27
Consolidated Balance Sheets as of December 31, 1998 and 1997.............. 28
Consolidated Statements of Income for the years ended December 31, 1998,
1997 and 1996............................................................ 29
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1998, 1997 and 1996......................................... 30
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996...................................................... 31
Notes to Consolidated Financial Statements................................ 32
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Mastech Corporation:
We have audited the accompanying consolidated balance sheets of Mastech
Corporation (a Pennsylvania corporation) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of Mastech Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
February 9, 1999
27
MASTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
------------------
1998 1997
-------- --------
ASSETS
Current assets:
Cash and cash equivalents (cost approximates market
value).................................................. $ 36,455 $ 82,924
Investments.............................................. 47,153 --
Accounts receivable, net of allowance for uncollectible
accounts................................................ 71,108 60,366
Unbilled receivables..................................... 12,261 1,829
Employee advances and related party advances............. 3,568 2,578
Prepaid and other assets................................. 2,672 1,511
Prepaid income taxes..................................... 2,218 --
Deferred income taxes.................................... 2,312 2,154
-------- --------
Total current assets................................... 177,747 151,362
Equipment and leasehold improvements, at cost:
Equipment................................................ 18,859 9,686
Leasehold improvements................................... 3,630 1,577
-------- --------
22,489 11,263
Accumulated depreciation................................. (5,661) (2,488)
-------- --------
Net equipment and leasehold improvements............... 16,828 8,775
-------- --------
Intangible assets, net..................................... 21,206 1,923
-------- --------
Total assets........................................... $215,781 $162,060
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit facilities.............................. $ -- $ 6,905
Accounts payable......................................... 8,326 5,319
Accrued payroll and related costs........................ 28,483 17,949
Other accrued liabilities................................ 10,024 8,083
Deferred revenue......................................... 723 127
Deferred income taxes.................................... -- 46
Accrued income taxes..................................... -- 2,005
-------- --------
Total current liabilities.............................. 47,556 40,434
Other long term liabilities.............................. 4,563 490
Deferred income taxes.................................... 5,455 1,710
Shareholders' equity:
Preferred Stock, without par value: 20,000,000 shares
authorized, 1 share and 0 shares of Series A Preferred
Stock issued and outstanding, respectively.............. -- --
Common Stock, par value $0.01 per share 100,000,000
shares authorized, 49,141,079 and 48,789,800 shares
issued and outstanding, respectively.................... 491 252
Additional paid-in capital............................... 111,119 105,375
Retained earnings........................................ 47,168 14,722
Deferred compensation.................................... -- (258)
Accumulated other comprehensive income................... (571) (665)
-------- --------
Total shareholders' equity............................. 158,207 119,426
-------- --------
Total liabilities and shareholders' equity............. $215,781 $162,060
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
28
MASTECH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Year Ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
Revenues.......................................... $390,871 $240,448 $162,939
Cost of revenues.................................. 262,178 167,685 119,268
-------- -------- --------
Gross profit...................................... 128,693 72,763 43,671
Selling, general and administrative............... 74,653 46,140 29,340
Non-recurring charges............................. 258 518 875
-------- -------- --------
Income from operations............................ 53,782 26,105 13,456
Interest (income) expenses, net................... (3,321) (1,193) 331
Merger-related expenses........................... 3,212 -- --
-------- -------- --------
Income before income taxes........................ 53,891 27,298 13,125
Provision (credit) for income taxes
Current......................................... 17,911 12,140 253
Deferred........................................ 2,548 (909) (17)
Termination of S-corporation status............. -- -- 3,900
-------- -------- --------
Provision for income taxes.................... $ 20,459 11,231 4,136
-------- -------- --------
Net income........................................ $ 33,432 $ 16,067 $ 8,989
======== ======== ========
Basic earnings per common share................... $ 0.68 $ 0.36
======== ========
Diluted earnings per common share................. $ 0.67 $ 0.35
======== ========
Pro Forma Information (Unaudited)
Net income....... $8,989
Pro forma income
taxes........... 5,291
------
Pro forma net
income.......... $3,698
======
Pro forma basic
and diluted
earnings per
common share.... $ 0.09
======
The accompanying notes are an integral part of these consolidated financial
statements.
29
MASTECH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands)
Accumu-
Series A lated
Common Stock Preferred Other Total
---------------- ------------ Additional Deferred Compre- Share- Compre-
Par Par Paid-In Retained Compen- hensive holders' hensive
Shares Value Shares Value Capital Earnings sation Income Equity Income
---------- ----- ------ ----- ---------- -------- -------- ------- -------- -------
Balance, December 31,
1995................... 38,023,000 $198 -- $-- $ 91 $ 14,342 $ -- $ (18) $ 14,613
Amortization of deferred
compensation........... -- -- -- -- -- -- 43 -- 43
Acquisition of minority
interest in Scott
Systems................ -- -- -- -- 28 -- -- -- 28
Issuance of common
stock.................. 6,800,000 34 -- -- 50,216 (4,644) -- -- 45,606
Restricted stock award.. 109,200 1 -- -- 818 -- (819) -- --
Disproportionate
dividend............... -- -- -- -- -- (190) -- -- (190)
Dividends-paid by
Quantum................ -- -- -- -- -- (363) -- -- (363)
Dividends............... -- -- -- -- -- (19,045) -- -- (19,045)
Comprehensive income:
Currency translation
adjustment........... -- -- -- -- -- -- -- (93) (93) $ (93)
Net income............ -- -- -- -- -- 8,989 -- -- 8,989 8,989
-------
8,896
------------------------------------------------------------------------------------------------------- =======
Balance, December 31,
1996................... 44,932,200 233 -- -- 51,153 (911) (776) (111) 49,588
Amortization of deferred
compensation........... -- -- -- -- -- -- 518 -- 518
Exercise of stock
options, includes
effect of tax benefit
recognized............. 257,600 1 -- -- 2,814 -- -- -- 2,815
Reduction of previously
authorized S-
corporation dividend... -- -- -- -- 162 -- -- -- 162
Issuance of common
stock.................. 3,600,000 18 -- -- 51,246 -- -- -- 51,264
Dividends-paid by
Quantum................ -- -- -- -- -- (434) -- -- (434)
Comprehensive income:
Currency translation
adjustment........... -- -- -- -- -- -- -- (554) (554) (554)
Net income............ -- -- -- -- -- 16,067 -- -- 16,067 16,067
-------
15,513
------------------------------------------------------------------------------------------------------- =======
Balance, December 31,
1997................... 48,789,800 252 -- -- 105,375 14,722 (258) (665) 119,426
Amortization of deferred
compensation........... -- -- -- -- -- -- 258 -- 258
Exercise of stock
options, includes
effect of tax benefit
recognized............. 351,279 2 -- -- 5,482 -- -- -- 5,484
Two-for-one stock split
effected in the form of
a stock dividend paid
on April 10, 1998...... -- 237 -- -- -- (237) -- -- --
Issuance of preferred
stock.................. -- -- 1 -- -- -- -- -- --
Non-cash merger costs... -- -- -- -- 262 -- -- -- 262
Dividends-paid by
Quantum................ -- -- -- -- -- (749) -- -- (749)
Comprehensive income:
Net unrealized gain on
investments............ -- -- -- -- -- -- -- 368 368 368
Currency translation
adjustment........... -- -- -- -- -- -- -- (274) (274) (274)
Net income............ -- -- -- -- -- 33,432 -- -- 33,432 33,432
-------
$33,526
------------------------------------------------------------------------------------------------------- =======
Balance,
December 31, 1998....... 49,141,079 $491 1 $-- $111,119 $ 47,168 $ -- $(571) $158,207
=======================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
30
MASTECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
--------------------------
1998 1997 1996
-------- ------- -------
Cash Flows From Operating Activities
Operations:
Net income....................................... $ 33,432 $16,067 $ 8,989
Adjustments to reconcile net income to cash:
Depreciation and amortization.................. 3,734 1,487 395
Allowance for uncollectible accounts........... 513 540 175
Minority interest.............................. -- -- (54)
Deferred income taxes, net..................... 3,160 (2,061) 3,654
Non-cash merger costs, net..................... 262 -- --
Amortization of deferred compensation.......... 258 518 43
Amortization of bond premium................... 534 -- --
Working capital items:
Accounts receivable and unbilled receivables... (15,559) (30,858) (4,536)
Employee and related party advances............ (990) 694 (2,338)
Prepaid and other assets....................... (1,027) (541) 280
Accounts payable............................... 2,420 356 2,940
Accrued and other current liabilities.......... 8,379 10,333 2,171
-------- ------- -------
Net cash flows from operating activities..... 35,116 (3,465) 11,719
-------- ------- -------
Cash Flows From Investing Activities
Additions to equipment and leasehold
improvements.................................... (11,147) (5,897) (3,102)
Purchases of investments......................... (74,965) -- --
Sales of investments............................. 27,646 -- --
Acquisitions, net of cash acquired............... (19,218) (2,154) 28
-------- ------- -------
Net cash flows from investing activities..... (77,684) (8,051) (3,074)
-------- ------- -------
Cash Flows From Financing Activities
Net borrowings (payments) under revolving credit
facilities...................................... (8,362) 1,121 2,480
Net proceeds from issuance of Common Stock....... -- 51,264 45,606
Proceeds from exercise of stock options.......... 5,484 2,815 --
Dividends paid................................... (749) (6,772) (13,098)
-------- ------- -------
Net cash flows from financing activities..... (3,627) 48,428 34,988
-------- ------- -------
Effect of currency translation to cash............. (274) (554) (93)
-------- ------- -------
Net change in cash and cash equivalents............ (46,469) 36,358 43,540
Cash and cash equivalents, beginning of period..... 82,924 46,566 3,026
-------- ------- -------
Cash and cash equivalents, end of period........... $ 36,455 $82,924 $46,566
======== ======= =======
Non-Cash Investing and Financing Activities
Unrealized gain on investments................... $ 368 $ -- $ --
======== ======= =======
Supplemental Disclosure
Cash payments for interest....................... $ 300 $ 757 $ 511
======== ======= =======
Cash payments for income taxes................... $ 16,148 $ 9,170 $ 376
======== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
31
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
In conjunction with the closing of its initial public offering on December
16, 1996, Mastech Systems Corporation, the entity through which the business
of the Company had been conducted since its inception in July 1986, became an
indirect, wholly owned subsidiary of Mastech Corporation ("Mastech" or the
"Company"), which was incorporated in Pennsylvania on November 12, 1996.
Mastech is a worldwide provider of information technology ("IT") services to
large and medium-sized organizations. Mastech provides its clients with a
single source for a broad range of applications solutions and services,
including client/server design and development, software modernization
services, enterprise resource planning ("ERP") package implementation
services, E-Business solutions, customer interaction management, applications
maintenance outsourcing and Year 2000 services. These services are provided in
a variety of computing environments and use leading technologies, including
client/server architectures, object-oriented programming languages and tools,
distributed database management systems and the latest networking and
communications technologies. To enhance its services, Mastech has formed
business alliances with leading software companies such as Oracle, PeopleSoft,
SAP, Siebel and Genesys. In addition, the Company has developed its own
proprietary methodologies and tools, under the name SmartAPPS, that enhance
the productivity of the Company's Year 2000 and other services.
Mascot Systems Pvt, Ltd. ("Mascot"), a wholly owned foreign subsidiary, was
acquired upon the closing of the Company's initial public offering. During
1997, Mascot operated one offshore software development center in Bangalore,
India, and during 1998 opened two additional centers in the cities of Pune and
Madras, India. Mascot's current operations serve as Mastech's single source
for offshore software development. Scott provides IT professional recruiting
and training services. As of December 31, 1997, all of Mascot, SWAT and
Scott's revenues were derived from services provided to Mastech Systems.
Financial results for the years ended December 31, 1997 and 1996 have been
restated to reflect the acquisition of Quantum in a business combination that
was accounted for as a pooling of interests.
2. Stock Split
On March 17, 1998, the Company's Board of Directors declared a two-for-one
stock split that was effected in the form of a stock dividend paid on April
10, 1998 to shareholders of record on March 27, 1998. All share and per share
amounts included in the Company's consolidated financial statements have been
restated to reflect the stock split for all periods presented except where
otherwise noted.
3. Summary of Significant Accounting Policies
The accompanying Consolidated Financial Statements reflect the application
of the following significant accounting policies:
(a) Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash and Cash Equivalents are defined as cash and short-term investments
with maturities of three months or less at the time of acquisition.
(c) Investments
The Company's short-term investments are classified as available-for-sale as
defined by Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities"
32
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
("SFAS No. 115"). These investments consist of investment grade municipal
bonds and are stated at estimated fair value based upon market quotes.
(d) Accounts Receivable
The Company extends credit to clients based upon management's assessment of
their creditworthiness. Substantially all of the Company's revenues (and the
resulting accounts receivable) are from large companies, major systems
integrators and governmental agencies. The allowance for uncollectible
accounts was approximately $1,728,000, $1,215,000 and $675,000 as of December
31, 1998, 1997 and 1996, respectively.
Unbilled receivables represent amounts recognized as revenues for the
periods presented based on services performed under the terms of client
contracts that will be invoiced in subsequent periods.
(e) Revenue Recognition
The Company recognizes revenue on time-and-materials contracts as the
services are performed for clients. Revenues on fixed-price contracts are
recognized using the percentage of completion method. Percentage of completion
is determined by relating the actual cost of work performed to date to the
estimated total cost for each contract. If the estimate indicates a loss on a
particular contract, a provision is made for the entire estimated loss without
reference to the percentage of completion. Changes in job performance,
conditions and estimated profitability may result in revisions to costs and
revenues and are recognized in the period in which the changes are identified.
(f) Hedging
The Company selectively uses foreign exchange contracts to hedge foreign
exchange exposure on certain intercompany debt. Gains and losses on the
foreign exchange contracts are recognized under hedge accounting in
Shareholders' Equity as Currency Translation Adjustment. Such gains and losses
are essentially offset in Currency Translation Adjustment by gains or losses
on translation of the related debt.
(g) Depreciation and Amortization
The Company provides for depreciation using the straight-line method in
amounts which allocate the costs of equipment over their estimated useful
lives of three to seven years, and leasehold improvements over the shorter of
the life of the improvement or of the underlying lease term.
Intangible assets, which include the excess of purchase price and related
costs over the value of the net assets acquired, are amortized using the
straight-line method over periods ranging from five to thirty years. The
Company assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows. The Company believes that
the carrying amount of these intangible assets will be realizable over their
respective amortization periods. Accumulated amortization was approximately
$258,000 and $11,000 for 1998 and 1997, respectively. Annual amortization
expense for 1998 and 1997 was approximately $247,000 and $11,000,
respectively.
(h) Currency Translation Adjustment
The financial statements of foreign subsidiaries are translated using the
exchange rate in effect at year-end for balance sheet accounts and the average
exchange rate in effect during the year for revenue and expense accounts.
Translation gains and losses are excluded from the consolidated income
statements and are instead reported as the currency translation adjustment
component of shareholders' equity.
33
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
The functional currency of international offices and foreign subsidiaries is
the currency of the country in which the office or subsidiary is located.
Revenues of the Company are billed in the currency of the country in which the
customer is located. Translation gains and losses arising from differences
between the functional and billing currencies are recognized in the
consolidated income statements.
Mastech Systems has loans outstanding from Mascot Systems, which have been
eliminated in the accompanying consolidated balance sheets as of December 31,
1998 and 1997. The terms of the loans provide for the scheduled repayment of
principal and accrued interest in fiscal years 2001 through 2005. However, the
Company considers these loans permanently reinvested, and therefore has
recorded the related foreign transaction gains and losses in the currency
translation adjustment as of December 31, 1998.
(i) Income Taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the Company's
assets and liabilities.
Prior to its initial public offering, the Company elected to be taxed under
Subchapter S of the Internal Revenue Code of 1986, as amended ("S-
corporation") for income tax purposes. Accordingly, the income of the Company
was reported on the individual income tax returns of its shareholders.
Therefore, the financial statements do not include a provision for income
taxes related to income prior to the closing of the initial public offering.
The Company's S-corporation status terminated in connection with the
Company's initial public offering, thereby subjecting the Company's income to
federal and state income taxes at the corporate level. Due to temporary
differences in recognition of revenues and expenses at the time of the initial
public offering, income for financial reporting purposes exceeded income for
income tax purposes. Accordingly, the application of the provisions of SFAS
No. 109 resulted in the recognition of deferred tax liabilities (and a
corresponding one-time charge to expense) of $3.9 million as of the date the
S-corporation was terminated. The majority of this tax provision will be paid
through the year 2000.
In the recent past, the government of India has provided incentives, in the
form of tax holidays, to encourage foreign investment. The Company's operation
in India was eligible for a tax holiday for a five-year period beginning in
1997.
(j) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(k) Financial Instruments
The fair values and carrying amounts of the Company's financial instruments,
primarily accounts receivable and payable, are approximately equivalent. The
financial instruments are classified as current and will be liquidated within
the next operating cycle.
(l) Pro Forma Information (Unaudited):
The pro forma adjustments for income taxes included in the accompanying
consolidated income statements are based upon the statutory rates in effect
for C-corporations during the periods presented.
34
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
(m) Reclassifications
Certain reclassifications have been made to the Company's 1997 and 1996
financial statements to conform to current year presentation.
4. Investments
Short-term investments, classified as available-for-sale, consist of
investment grade municipal bonds at December 31, 1998 with an amortized cost
of $46,785,000, unrealized gain of $368,000 and market value of $47,153,000.
The value of securities with a contractual maturity within one year at
December 31, 1998 was $28,271,000. The value of securities with a contractual
maturity at December 31, 1998 over one year and less than three years was
$18,882,000. Gross realized gains on sales of securities in 1998 was
immaterial.
5. Hedging Activities
The Company selectively uses foreign exchange contracts to hedge foreign
exchange exposure on certain intercompany debt. At December 31, 1998, the
Company held one foreign exchange contract, which was the far end of a
Canadian dollar swap, maturing on March 31, 1999. The outstanding contract is
for the sale by the Company of 7 million Canadian dollars at 1.54875 (US
$4,519,774).
6. Income Taxes
The components of the provision (benefit) for income taxes for the years
ended December 31, 1998, 1997 and 1996 are as follows:
December 31,
-----------------------
1998 1997 1996
------- ------- ------
(dollars in thousands)
Current provision:
Federal.............................................. $13,806 $ 9,312 $ 216
State................................................ 1,869 1,577 --
Foreign.............................................. 2,236 1,251 37
------- ------- ------
Total current provision............................ 17,911 12,140 253
Deferred provision (benefit):
Federal.............................................. 2,057 (700) (17)
State................................................ 491 (155) --
Foreign.............................................. -- (54) --
Termination of S-corporation status.................. -- -- 3,900
------- ------- ------
Total deferred provision (benefit)................. 2,548 (909) 3,883
------- ------- ------
Total provision for income taxes....................... $20,459 $11,231 $4,136
======= ======= ======
The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes for the years ended December 31,
1998 and 1997 follows:
December 31, 1998 December 31, 1997
------------------- -------------------
(dollars in thousands)
Income taxes computed at the federal
statutory rate........................ $ 18,862 35.0% $ 9,554 35.0%
State income taxes, net of federal
benefit............................... 1,534 2.8 924 3.4
Other, net............................. 63 0.2 753 2.7
---------- ------- ---------- -------
Provision for income taxes............. $ 20,459 38.0% $ 11,231 41.1%
========== ======= ========== =======
35
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
The Company's S-corporation status terminated in connection with the
Company's initial public offering, thereby subjecting the Company's income to
federal and state income taxes at the corporate level.
Prior to the initial public offering, the Company elected Subchapter S-
corporation status for income tax purposes. Accordingly, the income of the
Company was reported on the individual income tax returns of its shareholders.
The financial statements, therefore, do not include a provision for income
taxes prior to the closing of the initial public offering.
The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes for the 15-day C-corporation
period ended December 31, 1996 follows. Due to the S- to C-corporation
conversion, a reconciliation of the effective tax rate expressed in
percentages is not meaningful for 1996.
December 31, 1996
----------------------
(dollars in thousands)
C-corporation income before taxes for the 15 day period
ended December 31, 1996................................ $ 413
Net taxable temporary differences....................... 4
Current portion of S-corporation deferred revenue....... 123
------
Book taxable income as a C-corporation.................. 540
Income taxes computed at the federal statutory rate..... 216
Provision for change in tax status to C-corporation..... 3,900
Other, net.............................................. 20
------
Provision for income taxes.............................. $4,136
======
The components of the deferred tax assets and liabilities are as follows:
December 31,
------------------------
1998 1997
----------- -----------
(dollars in thousands)
Deferred tax assets
Allowance for doubtful accounts and employee
advances.......................................... $ (356) $ (304)
Accrued vacation................................... (1,088) (418)
Foreign tax credit carryforward.................... (31) (225)
Reserve for contract costs......................... (653) (692)
Reserve for Canadian employment taxes.............. (915) (979)
Accrued pension costs.............................. (187) (196)
Other.............................................. (660) (615)
----------- -----------
$ (3,890) $ (3,429)
=========== ===========
Deferred tax liabilities
S-corporation deferred revenue..................... $ 1,200 $ 2,345
Compensation for IMIS employees.................... 3,372 --
Section 481(a) adjustments......................... 381 --
Other.............................................. 2,080 686
----------- -----------
Total deferred tax liability......................... $ 7,033 $ 3,031
=========== ===========
Net current (asset) liability........................ $ (2,312) $ (2,108)
Net long-term liability.............................. 5,455 1,710
----------- -----------
$ 3,143 $ (398)
=========== ===========
36
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
The foreign tax credit carryforwards of $31,000 recognized as of December
31, 1998 expire during fiscal year 2002.
7. Revolving Credit Facility
The Company had a revolving credit facility with PNC Bank, National
Association. Borrowings under this arrangement were unsecured, were limited to
$15.0 million, bore interest at LIBOR plus 1.0% or the prime rate and were
payable upon demand. There were no borrowings outstanding under this
arrangement as of December 31, 1996. Average outstanding borrowings under this
arrangement were $535,000 and $1.4 million for the years ended December 31,
1997 and 1996, respectively.
Effective May 30, 1997, the Company replaced the above mentioned revolving
credit facility with a $25.0 million revolving credit facility with PNC Bank,
National Association (the "Facility"). The Facility bears interest at a rate
equal to LIBOR plus 1.0% or prime, at the Company's option, and borrowings are
unsecured. The Facility contains certain restrictive covenants and financial
ratio requirements which would limit distributions to shareholders and
additional borrowings. There were no borrowings outstanding under this
arrangement as of December 31, 1997. For the year ended December 31, 1997,
average outstanding borrowings were approximately $489,000 and the maximum
outstanding borrowings were $4.0 million. The weighted-average interest rate
for the year ended December 31, 1997 was 8.5%.
Effective December 3, 1998, the Company replaced the aforementioned Facility
with a $75.0 million revolving credit facility with PNC Bank, National
Association ("the Credit Facility"). This Credit Facility bears interest at a
rate per annum equal to a base rate (which is adjusted by a change in the
prime rate or the Federal Funds Effective Rate at the Company's option) that
is equal to the sum of the Euro-rate plus an applicable Euro-rate margin. The
Credit Facility contains certain restrictive covenants and financial ratio
requirements which would limit distributions to shareholders and additional
borrowings. There were no borrowings outstanding under this arrangement as of
December 31, 1998. For the year ended December 31, 1998, average outstanding
borrowings were approximately $161,000 and the maximum outstanding borrowings
were $4.0 million. The weighted-average interest rate for the year ended
December 31, 1998 was 8.5%.
During the first quarter of 1998, Mascot Systems had aggregate borrowings of
approximately $1.7 million outstanding under revolving credit agreements with
ICICI Banking Corporation Limited and IndusInd Bank Limited, both of India.
Interest rates charged on these borrowings ranged from 18.75% to 19.25% per
year. These borrowings were repaid in full by the Company in May 1998.
The Company assumed $6.9 million of borrowings outstanding under a revolving
credit agreement with the Bank of Montreal related to the Quantum acquisition.
This amount was repaid in full as of June 30, 1998.
8. Related Party Transactions
As an S-corporation, the net income of the Company was attributed, for
federal (and some state) income tax purposes, directly to the Company's
shareholders rather than to the Company. During 1997 and 1996, the Company had
from time to time paid the corresponding income taxes due on these amounts on
behalf of the controlling shareholders in the form of interest-free advances
which were later repaid. The highest aggregate amounts of advances outstanding
to one of the controlling shareholders and his Qualified Subchapter S Trust
during 1998, 1997 and 1996 were approximately $87,000, $96,000 and $1,682,000,
respectively. The highest aggregate amounts of advances outstanding to the
other controlling shareholder and his Qualified Subchapter S Trust during
1998, 1997 and 1996 were approximately $118,000, $158,000 and $1,682,000,
respectively.
37
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Mascot Systems leases from the controlling shareholders the office space for
the offshore software development facilities in Bangalore, India. The
acquisition of the real estate and the construction of this office building
(but not the buildout of the office space) was financed entirely by the
controlling shareholders out of personal funds. Specifically, Mascot Systems
leases approximately 4,500 square feet of office space on one floor of an
office building located in Bangalore, which is owned by the controlling
shareholders. The lease has a ten-year term expiring in February 2008, with a
rent revision clause every March. The rent is approximately $29,000 per year.
Mascot Systems also leases a 32,500-square-foot office building located in
Bangalore from the controlling shareholders. This lease has a ten-year term
expiring in October 2006, and the annual rent is approximately $95,000. The
Offshore Development Center at Chennai was partly functional during 1998 and
fully functional beginning January 1, 1999. The lease agreement effective for
a ten-year period effective March 1998 and expiring February 2008 has an
annual rent of $449,000. The rental agreement may be revised each March. Since
the facility was partly occupied during 1998, rent paid to the controlling
shareholders was $118,000. Mascot Systems has also rented approximately 9,000
square feet of space for its facilities located in Bangalore and Chennai for
which rent in the amount of $9,000 was paid during 1998.
Scott Systems leases, for its training facilities, approximately 2,100
square feet of office space on one floor of an office building located in
Mumbai (Bombay, India). The leased space is divided into five separately owned
suites owned individually by the controlling shareholders. The lease expires
in March 2003, and the aggregate rent is approximately $20,000 per year. Scott
Systems also leases further office space of approximately 900 square feet on
another floor in the same office building, which is owned by the controlling
shareholders. This lease has a term that expires in August 2007, and the rent
is $6,000 per year. Scott Systems also leases a portion of the Pune facility
from the controlling shareholders. This lease covers 7,500 square feet of
office space and expires in August 2007. The rent is approximately $18,000 per
year.
9. Commitments and Contingencies
The Company rents certain office facilities and equipment under
noncancelable operating leases that provide for the following future minimum
rental payments as of December 31, 1998:
Period ending
December 31, Amount
------------- ----------------------
(dollars in thousands)
1999................................................. $4,010
2000................................................. 3,582
2001................................................. 2,471
2002................................................. 1,466
Thereafter........................................... 4,077
Rental expense was approximately $3,210,000, $1,984,000 and $1,448,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
The Company has employment agreements with its controlling shareholders and
certain of its executive officers which provide generally for specified
minimum salaries and bonuses based upon the Company's performance.
The majority of the Company's projects with customers, including those
related to Year 2000 conversion, generally provide that the Company will
supply consultants to perform under the customer's supervision. At this time,
the Company is unable to quantify the potential risk to the Company related to
Year 2000 conversions from future claims. Nonetheless, management does not
believe that claims that may arise as a result of the above will have a
significant impact on either the financial position or the results of
operations of the Company.
38
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
The Company is a party to several "preferred vendor" contracts and is
seeking additional similar contracts in order to obtain new or additional
business from large or medium-sized clients. While these contracts are
expected to generate higher volumes, they generally result in lower margins.
Although the Company attempts to lower costs to maintain margins, there can be
no assurance that the Company will be able to sustain margins on such
contracts. In addition, the failure to be designated a preferred vendor, or
the loss of such status, may preclude the Company from providing services to
existing or potential clients, except as a subcontractor. Nonetheless,
management does not believe that claims that may arise as a result of the
above will have a significant impact on either the financial position or the
results of operations of the Company.
10. Employee Benefit Plans
The Company sponsors a 401(k) benefit plan. Eligible employees, as defined
in the plan, may contribute up to 15% of eligible compensation, as defined.
The Company does not currently contribute to this plan.
11. Non-recurring Charges
In October 1996, the Company entered into an agreement with an executive
pursuant to which the Company agreed to pay this individual, as compensation
for past services, an amount equal to the value of 218,400 shares of Common
Stock at the initial public offering price of $7.50 per share. Both of these
numbers have been adjusted to reflect the two-for-one stock split. One-half of
this payment was made in cash, at the election of the executive, on December
16, 1996. The remaining half of this obligation was satisfied on December 16,
1996 via the issuance of 109,200 shares of restricted Common Stock, as
described in Note 12. The Company has reflected the cash payment along with
the applicable tax withholdings as a non-recurring charge in the accompanying
consolidated statements of income for the year ended December 31, 1996.
For the years ended December 31, 1997 and 1998, the Company has reflected
the amortization of deferred compensation for this same executive as a non-
recurring charge in the accompanying consolidated statements of income.
In connection with the acquisition of Quantum, $3.2 million of merger-
related costs and expenses (primarily severance, legal and accounting costs)
were incurred and were charged to expense in the second quarter of 1998. As of
December 31, 1998, $245,000 remains and will be paid during 1999.
12. Stock-Based Compensation and Restricted Stock Award
Effective December 16, 1996, the Company adopted the 1996 Stock Incentive
Plan (the "Plan") for directors, executive management and key personnel.
Effective February 1, 1999, the Company adopted the Second Amended and
Restated 1996 Stock Incentive Plan (the "Amended Plan") for directors,
executive management and key personnel. The Amended Plan provides that up to
15% of the number of outstanding shares of the Company on each December 31
beginning on December 31, 1998 shall be available for issuance under the
Amended Plan. As of December 31, 1998, there were 3,605,286 shares of Common
Stock available for issuance under the Amended Plan. The Company accounts for
the Plan under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Had compensation costs for the Plan been
determined consistent with Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), net income
and basic and diluted earnings per share for the year ended December 31, 1998
would have been reduced by $3.5 million, or $0.07 per share. For the year
ended December 31, 1997, net income and basic and diluted earnings per share
would have been reduced by $1.3 million, or $0.03 per share. For the year
ended December 31, 1996, net income would have been reduced by $24,000 and
there would have been no impact on pro forma basic and diluted earnings per
common share for the same period.
39
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
During 1998, 1997 and 1996, options covering a total of 1,703,873 shares,
820,100 shares and 1,691,100 shares, respectively, of Common Stock were granted
under the Plan. Options expire ten years from the date of grant or earlier if
an option holder ceases to be employed by the Company for any reason. A summary
of stock option activity follows:
Weighted Average
Options Exercise Price
--------- ----------------
1998
Options outstanding, beginning of period............. 2,134,600 $ 8.37
Granted.............................................. 1,703,873 19.47
Exercised............................................ 351,279 8.76
Lapsed and forfeited................................. 330,198 11.06
---------
Options outstanding, end of period................... 3,156,996 $14.25
========= ======
Options exercisable, end of period................... 412,828 $ 9.11
========= ======
Available for future grant........................... 3,605,286
=========
1997
Options outstanding, beginning of period............. 1,691,100 $ 7.50
Granted.............................................. 820,100 9.76
Exercised............................................ 257,600 7.50
Lapsed and forfeited................................. 119,000 7.50
---------
Options outstanding, end of period................... 2,134,600 $ 8.37
========= ======
Options exercisable, end of period................... 212,064 $ 7.50
========= ======
Available for future grant........................... 4,978,961
=========
1996
Options outstanding, beginning of period............. -- --
Granted.............................................. 1,691,100 $ 7.50
Exercised............................................ -- --
Lapsed and forfeited................................. -- --
---------
Options outstanding, end of period................... 1,691,100 $ 7.50
========= ======
Options exercisable, end of period................... -- --
========= ======
Available for future grant........................... 5,680,061
=========
40
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Stock options outstanding at December 31, 1998
Options Outstanding Options Exercisable
- ---------------------------------------------------- -------------------------------------------------
Weighted Average Weighted Average
Weighted Average Remaining Weighted Average Remaining
Exercise Price Options Contractual Life (Years) Exercise Price Options Contractual Life (Years)
- ---------------- --------- ------------------------ ---------------- ------- ------------------------
$ 7.50 1,020,257 7.96 $ 7.50 292,258 7.96
9.56 370,000 7.33 9.98 64,834 7.33
15.80 619,166 8.96 15.26 42,736 8.86
19.26 598,573 9.17 19.72 13,000 9.46
22.37 490,000 9.80 -- -- --
25.84 59,000 9.54 -- -- --
--------- -------
$14.25 3,156,996 8.63 $ 9.80 412,828 8.04
========= ==== ======= ====
Stock options outstanding at December 31, 1997
Options Outstanding Options Exercisable
- ---------------------------------------------------- -------------------------------------------------
Weighted Average Weighted Average
Weighted Average Remaining Weighted Average Remaining
Exercise Price Options Contractual Life (Years) Exercise Price Options Contractual Life (Years)
- ---------------- --------- ------------------------ ---------------- ------- ------------------------
$ 7.50 1,407,600 9.24 $7.50 212,064 9.24
8.82 560,000 9.62 -- -- --
14.21 167,000 9.91 -- -- --
--------- -------
$ 8.37 2,134,600 9.39 $7.50 212,064 9.24
========= ==== ======= ====
Stock options outstanding at December 31, 1996
Options Outstanding Options Exercisable
- ---------------------------------------------------- -------------------------------------------------
Weighted Average Weighted Average
Weighted Average Remaining Weighted Average Remaining
Exercise Price Options Contractual Life (Years) Exercise Price Options Contractual Life (Years)
- ---------------- --------- ------------------------ ---------------- ------- ------------------------
$7.50 1,691,100 9.96 -- -- --
========= ==== === ===
41
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Stock
Option
Summary of Stock Options Price
- ------------------------ ------
Weighted average fair value of options granted during 1998*.............. $9.68
=====
Weighted average fair value of options granted during 1997*.............. $2.60
=====
Weighted average fair value of options granted during 1996*.............. $2.93
=====
- --------
*The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions:
1998 1997 1996
------- ------- -------
Risk free interest rate................................. 5.6% 6.5% 6.2%
Expected dividend yield................................. 0.0% 0.0% 0.0%
Expected life of options................................ 5 years 5 years 6 years
Expected volatility rate................................ 50.0% 33.0% 24.5%
Effective December 16, 1996, the Company entered into an employment
agreement with an executive that included the granting of 109,200 shares of
restricted Common Stock. During the restricted period (from December 16, 1996
to June 30, 1998), the restricted stock vested ratably and daily. The
agreement provides for partial awards and forfeitures under various
circumstances. At December 31, 1998 and 1997, the Company's consolidated
balance sheet reflects deferred compensation of $0 and $258,000, respectively,
related to this award, as an offset to shareholders' equity. Compensation
expense of $258,000, $518,000 and $43,000 related to the vesting of restricted
shares during 1998, 1997 and 1996, respectively, has been recorded in the
Company's consolidated income statement.
13. Earnings per Common Share
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS No. 128"), which establishes
new standards for computing and presenting earnings per share. SFAS No. 128 is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods. The Company adopted SFAS No. 128 during
1997. Earnings per share for the pro forma periods were not impacted by the
adoption of SFAS No. 128.
Basic pro forma net income per common share and earnings per common share
are calculated by dividing pro forma net income and net income, respectively,
by the weighted average number of common shares outstanding during the year.
Diluted pro forma net income per common share and earnings per common share
are calculated by dividing pro forma net income and net income, respectively,
by the weighted average number of shares of common stock outstanding adjusted
for the assumed conversion of all dilutive securities.
The 1996 diluted shares outstanding, as calculated below, also includes
393,462 (pre-split) common shares, which represents the number of shares, when
multiplied by the initial public offering price, would have been sufficient to
replace the capital in excess of earnings withdrawn as dividends during the
period.
42
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Year Ended December 31,
-----------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
(dollars in thousands, except per share data)
Basic earnings per share
Net income................... $33,432 $16,067 $3,698
Divided by:
Weighted average common
shares...................... 48,996,895 45,250,620 39,194,023
=============== =============== ===============
Basic earnings per share....... $0.68 $0.36 $0.09
=============== =============== ===============
Diluted earnings per share
Net income................... $33,432 $16,067 $3,698
Divided by the sum of:
Weighted average common
shares...................... 48,996,895 45,250,620 39,194,023
Dilutive effect of common
stock equivalents........... 833,539 469,506 6,400
--------------- --------------- ---------------
Diluted average common
shares...................... 49,830,434 45,720,126 39,200,423
=============== =============== ===============
Diluted earnings per share..... $0.67 $0.35 $0.09
=============== =============== ===============
14. Business Acquisitions
On October 26, 1998, the Company acquired International MIS, Inc. ("IMIS"),
a business and information technology consulting firm based in San Francisco,
California. IMIS provides the financial industry with high-level project
management and business analysis consulting services. The acquisition was
accounted for as a purchase. Operating results have been included in the
Company's consolidated financial statements since the date of acquisition, but
pro forma information has not been presented because it is immaterial.
On July 1, 1998, the Company acquired privately held MC Computer Services
Pty Limited ("MCCS"), a Canberra, Australia-based information technology
services provider. MCCS provides a wide range of high-level information
technology services such as applications development, consultant services,
systems analysis and design, and project management. The acquisition has been
accounted for as a purchase. Operating results have been included in the
Company's consolidated financial statements since the date of acquisition, but
pro forma information has not been presented because it is immaterial.
Related to these acquisitions, an initial payment of $15.0 million was paid
and $4.0 million was recorded as a long-term liability, which represents the
unpaid purchase price. Future payments will be made based upon a calculation
of earnings before interest, taxes, depreciation and amortization of goodwill
for the years ending 1999, 2000 and 2001. Future payments will not exceed $8.0
million under the terms of one agreement. The maximum amount of future
payments for the other agreement, will be established based upon the
calculation described above.
During 1998, the Company recorded approximately $19.5 million of goodwill
related to the above acquisitions. The final amount of goodwill will be
determined upon the finalization of fair value studies of the assets acquired.
Additionally, this amount will be adjusted based upon future payments. These
two acquisitions, accounted for under the purchase method of accounting, added
$12.5 million in revenues and $9.5 million in assets for 1998.
On June 1, 1998, the Company acquired all of the issued and outstanding
capital stock of Quantum Information Resources Limited ("Quantum"), a Canadian
corporation, pursuant to a business combination the terms of which were
contained in that certain Combination and Exchange Agreement dated June 1,
1998 (the
43
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
"Exchange Agreement"). Pursuant to the Exchange Agreement, the shareholders of
Quantum received 1,623,000 exchangeable non-voting shares of Quantum, which
are convertible into the same number of shares of the Company's Common Stock
(the "Exchangeable Shares"), and PNC Bank, National Association, received 1
share of Series A Preferred Stock, as trustee for the shareholders of Quantum,
pursuant to which such shareholders were granted the right to vote the Company
Common Stock underlying the Exchangeable Shares.
Quantum provides IT services primarily in Canada and parts of the United
States. The business combination was accounted for as a pooling of interests
and, accordingly, the Company's consolidated financial statements have been
restated to include results for Quantum for all periods presented. Separate
revenues and net income, prior to the business combination, are presented in
the following table:
Five Months
Ended May 31, Year Ended December 31,
------------- -----------------------
1998 1997 1996
-------- ----------- -----------
(dollars in thousands)
Revenues
Mastech................................. $121,298 $ 195,967 $ 123,400
Quantum................................. 20,181 44,481 39,539
-------- ----------- -----------
Total................................... $141,479 $ 240,448 $ 162,939
======== =========== ===========
Net income
Mastech $ 11,093 $ 15,606 $ 8,692
Quantum................................. 928 461 297
-------- ----------- -----------
Total................................... $ 12,021 $ 16,067 $ 8,989
======== =========== ===========
On December 2, 1997, the Company acquired Asia Pacific Computer Consultants
Pty Limited ("Asia Pacific"), a Sydney, Australia-based information technology
and telecommunications ("IT&T") services provider. Asia Pacific was merged
with Mastech's existing Australia operations and became a Mastech subsidiary,
Mastech Asia-Pacific. In addition to an initial payment, a contingent future
payment, if required, will be made in accordance with a calculation involving
the earnings before interest of Asia Pacific, as defined, for each of the
years ended December 31, 1998 and 1999.
15. S-Corporation Dividend
In December 1996, the Company's Board of Directors declared an S-corporation
dividend to former S-corporation shareholders in an aggregate amount
representing the estimated amount of all undistributed earnings of the Company
taxed or taxable to its shareholders through December 16, 1996 (the "S-
corporation Dividend"). The S-corporation Dividend was recorded in the
consolidated balance sheets at December 31, 1996 in the amount of $6.5
million. The S-corporation Dividend was paid in the amount of $6.3 million in
1997, with the difference recognized as an increase in additional paid-in
capital as shown in the accompanying consolidated statements of shareholders'
equity.
16. Segment Reporting
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"), which requires the use of the "management approach" model
for segment reporting. The management approach model is based on the way a
company's management organizes segments within the company for making
operating decisions and assessing performance. Reportable segments are based
on products and services, geography, legal structure, management structure or
any other manner in which management segregates a company.
44
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Mastech Corporation's reportable segments are strategic business units that
offer similar services to different target markets. They are managed
separately because each business unit requires different marketing strategies.
The Company has three reportable segments: U.S. Client Services group, the
High Value Services group and the International Client Services group.
The U.S. Client Services group is divided into geographic regions, each of
which is directed by a Manager or Regional Director. Each region includes
multiple new business development managers. These individuals use a
proprietary database of several thousand prospects to telemarket Mastech's
services nationally. The Company subsequently sends interested prospective
clients a written proposal providing information about the Company, its
approach and methodology, schedules, team members, pricing and terms.
The U.S. Client Services group also focuses on developing national and
global relationships with major systems integrators such as EDS, IBM, KPMG,
Ernst & Young and Oracle. Mastech assists these integrators in meeting their
customers' needs by providing specialized technical expertise and
complementary capabilities such as offshore development.
The High Value Services group provides IT professionals trained in ERP
implementations, E-Business consulting, network services, Year 2000 services,
in addition to managing engagements in the aforementioned services.
Additionally, this group provides services through offshore software
development centers which are connected via secure, high-speed satellite links
to the Company's headquarters and client sites. This group works directly with
the end-user clients and also partners with a wide array of software
companies, ranging from ERP to supply-chain and custom-interaction vendors,
and systems integrators on teamed implementation efforts.
The International Client Services group operates through offices in nine
different countries. Each office is supervised by a Country Manager and
supported by dedicated sales personnel that sell directly to new clients using
an approach similar to the Company's U.S. sales approach. Additionally, these
offices focus on leveraging Mastech's existing relationships with its U.S.-
based multinational clients.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates segment
performance based on profit or loss from operations. The Company does not
allocate income taxes, other income or expense and non-recurring charges to
segments. In addition, the Company accounts for inter-segment sales and
transfers at current market prices.
Revenues by geographic area consisted of the following:
Year Ended December 31,
--------------------------
1998 1997 1996
(dollars in thousands) -------- -------- --------
Revenues
United States...................................... $283,569 $175,364 $116,514
Canada............................................. 49,489 47,830 39,935
Europe............................................. 26,126 8,898 329
Pacific Rim........................................ 31,687 8,356 6,161
-------- -------- --------
Total Revenues..................................... $390,871 $240,448 $162,939
======== ======== ========
Year Ended December 31,
-----------------------
1998 1997
----------- -----------
Total Assets
United States......................................... $168,276 $145,994
Canada................................................ 16,158 3,628
Europe................................................ 13,836 5,643
Pacific Rim........................................... 17,511 6,795
----------- -----------
Total Assets.......................................... $215,781 $162,060
=========== ===========
45
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
U.S. International
Client High Value Client Corporate
Services Services Services(1) Activities(2) Total
-------- ---------- ------------- ------------- --------
(dollars in thousands)
1998
Revenues (3)........... $159,679 $140,092 $91,100 $ -- $390,871
Income from operations. 40,344 33,804 6,407 (26,773) 53,782
Interest (income)
expense............... -- -- -- (3,321) (3,321)
Merger-related
expenses.............. -- -- -- 3,212 3,212
Provision for income
taxes................. -- -- -- 20,459 20,459
--------
Net income............................................................. $ 33,432
========
U.S. International
Client High Value Client Corporate
Services Services Services(1) Activities(2) Total
-------- ---------- ------------- ------------- --------
1997
Revenues (3)........... $122,387 $58,961 $59,100 $ -- $240,448
Income from operations. 28,876 10,626 4,044 (17,441) 26,105
Interest (income)
expense............... -- -- -- (1,193) (1,193)
Provision for income
taxes................. -- -- -- 11,231 11,231
--------
Net income............................................................. $ 16,067
========
U.S. International
Client High Value Client Corporate
Services Services Services(1) Activities(2) Total
-------- ---------- ------------- ------------- --------
1996
Revenues (3)........... $105,488 $10,931 $46,520 $ -- $162,939
Income from operations. 25,129 (183) 2,295 (13,785) 13,456
Interest (income)
expense............... -- -- -- 331 331
Provision for income
taxes................. -- -- -- 4,136 4,136
--------
Net income............................................................. 8,989
Pro forma tax provision................................................ 5,291
--------
Pro forma net income................................................... $ 3,698
========
- --------
(1) Income from operations for the International Client Services group
includes certain international administrative and other operating
expenses which are not allocated to the U.S. Client Services and High
Value Services groups.
(2) Corporate activities include general corporate expenses, eliminations of
intersegment transactions, interest income and expense and other
unallocated charges. The Company evaluates segments based on income from
operations. Since certain administrative and other operating expenses
have not been allocated to the business segments, this basis is not
necessarily a measure computed in accordance with generally accepted
accounting principles and it may not be comparable to other companies.
Additionally, the Company does not allocate assets, depreciation expense
and capital additions to the business segments.
(3) A single customer, included in U.S. Client Services accounted for
approximately 11%, 11%, and 7% of the Company's revenues for the years
ended December 31, 1998, 1997 and 1996, respectively.
46
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
17. Quarterly Financial Information (Unaudited)
The following table sets forth certain unaudited financial information for
each of the quarters indicated below and, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation thereof. All information has been restated
for pooling of interests business combinations through December 31, 1998.
Three Months Ended
------------------------------------------------
Mar. 31, Jun. 30, Sept. 30, Dec. 31,
----------- ----------- ------------ -----------
(dollars in thousands, except per share data)
1998
Revenues..................... $ 81,586 $ 92,584 $ 103,405 $ 113,296
Gross Profit................. 26,303 30,745 34,649 36,996
Income from operations....... 10,939 12,861 14,964 15,018
Income before income taxes... 11,611 10,380 15,699 16,201
Provision for income taxes... 4,667 4,627 5,495 5,670
Net income................... $ 6,944 $ 5,753 $ 10,204 $ 10,531
========== ========== =========== ===========
Basic and diluted earnings
per common share............ $ 0.14 $ 0.12 $ 0.20 $ 0.21
========== ========== =========== ===========
1997
Revenues..................... $ 48,339 $ 55,905 $ 64,209 $ 71,995
Gross Profit................. 13,581 16,277 19,737 23,168
Income from operations....... 3,461 5,988 7,589 9,067
Income before income taxes... 3,867 6,349 7,703 9,379
Provision for income taxes... 1,698 2,508 3,148 3,877
Net income................... $ 2,169 $ 3,841 $ 4,555 $ 5,502
========== ========== =========== ===========
Basic and diluted earnings
per common share............ $ 0.05 $ 0.08 $ 0.10 $ 0.12
========== ========== =========== ===========
- --------
Note: The sum of the four quarters may not equal yearly totals due to rounding
of quarterly results.
18. Comprehensive Income
During 1998, the Company adopted FASB Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No.
130 establishes new rules for the reporting and display of comprehensive
income and its components. SFAS No. 130 requires companies to report all
changes in equity during a period, except those resulting from investment by
owners and distribution to owners. The adoption of SFAS No. 130 had no impact
on the Company's net income or shareholders' equity.
19. Subsequent Events
In January 1999, the Company made the following acquisitions: (1) the Amber
Group ("Amber") an SAP services company that provides integrated consulting,
development, implementation and training; (2) Direct Resources Scotland
Limited ("Direct Resources") of Edinburgh, Scotland, an IT services firm
focusing on the financial services industry; and (3) Global Resource
Management ("GRM") of Jacksonville, Florida. GRM provides information
technology consulting and support services to large companies for mission-
critical projects.
The acquisitions above had combined revenues of approximately $26.2 million
for the year ended December 31, 1998. Additionally, the assets of the above
companies as of December 31, 1998 were approximately $6.1 million.
47
MASTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
The Amber acquisition will be accounted for under the pooling-of-interests
method of accounting. Direct Resources and GRM will be accounted for under the
purchase method of accounting.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
48
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item is incorporated by reference from the
information under the caption "Management and Directors" in the Company's
definitive proxy statement to be filed.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
information under the caption "Executive Compensation" in the Company's
definitive proxy statement to be filed provided that the information in such
proxy statement under the captions "Performance Graph" and "Compensation
Committee Report on Executive Compensation" should not be incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" in the Company's definitive proxy statement to be filed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
information under the caption "Certain Transactions" in the Company's
definitive proxy statement to be filed.
49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following consolidated financial statements of the registrant and its
subsidiaries are included on pages 28 to 48 and the report of independent
public accountants is included on page 27 in this Form 10-K.
Report of Independent Public Accountants.
Consolidated Balance Sheets--December 31, 1998 and 1997.
Consolidated Statements of Income--Years ended December 31, 1998, 1997 and
1996.
Consolidated Statements of Shareholders' Equity--Years ended December 31,
1998, 1997 and 1996.
Consolidated Statements of Cash Flows--Years ended December 31, 1998, 1997
and 1996.
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules
The following consolidated financial statement schedules shown below should
be read in conjunction with the consolidated financial statements on pages 28
to 48 in this Form 10-K. All other schedules are omitted because they are not
applicable or the required information is shown in the financial statements or
Notes thereto.
The following items appear immediately following the signature pages:
Report of Independent Public Accountants on Consolidated Financial Statement
Schedules.
Financial Statement Schedules:
Schedule II-Valuation and Qualifying Accounts for the three years ended
December 31, 1998.
Financial Data Schedules
3. Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index, which is incorporated herein by reference.
(b)Reports on Form 8-K: Not applicable.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized on this 29th day of
March, 1999.
Mastech Corporation
/s/ Sunil Wadhwani
By: _________________________________
Sunil Wadhwani
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Mastech Corporation, hereby
severally constitute and appoint Sunil Wadhwani, Ashok Trivedi and Jeffrey
McCandless, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities indicated below, amendments to this report, and generally to do all
things in our names and on our behalf in such capacities to enable Mastech
Corporation to comply with the provisions of the Securities Exchange Act of
1934, as amended, and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Sunil Wadhwani Co-Chairman, Chief March 29, 1999
______________________________________ Executive and Director
Sunil Wadhwani (principal executive
officer)
/s/ Ashok Trivedi Co-Chairman, President and March 29, 1999
______________________________________ Director
Ashok Trivedi
/s/ Jeffrey McCandless Vice President--Finance March 29, 1999
______________________________________ (principal financial
Jeffrey McCandless officer)
/s/ Neil M. Ebner Corporate Controller March 29, 1999
______________________________________ (principal accounting
Neil M. Ebner officer)
/s/ Ed Yourdon Director March 29, 1999
______________________________________
Ed Yourdon
/s/ J. Gordon Garrett Director March 29, 1999
______________________________________
J. Gordon Garrett
/s/ Michel Berty Director March 29, 1999
______________________________________
Michel Berty
51
MASTECH CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1998, 1997 and 1996
Balance at Balance at
Allowance for beginning Charged end
Doubtful Accounts of period to expense Deductions of period
----------------- ---------- ---------- ---------- ----------
(dollars in thousands)
Year ended December 31, 1998........ $1,215 $1,413 $(900) $1,728
Year ended December 31, 1997........ 675 1,000 (460) 1,215
Year ended December 31, 1996........ 500 300 (125) 675
52
EXHIBIT INDEX DESCRIPTION OF EXHIBIT
------- ----------------------------
3.1 Articles of Incorporation of the Company are incorporated by reference
from Exhibit 3.1 to Mastech Corporation's Registration Statement on Form
S-1, Commission File No. 333-14169, filed on November 19, 1996.
3.2 Bylaws of the Company are incorporated by reference from Exhibit 3.2 to
Mastech Corporation's Registration Statement on Form S-1, Commission File
No. 333-14169, filed on November 19, 1996.
4.1 Form of certificate representing the Common Stock of the Company is
incorporated by reference from Exhibit 4.1 to Mastech Corporation's
Registration Statement on Form S-1, Commission File No. 333-14169, filed
on November 19, 1996.
10.1 Form of Employment Agreement by and between the Company and Sunil Wadhwani
and Ashok Trivedi is incorporated by reference from Exhibit 10.1 to
Mastech Corporation's Registration Statement on Form S-1, Commission File
No. 333-14169, filed on November 19, 1996.*
10.2 1996 Stock Incentive Plan is incorporated by reference from Exhibit 10.2
to Mastech Corporation's Registration Statement on Form S-1, Commission
File No. 333-14169, filed on November 19, 1996.*
10.3 Amended and Restated 1996 Stock Incentive Plan is incorporated by
reference from the Quarterly Report on Form 10-Q, File No. 000-21755 filed
on November 16, 1998.
10.4 Second Amended and Restated 1996 Stock Incentive Plan is incorporated by
reference from Exhibit 99.1 to Mastech Corporation's Definitive Proxy
Statement, File No. 000-21755 filed on December 30, 1998.
10.5 Agreement dated October 14, 1996 between Mastech Systems Corporation
(f/k/a Mastech Corporation) and Steven Shangold, as amended by Addendum
dated as of November 18, 1996, is incorporated by reference from Exhibit
10.3 to Mastech Corporation's Registration Statement on Form S-1,
Commission File No. 333-14169, filed on November 19, 1996.*
10.6 Form of Employment Agreement by and between the Company and each of its
Executive Officers is incorporated by reference from Exhibit 10.4 to
Mastech Corporation's Registration Statement on Form S-1, Commission File
No. 333-14169, filed on December 16, 1996.*
10.7 Shareholders Agreement by and among the Company, Sunil Wadhwani and Ashok
Trivedi and the Joinder Agreement by Grantor Retained Annuity Trusts
established by Messrs. Wadhwani and Trivedi are incorporated by reference
from Exhibit 10.5 to Mastech Corporation's Registration Statement on Form
S-1, Commission File No. 333-14169, filed on December 16, 1996.
10.10 Lease Agreement dated January 15, 1995 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India is incorporated by reference from Exhibit 10.10 to
Mastech Corporation's Registration Statement on Form S-1, Commission File
No. 333-14169, filed on November 19, 1996.
10.11 Lease Agreement dated November 6, 1996 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India is incorporated by reference from Exhibit 10.11 to
Mastech Corporation's Registration Statement on Form S-1, Commission File
No. 333-14169, filed on November 19, 1996.
10.12 Lease Agreement dated January 15, 1998 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India is filed herewith.
10.13 Lease Agreement dated March 26, 1997 by and between Mascot Systems Private
Limited and Messrs. Wadhwani and Trivedi for real estate in Bangalore,
India is filed herewith.
53
EXHIBIT INDEX DESCRIPTION OF EXHIBIT
------- ----------------------------
10.14 Lease Agreement dated January 13, 1998 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Chennai, India is filed herewith.
10.15 Lease Agreement dated April 1, 1996 by and between Scott Systems Private
Limited and Messrs. Wadhwani and Trivedi for real estate in Bombay, India
is incorporated by reference from Exhibit 10.12 to Mastech Corporation's
Registration Statement on Form S-1, Commission File No. 333-4169, filed on
November 19, 1996.
10.16 Lease Agreement dated April 1, 1996 by and between Scott Systems Private
Limited and Sunil Wadhwani for real estate in Bombay, India is
incorporated by reference from Exhibit 10.13 to Mastech Corporation's
Registration Statement on Form S-1, Commission File No. 333-14169, filed
on November 19, 1996.
10.17 Lease Agreement dated April 1, 1996 by and between Scott Systems Private
Limited and Ashok Trivedi for real estate in Bombay, India is incorporated
by reference from Exhibit 10.14 to Mastech Corporation's Registration
Statement on Form S-1, Commission File No. 333-14169, filed on November
19, 1996.
10.18 Lease Agreement dated April 18, 1998 by and between Scott Systems Private
Limited and Messrs. Wadhwani and Trivedi for real estate in Mumbai, India
is filed herewith.
10.19 Lease Agreement dated April 18, 1998 by and between Scott Systems Private
Limited and Messrs. Wadhwani and Trivedi for real estate in Mumbai, India
is filed herewith.
10.20 Stock Purchase Agreement by and between the Company and Messrs. Wadhwani
and Trivedi for their shares of Mascot Systems Private Limited
(incorporated by reference to Exhibit 10.15 on Form S-1 of Mastech
Corporation, Commission File No. 333-14169, filed on November 19, 1996).
10.21 Agreement and Plan of Merger by and between the Company and SWAT Systems
is incorporated by reference from Exhibit 10.15 to Mastech Corporation's
Registration Statement on Form S-1, Commission File No. 333-14169, filed
on November 19, 1996.
10.22 Form of S-corporation Revocation, Tax Allocation and Indemnification
Agreement is incorporated by reference from Exhibit 10.17 to Mastech
Corporation's Registration Statement on Form S-1, Commission File No. 333-
14169, filed on November 19, 1996.
10.23 Credit Agreement dated December 3, 1998 between the Company and PNC Bank,
National Association filed herewith.
10.24 Sublease Agreement dated February 10, 1995 by and between Westinghouse
Electric Corporation and the Company for the Company's Oakdale, PA
headquarters, as amended by amendment dated March 20, 1996 is incorporated
by reference from Exhibit 10.19 to Mastech Corporation's Registration
Statement on Form S-1, Commission File No. 333-14169, filed on November
19, 1996.
10.25 Lease Agreement dated October 14, 1998 by and between Park Ridge One
Associates and the Company for office space located in Park Ridge Office
Center near Pittsburgh, Pennsylvania is filed herewith.
10.26 Form of Capital Contribution Agreement by and among the Company, Sunil
Wadhwani, Ashok Trivedi and their respective family trusts is incorporated
by reference from Exhibit 10.21 to Mastech Corporation's Registration
Statement on Form S-1, Commission File No. 333-14169, filed on December
16, 1996.
54
EXHIBIT INDEX DESCRIPTION OF EXHIBIT
------- ----------------------------
23.0 Report of Independent Public Accountants on Financial Statement Schedule
23.1 Consent of Independent Public Accountants
24.1 Power of Attorney (included on signature page in this report)
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
- --------
* Management compensatory plan or arrangement
55
EX-10.12
2
LEASE AGREEMENT DATED JANUARY 15, 1998
EXHIBIT 10.12
-------------
MEMORANDUM OF LEAVE AND LICENCE
-------------------------------
This Memorandum of Leave and Licence made at Bangalore on this 15th day of
January, 1998 between:
1. Sunil Wadhwani residing at 930 Osage Road, Pittsburgh PA 15243, U.S.A.
2. Ashok Trivedi residing at 1446 Peterson Place, Pittsburgh PA 15241, U.S.A.
(hereinafter referred to as "the Licensors" which expression shall unless
repugnant to its context shall mean and include their heirs, successors and
assigns) of the One Part;
and
Mascot Systems Private Limited a company incorporated under the Companies Act,
1956 and having Registered Office at No. 1, Main Road, Kalyana Mandapa Road,
Jakkasandra Village, Begur Hobli, Sarjapur, Bangalore 560 034. (hereinafter
referred to as "the Licensee" which expression shall include its successors and
permitted assigns) of the Other Part.
WHEREAS the Licensors are the owners of office premises at 401 to 410 in the `C'
Wing of the building known as Mittal Towers' located at Mahatma Gandhi Road,
Bangalore 560 001
WHEREAS the Licensee is desirous of taking a portion of the said premises on
leave and licence basis for use as software development center, more
particularly described in the Schedule appended hereto (hereinafter referred to
as "the said premises").
NOW THIS MEMORANDUM WITNESSETH AS UNDER:
1. The Licensee has been given a licence to make use of the said premises and
more particularly described in the Schedule appended hereto.
2. The said license has been and shall be regarded as operative from Jan. 16,
1998 to February 28, 2008. The Licensee has agreed to and shall continue to
pay license fee in the sum of Rs. 1,00,000 (Rupees One lakh only) per month
or such License fee as may be mutually agreed from time to time pursuant to
the review as set out in clause 4 below. The said sum shall be paid in
advance, by the Licensee to the Licensors regularly on 1st day of every
English calendar month.
3. Both the Licensors are equal owners of the said premises and the Licensee
shall pay the monthly licence fee of Rs. 1,00,000/- or such license fee as
may be mutually agreed from time to time pursuant to clause 4 below in equal
proportion to both the Licensors by drawing a cheque or demand draft of Rs.
50,000 (Rupees Fifty thousand only) or one half of the total license fee as
determined pursuant to clause 4 in the name of each of the Licensor.
4. The License fees shall be reviewed in March each year beginning from March,
1999. Pursuant to such review, the license fee may be revised from time to
time as mutually agreed in writing by the Licensor and the Licensee. The
license fee as most recently agreed shall always be in force and the
Licensee shall pay the Licensor such license fee as provided herein.
5. The Licensee shall pay all charges in respect of water, electricity, power,
maintenance, sanitation, security and all other running and maintenance
expenses in respect of the use of the said presmises. The property tax and
other public dues in respect of the said premises shall be paid by the
Licensors.
6. Upon execution of this Memorandum by the Licensor and the Licensee, the
Licensee shall be entitled to commence work relating to interior office
infrastructure such as furniture, fixtures, lighting, airconditioning etc.
and for this purpose the Licensee can use the said premises from the date
hereof.
7. The licence is personal to the Licensee and the Licensee shall have no right
to sub-let, transfer or part with the possession or occupation of the said
premises or any part thereof in any manner and shall not have any right to
allow anyone else to make use of the licence given to it by the Licensors.
8. At all times during the continuance of the licence, the Licensee shall keep
the premises in good and substantial and tenantable repair, and all charges
for doing so shall be borne by the Licensee. If however, there are any major
structural repairs or any reconstruction required by reason of any portion
falling down, or being in danger of falling down, the Licensors shall effect
such repairs or make reconstruction at their own cost.
9. The license is given only for carrying out bonafide business activities of
the Licensee. The Licensee shall make use of the said premises carefully and
always keep them neat and clean and all cost for doing so shall be borne by
the Licensee. The Licensee shall not do or cause to be done any act or thing
which may be unlawful or may amount to nuisance or annoyance, waste or
damage to the said premises. If any such damage is, however, caused to the
premises, the same shall be repaired by the Licensee at its cost.
10. If the Licensee is desirous of making at its own cost any alterations or
constructions in temporary or permanent structure of constructions in the
said premises to meet or suit its needs it may do so with prior written
consent of the Licensors provided there is no permanent damage to the
existing premises.
Licensors shall not be required to spend any amount in respect of such
alterations or reconstructions and the Licensee shall not be entitled to
claim any compensation for such expenses incurred by the Licensee for such
alterations or constructions.
11. The Licensors shall not be liable to the Licensee for any loss or damage
caused to any goods or machinery of the Licensee or the life or property or
invitees in or out of such premises or an the passage permitted to be used
at any time by reason of theft, fire, riot, leakage of water or any act of
God or by any reason whatsoever.
12. In case of any default by the Licensee to abide by terms and conditions of
this lecence including failure to pay the Licence Fee, the Licensors shall
be entitled to give the Licensee a notice of their intention to revoke the
Licence on the expiry of fifteen days from the date of such notice. If the
Licensee fails to remedy the default within the said period of fifteen days
the licence shall be terminated forthwith on the expiry of the said fifteen
days.
13. Nothing contained herein shall create or shall be construed to create any
tenancy right or any interest, estate or rights in respect of the said
premises and the said premises shall continue to be and shall be deemed to
continue to remain in the possession of the Licensors.
14. The Licensee shall be terminated at the end of 28th day of February, 2008.
However, the Licensors may terminate the licence earlier by giving notice
of termination to the Licensee of not less than one hundred and twenty
(120) days.
15. The Licensors or their authorised representatives shall at all times during
continuance of the license be entitled to inspection of the said premises.
16. If at any time, the Licensee is ordered to be wound up under the orders of
a competent court or authority or by passing a resolution for winding up or
permanently closes its business or if any receiver is appointed to take
possession of its properties, the licence shall come to an end forthwith
automatically and the Licensors shall be entitled to forthwith receive the
vacant and peaceful possession of the said premises.
17. In the event of determination or revocation of the licence for any reason
whatsoever, the Licensee shall forthwith hand over to the Licensors the
vacant and peaceful possession of the said premises and the Licensee shall
not be entitled to continue to make use of the said premises and shall
cease to make use of the said premises forthwith without raising any
dispute and shall remove all its goods, machineries and other properties
from the premises and no employee or servant or any agent or representative
of the Licensee shall enter the said premises and the Licensors shall be
free to restain the Licensee and its servants and employees, agents or
representative from entering the said premises and making any use thereof
and the Licensors shall also be entitled to remove from the said premises
any goods or machineries of the Licensee lying in or upon the said premises
if need be without resource to a court of law, and without incurring any
liability whatsoever for any claim or compensation. Upon such determination
or revocation the Licensee shall pay all outstanding charges for water,
electricity etc as is referred to in clause 4 hereof and the Licensors
shall be entitled to recover from the Licensee all such charges remaining
unpaid by the Licensee.
18. This Memorandum of Leave and Licence shall supersede all earlier
understandings, written or otherwise, between the Licensors and Licensee
with respect to the license of the said premises.
19. The Licensors agree that they will give the Licensee the option to take
additional space in the building known as "Mac Commerce Park" on leave and
license any other party on terms which shall not be unfavourable the
Licensors than those that could be acceptable to such other party.
SCHEDULE
Office premises on the fourth floor bearing numbers 401 to 410 admeasuring in
all about 4,500 square feet of built up area out of a total of about 4750 square
feet of built up area at Mittal Towers, `C' Wing, 47/6 Mahatma Gandhi Road,
Bangalore 560 001
IN WITNESS WHEREOF the Licensors and Licensee have signed and sealed this
Memorandum the day and year first written.
SIGNED, SEALED AND DELIVERED )
By the Licensors
(1) Sunil Wadhwani ) /s/ Sunil Wadhwani
(2) Ashok Trivedi ) /s/ Ashok Trivedi
SIGNED, SEALED AND DELIVERED )
By the Licensee )
Mascot Systems Private Limited
By its Managing Director
Mr. Shekar Sivasubramanian ) /s/ Shekar Sivasubramanian
EX-10.13
3
LEASE AGREEMENT DATED MARCH 26, 1997
EXHIBIT 10.13
-------------
SUPPLEMENTARY AGREEMENT FOR LEAVE AND LICENSE
---------------------------------------------
This Supplementary Agreement for Leave and License made on this 26th day of
March, 1997 between:
1) Sunil Wadhwani residing at 930 Osage Road, Pittsburgh PA 15243, U.S.A.
2) Ashok Trivedi residing at 1446 Peterson Place, Pittsburgh PA 15241, U.S.A.
(hereinafter collectively referred to as "the Licensors" which expression shall
unless repugnant to its context mean and include their heirs, successors and
assigns) of the One Part:
and
Mascot Systems Private Limited a company incorporated under the Companies Act,
1956 and having Registered Office at No. 1, Main Road, Kalyanamandapa Road,
Jakkasandra Village, Begur Hobli, Sarjapur, Bangalore 560 034 (hereinafter
referred to as "the Licensee" which expression shall include its successors and
liquidators or assigns) of the Other Part.
WHEREAS the Licensors are the owners of commercical premises bearing Corporation
No. 1 Inward no 66 (previously known as property no. 99 of Jakkasandra Village
and Survey no:49/43A) situated on Kalyanamandapa Road, Jakkasandra, Bangalore
more particularly described in the Schedule appended hereto (hereinafter
referred to as "the said premises").
/s/ Sunil Wadhwani
/s/ Ashok Trivedi
/s/ Shekar Sivasubramanian
SCHEDULE
Commercial premises being Corporation No. 1 in ward no. 66 (previously known as
property no. 99 Jakkasandra Village and Survey No: 49/43A) situated on the Main
Road also known as Kalyanamandapa Road, Jakkasandra, Bangalore consisting of
building with basement, ground floor and four upper floors admeasuring about
32500 square feet of built up area.
IN WITNESS WHEREOF the Licensors and Licensee have signed and sealed this
Memorandum the day and year first written.
SIGNED, SEALED AND DELIVERED )
By the Licensors
(1) Sunil Wadhwani ) /s/ Sunil Wadhwani
(2) Ashok Trivedi ) /s/ Ashok Trivedi
SIGNED, SEALED AND DELIVERED )
By the Licensee )
Mascot Systems Private Limited
By its Managing Director
Mr. Shekar Sivasubramanian ) /s/ Shekar Sivasubramanian
EX-10.14
4
LEASE AGREEMENT DATED JANUARY 13, 1998
EXHIBIT 10.14
-------------
MEMORANDUM OF LEAVE AND LICENCE
-------------------------------
This Memorandum of Leave and Licence made at Chennai on this 13th day of
January, 1998 between:
1. Sunil Wadhwani residing at 930 Osage Road, Pittsburgh PA 15243, U.S.A.
2. Ashok Trivedi residing at 1446 Peterson Place, Pittsburgh PA 15241, U.S.A.
(hereinafter referred to as "the Licensors" which expression shall unless
repugnant to its context shall mean and include their heirs, successors and
assigns) of the One Part;
and
Mascot Systems Private Limited a company incorporated under the Companies Act,
1956 and having Registered Office at No. 1, Main Road, Kalyana Mandapa Road,
Jakkasandra Village, Begur Hobli, Sarjapur, Bangalore 560 034. (hereinafter
referred to as "the Licensee" which expression shall include its successors and
permitted assigns) of the Other Part.
WHEREAS the Licensors are the owners of commercical building known as "Mac
Commerce Park" being the multistoreyed building located on land bearing
Municipal numbers 106 to 109, Mount Road, Chennai 600 032.
WHEREAS the Licensee is desirous of taking a portion of the said premises on
leave and licence basis for use as software development center, more
particularly described in the Schedule appended hereto (hereinafter referred to
as "the said premises").
5. The Licensee shall pay all charges in respect of water, electricity, power,
maintenance, sanitation, security and all other running and maintenance
expenses in respect of the use of the said presmises. The property tax and
other public dues in respect of the said premises shall be paid by the
Licensors.
6. Upon execution of this Memorandum by the Licensor and the Licensee, the
Licensee shall be entitled to commence work relating to interior office
infrastructure such as furniture, fixtures, lighting, airconditioning etc.
and for this purpose the Licensee can use the said premises from the date
hereof.
7. The licence is personal to the Licensee and the Licensee shall have no right
to sub-let, transfer or part with the possession or occupation of the said
premises or any part thereof in any manner and shall not have any right to
allow anyone else to make use of the licence given to it by the Licensors.
8. At all times during the continuance of the licence, the Licensee shall keep
the premises in good and substantial and tenantable repair, and all charges
for doing so shall be borne by the Licensee. If however, there are any major
structural repairs or any reconstruction required by reason of any portion
falling down, or being in danger of falling down, the Licensors shall effect
such repairs or make reconstruction at their own cost.
9. The license is given only for carrying out bonafide business activities of
the Licensee. The Licensee shall make use of the said premises carefully
and always keep them neat and clean and all cost for doing so shall be
borne by the Licensee. The Licensee shall not do or cause to be done any
act or thing which may be unlawful or may amount to nuisance or annoyance,
waste or damage to the said premises. If any such damage is, however,
caused to the premises, the same shall be repaired by the Licensee at its
cost.
10. If the Licensee is desirous of making at its own cost any alterations or
constructions in temporary or permanent structure of constructions in the
said premises to meet or suit its needs it may do so with prior written
consent of the Licensors provided there is no permanent damage to the
existing premises.
Licensors shall not be required to spend any amount in respect of such
alterations or reconstructions and the Licensee shall not be entitled to
claim any compensation for such expenses incurred by the Licensee for such
alterations or constructions.
11. The Licensors shall not be liable to the Licensee for any loss or damage
caused to any goods or machinery of the Licensee or the life or property or
invitees in or out of such premises or an the passage permitted to be used
at any time by reason of theft, fire, riot, leakage of water or any act of
God or by any reason whatsoever.
12. In case of any default by the Licensee to abide by terms and conditions of
this lecence including failure to pay the Licence Fee, the Licensors shall
be entitled to give the Licensee a notice of their intention to revoke the
Licence on the expiry of fifteen days from the date of such notice. If the
Licensee fails to remedy the default within the said period of fifteen days
the licence shall be terminated forthwith on the expiry of the said fifteen
days.
13. Nothing contained herein shall create or shall be construed to create any
tenancy right or any interest, estate or rights in respect of the said
premises and the said premises shall continue to be and shall be deemed to
continue to remain in the possession of the Licensors.
14. The Licensee shall be terminated at the end of 28th day of February, 2008.
However, the Licensors may terminate the licence earlier by giving notice
of termination to the Licensee of not less than one hundred and twenty
(120) days.
15. The Licensors or their authorised representatives shall at all times
during continuance of the license be entitled to inspection of the said
premises.
16. If at any time, the Licensee is ordered to be wound up under the orders of
a competent court or authority or by passing a resolution for winding up or
permanently closes its business or if any receiver is appointed to take
possession of its properties, the licence shall come to an end forthwith
automatically and the Licensors shall be entitled to forthwith receive the
vacant and peaceful possession of the said premises.
17. In the event of determination or revocation of the licence for any reason
whatsoever, the Licensee shall forthwith hand over to the Licensors the
vacant and peaceful possession of the said premises and the Licensee shall
not be entitled to continue to make use of the said premises and shall
cease to make use of the said premises forthwith without raising any
dispute and shall remove all its goods, machineries and other properties
from the premises and no employee or servant or any agent or representative
of the Licensee shall enter the said premises and the Licensors shall be
free to restain the Licensee and its servants and employees, agents or
representative from entering the said premises and making any use thereof
and the Licensors shall also be entitled to remove from the said premises
any goods or machineries of the Licensee lying in or upon the said premises
if need be without resource to a court of law,
and without incurring any liability whatsoever for any claim or
compensation. Upon such determination or revocation the Licensee shall pay
all outstanding charges for water, electricity etc as is referred to in
clause 4 hereof and the Licensors shall be entitled to recover from the
Licensee all such charges remaining unpaid by the Licensee.
18. This Memorandum of Leave and Licence shall supersede all earlier
understandings, written or otherwise, between the Licensors and Licensee
with respect to the license of the said premises.
19. The Licensors agree that they will give the Licensee the option to take
additional space in the building known as "Mac Commerce Park" on leave and
license any other party on terms which shall not be unfavourable the
Licensors than those that could be acceptable to such other party.
SCHEDULE
Office premise admeasuring about 13,000 square feet on the Third Floor and
basement admeasuring about 10,000 square feet or thereabouts in the
multistoreyed commercial building know as "Mac Commerce Park" admeasuring 55,000
square feet of built up area and basement area of 10,000 square feet or
thereabouts situated on ten grounds and 1371 square feet of land situated in
Adyar Village comprised in T.S. No.5, Block No.7 bearing municipal Door No. 106
to 109, Mount Road, Guindy, Chennai 600 032 bounded on the
North by T.S. No.6
South by T.S. No.4
East by T.S. No.7
West by T.S. No.5/1
Within the Sub-registration District of Adyar in Registration District of South
Chennai.
IN WITNESS WHEREOF the Licensors and Licensee have signed and sealed this
Memorandum the day and year first written.
SIGNED, SEALED AND DELIVERED )
By the Licensors
(1) Sunil Wadhwani ) /s/ Sunil Wadhwani
(2) Ashok Trivedi ) /s/ Ashok Trivedi
SIGNED, SEALED AND DELIVERED )
By the Licensee )
Mascot Systems Private Limited
By its Managing Director
Mr. Shekar Sivasubramanian ) /s/ Shekar Sivasubramanian
EX-10.18
5
LEASE AGREEMENT DATED APRIL 18, 1998
EXHIBIT 10.18
-------------
MEMORANDUM OF LEAVE AND LICENCE
-------------------------------
This Memorandum of Leave and Licence made at Mumbai on this 18th day of April,
1998 between Sunil Wadhwani residing at 930 Osage Road, Pittsburgh PA
15243,U.S.A., and Ashok Trivedi residing at 1446 Peterson Place, Pittsburgh PA
15241, U.S.A. (hereinafter referred to as "the Licensors" which expression shall
unless repugnant to its context shall mean and include his heirs, successors and
assigns) of the One Part;
And
Scott Systems Private Limited a company incorporated under the Companies Act,
1956 and having its Registered Office at Mastech Centre, 18 Viman Nagar, Pune
411 014, (hereinafter referred to as "the Lecensee" which expression shall
include its successors and permitted assigns) of the Other Part.
WHEREAS the Licensors are the owner of commercial premises at 207 & 208 Navkar
Chambers, Andheri-Kurla Road, Andheri (E), Mumbai 400 069.
WHEREAS the Licensee is desirous of taking a portion of the said commercial
premises namely office no: 207 & 208 at "Navkar Chambers", Andheri-Kurla Road,
Marol Village, Andheri (E), Mumbai 400 069 (hereinafter referred to as "the
said premises") on leave and license basis.
NOW THIS MEMORANDUM WITNESSETH AS UNDER:
1. The Licensee has been given by the Licensors a licence to make use of the
said premises.
2. The said license has been and shall be regarded as operative from April 16,
1998 to March 31, 2003. The Licensee has agreed to and shall continue to pay
license fee in the sum of Rs.20,000 (Rupees Twenty thousand only) per month
for office no. 207, Rs.15,000 (Rupees Fifteen thousand only) per month for
Office no. 208 aggregating to Rs.35,000 (Rupees Thirty five thousand only)
per month for all offices or such license fee as may be mutually agreed from
time to time pursuant to the review as set out in clause 3 below. The said
sum shall be paid in advance, by the Licensee to the Licensors regularly on
1st day of every English calendar month.
Both the Licensors are equal owners of the said premises and the Licensee
shall pay the monthly license fee in equal proportion to both Licensors by
drawing two cheques favouring each Licensor for one half of the licence fee
payable pursuant to this Memorandum.
3. The license fee shall be reviewed in March each year beginning from March,
1999. Pursuant to such review, the license fee may be revised from time to
time as mutually agreed in writing by the Licensors and the Licensee. The
license fee as most recently agreed shall always be in force and the
Licensee shall pay the Licensors such license fee as provided herein.
4. The Licensee shall pay all charges in respect of water, electricity, power,
maintenance, sanitation, security and all other running and maintenance
expenses in respect of the use of the said presmises. The property tax and
other public dues in respect of the said premises shall be paid by the
Licensors.
5. Upon execution of this Memorandum by the Licensors and the Licensee, the
Licensee shall be entitled to commence work relating to interior office
infrastructure such as furniture, fixtures, lighting, airconditioning etc.
and for this purpose the Licensee can use the said premises from the date
hereof.
6. The licence is personal to the Licensee and the Licensee shall have no
right to sub-let, transfer or part with the possession or occupation of the
said premises or any part thereof in any manner and shall not have any
right to allow anyone else to make use of the licence given to it by the
Licensors.
7. At all times during the continuance of the licence, the Licensee shall keep
the premises in good and substantial and tenantable repair, and all charges
for doing so shall be borne by the Licensee. If however, there are any
major structural repairs or any reconstruction required by reason of any
portion falling down, or being in danger of falling down, the Licensors
shall effect such repairs or make reconstruction at their own cost.
8. The license is given only for carrying out bonafide business activities of
the Licensee. The Licensee shall make use of the said premises carefully
and always keep them neat and clean and all cost for doing so shall be
borne by the Licensee. The Licensee shall not do or cause to be done any
act or thing which may be unlawful or may amount to nuisance or annoyance,
waste or damage to the said premises. If any such damage is, however,
caused to the premises, the same shall be repaired by the Licensee at its
cost.
9. If the Licensee is desirous of making at its own cost any alterations or
constructions in temporary or permanent structure of constructions in the
said premises to meet or suit its needs it may do so with prior written
consent of the Licensors provided there is no permanent damage to the
existing premises.
Licensors shall not be required to spend any amount in respect of such
alterations or reconstructions and the Licensee shall not be entitled to
claim any compensation for such expenses incurred by the Licensee for such
alterations or constructions.
10. The Licensors shall not be liable to the Licensee for any loss or damage
caused to any goods or machinery of the Licensee or the life or property or
invitees in or out of such premises or an the passage permitted to be used
at any time by reason of theft, fire, riot, leakage of water or any act of
God or by any reason whatsoever.
11. In case of any default by the Licensee to abide by terms and conditions of
this lecence including failure to pay the Licence Fee, the Licensors shall
be entitled to give the Licensee a notice of their intention to revoke the
Licence on the expiry of fifteen days from the date of such notice. If the
Licensee fails to remedy the default within the said period of fifteen days
the licence shall be terminated forthwith on the expiry of the said fifteen
days.
12. Nothing contained herein shall create or shall be construed to create any
tenancy right or any interest, estate or rights in respect of the said
premises and the said premises shall continue to be and shall be deemed to
continue to remain in the possession of the Licensors.
13. The Licensee shall be terminated at the end of 31st day of March, 2003.
However, the Licensors may terminate the licence earlier by giving notice
of termination to the Licensee of not less than one hundred and twenty
(120) days.
14. The Licensors or his authorised representatives shall at all times during
continuance of the license be entitled to inspection of the said premises.
15. If at any time, the Licensee is ordered to be wound up under the orders of
a competent court or authority or by passing a resolution for winding up
or permanently closes its business or if any receiver is appointed to take
possession of its properties, the licence shall come to an end forthwith
automatically and the Licensors shall be entitled to forthwith receive the
vacant and peaceful possession of the said premises.
16. In the event of determination or revocation of the licence for any reason
whatsoever, the Licensee shall forthwith hand over to the Licensors the
vacant and peaceful possession of the said premises and the Licensee shall
not be entitled to continue to make use of the said premises and shall
cease to make use of the said premises forthwith without raising any
dispute and shall remove all its goods, machineries and other properties
from the premises and no employee or servant or any agent or representative
of the Licensee shall enter the said premises and the Licensor shall be
free to restain the Licensee and its servants and employees, agents or
representative from entering the said premises and making any use thereof
and the Licensors shall also be entitled to remove from the said premises
any goods or machineries of the Licensee lying in or upon the said premises
if need be without resource to a court of law, and without incurring any
liability whatsoever for any claim or compensation. Upon such determination
or revocation the Licensee shall pay all outstanding charges for water,
electricity etc as is referred to in clause 4 hereof and the Licensors
shall be entitled to recover from the Licensee all such charges remaining
unpaid by the Licensee.
17. This Memorandum of Leave and Licence shall supersede all earlier
understandings, written or otherwise, between the Licensors and Licensee
with respect to the license of the said premises.
IN WITNESS WHEREOF the Licensors and Licensee have signed and delivered this
Memorandum the day and year first above written.
Signed and Delivered by the Licensors
Mr. Sunil Wadhwani and Mr. Ashok
Trivedi ) /s/ Sunil Wadhwani
) /s/ Ashok Trivedi
Signed and Delivered by the Licensee
Scott Systems Private Limited by its
Managing Director
Mr. Murali Sanathanam ) /s/ Murali Sanathanam
EX-10.19
6
LEASE AGREEMENT DATED APRIL 18, 1998
EXHIBIT 10.19
-------------
MEMORANDUM OF LEAVE AND LICENCE
-------------------------------
This Memorandum of Leave and Licence made at Mumbai on this 18th day of April,
1998 between Sunil Wadhwani residing at 930 Osage Road, Pittsburgh PA
15243,U.S.A. (hereinafter referred to as "the Licensor" which expression shall
unless repugnant to its context shall mean and include his heirs, successors and
assigns) of the One Part;
And
Scott Systems Private Limited a company incorporated under the Companies Act,
1956 and having its Registered Office at Mastech Centre, 18 Viman Nagar, Pune
411 014, (hereinafter referred to as "the Lecensee" which expression shall
include its successors and permitted assigns) of the Other Part.
WHEREAS the Licensor is the owner of commercial premises at 209, 306 and 309 at
Navkar Chambers, Andheri-Kurla Road, Andheri (E), Mumbai 400 069.
WHEREAS the Licensee is desirous of taking a portion of the said commercial
premises namely office nos: 209, 306 and 309 at "Navkar Chambers", Andheri-Kurla
Road, Marol Village, Andheri (E), Mumbai 400 069 (hereinafter referred to as
"the said premises") on leave and license basis.
NOW THIS MEMORANDUM WITNESSETH AS UNDER:
1. The Licensee has been given by the Licensor a licence to make use of the
said premises.
2. The said license has been and shall be regarded as operative from April 16,
1998 to March 31, 2003. The Licensee has agreed to and shall continue to pay
license fee in the sum of Rs.20,000 (Rupees Twenty thousand only) per month
for office no. 209, Rs.20,000 (Rupees Twenty thousand only) per month for
Office no. 306 and Rs.20,000 (Rupees Twenty thousand only) per month for
Office no. 309 aggregating to Rs.60,000 (Rupees Sixty thousand only) per
month for all offices or such license fee as may be mutually agreed from
time to time pursuant to the review as set out in clause 3 below. The said
sum shall be paid in advance, by the Licensee to the Licensor regularly on
1st day of every English calendar month.
3. The license fee shall be reviewed in March, 1999. Pursuant to such review,
the license fee may be revised from time to time as mutually agreed in
writing by the Licensor and the Licensee. The license fee as most recently
agreed shall always be in force and the Licensee shall pay the Licensor such
license fee as provided herein.
4. The Licensee shall pay all charges in respect of water, electricity, power,
maintenance, sanitation, security and all other running and maintenance
expenses in respect of the use of the said presmises. The property tax and
other public dues in respect of the said premises shall be paid by the
Licensor.
5. Upon execution of this Memorandum by the Licensor and the Licensee, the
Licensee shall be entitled to commence work relating to interior office
infrastructure such as furniture, fixtures, lighting, airconditioning etc.
and for this purpose the Licensee can use the said premises from the date
hereof.
6. The licence is personal to the Licensee and the Licensee shall have no right
to sub-let, transfer or part with the possession or occupation of the said
premises or any part thereof in any manner and shall not have any right to
allow anyone else to make use of the licence given to it by the Licensor.
7. At all times during the continuance of the licence, the Licensee shall keep
the premises in good and substantial and tenantable repair, and all charges
for doing so shall be borne by the Licensee. If however, there are any major
structural repairs or any reconstruction required by reason of any portion
falling down, or being in danger of falling down, the Licensor shall effect
such repairs or make reconstruction at their own cost.
8. The license is given only for carrying out bonafide business activities of
the Licensee. The Licensee shall make use of the said premises carefully and
always keep them neat and clean and all cost for doing so shall be borne by
the Licensee. The Licensee shall not do or cause to be done any act or thing
which may be unlawful or may amount to nuisance or annoyance, waste or
damage to the said premises. If any such damage is, however, caused to the
premises, the same shall be repaired by the Licensee at its cost.
9. If the Licensee is desirous of making at its own cost any alterations or
constructions in temporary or permanent structure of constructions in the
said premises to meet or suit its needs it may do so with prior written
consent of the Licensors provided there is no permanent damage to the
existing premises.
Licensor shall not be required to spend any amount in respect of such
alterations or reconstructions and the Licensee shall not be entitled to
claim any compensation for such expenses incurred by the Licensee for such
alterations or constructions.
10. The Licensor shall not be liable to the Licensee for any loss or damage
caused to any goods or machinery of the Licensee or the life or property or
invitees in or out of such premises or an the passage permitted to be used
at any time by reason of theft, fire, riot, leakage of water or any act of
God or by any reason whatsoever.
11. In case of any default by the Licensee to abide by terms and conditions of
this lecence including failure to pay the Licence Fee, the Licensors shall
be entitled to give the Licensee a notice of their intention to revoke the
Licence on the expiry of fifteen days from the date of such notice. If the
Licensee fails to remedy the default within the said period of fifteen days
the licence shall be terminated forthwith on the expiry of the said fifteen
days.
12. Nothing contained herein shall create or shall be construed to create any
tenancy right or any interest, estate or rights in respect of the said
premises and the said premises shall continue to be and shall be deemed to
continue to remain in the possession of the Licensor.
13. The Licensee shall be terminated at the end of 31st day of March, 2003.
However, the Licensor may terminate the licence earlier by giving notice of
termination to the Licensee of not less than one hundred and twenty (120)
days.
14. The Licensor or his authorised representatives shall at all times during
continuance of the license be entitled to inspection of the said premises.
15. If at any time, the Licensee is ordered to be wound up under the orders of
a competent court or authority or by passing a resolution for winding up
or permanently closes its business or if any receiver is appointed to take
possession of its properties, the licence shall come to an end forthwith
automatically and the Licensors shall be entitled to forthwith receive the
vacant and peaceful possession of the said premises.
16. In the event of determination or revocation of the licence for any reason
whatsoever, the Licensee shall forthwith hand over to the Licensor the
vacant and peaceful possession of the said premises and the Licensee shall
not be entitled to continue to make use of the said premises and shall
cease to make use of the said premises forthwith without raising any
dispute and shall remove all its goods, machineries and other properties
from the premises and no employee or servant or any agent or representative
of the Licensee shall enter the said premises and the Licensor shall be
free to restain the Licensee and its servants and employees, agents or
representative from entering the said premises and making any use thereof
and the Licensors shall also be entitled to remove from the said premises
any goods or machineries of the Licensee lying in or upon the said premises
if need be without resource to a court of law, and without incurring any
liability whatsoever for any claim or compensation. Upon such determination
or revocation the Licensee shall pay all outstanding charges for water,
electricity etc as is referred to in clause 4 hereof and the Licensor shall
be entitled to recover from the Licensee all such charges remaining unpaid
by the Licensee.
17. This Memorandum of Leave and Licence shall supersede all earlier
understandings, written or otherwise, between the Licensor and Licensee
with respect to the license of the said premises.
IN WITNESS WHEREOF the Licensor and Licensee have signed and sealed this
Memorandum the day and year first written.
Signed and Delivered by the Licensor
Mr. Sunil Wadhwani ) /s/ Sunil Wadhwani
Signed and Delivered by the Licensee
Scott Systems Private Limited by its
Managing Director
Mr. Murali Sanathanam ) /s/ Murali Sanathanam
EX-10.23
7
CREDIT AGREEMENT DATED DECEMBER 3, 1998
Exhibit 10.23
DRAFT DATED 12/1/98
CREDIT AGREEMENT
By and Among
MASTECH CORPORATION,
as Borrower
and
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders
and
PNC BANK, NATIONAL ASSOCIATION,
as Agent and as L/C Issuer
Dated as of December 3, 1998
TABLE OF CONTENTS
-------------------
SCHEDULES ........................................................................................ iv
EXHIBITS ........................................................................................ v
ARTICLE I CERTAIN DEFINITIONS; CONSTRUCTION....................................................... 1
1.01. Certain Definitions..................................................................... 1
1.02. Construction............................................................................ 18
1.03. Accounting Principles................................................................... 20
ARTICLE II REVOLVING CREDIT FACILITY............................................................... 20
2.01. Revolving Credit Commitments............................................................ 20
2.02. Nature of Lenders' Obligations with Respect to Loans.................................... 20
2.03. Commitment Fees......................................................................... 21
2.04. Reduction of Revolving Credit Commitment................................................ 21
2.05. Loan Requests........................................................................... 22
2.06. Making Loans............................................................................ 22
2.07. Notes................................................................................... 22
2.08. Interest Payments, Interest Rates and Certain Related Payments Pertaining to the Loans.. 23
2.09. Prepayments: Allocation of Repayments................................................... 26
2.10. Yield Protection........................................................................ 27
2.11. Special Provisions Relating to the Euro-Rate Option..................................... 28
2.12. Capital Adequacy........................................................................ 30
2.13. Utilization of Commitments in Optional Currencies....................................... 30
2.14. Interbank Market Presumption............................................................ 34
2.15. Loan Account............................................................................ 34
2.16. All Advances to Constitute One Loan..................................................... 34
2.17. Use of Proceeds......................................................................... 34
2.18. Letter of Credit Subfacility............................................................ 34
2.19. Taxes................................................................................... 42
2.20. Payments................................................................................ 43
2.21. Judgment Currency....................................................................... 44
ARTICLE III LOAN DISBURSEMENT ACCOUNT, GUARANTEES, ETC.............................................. 44
3.01. Loan Disbursement Account............................................................... 44
3.02. Designation of Subsidiary Guarantors.................................................... 44
3.03. Foreign Subsidiaries.................................................................... 45
3.04. Further Cooperation..................................................................... 45
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................................... 45
4.01. Organization and Qualification.......................................................... 45
4.02. Capitalization and Ownership............................................................ 45
4.03. Subsidiaries............................................................................ 46
4.04. Power and Authority..................................................................... 46
4.05. Validity and Binding Effect............................................................. 46
4.06. No Conflict............................................................................. 46
4.07. Litigation.............................................................................. 47
4.08. Financial Statements.................................................................... 47
i
4.09. Margin Stock; Section 20 Subsidiaries................................................... 47
4.10. Full Disclosure......................................................................... 47
4.11. Tax Returns and Payments................................................................ 48
4.12. Consents and Approvals.................................................................. 48
4.13. No Event of Default; Compliance with Instruments........................................ 48
4.14. Compliance with Laws.................................................................... 48
4.15. Investment Company; Public Utility Holding Company...................................... 48
4.16. Plans and Benefit Arrangements.......................................................... 49
4.17. Title to Properties..................................................................... 50
4.18. Insurance............................................................................... 50
4.19. Employment Matters...................................................................... 50
4.20. Environmental Matters................................................................... 50
4.21. Senior Debt Status...................................................................... 52
4.22. Solvency................................................................................ 52
4.23. Material Contracts; Burdensome Restrictions............................................. 52
4.24. Patents, Trademarks, Copyrights, Licenses, etc.......................................... 52
4.25. Year 2000 Problem....................................................................... 52
4.26. Brokers................................................................................. 53
4.27. No Material Adverse Change.............................................................. 53
ARTICLE V CONDITIONS OF LENDING OR ISSUANCE OF LETTER OF CREDIT................................... 53
5.01. Conditions to Initial Borrowings........................................................ 53
5.02. Each Additional Loan or Issuance of a Letter of Credit.................................. 55
5.03. Location of Closing..................................................................... 56
ARTICLE VI AFFIRMATIVE COVENANTS................................................................... 56
6.01. Preservation of Existence, Etc.......................................................... 56
6.02. Accounting System; Reporting Requirements............................................... 57
6.03. Notices Regarding Plans and Benefit Arrangements........................................ 58
6.04. Payment of Liabilities, Including Taxes, etc............................................ 60
6.05. Maintenance of Insurance................................................................ 60
6.06. Maintenance of Properties and Leases.................................................... 60
6.07. Maintenance of Permits and Franchises................................................... 60
6.08. Visitation Rights....................................................................... 60
6.09. Keeping of Records and Books of Account................................................. 61
6.10. Plans and Benefit Arrangements.......................................................... 61
6.11. Compliance with Laws.................................................................... 61
6.12. Use of Proceeds......................................................................... 61
6.13. Environmental Laws...................................................................... 61
6.14. Senior Debt Status...................................................................... 62
ARTICLE VII NEGATIVE COVENANTS...................................................................... 62
7.01. Indebtedness............................................................................ 62
7.02. Liens................................................................................... 63
7.03. Loans, Acquisitions and Investments..................................................... 63
7.04. Liquidations, Mergers and Consolidations................................................ 64
7.05. Dispositions of Assets or Subsidiaries.................................................. 65
7.06. Affiliate Transactions.................................................................. 65
7.07. Subsidiaries, Partnerships and Joint Ventures........................................... 66
7.08. Continuation of or Change in Business................................................... 66
ii
7.09. Plans and Benefit Arrangements.......................................................... 66
7.10. Fiscal Year............................................................................. 67
7.11. Changes in Organizational Documents..................................................... 67
7.12. Financial Covenants..................................................................... 67
ARTICLE VIII DEFAULT................................................................................. 67
8.01. Events of Default....................................................................... 67
8.02. Consequences of Event of Default........................................................ 70
ARTICLE IX THE AGENT............................................................................... 72
9.01. Appointment and Grant of Authority...................................................... 72
9.02. Delegation of Duties.................................................................... 72
9.03. Reliance by Agent on Lenders for Funding................................................ 73
9.04. Non-Reliance on Agent................................................................... 73
9.05. Responsibility of Agents and Other Matters.............................................. 73
9.06. Actions in Discretion of Agent; Instructions from the Lenders........................... 74
9.07. Indemnification......................................................................... 74
9.08. Agent's Rights as Lender................................................................ 75
9.09. Notice of Default....................................................................... 75
9.10. Payment to Lenders...................................................................... 75
9.11. Holders of Notes........................................................................ 76
9.12. Equalization of Lenders................................................................. 76
9.13. Successor Agent......................................................................... 76
9.14. Calculations............................................................................ 77
9.15. Beneficiaries........................................................................... 77
ARTICLE X GENERAL PROVISIONS...................................................................... 77
10.01. Amendments and Waivers.................................................................. 77
10.02. Taxes................................................................................... 78
10.03. Costs and Expenses, etc................................................................. 78
10.04. Notices................................................................................. 78
10.05. Participation and Assignment............................................................ 80
10.06. Successors and Assigns.................................................................. 82
10.07. No Implied Waivers; Cumulative Remedies; Writing Required............................... 82
10.08. Severability............................................................................ 83
10.09. Indemnity............................................................................... 83
10.10. Confidentiality......................................................................... 83
10.11. Survival................................................................................ 84
10.12. GOVERNING LAW........................................................................... 84
10.13. FORUM................................................................................... 84
10.14. Non-Business Days....................................................................... 85
10.15. Integration............................................................................. 85
10.16. Counterparts............................................................................ 85
10.17. Funding by Branch, Subsidiary or Affiliate.............................................. 85
10.18. WAIVER OF JURY TRIAL.................................................................... 86
iii
SCHEDULES
---------
Schedule 1.01(a) Lenders; Commitments
Schedule 4.01 Jurisdictions of Incorporation and Qualification of
Borrower and Subsidiaries
Schedule 4.02 Capital Stock Options
Schedule 4.03 Interests in Subsidiaries and Other Entities
Schedule 4.07 Litigation
Schedule 4.11 Agreements Concerning Tax Returns
Schedule 4.12 Consents and Approvals
Schedule 4.16 Plans and Benefit Arrangements
Schedule 4.20 Environmental Matters
Schedule 7.01 Permitted Indebtedness
Schedule 7.03 Other Investments
Schedule 7.06 Affiliate Transactions
iv
EXHIBITS
--------
Exhibit "A" Form of Note
Exhibit "B" Form of Loan Request
Exhibit "C" Form of Subsidiary Guaranty
Exhibit "D" Form of Pledge Agreement
Exhibit "E" Form of Compliance Certificate
Exhibit "F" Form of Opinion of Counsel
Exhibit "G" Form of Assignment and Assumption Agreement
v
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 3, 1998, is made by and
among MASTECH CORPORATION, a Pennsylvania corporation (as more fully defined
below, the "Borrower"), the Lenders (as hereinafter defined), and PNC BANK,
NATIONAL ASSOCIATION, in its capacity as L/C Issuer (as hereinafter defined) and
as agent for the L/C Issuer and the Lenders under this Agreement (in such
capacity, as more fully defined below, the "Agent").
WITNESSETH:
WHEREAS, the Borrower has requested the Lenders to make available to
the Borrower Loans in an aggregate principal amount not exceeding Seventy-Five
Million Dollars ($75,000,000) at any one time outstanding; and the Borrower has
requested the Lenders to provide for the issuance for the account of the
Borrower Letters of Credit with an aggregate Stated Amount not exceeding Ten
Million Dollars ($10,000,000) at any one time outstanding; provided that at no
time will Total Utilization exceed Seventy-Five Million Dollars ($75,000,000);
and
WHEREAS, the Lenders are willing to make the Loans available to the
Borrower upon the terms and conditions hereinafter set forth; and the L/C Issuer
is willing to issue Letters of Credit for the account of the Borrower and its
Subsidiaries upon the terms and conditions hereinafter set forth; and the
Lenders are willing to purchase risk participations with respect to each Letter
of Credit issued by the L/C Issuer hereunder upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises (each of which is
incorporated herein by reference) and the mutual covenants and agreements
hereinafter set forth, and other valuable consideration, and intending to be
legally bound hereby, the parties hereto hereby covenant and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS; CONSTRUCTION
---------------------------------
1.01. Certain Definitions. In addition to words and terms defined
-------------------
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context hereof clearly requires
otherwise:
Affiliate as to any Person shall mean any other Person (i) which
---------
directly or indirectly Controls, is Controlled by, or is under common Control
with such Person, (ii) which beneficially owns or holds 5 % or more of any class
of the voting or other equity interests of such Person, or (iii) 5 % or more of
any class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person.
Agent shall mean PNC Bank, National Association, a national banking
-----
association organized under the laws of the United States of America, in its
capacity as agent for the L/C Issuer and the Lenders pursuant to this Agreement,
and its successors and assigns in such capacity.
Agent's Fee shall mean the annual fee payable to the Agent for acting
-----------
as Agent hereunder, all as more fully set forth in the Agent's Letter.
Agent's Letter shall mean the letter from the Agent to the Borrower
--------------
dated December 3, 1998, as the same may be amended from time to time or
otherwise modified or supplemented.
Agreement shall mean this Credit Agreement, as the same may be
---------
supplemented or amended from time to time, including all schedules and exhibits
hereto.
Applicable Commitment Fee shall have the meaning ascribed to it in
-------------------------
Section 2.03 of this Agreement.
Applicable Euro-Rate Margin shall have the meaning ascribed to it in
---------------------------
Section 2.08(b)(ii) of this Agreement.
Applicable Standby Letter of Credit Fee shall have the meaning
---------------------------------------
ascribed to it in Section 2.18(b) of this Agreement.
Application for Commercial Letter of Credit shall mean the then
-------------------------------------------
current application for a commercial letter of credit used by the L/C Issuer.
Application for Letter of Credit shall mean the then current
--------------------------------
application for Standby Letter of Credit or Commercial Letter of Credit.
Application for Standby Letter of Credit shall mean the then current
----------------------------------------
application for a standby letter of credit used by the L/C Issuer.
Assignment and Assumption Agreement shall mean an Assignment and
-----------------------------------
Assumption Agreement by and among a Purchasing Lender, a Transferor Lender and
the Agent, as the Agent and on behalf of the remaining Lenders, substantially in
the form of Exhibit "G" hereto.
-----------
Arrangement Fee shall mean the arrangement fee set forth in the
---------------
Agent's Letter.
Assignment Fee shall mean the fee described in Section 10.05(b).
--------------
Authorized Officer shall mean those persons designated initially in
------------------
the several incumbency certificates delivered pursuant to Section 5.01 hereof by
the Borrower or a Subsidiary Guarantor, as the case may be. The Borrower, or a
Subsidiary Guarantor, as the case may be, may amend such list of persons from
time to time by giving written notice of such amendment to the Agent.
Availability shall mean, as of any time of determination, the positive
------------
difference between the Revolving Credit Commitment and Total Utilization.
Base Rate shall mean the greater of (i) the Prime Rate, or (ii) the
---------
Federal Funds Effective Rate plus fifty basis points (1/2 of 1 %) per annum.
Base Rate Option shall mean the interest rate option described in
----------------
Section 2.08(b)(i) hereof.
Base Rate Portion shall mean the portion of the Loans which bears,
-----------------
or is to bear, interest under the Base Rate Option.
Benefit Arrangement shall mean at any time an "employee benefit plan",
-------------------
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to, by any member of the ERISA Group.
Borrower shall mean Mastech Corporation, a corporation organized and
--------
existing under the laws of the Commonwealth of Pennsylvania, and its successors
and permitted assigns.
Borrowing Date shall mean, with respect to any Loan, the date for the
--------------
making thereof, or the renewal or conversion thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.
Business Day shall mean, (a) when used in any context other than in
------------
reference to or in connection with Euro-Rate, any day, other than a Saturday or
Sunday, on which the Lenders are open for business in Pittsburgh, Pennsylvania
and New York, New York, (b) when used in the context of a Euro-Rate, any day,
other than a Saturday or Sunday, on which (i) commercial banks are open for
business in Pittsburgh, Pennsylvania and New York, New York and (ii) dealings in
foreign currencies and exchange and eurodollar funding between banks may be
carried on at the location at which each of the Lenders transacts its eurodollar
funding, and (c) when used with respect to advances or payments of Loans or any
other matters relating to Loans denominated in an Optional Currency, such day
also shall be a day on which dealings in deposits in the relevant Optional
Currency are carried on in the applicable interbank market or on which all
applicable banks into which Loan proceeds may be deposited are open for business
and foreign exchange markets are open for business in the principal financial
center of the country of such currency.
Capital Adequacy Event shall have the meaning ascribed to it in
----------------------
Section 2.12 hereof.
Capital Compensation Amount shall have the meaning ascribed to it in
---------------------------
Section 2.12 hereof.
Cash Collateral Account shall have the meaning ascribed to it in
-----------------------
Section 8.02(e).
Cash Equivalents shall mean (i) securities issued or directly and
----------------
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (ii) time deposits, certificates of deposit and
eurodollar time deposits, bankers' acceptances and overnight bank deposits, in
each case with any Lender or with any domestic commercial bank
having capital and surplus in excess of $500,000,000 (iii) notes and bonds
issued by domestic corporations, (iv) tax-exempt money market securities, (v)
notes and bonds issued by state and municipal governments, and (vi) money market
mutual funds;
provided however, (x) at least one-third of the value of the Cash Equivalents
- -------- -------
shall have a maximum weighted average to maturity of not more than six (6)
months and the remaining value of the Cash Equivalents shall have a maximum
weighted average to maturity of not more than eighteen (18) months and (y) the
Cash Equivalents which are of a type customarily rated by S&P and Moody's, must
have a rating of at least A-1 by S&P or P-1/VMG-1 by Moody's, if short term, or
double "A" or higher by S&P and Moody's, if long term.
Closing shall mean the execution and delivery of this Agreement and
-------
the other Loan Documents by the parties hereto and thereto on the Closing Date.
Closing Date shall mean December 3, 1998.
------------
Closing Fee shall mean a fee in the amount of $56,250 payable on the
-----------
Closing Date in proportion to each Lender's Ratable Share.
Commercial Letter of Credit shall mean a letter of credit directly
---------------------------
related to the sale of goods or similar transaction in which it is intended by
the account party and beneficiary that payment will be made, in the ordinary
course, by a draw on the letter of credit in accordance with its terms.
Commercial Letter of Credit Fee shall have the meaning ascribed to it
-------------------------------
in Section 2.18(b) hereof.
Commitment Fee shall mean the fee described in Section 2.03.
--------------
Compliance Certificate shall mean a certificate executed by the chief
----------------------
financial officer, the treasurer or the controller of the Borrower,
substantially in the form of Exhibit "E" hereto.
-----------
Computation Date shall have the meaning ascribed to it in Section
----------------
2.13(a).
Consolidated Cash shall mean the Borrower's and its Subsidiaries
------------------
cash consolidated in accordance with GAAP.
Consolidated Cash Equivalents shall mean the Borrower's and its
-----------------------------
Subsidiaries Cash Equivalents consolidated in accordance with GAAP.
Consolidated EBIT shall mean, for any period, the consolidated net
-----------------
income (or net loss) of the Borrower and its Subsidiaries for such period as
determined in accordance with GAAP, plus (a) the sum of (i) Consolidated
----
Interest Expense, (ii) total income tax expense, (iii) extraordinary or unusual
losses (including after tax losses on sales of assets outside of the ordinary
course of business and not otherwise included in GAAP extraordinary or unusual
losses), (iv) other non-cash charges other than depreciation and amortization,
and (v) the net loss of any Person that is accounted for by the equity method of
accounting, except to the extent of the amount of dividends or distributions
paid to the Borrower, less (b) the sum of (i)
----
extraordinary or unusual gains (including after tax gains on sales of assets
outside of the ordinary course of business and not otherwise included in GAAP
extraordinary or nonrecurring gains), (ii) other noncash credits, and (iii) the
net income of any Person that is accounted for by the equity method of
accounting, except to the extent of the amount of dividends or distributions
paid to the Borrower; provided, that for purposes of calculating Consolidated
--------
EBIT of the Borrower and its Subsidiaries for any period, (x) the Consolidated
EBIT for any Person disposed of by the Borrower or its Subsidiaries during such
period shall be excluded for such period and (y) the Consolidated EBIT of any
Person acquired by the Borrower or its Subsidiaries during such period shall be
included on a pro forma basis for such period (and assuming the consummation of
---------
each such acquisition and the incurrence or assumption of any Indebtedness in
connection therewith occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the period preceding the acquisition of such
Person and related consolidated statements of income and stockholders' equity
and of cash flows for such period (i) have been previously provided to the Agent
and the Lenders and (ii) either (A) have been reported on without qualification
arising out of the scope of the audit by independent certified accountants of
nationally recognized standing or (B) have been found acceptable by the Agent,
and the Required Lenders.
Consolidated EBITDA shall mean, for any period, the consolidated net
-------------------
income (or net loss) of the Borrower and its Subsidiaries for such period as
determined in accordance with GAAP, plus (a) the sum of (i) depreciation
----
expense, (ii) amortization expense, (iii) Consolidated Interest Expense, (iv)
total income tax expense, (v) extraordinary or unusual losses (including after
tax losses on sales of assets outside of the ordinary course of business and not
otherwise included in GAAP extraordinary or unusual losses), (vi) other non-cash
charges, and (vii) the net loss of any Person that is accounted for by the
equity method of accounting, except to the extent of the amount of dividends or
distributions paid to the Borrower, less (b) the sum of (i) extraordinary or
----
unusual gains (including after tax gains on sales of assets outside of the
ordinary course of business and not otherwise included in GAAP extraordinary or
nonrecurring gains), (ii) other noncash credits, and (iii) the net income of any
Person that is accounted for by the equity method of accounting, except to the
extent of the amount of dividends or distributions paid to the Borrower;
provided, that for purposes of calculating Consolidated EBITDA of the Borrower
- --------
and its Subsidiaries for any period, (x) the Consolidated EBITDA of any Person
disposed of by the Borrower or its Subsidiaries during such period shall be
excluded for such period and (y) the Consolidated EBITDA of any Person acquired
by the Borrower or its Subsidiaries during such period shall be included on a
pro forma basis for such period (and assuming the consummation of each such
- ---------
acquisition and the incurrence or assumption of any Indebtedness in connection
therewith occurred on the first day of such period) if the consolidated balance
sheet of such acquired Person and its consolidated Subsidiaries as at the end of
the period preceding the acquisition of such Person and related consolidated
statements of income and stockholders' equity and of cash flows for such period
(i) have been previously provided to the Agent and the Lenders and (ii) either
(A) have been reported on without qualification arising out of the scope of the
audit by independent certified accountants of nationally recognized standing or
(B) have been found acceptable by the Agent, and the Required Lenders.
Consolidated Interest Expense shall mean any Person's interest
-----------------------------
expense, as determined in accordance with GAAP, as appearing on the Borrower's
financial statements.
Consolidated Net Income shall mean the net income of the Borrower and
-----------------------
its Subsidiaries determined on a consolidated basis, as determined in accordance
with GAAP, consistently applied.
Consolidated Net Worth shall mean stockholders' equity of any Person
----------------------
determined on a consolidated basis, as determined in accordance with GAAP
consistently applied.
Consolidated Receivables shall mean the Borrower's and its
------------------------
Subsidiaries Receivables consolidated in accordance with GAAP.
Consolidated Senior Indebtedness shall mean Indebtedness of the
--------------------------------
Borrower and its Subsidiaries consolidated in accordance with GAAP, which
Indebtedness by its terms is not explicitly subordinated in a manner in form and
substance satisfactory to the Agent and the Required Lenders to the payment in
full of the Lender Obligations.
Consolidated Senior Indebtedness to Consolidated EBITDA Ratio shall
-------------------------------------------------------------
mean, as of any date of determination, the ratio of the Borrower's Consolidated
Senior Indebtedness as of the end of the Borrower's most recently completed
Fiscal Quarter to the Borrower's Consolidated EBITDA for the Borrower's four
most recently completed Fiscal Quarters treated as a single accounting period.
Control shall mean the possession, directly or indirectly, of the
-------
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be, and the terms "Controlled" and
------------
"Controlling" shall have correlative meanings.
- -------------
December 1998 Delivery Date shall mean the date on which the annual
---------------------------
financial statements described in Section 6.02(b) for the Fiscal Year ending
December 31, 1998, are delivered to the Agent.
Default shall mean any event or condition which with notice or passage
-------
of time or both, would constitute an Event of Default.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money
----------------------------- -
of the United States of America.
Dollar Equivalent shall mean, with respect to any amount of any
-----------------
currency, the Equivalent Amount of such currency expressed in Dollars.
Environmental Complaint shall mean any written complaint setting forth
-----------------------
a cause of action for personal or property damage or equitable relief, or any
order, notice of violation or citation issued pursuant to any Environmental Laws
by an Official Body, subpoena or other written notice of any type relating to,
arising out of, or issued pursuant to, any Environmental Laws or any
Environmental Conditions.
Environmental Conditions shall mean any conditions of the environment,
------------------------
including, without limitation, the work place, the ocean, natural resources
(including flora or fauna), soil, surface water, ground water, any actual or
potential drinking water supply sources, substrata or the ambient air, relating
to or arising out of, or caused by the use, handling, storage, treatment,
recycling, generation, transportation, release, spilling, leaking, pumping,
emptying, discharging, injecting, escaping, leaching, disposal, dumping,
threatened release or other management or mismanagement of Regulated Substances
resulting from the use of, or operations on, any of the Property.
Environmental Laws shall mean all federal, state; local and foreign
------------------
Laws and regulations, including permits, licenses, authorizations, bonds,
orders, judgments and consent decrees issued or entered into pursuant thereto,
relating to pollution or protection of human health or the environment or
employee safety in the work place.
Equivalent Amount shall mean, at any time, as determined by the Agent
-----------------
(which determination shall be conclusive absent manifest error), with respect to
an amount of any currency (the "Reference Currency") which is to be computed as
an equivalent amount of another currency (the "Equivalent Currency"): (i) if the
Reference Currency and the Equivalent Currency are the same, the amount is such
Reference Currency; or (ii) if the Reference Currency and the Equivalent
Currency are not the same, the amount is such Equivalent Currency converted from
such Reference Currency at the Agent's spot selling rate (based on the market
rates then prevailing and available to the Agent) for the sale of such
Equivalent Currency for such Reference Currency at a time determined by the
Agent on the second Business Day immediately preceding the event for which such
calculation is made.
Equivalent Currency shall have the meaning assigned to such term in
-------------------
the definition of Equivalent Amount.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, in each
case as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all members of a
-----------
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code.
Euro shall have the meaning ascribed to it in Section 2.13.
----
Euro-Rate shall mean: (A) with respect to any Loans denominated in
---------
Dollars comprising any Portion to which the Euro-Rate Option applies for any
Euro-Rate Interest Period, the interest rate per annum determined by the Agent
by dividing (the resulting quotient rounded upward to the nearest 1/100th of 1%
per annum) (i) the rate of interest determined by the Agent in accordance with
its usual procedures (which determination shall be conclusive and binding upon
the Borrower, absent manifest error on the part of the Agent) to be equal to the
offered rates for deposits in Dollars for the applicable Euro-Rate Interest
Period quoted by the British Bankers Association ("BBA") which appear on Page
3750 of the Dow Jones Market
Service display page (or, if such quotation is not available, an appropriate
successor as determined by the Agent) reporting system as of approximately 11:00
a.m., Greenwich Mean Time, two (2) Business Days prior to the first day of such
Euro-Rate Interest Period for an amount comparable to such Loan and having a
borrowing date and a maturity comparable to such Interest Period by (ii) a
number equal to 1.00 minus the Euro-Rate Reserve Percentage. Such Euro-Rate may
also be expressed by the following formula:
Euro-Rate = Offered rate on Dow Jones Market Service
----------------------------------------
1.00 - Euro-Rate Reserve Percentage
If more than one offered rate appears on Page 3750 of the Dow Jones Market
Service rate reporting system or similar system, the rate will be the arithmetic
mean of such offered rates; and
(B) with respect to any Loans denominated in Optional Currency
comprising any Portion to which the Euro-Rate Option applies for any Euro-Rate
Interest Period, the interest rate per annum determined by Agent by dividing
(the resulting quotient rounded upward to the nearest 1/100th of 1% percent per
annum) (i) the rate of interest per annum determined by Agent in accordance with
its usual procedures (which determination shall be conclusive and binding upon
the Borrower absent manifest error) to be the rate of interest per annum for
deposits in the relevant Optional Currency quoted by BBA which appears on the
relevant Dow Jones Market Service display page (or, if such quotation is not
available, an appropriate successor as determined by the Agent) at approximately
9:00 a.m., Pittsburgh time, two (2) Business Days prior to the first day of such
Interest Period for delivery on the first day of such Interest Period for a
period, and in an amount, comparable to such Interest Period and principal
amount of such disbursement ("LIBO Rate") by (ii) a number equal to 1.00 minus
the Euro-Rate Reserve Percentage. Such Euro-Rate may also be expressed by the
following formula:
Euro-Rate = LIBO Rate
----------------------------------
1 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Agent shall give prompt notice to the Borrower of the
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error. The Euro-Rate for any Loans shall be
based upon the Euro-Rate for the currency in which such Loans are requested.
Euro-Rate Interest Period shall mean any individual period equal to
-------------------------
one (1), two (2), three (3), six (6) selected by the Borrower or twelve (12)
months if requested by the Borrower and available to the Agent and the Lenders
in each case commencing on the Borrowing Date, a conversion date or a renewal
date of a Euro-Rate Portion to which such period shall apply; provided, however,
that prior to the date which is the Business Day following the Syndication Date,
only such periods as the Agent and the Borrower mutually agree upon, not to
exceed a period of one month, shall be available.
Euro-Rate Option shall mean the interest rate option described in
----------------
Section 2.08b(ii) hereof.
Euro-Rate Portion shall mean each portion of the Loans which bears, or
-----------------
is to bear, interest under the Euro-Rate Option; and the term Euro-Rate Portions
shall mean collectively all such portions of the Loans which bear, or are to
bear, interest under the Euro-Rate Option.
Euro-Rate Reserve Percentage shall mean for any day the maximum
----------------------------
effective percentage as determined by the Agent in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) as
prescribed by the Federal Reserve Board (or any successor) for determining the
reserve requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in the Federal
Reserve System.
Event of Default shall have the meaning ascribed to it in Section 8.01
----------------
hereof.
Expiration Date shall mean November 30, 2003.
---------------
Federal Funds Effective Rate shall mean for any day the rate per annum
----------------------------
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1 %) announced by the Federal Reserve Bank of New York (or any
successor) on such day (or if such day is not a Business Day, the previous
Business Day) as being the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers on the previous trading day, as computed and announced by
such Federal Reserve Bank (or any successor) in substantially the same manner as
such Federal Reserve Bank computes and announces the weighted average it refers
to as the "Federal Funds Effective Rate" as of the date of this Agreement.
Federal Reserve Board shall mean the Board of Governors of the United
---------------------
States Federal Reserve System as constituted from time to time.
Fee shall mean any of the Agent's Fee, the Arrangement Fee, the
---
Closing Fee, the Commitment Fee, the Letter of Credit Fee, the L/C Fronting Fee,
any administration fee payable to the Agent, and any other fee payable under any
of the other Loan Documents.
Fiscal Quarter shall mean each three month fiscal period of the
--------------
Borrower beginning respectively on each January 1, April 1, July 1 and October 1
during the term hereof and ending on the immediately succeeding March 31, June
30, September 30 and December 31.
Fiscal Year shall mean each 12-month fiscal period of the Borrower
-----------
beginning January 1 and ending on the immediately succeeding December 31.
Founding Shareholders shall mean Ashok K. Trivedi and Sunil Wadhwani.
---------------------
GAAP shall mean, subject to the provisions of Section 1.03 hereof,
----
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be recognized by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
Guaranty or Guarantee shall mean any obligation, direct or indirect,
---------------------
by which a Person undertakes to guaranty, assume or remain liable for the
payment of another Person's obligations, including but not limited to (i)
endorsements of negotiable instruments, (ii) discounts with recourse, (iii)
agreements to pay upon a second Person's failure to pay, (iv) agreements to
maintain the capital, working capital solvency or general financial condition of
a second Person and (v) agreements for the purchase or other acquisition of
products, materials, supplies or services, if in any case payment therefor is to
be made regardless of the nondelivery of such products, materials or supplies or
the non-furnishing of such services.
Indebtedness shall mean as to any Person at any time, any and all
------------
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent or joint
and several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, hedging
contracts, Interest Hedge Agreement or other interest rate management device,
raw materials management device or commodities management device (except raw
materials or commodity management devices entered into in the ordinary course of
business), (iv) any other transaction (including forward sale or purchase
agreements, capitalized leases and conditional sales agreements) having the
commercial effect of a borrowing of money entered into by such Person to finance
its operations or capital requirements (but not including trade payables and
accrued expenses incurred in the ordinary course of business which are not
represented by a promissory note or other evidence of indebtedness), or (v) any
Guaranty of any of the foregoing.
Ineligible Security shall mean any security which may not be
-------------------
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
Interest Hedge Agreement shall mean any interest rate swap agreement,
------------------------
interest rate cap agreement, interest rate collar agreement, interest rate
insurance or any other agreement or arrangement designed to provide protection
against fluctuations in interest rates.
Interest Rate Option shall mean the Euro-Rate Option or the Base Rate
--------------------
Option.
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as
---------------------
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
L/C Fronting Fee shall have the meaning ascribed to it in Section
----------------
2.18(b) of this Agreement.
L/C Issuer shall mean PNC Bank, National Association, as the issuer of
----------
Letters of Credit pursuant to Section 2.18, and any successor to PNC Bank,
National Association as the issuer of Letters of Credit hereunder.
Labor Contracts shall have the meaning ascribed to it in Section 4.19
---------------
hereof.
Law shall mean any law (including common law), constitution, statute,
---
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Lender Obligations shall mean collectively, (i) all unpaid principal
------------------
and accrued and unpaid interest under the Loans, (ii) all accrued and unpaid
Fees hereunder or under any of the other Loan Documents, (iii) the face amount
of all Letters of Credit then outstanding, together with all Unreimbursed L/C
Draws and all accrued and unpaid interest on such Unreimbursed L/C Draws, (iv)
the actual (as opposed to nominal) credit exposure determined in accordance with
standard industry practices to any Lender or Affiliate of a Lender under an
Interest Hedge Agreement between such Person and the Borrower, (v) any amounts
due any Lender or an Affiliate of any Lender on any foreign exchange contract,
(vi) any other amounts payable hereunder or under any of the other Loan
Documents, including all reimbursements, indemnities, fees, costs, expenses,
prepayment premiums and other obligations of the Borrower to a Lender (in any
capacity hereunder) or any indemnified party hereunder, (vii) all out-of-pocket
costs and expenses incurred by the Agent in connection with this Agreement or
any other Loan Documents, including but not limited to the reasonable fees and
expenses of the Agent's counsel, (viii) all out-of-pocket costs and expenses
incurred by a Lender after an Event of Default in connection with any
administration or enforcement of the Loan Documents, including but not limited
to the reasonable fees and expenses of such Lender's counsel, and (ix) all other
liabilities, obligations, covenants, duties and Indebtedness of the Borrower to
the Agent, the L/C Issuer and the Lenders of any and every kind and nature,
arising under this Agreement or the other Loan Documents, whether heretofore,
now or hereafter owing, arising, due or payable from the Borrower to the Agent,
the L/C Issuer or the Lenders.
Lenders shall mean the financial institutions named on Schedule
------- --------
1.01(a) hereto and their respective successors and assigns as permitted
- -------
hereunder, each of which is referred to herein as a Lender.
Letter of Credit shall mean any Standby Letter of Credit or Commercial
----------------
Letter of Credit issued by the L/C Issuer for the account of the Borrower upon
the application of the Borrower pursuant to this Agreement and all extensions,
renewals, amendments, substitutions and replacements thereto and thereof.
Letter of Credit Fee shall have the meaning ascribed to it in Section
--------------------
2.18(b) hereof.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including but not
limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing).
Loans shall mean collectively all advances and Loan shall mean
----- ----
separately any advance made by the Lenders pursuant to Section 2.01 hereof.
Loan Account shall mean the loan account maintained by a Lender as
------------
more fully described in Section 2.15 hereof.
Loan Disbursement Account shall have the meaning ascribed to it in
-------------------------
Section 3.01 hereof.
Loan Documents shall mean this Agreement, the Notes, any Application
--------------
for Letter of Credit, the Subsidiary Guarantees, the Pledge Agreements, any
Interest Rate Hedge Agreement executed by a Lender or an Affiliate of a Lender
and the Borrower, any foreign exchange contract executed by a Lender or an
Affiliate of a Lender and the Borrower, and any other agreements, instruments,
certificates or documents contemplated thereby, as any of the same may be
supplemented or amended from time to time in accordance herewith or therewith;
and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean the Borrower, each Subsidiary Guarantor and
------------
each pledgor party to a Pledge Agreement and Loan Party shall mean any of the
-----------
Loan Parties.
Loan Request shall mean a request for Loans made in accordance with
------------
Section 2.05 hereof which request shall be substantially in the form of Exhibit
-------
"B" hereto.
- ---
Margin Regulations shall mean Regulations T, U and X as promulgated by
------------------
the Board of Governors of the Federal Reserve System, as amended from time to
time.
Material Adverse Change shall mean any set of circumstances or events
-----------------------
which (a) has or could reasonably be expected to have any material adverse
effect upon the validity or enforceability of this Agreement or any of the other
Loan Documents, (b) is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition or results of
operations of the Borrower and its Subsidiaries, taken as a whole, (c) impairs
materially or could reasonably be expected to impair materially the ability of
the Borrower and its Subsidiaries taken as a whole to duly and punctually pay
their Indebtedness, or (d) impairs materially or could reasonably be expected to
impair materially the ability of the Agent or any of the Lenders to enforce
their legal remedies pursuant to this Agreement or any other Loan Document.
Moody's shall mean Moody's Investors Service, Inc., a corporation
-------
organized and existing under the laws of the State of Delaware, its successors
and assigns, and, if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Agent, with the approval of the Borrower, by notice to the
Lenders.
Multiemployer Plan shall mean any employee benefit plan which is a
------------------
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make
contributions or, within the preceding five Plan years, has made or had an
obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
----------------------
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Notes shall mean collectively all of the promissory notes of the
-----
Borrower substantially in the form of Exhibit "A" hereto and Note shall mean
----------- ----
separately each promissory note of the Borrower substantially in the form of
Exhibit "A" hereto in each case evidencing Loans together with all renewals,
- -----------
replacements, refinancings or refundings thereof or thereto in whole or in part.
Official Body shall mean any national, federal, state, local or other
-------------
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Optional Currency shall mean any of the following currencies: (a) the
-----------------
Australian dollar, (b) the British Pound Sterling, (c) the Canadian dollar, (d)
the French Franc, (e) the Deutsche Mark, (f) the Italian Lira and (g) the
Spanish Pesetas, and any other freely convertible foreign currency, as
determined pursuant to the currency codes in effect from time to time under ISO
International Standard 4217 or any successor thereto, and approved by Agent and
the Required Lenders pursuant to Section 2.13(d).
Original Currency shall have the meaning assigned to such term in
-----------------
Section 2.21.
Other Currency shall have the meaning assigned to such term in Section
--------------
2.21.
Other Taxes shall have the meaning assigned to it in Section 2.19.
-----------
Overnight Rate shall mean for any day with respect to any Loans in an
--------------
Optional Currency, the rate of interest per annum as determined by the Agent at
which overnight deposits in such currency, in an amount approximately equal to
the amount with respect to which such rate is being determined, would be offered
for such day in the applicable offshore interbank market.
Participant shall mean any bank or financial institution which
-----------
acquires from any Lender an undivided interest in the Lender' s Ratable Share of
the Revolving Credit Commitments, Loans, Letters of Credit and Unreimbursed L/C
Draws, pursuant to Section 10.05.
Participation shall mean the sale, made in accordance with the
-------------
provisions of Section 10.05, by any Lender to any Participant of an undivided
interest in such Lender's Ratable Share of the Revolving Credit Commitments,
Loans, Letters of Credit and Unreimbursed L/C Draws.
PBGC shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Liens shall mean:
---------------
(i) Liens for taxes, assessments, governmental levies or similar
charges incurred in the ordinary course of business and which are not yet due
and payable, or if due and payable, (aa) are being contested in good faith and
by appropriate and lawful proceedings diligently conducted, but only so long as
such proceedings could not subject the Agent, the Lenders or the L/C Issuer to
any civil or criminal penalties or liabilities and (bb) for which such reserves
or other appropriate provisions, if any, as shall be required by GAAP shall have
been made and (cc) which shall be paid in accordance with the terms of any final
judgments or orders relating thereto within thirty (30) days after the entry of
such judgments or orders;
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age
pensions, other social security programs or similar program or to secure
liability to insurance carriers under insurance or self insurance agreements or
arrangement;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or
other like Liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable and Liens of landlords securing
obligations to pay lease payments that are not yet due and payable or in
default, or if such Liens are due and payable, (aa) are being contested in good
faith and by appropriate and lawful proceedings diligently conducted and (bb)
for which such reserves or other appropriate provisions, if any, as required by
GAAP shall have been made and (cc) which shall be paid in accordance with the
terms of any final judgments or orders relating thereto within thirty (30) days
after the entry of such judgments or orders;
(iv) Pledges or deposits made in the ordinary course of business to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of the aggregate amounts due
thereunder, or to secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course of business;
(v) (aa) Encumbrances consisting of zoning restrictions, easements,
rights-of-way, or other restrictions on the use of real property, (bb) defects
in title to real property, and (cc) Liens, encumbrances and title defects
affecting real property not known by the Borrower or a Subsidiary, as
applicable, and not discoverable by a search of the public records, none of
which materially impairs the use of such property;
(vi) (aa) Liens on assets of a Person which is merged into or acquired
by the Borrower or a Subsidiary of the Borrower on or after the date of this
Agreement, and (bb) Liens on assets acquired after the date of this Agreement,
provided that (A) such Liens existed at the time of such merger or acquisition
- --------
and were not created in anticipation thereof, (B) no such Lien is spread to
cover any property or assets of the Borrower or any Subsidiary of the Borrower;
and (C) the principal amount of Indebtedness secured thereby is not increased
from the amount outstanding immediately prior to such merger or acquisition;
(vii) Liens created by or resulting from any litigation or legal
proceedings which are currently being contested in good faith by appropriate and
lawful proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made and Liens arising out of judgments or orders for the payment of money which
do not constitute an Event of Default hereunder;
(viii) Liens placed upon fixed assets or equipment hereafter acquired
to secure all or a portion of the purchase price thereof, provided that any such
Lien shall not encumber any other property of the Borrower or any Subsidiary;
(ix) Other Liens incidental to the conduct of the Borrower's or any
Subsidiary's business or the ownership of its property and assets which were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit, and which do not in the aggregate materially detract from the value
of the Borrower's or any Subsidiary's property or assets or which do not
materially impair the use thereof in the operation of the Borrower's business;
(x) Leases or subleases not otherwise prohibited by this Agreement or
other Loan Documents; provided, however, except as set forth in items (i)
-------- -------
through (x) of this definition the Borrower shall not permit or authorize Liens
on any of the Borrower's or any of its Subsidiaries' properties, except in favor
of the Agent for the benefit of the Agent, the Lenders and the L/C Issuer; and
(xi) Liens securing Indebtedness of a foreign Subsidiary which
Indebtedness is permitted hereunder; provided such Lien encumbers only the
--------
assets of the Subsidiary incurring such Indebtedness.
Person or person shall mean any individual, corporation, partnership,
----------------
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
----
(including a Multiple Employer Plan but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
Pledge Agreement shall mean a pledge agreement executed by the
----------------
Borrower or another Loan Party substantially in the form of Exhibit "D" hereto,
------------
together in each case with all extensions, renewals, amendments, substitutions,
and replacements thereto and thereof.
Portions shall mean collectively the Base Rate Portions and the Euro-
--------
Rate Portions; and the term Portion shall mean individually any of the Portions.
-------
Prime Rate shall mean for any day, a fluctuating interest rate per
----------
annum equal to the rate of interest which the Agent announces from time to time
as its prime lending rate, which rate may not be the lowest rate then being
charged by the Agent to commercial borrowers.
Principal Office shall mean the principal commercial banking office of
----------------
the Agent in Pittsburgh, Pennsylvania.
Prohibited Transaction shall mean any prohibited transaction as
----------------------
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Property shall mean, and refer to, each parcel of real property,
--------
whether owned in fee or leased, of any Loan Party.
Purchasing Lender shall mean a Lender which becomes a party to this
-----------------
Agreement by executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Lender's Revolving
-------------
Credit Commitment bears to the Revolving Credit Commitments of all of the
Lenders.
Receivable shall mean, with respect to the Borrower or any Subsidiary,
----------
all accounts receivable, contract rights related to such account receivable,
instruments, chattel paper, general intangibles related to such Receivables and
all other rights to payments of moneys for any reason (whether or not evidenced
by a contract, instrument, chattel paper or document), and all other rights,
powers and privileges of the Borrower or any Subsidiary, as the case may be,
arising thereunder or related thereto (including but not limited to all
guarantees, collateral security, surety bonds, rights under letters of credit,
insurance or other direct or indirect security), assertible against any Person
whatever and all rebates, refunds, adjustments and returned, rejected, or
repossessed goods relating thereto and all proceeds of any of the foregoing.
Reference Currency shall have the meaning assigned to such term in the
------------------
definition of Equivalent Amount.
Register shall have the meaning ascribed to it in Section 10.05(c).
--------
Regulated Substances shall mean any substance, including without
--------------------
limitation Solid Waste, the generation, manufacture, processing, distribution,
treatment, storage, disposal, transport, recycling, reclamation, use, reuse or
other management or mismanagement of which is regulated by the Environmental
Laws.
Reportable Event shall mean a reportable event described in Section
----------------
4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer
Plan.
Required Lenders shall mean Lenders whose Revolving Credit Commitments
----------------
aggregate at least 66-2/3% of the Revolving Credit Commitments of all of the
Lenders.
Revolving Credit Commitment shall mean, as to any Lender at any time,
---------------------------
the aggregate amount initially set forth opposite its name on Schedule 1.01(a),
----------------
and thereafter on Schedule I to the most recent Assignment and Assumption
Agreement, as the same may be reduced pursuant to Sections 2.04 or 2.10(a)
hereof, and Revolving Credit Commitments shall mean the aggregate Revolving
----------------------------
Credit Commitments of all of the Lenders.
S&P shall mean Standard & Poor's Ratings Group, a division of McGraw
---
Hill Corporation, and, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, "S&P" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Agent, with the approval of the Borrower, by notice to the
Lenders.
Section 20 Subsidiary shall mean the Subsidiary of the bank holding
---------------------
company controlling any Lender, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
Solid Waste shall mean any garbage, refuse or sludge from any waste
-----------
treatment plant, water supply treatment plant or air pollution control facility
generated by activities on the Property, and any unpermitted release into the
environment or the work place of any material as a result of activities on the
Property, including without limitation used Regulated Substances.
Solvent shall mean, with respect to any Person on a particular date,
-------
that on such date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
Standby Letter of Credit shall mean a letter of credit which is not a
------------------------
Commercial Letter of Credit.
Standby Letter of Credit Fee shall have the meaning ascribed to it in
----------------------------
Section 2.18(b) hereof.
Stated Amount shall mean as to any Letter of Credit, the lesser of (i)
-------------
the face amount thereof or (ii) the remaining available undrawn amount thereof
(regardless of whether any conditions for drawing could then be met).
Subsidiary of any Person at any time shall mean (i) any corporation or
----------
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, (ii) any partnership of which such Person is a general partner or
of which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Person's Subsidiaries,
(iii) any limited liability company of which such Person is a member or of which
50% or more of the limited liability company interests is at the time directly
or indirectly owned by such Person or one or more of such Person's Subsidiaries
or (iv) any corporation, trust, partnership, limited liability company or other
entity which is Controlled or capable of being Controlled by such Person or one
or more of such Person's Subsidiaries.
Subsidiary Guarantor shall mean each Subsidiary of the Borrower
--------------------
incorporated or organized in the United States of America whether now existing
or hereafter created or acquired.
Subsidiary Guaranty shall mean a guaranty agreement executed by a
-------------------
Subsidiary Guarantor substantially in the form of Exhibit "C" attached hereto,
-----------
together in each case with all extensions, renewals, amendments, substitutions
and replacements thereto and thereof.
Syndication Date shall mean the earlier of (i) the date of completion
----------------
of syndication hereunder, as determined by the Agent, or (ii) ninety (90) days
after the Closing Date.
Taxes shall have the meaning ascribed to it in Section 2.19.
-----
Total Utilization shall mean as of the time of determination the sum
-----------------
of Loans outstanding, the Unreimbursed L/C Draws outstanding and the aggregate
Stated Amount of the Letters of Credit outstanding.
Transfer Effective Date shall have the meaning ascribed to it in the
-----------------------
applicable Assignment and Assumption Agreement.
Transferor Lender shall mean the selling Lender pursuant to an
-----------------
Assignment and Assumption Agreement.
Unreimbursed L/C Draw shall have the meaning ascribed to it in Section
---------------------
2.18(f).
Year 2000 Problem shall have the meaning ascribed to it in Section
-----------------
4.25.
1.02. Construction.
------------
(a) Unless the context of this Agreement otherwise clearly requires,
the following rules of construction shall apply to this Agreement and each of
the other Loan Documents:
(i) Number: Inclusion. References to the plural include the singular,
-----------------
the singular the plural and the part the whole, "or" has the inclusive meaning
represented by the phrase "and/or," and "including" has the meaning represented
by the phrase "including without limitation".
(ii) Determination. References to "determination" of or by the Agent,
-------------
the L/C Issuer or the Lenders shall be deemed to include good faith estimates by
the Agent, the L/C Issuer or the Lenders (in the case of quantitative
determinations) and good faith beliefs by the Agent, the L/C Issuer or the
Lenders (in the case of qualitative determinations) and such determination shall
be conclusive absent manifest error.
(iii) Discretion and Consent. Whenever the Agent, the L/C Issuer, PNC
----------------------
Bank or the Lenders are granted the right herein to act in its or their sole
discretion or to grant or withhold consent such right shall be exercised in good
faith.
(iv) Documents Taken as a Whole. The words "hereof," "herein,"
--------------------------
"hereunder", "hereto" and similar terms in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document as a whole and not
to any particular provision of this Agreement or such other Loan Document.
(v) Headings. The article, section and other headings contained in
--------
this Agreement or such other Loan Documents and the Table of Contents (if any)
preceding this Agreement or such other Loan Document are for reference purposes
only and shall not control or affect the construction of this Agreement or such
other Loan Document or the interpretation thereof in any respect.
(vi) Implied References. Article, section, subsection, item, clause,
------------------
schedule and exhibit references are to this Agreement or to such other Loan
Document, as the case may be, unless otherwise specified.
(vii) Persons. Reference to any Person includes such Person's
-------
successors and assigns, but, if applicable, only if such successors and assigns
are permitted by this Agreement or such other Loan Document, as the case may be,
and reference to a Person in a particular capacity excludes such Person in any
other capacity.
(viii) Laws and Agreements. Reference to any Law, agreement or
-------------------
contract includes such Law, agreement or contract as the same may be amended,
supplemented, modified, extended, waived, consolidated, replaced or renewed from
time to time, but only to the extent permitted by, and effected in accordance
with, the terms thereof and of this Agreement and the other Loan Documents.
(ix) From, To and Through. Relative to the determination of any period
--------------------
of time, "from" means "from and including", "to" means "to but excluding", and
"through" means "through and including".
(x) Shall; Will. References to "shall" and "will" are intended to have
-----------
the same meaning.
(xi) UCC Terms. All terms used in Article 9 of the Uniform Commercial
---------
Code and not specifically defined in this Agreement or in any other Loan
Document shall herein have the meanings assigned to such terms in the Uniform
Commercial Code as from time to time in effect in the Commonwealth of
Pennsylvania.
(xii) Writing; Written. References to "writing" include printing,
----------------
typing, lithography and other means of reproducing words in a tangible visible
form. References to "written" include "printed", "typed", "lithographed" and
other adjectives relating to words reproduced in a tangible visible form
consistent with the preceding sentence and also include electronic images and
images stored on computer disks, magnetic tape and like media.
1.03. Accounting Principles . Except as otherwise provided in this
---------------------
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
ARTICLE II
REVOLVING CREDIT FACILITY
-------------------------
2.01. Revolving Credit Commitments . Subject to the terms and
----------------------------
conditions hereof and relying upon the representations and warranties herein set
forth, each Lender severally agrees to make Loans (the "Loans") in Dollars or
Optional Currency to the Borrower at any time or from time to time on or after
the date hereof to, but not including, the Expiration Date, provided that the
aggregate principal Equivalent Amount in Dollars of each Lender's Loans
outstanding hereunder to the Borrower shall not exceed at any one time such
Lender's Ratable Share of the aggregate Revolving Credit Commitments minus such
Lender's Ratable Share of the sum of (i) the aggregate Stated Amount of
outstanding Letters of Credit and (ii) the aggregate amount of Unreimbursed L/C
Draws. Within such limits of time and amount and subject to the other provisions
of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.01. The aggregate amount of the Revolving Credit Commitments on the
Closing Date is $75,000,000. All Revolving Credit Commitments shall expire on
the Expiration Date; and all Loans outstanding on the Expiration Date shall
become due and payable in full on such date.
2.02. Nature of Lenders' Obligations with Respect to Loans. Each
----------------------------------------------------
Lender shall be obligated to participate in each request for Loans pursuant to
Section 2.05 hereof in accordance with its Ratable Share. The aggregate
principal Equivalent Amount in Dollars of each Lender's Loans outstanding
hereunder to the Borrower at any time shall never exceed such Lender's Ratable
Share of the aggregate Revolving Credit Commitments minus such Lender's Ratable
Share of the sum of (i) the aggregate Stated Amount of outstanding Letters of
Credit and (ii) the aggregate amount of Unreimbursed L/C Draws. The obligations
of each Lender hereunder are several. The failure of any Lender to perform its
obligations hereunder shall not affect the obligations of the Borrower, or any
other Lender, to any other party nor shall the Borrower, or any other Lender, be
liable for the failure of such Lender to perform its obligations hereunder. The
Lenders shall have no obligation to make Loans hereunder on or after the
Expiration Date.
2.03. Commitment Fees
---------------
(a) Commitment Fee. Accruing from the Closing Date until the
--------------
Expiration Date, the Borrower agrees to pay to the Agent for the account of each
Lender, as consideration for such Lender's Revolving Credit Commitment
hereunder, a commitment fee (the "Commitment Fee") equal to the Applicable
Commitment Fee per annum, as determined below, (all computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed) on the
average daily Equivalent Amount in Dollars equal to such Lender's Revolving
Credit Commitment minus such Lender's Ratable Share of Total Utilization
relating to its Revolving Credit Commitment.
(b) Applicable Commitment Fee. For purposes of this Agreement, the
-------------------------
term "Applicable Commitment Fee" shall mean the rate per annum set forth in the
chart below which corresponds to the range of ratios in which the Borrower's
Consolidated Senior Indebtedness to Consolidated EBITDA Ratio, as at the end of
the preceding fiscal quarter, falls:
Consolidated Senior Indebtedness
to Consolidated EBITDA Ratio Commitment Fee
- ------------------------------------------------------------------------------------------------
Less than 0.5 to 1.0 .15%
- ------------------------------------------------------------------------------------------------
Equal to or greater than 0.5 to 1.0, but less than 1.0 to 1.0
.175%
- ------------------------------------------------------------------------------------------------
Equal to or greater than 1.0 to 1.0 but less than or equal to 1.5 to
1.0 .20%
- ------------------------------------------------------------------------------------------------
Equal to or greater than 1.5 to 1.0 but less than or equal to 2.0 to
1.0 .225%
- ------------------------------------------------------------------------------------------------
Equal to or greater than 2.0 to 1.0 .25%
- ------------------------------------------------------------------------------------------------
All such adjustments shall be determined as of the date the Borrower's financial
statements and Compliance Certificate are required to be delivered to the
Lenders pursuant to items (a), (b) and (c) of Section 6.02. The foregoing
notwithstanding, the Applicable Commitment Fee from the Closing Date to and
including the December 1998 Delivery Date shall be .15%. All Commitment Fees
shall be payable (i) quarterly in arrears beginning December 31, 1998, and
continuing on the last Business Day of each Fiscal Quarter occurring during the
term of the Revolving Credit Commitment, (ii) upon the Expiration Date and (iii)
upon acceleration of the Notes.
2.04. Reduction of Revolving Credit Commitment. Subject to the
----------------------------------------
provisions of Section 2.09 hereof, at any time and from time to time upon at
least five (5) Business Days' prior written notice to the Agent, the Borrower
may terminate, in whole or in part, without penalty, the then unused portion of
the Revolving Credit Commitments, thereby causing a corresponding abatement of
the Commitment Fee. Each such reduction shall be in a minimum principal amount
of $10,000,000 or, if in excess of $10,000,000, in integral multiples of
$1,000,000. The Commitment Fee shall cease to accrue with respect to any unused
portion of the Revolving Credit Commitments so terminated five (5) Business Days
after receipt of such notice. Notice of termination once given shall be
irrevocable and the portion of the Revolving Credit Commitments so terminated
shall not be available for borrowing once such notice has been given under the
terms hereof. The Agent shall promptly notify each Lender of its Ratable Share
of such terminated unused portion and the date of each such termination.
2.05. Loan Requests . Each request for a disbursement shall be made
-------------
to the Agent by an Authorized Officer of the Borrower orally or in writing
pursuant to the execution and delivery by the Borrower to the Agent of a Loan
Request, substantially in the form of Exhibit "B" hereto, (A) by 11:00 a.m.
-----------
(Pittsburgh, Pennsylvania time) on the date of the proposed disbursement if the
disbursement is initially to bear interest at the Base Rate Option, (B) by 11:00
a.m. (Pittsburgh, Pennsylvania time) at least three (3) Business Days prior to
the proposed disbursement with respect to Loans made in Dollars if the
disbursement or any part thereof is to initially bear interest at the Euro-Rate
Option, or (C) by 11:00 a.m. (Pittsburgh, Pennsylvania time) at least four (4)
Business Days prior to the proposed disbursement with respect to Loans funded in
an Optional Currency (which Loans must bear interest at the Euro-Rate Option),
in each case specifying the date and the Dollar or Dollar Equivalent (if
applicable) amount thereof, selecting the Interest Rate Option therefor pursuant
to Section 2.08(b) hereof, for Loans to be funded under the Euro-Rate Option,
selecting the Euro-Rate Interest Period therefor and for Loans to be funded in
an Optional Currency, the currency in which the disbursement is to be funded.
Any oral request for a disbursement hereunder shall be followed immediately by
the Borrower's written Loan Request. A request from the Borrower pursuant to
this Section 2.05 with respect to a disbursement or any part thereof which is
initially to bear interest at the Euro-Rate Option, shall irrevocably commit the
Borrower to accept such disbursement on the date specified in such request.
Promptly upon receipt of such notice, the Agent shall notify each Lender of the
Borrower's request and the amount of such requested disbursement which is to be
advanced by such Lenders. Each such Lender shall make its Ratable Share of such
disbursement available at the Agent's principal office in immediately available
funds no later than 3:00 p.m. (Pittsburgh, Pennsylvania time) on the date of the
requested disbursement.
2.06. Making Loans . Subject to Section 9.03, the Agent shall,
------------
promptly after receipt by it of a Loan Request pursuant to Section 2.05 (but not
later than noon (Pittsburgh, Pennsylvania time) on the Borrowing Date for same
day funding, 2:00 p.m. (Pittsburgh, Pennsylvania time) on the third Business Day
preceding any Borrowing Date for which any Portion of the Loans to be made on
such Borrowing Date is to bear interest at the Euro-Rate Option and 2:00 p.m.
(Pittsburgh, Pennsylvania time) on the fourth Business Day preceding any
Borrowing Date of the Loans to be made in an Optional Currency), notify the
Lenders of its receipt of such Loan Request specifying: (i) the proposed
Borrowing Date and the time and method of disbursement of such Loan; (ii) the
amount and type of such Loan and the applicable Euro-Rate Portions and Euro-Rate
Interest Periods (if any) and the Optional Currency (if any); and (iii) the
apportionment among the Lenders of the Loans as determined by the Agent in
accordance with Section 2.02 hereof. Subject to Section 9.03, each Lender shall
remit the principal amount of each Loan to the Agent such that the Agent is able
to, and the Agent shall, to the extent the Lenders have made funds available to
it for such purpose, fund such Loan to the Borrower in immediately available
funds prior to 2:00 P.M. (Pittsburgh, Pennsylvania time) on the Borrowing Date,
provided that if any Lender fails to remit such funds to the Agent in a timely
manner, or any Lender fails to advise the Agent of its intention not to fund,
then the Agent may elect in its sole discretion to fund with its own funds the
Loan of such Lender on the Borrowing Date.
2.07. Notes. The obligation of the Borrower to repay the aggregate
-----
unpaid principal amount of the Loans made to the Borrower by each Lender,
together with interest
thereon, shall be evidenced by a promissory note of the Borrower dated the
Closing Date in substantially the form attached hereto as Exhibit "A" payable to
----------
the order of each Lender in a face amount equal to the Revolving
Credit Commitment of such Lender.
2.08. Interest Payments, Interest Rates and Certain Related Payments
--------------------------------------------------------------
Pertaining to the Loans.
- -----------------------
(a) Interest. The Notes shall bear interest on the actual unpaid
--------
principal amount thereof from time to time outstanding from the date thereof
until payment in full at the rates of interest set forth in Section 2.08(b). The
Borrower shall pay accrued interest on the unpaid principal balance of the Notes
in arrears:
(i) with respect to the Base Rate Portion, at the rate specified
in the Base Rate Option, (A) on the last Business Day of each Fiscal Quarter
during the term of the Revolving Credit Commitment, (B) at maturity, whether by
acceleration or otherwise, of the Notes and (C) after maturity on demand until
all amounts evidenced by the Notes are paid in full whether or not judgment has
been entered on the Notes; and
(ii) with respect to each Euro-Rate Portion, at the rate specified
in the Euro-Rate Option, (A) on the last day of the Euro-Rate Interest Period
applicable thereto; provided, however, if the Euro-Rate Interest Period chosen
-------- -------
for any Euro-Rate Portion exceeds three (3) months, interest on that Euro-Rate
Portion shall be due and payable at the end of every three (3) months during
such Euro-Rate Interest Period and on the last day of such Euro-Rate Interest
Period, (B) at the maturity, whether by acceleration or otherwise, of the Notes
and (C) after maturity on demand until all amounts evidenced by the Notes are
paid in full whether or not judgment has been entered on the Notes.
(b) Interest Rate Options. During the term hereof, the Borrower shall
---------------------
have the option of electing, from time to time, one or more of the Interest Rate
Options set forth below to be applied to the Loans.
(i) Base Rate Option. Interest under this Interest Rate Option
----------------
shall accrue, for the Base Rate Portion of the Loans outstanding, at a rate per
annum equal to the Base Rate. The Base Rate shall be adjusted automatically from
time to time upon each change in the Prime Rate or the Federal Funds Effective
Rate, as the case may be, and in accordance with the provisions of Section
2.08(d).
(ii) Euro-Rate Option. Interest under this Interest Rate Option
----------------
shall accrue, for each Euro-Rate Portion of the Loans outstanding, for any Euro-
Rate Interest Period selected, at a rate per annum equal to the sum of (A) the
Euro-Rate plus (B) the Applicable Euro-Rate Margin as determined below. The rate
of interest established pursuant to the preceding sentence of this Section
2.08(b)(ii) for each Euro-Rate Portion shall be adjusted from time to time in
accordance with the provisions of Section 2.08(d).
For purposes of this Agreement, the term "Applicable Euro-Rate Margin" shall
mean the rate per annum set forth in the chart below which corresponds to the
range of ratios in which the Borrower's Consolidated Senior Indebtedness to
Consolidated EBITDA Ratio as at the end of the preceding Fiscal Quarter falls:
Consolidated Senior Indebtedness Applicable Euro-Rate
to Consolidated EBITDA Ratio Margin
- ------------------------------------------------------------------------------------------------------------------
Less than 0.5 to 1.0 .50%
- ------------------------------------------------------------------------------------------------------------------
Equal to or greater than 0.5 to 1.0 but less than 1.0 to 1.0
.625%
- ------------------------------------------------------------------------------------------------------------------
Equal to or greater than 1.0 to 1.0 but less than 1.5 to 1.0
.75%
- ------------------------------------------------------------------------------------------------------------------
Equal to or greater than 1.5 to 1.0 but less than 2.0 to 1.0
.875%
- ------------------------------------------------------------------------------------------------------------------
Equal to or greater than 2.0 to 1.0 1.00%
- ------------------------------------------------------------------------------------------------------------------
All adjustments shall be determined as of the date the Borrower's financial
statements and Compliance Certificate are required to be delivered pursuant to
items (a), (b) and (c) of Section 6.02. The foregoing notwithstanding, the
Applicable Euro-Rate Margin from the Closing Date to and including the December
1998 Delivery Date shall be .50%.
(c) Optional Currency Interest. Each Portion of each Optional
--------------------------
Currency funded Loan shall bear interest at the Euro-Rate Option, subject,
however, to the other provisions of this Agreement.
(d) Interest After Maturity. After the occurrence of an Event of
-----------------------
Default and during the continuation thereof, the Base Rate Portion shall bear
interest at a rate per annum which shall be two hundred (200) basis points (2%)
above the Base Rate otherwise in effect during such period. After the occurrence
of an Event of Default and during the continuation thereof, all Euro-Rate
Portions shall bear interest (i) until the end of the then current Euro-Rate
Interest Period for each such Euro-Rate Portion, at a rate per annum which shall
be two hundred (200) basis points (2%) above the sum of (A) the Euro-Rate and
(B) the Applicable Euro-Rate Margin otherwise in effect during such period and
(ii) at the end of the then current Euro-Rate Interest Period for each such
Euro-Rate Portion, such Euro-Rate Portions shall automatically be converted to
the Base Rate Portion, and thereafter the interest rate shall be calculated in
accordance with the initial sentence of this Section 2.08(d).
(e) Interest Periods; Limitations on Elections. At any time when the
------------------------------------------
Borrower shall select, convert to or renew the Euro-Rate Option to apply to all
or any portion of the outstanding Loans, it shall elect one or more Euro-Rate
Interest Periods as the case may be. All the foregoing, however, is subject to
the following:
(i) any Euro-Rate Interest Period which would otherwise end on a
day which is not a Business Day shall be extended to the next Business Day
unless such Business Day falls in the succeeding calendar month in which case
such Euro-Rate Interest Period shall end on the next preceding Business Day; and
(ii) any Euro-Rate Interest Period which begins on the last day of
a calendar month or on a day for which there is no numerically corresponding day
in the subsequent calendar month during which such Euro-Rate Interest Period is
to end shall end on the last Business Day of such subsequent month.
Elections by the Borrower of the Euro-Rate Option shall be subject to the
following limitations:
(i) The Euro-Rate Portion for each Euro-Rate Interest Period shall
be in an aggregate principal Equivalent Amount of $1,000,000 or more; provided,
--------
however, that each increment in excess of $1,000,000 shall be $1,000,000 or an
- -------
integral multiple thereof;
(ii) No Euro-Rate Interest Period may be elected at any time that
a Default or an Event of Default shall have occurred and be continuing;
(iii) No Euro-Rate Interest Period may be elected which would end
later than the relevant Expiration Date;
(iv) No Euro-Rate Interest Period may be elected with regard to
amounts outstanding which would be in excess of the Revolving Credit Commitment;
and
(v) At no time may there be more than seven (7) separate Euro-Rate
Interest Periods in effect.
(f) Election, Renewal or Conversion of Interest Rate Options.
--------------------------------------------------------
Elections or renewals of, or conversions to, the Base Rate Option shall continue
in effect until converted or renewed as hereinafter provided. Elections or
renewals of, or conversions to, the Euro-Rate Option shall expire as to each
Euro-Rate Portion at the expiration of the applicable Euro-Rate Interest Period.
At any time with respect to the Base Rate Portion or at the expiration of the
applicable Euro-Rate Interest Period with respect to any Euro-Rate Portion, the
Borrower may cause (subject to Subsection 2.08(e)) all or any part of the
principal amount of such Portion to be converted to, or to be renewed under, the
Euro-Rate Option by notice to the Agent as hereinafter provided. Such notice (i)
shall be irrevocable, (ii) shall be given not later than noon (Pittsburgh,
Pennsylvania time) in the case of a conversion to or renewal of, either in whole
or in part, the Euro-Rate Option, not less than three (3) Business Days prior to
the proposed effective date for such conversion or renewal, and (iii) shall set
forth:
(A) the effective date of such conversion or renewal, which
shall be a Business Day;
(B) the new Euro-Rate Interest Period(s) selected; and
(C) with respect to each such Euro-Rate Interest Period, the
aggregate principal amount of the corresponding Euro-Rate Portion.
At the expiration of each Euro-Rate Interest Period, any part (including the
whole) of the principal amount of the corresponding Euro-Rate Portion as to
which no notice of conversion or renewal has been received shall automatically
be converted to the Base Rate Option. The Agent shall promptly notify the
Borrower and the Lenders of any such automatic conversion.
(g) Notification of Election of an Interest Rate Option. The Borrower,
---------------------------------------------------
by an Authorized Officer, shall notify the Agent of each election of an Interest
Rate Option, each conversion from one Interest Rate Option to another, the
amount of the Loans then outstanding
to be allocated to each Interest Rate Option and, where relevant, the Euro-Rate
Interest Periods as provided for in this Agreement. Any such communication may
be oral or written and if oral it shall be followed promptly by written
confirmation of such Interest Rate Option election executed by an Authorized
Officer of the Borrower.
(h) Calculation of Interest. Interest on the Base Rate Portion shall
-----------------------
be calculated on the basis of a 365 or 366 day year, as the case may be, and the
actual days elapsed. Interest on each Euro-Rate Portion shall be calculated on
the basis of a 360-day year and the actual days elapsed. The calculation of the
amount of interest due and owing to the Lenders shall be evidenced by posting
the amount of interest due under the Revolving Credit Notes to the Loan Account
established by the Agent pursuant to Section 2.15.
(i) Lawful Interest Rates Intended. In no event whatsoever shall the
------------------------------
interest rates charged hereunder exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that any
Lender has received interest hereunder in excess of the highest applicable rate,
such Lender shall promptly refund such excess to the Borrower, or at such
Lender's option, apply such excess in reduction of the principal balance of the
Lender Obligations owing to the affected Lender.
2.09. Prepayments: Allocation of Repayments.
-------------------------------------
(a) Prepayments of Base Rate Portion. The Borrower, upon oral or
--------------------------------
written notice to the Agent by an Authorized Officer of Borrower given not later
than 12:00 noon (Pittsburgh, Pennsylvania time) on the proposed date for
prepayment, may prepay without penalty or premium any or all of the Base Rate
Portion. Any oral notice of election hereunder shall be followed immediately by
written confirmation of such prepayment election executed by an Authorized
Officer of Borrower.
(b) Prepayments of Euro-Rate Portions. Except as otherwise provided in
---------------------------------
Section 2.10(c), the Borrower, upon oral or written notice to the Agent by an
Authorized Officer of Borrower given at least three (3) Business Days prior to
the proposed date for repayment, may prepay, all or any part of such Euro-Rate
Portion. If such Euro-Rate Portion is prepaid on the last day of the Euro-Rate
Interest Period applicable thereto, such prepayment shall be without premium or
penalty. If the Borrower prepays a Euro-Rate Portion other than on the last day
of the Euro-Rate Interest Period applicable thereto, the Borrower agrees to pay,
in addition to the other amounts set forth in this Section 2.09(b), such
additional amounts as may be necessary to compensate each Lender for any loss
(including loss of profit on a pre-tax basis) and any direct or indirect costs,
including the costs of reemployment of funds prepaid at rates lower than the
cost to such Lender of such funds. Such losses and costs shall be specified in
writing to the Borrower by the affected Lenders (and such specifications shall
set forth in reasonable detail the calculation of such losses and costs) and
such specifications shall, absent manifest error, be binding and conclusive on
the Borrower. Such prepayment shall include the then outstanding principal
Equivalent Amount in Dollars of the Euro-Rate Portion being prepaid together
with accrued interest, fees and other amounts then due and payable on the amount
prepaid, to the day of such prepayment. Except as provided in this Section
2.09(b), there shall be no voluntary prepayment of any Euro-Rate Portion.
(c) Allocation of Repayments of Principal. Except as otherwise
-------------------------------------
specified by the Borrower, any voluntary prepayment pursuant to this Section
2.09 hereof shall be applied first to the repayment of any Euro-Rate Portion of
the Loans for which its associated Euro-Rate Interest Period expires on the date
of such payment, second, to the reduction of the Base Rate Portion of the Loans,
and third, to the reduction of such Euro-Rate Portions of the Loans as directed
by the Borrower, and if the Borrower fails to give such directions, or if a
Default or Event of Default has occurred and is continuing, to the reduction of
such Euro-Rate Portions of the Loans as the Agent may select in its sole and
absolute discretion. Any reduction in any Euro-Rate Portion on a date other than
the date on which its associated Euro-Rate Interest Period expires may result in
a funding loss for which the Borrower will owe the Lenders an indemnity payment
pursuant to Section 2.10 hereof.
2.10. Yield Protection.
----------------
(a) If any change subsequent to the Closing Date in any Law or in the
interpretation or application thereof by any Official Body or in the compliance
with any guideline or request from any Official Body, shall make it unlawful for
any Lender to maintain or give effect to its obligations as contemplated under
the Revolving Credit Commitment, such Lender shall notify the Borrower and the
Agent in writing of its determination of such unlawfulness and an explanation
thereof. Thereafter, such Lender's obligation to make available any further
Loans hereunder shall forthwith be cancelled and the Borrower, within thirty
(30) days, or within such longer period as may be allowed by Law, if any, shall
repay to such Lender so affected its pro rata share of the outstanding principal
amount of all Loans, together with interest thereon to the date of repayment and
fees, if any, due as of the date of termination; provided, however, that the
affected Lender's obligations which are lawful, if severable from those which
are unlawful, shall continue, and with respect to those obligations, this
Agreement shall not terminate.
(b) If any Law issued after the Closing Date (including, without
limitation, Regulation D of the Federal Reserve Board), or if any change on or
after the Closing Date in any Law (including, without limitation, Regulation D)
or in the interpretation thereof by any Official Body charged with the
administration thereof, shall
(i) subject any Lender to any tax, levy, impost, charge, fee,
duty, deduction or withholding or any kind hereunder (other than any tax imposed
or based upon the income of such Lender and payable to any governmental or
taxing authority in the United States of America, any state or any municipality
thereof); or
(ii) change the basis of taxation of any Lender with respect to
payments of principal or interest or other amounts due hereunder (other than any
change which affects, and only to the extent that it affects, the taxation by
the United States, any state or any municipality thereof based upon the income
of such Lender); or
(iii) impose, modify or deem applicable any reserve, special
deposit or similar requirements against assets held by any Lender (other than
such requirements which result solely from a change in the credit quality of the
Borrower or which are included in the determination of the applicable rate of
interest hereunder); or
(iv) impose upon any Lender any other obligation or condition
with respect to this Agreement, and the result of any of the foregoing is to
increase the cost to any Lender, to decrease the yield to any Lender with
respect to the Loans or any Letters of Credit, to reduce the income receivable
by any Lender or to impose any expenses upon any Lender with respect to the
Loans or any Letters of Credit by an amount which any Lender reasonably deems
material, then and in any such case:
(A) the Lender so affected shall promptly notify the Borrower and the
Agent of the happening of such event;
(B) the Borrower shall pay to the affected Lender, within five (5)
Business Days of written demand such amount as will compensate such Lender for
such additional cost or reduced amount, calculated from the date of the
notification by such Lender; and
(C) the Borrower may pay to such affected Lender the affected Loan in
full without the payment of any additional amount other than on account of such
Lender's out-of-pocket losses (including funding losses, if any, as provided in
paragraph (c) below) not otherwise provided for in subparagraph (B) immediately
above.
The Lender so affected shall present to the Borrower and the Agent a certificate
setting forth such increased cost or reduced amount. Such certificate shall set
forth in reasonable detail the calculation of the amount due and such Lender's
reasons for invoking the provisions of this Section 2.10(b). Such certificate
shall be conclusive evidence of the amount due thereunder except in the case of
manifest error in computation.
(c) The Borrower agrees to indemnify each Lender, on demand, against
any loss or expense (including loss of profit) which such Lender may sustain or
incur in liquidating or employing deposits from third parties acquired to
effect, fund or maintain such Euro-Rate Portions or any part thereof as a
consequence of (i) the failure of the Borrower to make a payment on the due date
thereof, (ii) the failure of the Borrower to borrow under, convert to or renew
under the Euro-Rate Option on the proposed effective date of such borrowing,
conversion or renewal, or (iii) the payment, prepayment or conversion by the
Borrower of any Euro-Rate Portions for any reason on a day other than the last
day of the applicable Euro-Rate Interest Period. Any Lender's determination of
an amount payable under this paragraph (c) shall be conclusive absent manifest
error.
(d) The foregoing notwithstanding, if the affected Lender can mitigate
or eliminate such increased cost or reduced yield by transferring the Loans to
another existing lending office of such Lender, such Lender agrees to so
transfer the Loans; provided, such transfer would not subject such Lender to any
--------
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.
2.11. Special Provisions Relating to the Euro-Rate Option. -
--------------------------------------------------- -
(a) Euro-Rate Unascertainable. In the event that on any date on which
-------------------------
a Euro-Rate Option would otherwise be set, the Agent shall have determined
(which determination shall be final and conclusive) that, by reason of
circumstances affecting the
London interbank market, adequate, reasonable means do not exist for
ascertaining the Euro-Rate, the Agent shall give prompt notice of such
determination to the Borrower and the Lenders. Until the Agent notifies the
Borrower and the Lenders that the circumstances giving rise to such
determination no longer exist (which notice shall be given promptly following
receipt of knowledge thereof by the Agent), the right of the Borrower to borrow
under, convert to or renew the Euro-Rate Option shall be suspended. Any notice
of borrowing under, conversion to or renewal of the Euro-Rate Option which was
to become effective during the period of such suspension shall be treated as a
request to borrow under, convert to or renew the Base Rate Option with respect
to the principal amount therein specified.
(b) Inability to Offer Euro-Rate. In the event that any Lender shall
----------------------------
determine, in its sole discretion, that it is unable to obtain deposits in the
London interbank market in sufficient amounts and with maturities related to
such Euro-Rate Portions which would enable such Lender to fund such Euro-Rate
Portions, then such Lender shall notify the Borrower and the Agent that the
right of the Borrower to borrow under, convert to or renew the Euro-Rate Option,
shall be suspended with respect to such Lender. Such notice shall set forth in
reasonable detail such Lender's reasons for invoking the provisions of this
Section 2.11(b). Following notification of the suspension of the Euro-Rate
Option with respect to such Lender, the Borrower agrees to negotiate with such
Lender for a modified or alternative fixed rate of interest, which will allow
such Lender to realize its anticipated and bargained-for yield. In the event
that the Borrower and such Lender cannot agree on a modified or alternative
fixed rate of interest, any notice of borrowing under, conversion to or renewal
of the Euro-Rate Option which was to become effective during the period of
suspension shall be treated as a request to borrow under, convert to or renew
the Base Rate Option with respect to the principal amount specified therein
attributable to such Lender.
(c) Illegality. If any Lender shall determine in good faith (which
----------
determination shall be final and conclusive) that compliance with any Law
(whether or not having the force of law) or the interpretation or application
thereof by any Official Body, has made it unlawful or impractical for such
Lender to make or maintain the Loans under the Euro-Rate Option, such Lender
shall give notice of such determination to the Borrower and the Agent, which
notice shall set forth in reasonable detail such Lender's reasons for invoking
the provisions of this Section 2.11(c). Notwithstanding any provision of this
Agreement to the contrary, unless and until such Lender shall have given notice
to the Borrower and the Agent that the circumstances giving rise to such
determination no longer apply (which notice shall be given promptly following
receipt of knowledge thereof by such Lender):
(i) with respect to any Euro-Rate Interest Periods thereafter
commencing, interest in an amount equal to such Lender's Ratable Share of the
corresponding Euro-Rate Portion shall be computed and payable under the Base
Rate Option; and
(ii) on such date, if any, as shall be required by law, an amount
equal to such Lender's Ratable Share of any Euro-Rate Portion, as the case may
be, then outstanding shall be automatically converted to the Base Rate Option
and the Borrower shall pay to such Lender the accrued and unpaid interest on
such amounts to (but not including) such conversion date.
The Borrower shall pay any such Lender any additional amounts reasonably
necessary to compensate such Lender for any costs incurred by such Lender as a
result of any conversion pursuant to clause (ii) above which occurs on a day
other than the last day of the relevant Euro-Rate Interest Period, including,
but not limited to, any interest or fees payable by such Lender to lenders of
funds obtained by them to loan or maintain the lending of the Loans so
converted. Such Lender shall furnish to the Borrower and the Agent a certificate
as to the amount necessary to compensate it for such costs, which certificate
shall set forth in reasonable detail the calculation of the amount due. Such
certificate shall constitute conclusive evidence of the amount due thereunder
absent any manifest error in computation. The Borrower shall pay such amount to
such Lender, as additional consideration hereunder, within ten (10) days of the
Borrower's receipt of such certificate.
(d) The foregoing notwithstanding, if the affected Lender can continue
to offer the Euro-Rate Option to the Borrower by transferring the Loans to
another existing lending office of such Lender, such Lender agrees to so
transfer the Loans; provided, such transfer would not subject such Lender to any
--------
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.
2.12. Capital Adequacy. If after the Closing Date (i) any adoption
----------------
of or any change in or in the interpretation by an Official Body of any Law or
(ii) compliance with any Law, guideline or request of any Official Body
exercising control over banks or financial institutions generally or any court
(whether or not having the force of law), affects or would affect the amount of
capital required or expected to be maintained by any Lender or any corporation
controlling such Lender other than those resulting solely from a change in the
credit quality of the Borrower (a "Capital Adequacy Event"), and the result of
such Capital Adequacy Event is to reduce the rate of return on capital of such
Lender or any corporation controlling such Lender as a consequence thereof to a
level below that which such Lender could have achieved but for such Capital
Adequacy Event, taking into consideration such Lender's policies with respect to
capital adequacy, by an amount which such Lender deems to be material, such
Lender shall promptly deliver to the Borrower and the Agent a statement of the
amount necessary to compensate such Lender for the reduction in the rate of
return on its capital attributable to the commitments under this Agreement or
any of the Loan Documents (the "Capital Compensation Amount"). Each Lender
shall determine the Capital Compensation Amount in good faith, using reasonable
attribution and averaging methods. Each Lender shall, from time to time,
furnish to the Borrower and the Agent a certificate setting forth the amount so
determined and the calculations of such amount. Such certificate shall
constitute conclusive evidence of the amount due thereunder absent any manifest
error in computation. Such amount shall be due and payable by the Borrower to
such Lender ten (10) days after such notice is given. As soon as practicable
after any Capital Adequacy Event, such Lender shall submit to the Borrower and
the Agent estimates of the Capital Compensation Amounts that would be payable as
a function of such Lender's Revolving Credit Commitment hereunder.
2.13. Utilization of Commitments in Optional Currencies.
-------------------------------------------------
(a) Periodic Computations of Dollar Equivalent Amounts of Loans and
---------------------------------------------------------------
Letters of Credit Outstanding. The Agent will determine the Dollar Equivalent
- -----------------------------
amount of (i) proposed Loans or Letters of Credit to be denominated in an
Optional Currency as of the date of the requested disbursement or date of
issuance, as the case may be, (ii) outstanding Loans
or Letters of Credit Outstanding denominated in an Optional Currency as of the
last Business Day of each month, and (iii) outstanding Loans denominated in an
Optional Currency as of the end of each Interest Period (each such date under
clauses (i) through (iii), a "Computation Date").
(b) Notices From Lenders That Optional Currencies Are Unavailable To
----------------------------------------------------------------
Fund New Loans. The Lenders shall be under no obligation to make the Loans or
- --------------
issue the Letters of Credit requested by the Borrower which are denominated in
an Optional Currency if any Lender notifies the Agent by 5:00 p.m. (Pittsburgh,
Pennsylvania time) four (4) Business Days prior to the borrowing or issuance
date for such Loans or Letters of Credit that such Lender cannot provide its
share of such Loans in such Optional Currency. In the event the Agent timely
receives a notice from a Lender pursuant to the preceding sentence, the Agent
will notify the Borrower no later than 12:00 Noon (Pittsburgh, Pennsylvania
time) three (3) Business Days prior to the disbursement for such Loans or the
issuance of such Letter of Credit that the Optional Currency is not then
available for such Loans or such Letters of Credit, and the Agent shall promptly
thereafter notify the Lenders of the same. If the Borrower receives a notice
described in the preceding sentence, the Borrower may, by notice to the Agent
not later than 5:00 p.m. (Pittsburgh, Pennsylvania time) three (3) Business Days
prior to the borrowing or issuance date for such Loans or such Letters of
Credit, withdraw the Loan Request for such Loans or the issuance of such Letters
of Credit. If the Borrower withdraws such Loan Request, the Agent will promptly
notify each Lender of the same and the Lenders shall not make such Loans or
issue such Letters of Credit. If the Borrower does not withdraw such Loan
Request before such time, (i) the Borrower shall be deemed to have requested
that (a) the Loans referred to in its Loan Request shall be made in Dollars in
an amount equal to the Dollar Equivalent amount of such Loans and (b) the
Letters of Credit referred to in its Loan Request shall be issued in Dollars in
an amount equal to the Dollar Equivalent amount of such Letters of Credit and
shall bear interest under the Base Rate Option, and (ii) the Agent shall
promptly deliver a notice to each Lender stating: (A) that such Loans or such
Letters of Credit shall be made in Dollars and the Loans shall bear interest
under the Base Rate Option, (B) the aggregate amount of such Loans or such
Letters of Credit, and (C) such Lender's Ratable Share of such Loans or such
Letters of Credit.
(c) Notices from Lenders that Optional Currencies Are Unavailable to
----------------------------------------------------------------
Fund Renewals of Euro-Rate Option Loans. If the Borrower delivers a Loan
- ---------------------------------------
Request requesting that the Lenders renew the Euro-Rate Option with respect to
an outstanding Portion of Loans or Letters of Credit denominated in an Optional
Currency, the Lenders shall be under no obligation to renew such Euro-Rate
Option if any Lender delivers to the Agent a notice by 5:00 p.m. (Pittsburgh,
Pennsylvania time) four (4) Business Days prior to effective date of such
renewal that such Lender cannot continue to provide Loans or Letters of Credit
in such Optional Currency. In the event the Agent timely receives a notice from
a Lender pursuant to the preceding sentence, the Agent will notify the Borrower
no later than 12:00 Noon (Pittsburgh time) three (3) Business Days prior to the
renewal date that the renewal of such Loans or such Letters of Credit in such
Optional Currency is not then available, and the Agent shall promptly thereafter
notify the Lenders of the same. If the Agent shall have so notified the
Borrower that any such continuation of Loans denominated in an Optional Currency
or Letters of Credit issued in an Optional Currency is not then available, any
notice of renewal with respect thereto shall be deemed withdrawn, and such Loans
denominated in an Optional Currency or Letters of Credit issued in an Optional
Currency shall be re-denominated into Base Rate Loans or Letters of
Credit in Dollars with effect from the last day of the Interest Period with
respect to any such Loans denominated in an Optional Currency or Letters of
Credit issued in an Optional Currency. The Agent will promptly notify the
Borrower and the Lenders of any such re-denomination, and in such notice, the
Agent will state the aggregate Dollar Equivalent amount of the re-denominated
Loans denominated in an Optional Currency or Letters of Credit issued in an
Optional Currency as of the Computation Date with respect thereto and such
Lender's Ratable Share thereof.
(d) Requests for Additional Optional Currencies. The Borrower may
-------------------------------------------
deliver to the Agent a written request that Loans hereunder also be permitted to
be made in any other lawful currency (other than Dollars), in addition to the
currencies specifically identified in the definition of "Optional Currency";
provided that such currency must be freely traded in the offshore interbank
foreign exchange markets, freely transferable, freely convertible into Dollars
and available to the Lenders in the applicable interbank market. The Agent will
promptly notify the Lenders of any such request promptly after the Agent
receives such request. Each Lender may grant or deny such request in its sole
discretion. The Agent will promptly notify the Borrower of the acceptance or
rejection by each of the Lender of the Borrower's request. The requested
currency shall be approved as an Optional Currency hereunder only if the
Required Lenders approve of the Borrower's request.
(e) Optional Currency Fee. The Borrower shall pay to the Agent in
---------------------
Dollars for the Agent's sole account the Agent's then in effect customary fees
and administrative expenses payable with respect to Loans denominated in an
Optional Currency or Letters of Credit issued in an Optional Currency as the
Agent may generally charge or incur in connection with the funding, maintenance,
modification (if any), assignment or transfer (if any), negotiation, and
administration of Loans denominated in an Optional Currency or Letters of Credit
issued in an Optional Currency.
(f) Currency Repayments. Notwithstanding anything contained herein to
-------------------
the contrary, the entire amount of principal of and interest on any Loan made in
an Optional Currency shall be repaid in the same Optional Currency in which such
Loan was made, provided, however, that if it is impossible or illegal for the
-------- -------
Borrower to effect payment of a Loan in the Optional Currency in which such Loan
was made, or if the Borrower defaults in its obligation to do so, the Lenders
may at their option permit such payment to be made (i) at and to a different
location, subsidiary, affiliate or correspondent of the Agent, or (ii) in the
Equivalent Amount of Dollars or (iii) in an Equivalent Amount of such other
currency (freely convertible into Dollars) as the Lenders may solely at their
option designate. Upon any events described in (i) through (iii) of the
preceding sentence, the Borrower shall make such payment and the Borrower agrees
to hold each Lender harmless from and against any loss incurred by any Lender
arising from the cost to such Lender of any premium, any costs of exchange, the
cost of hedging and covering the Optional Currency in which such Loan was
originally made, and from any change in the value of Dollars, or such other
currency, in relation to the Optional Currency that was due and owing. Such
loss shall be calculated for the period commencing with the first day of the
Interest Period for such Loan and continuing through the date of payment
thereof. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the Borrower's obligations under this Section 2.13 shall
survive termination of this Agreement.
(g) Optional Currency Amounts. Notwithstanding anything contained
-------------------------
herein to the contrary, the Agent may, with respect to notices by the Borrowers
for Loans in an Optional Currency or voluntary prepayments of less than the full
amount of an Optional Currency Disbursement, engage in reasonable rounding of
the Optional Currency amounts requested to be loaned or repaid; and, in such
event, the Agent shall promptly notify the Borrower and the Lenders of such
rounded amounts and the Borrower's request or notice shall thereby be deemed to
reflect such rounded amounts.
(h) Currency Fluctuations. If on any Computation Date the sum of the
---------------------
Dollar Equivalent of all Loans and all Letters of Credit Outstanding is greater
than the sum of the Revolving Credit Commitments, as a result of a change in
exchange rates between one (1) or more Optional Currencies and Dollars, then the
Agent shall notify the Borrower of the same. Within one (1) Business Day after
receiving such notice, the Borrower shall either (i) pay or prepay (subject to
the Borrower's indemnity obligations under this Agreement) Loans denominated in
an Optional Currency and Letters of Credit issued in an Optional Currency or
(ii) pay or prepay Loans denominated in Dollars (subject to the Borrower's
indemnity obligations under this Agreement), in either case in amounts such that
the sum of the Dollar Equivalent of all Loans and all Letters of Credit
Outstanding does not exceed the Revolving Credit Commitments, all after giving
effect to such payments or prepayments.
(i) European Monetary Union.
-----------------------
(i) (A) If, as a result of the implementation of the European
monetary union, any Optional Currency ceases to be lawful currency of the nation
issuing the same and is replaced by a European common currency (the "Euro") or
(B) any Optional Currency and the Euro are at the same time recognized by any
governmental authority of the nation issuing such currency as lawful currency of
such nation and the Required Lenders shall so request in a notice delivered to
the Borrower, then any amount payable hereunder by any party hereto in such
Optional Currency shall instead be payable in the Euro and the amount so payable
shall be determined by translating the amount payable in such Optional Currency
to the Euro at the exchange rate recognized by the European Central Bank for the
purpose of implementing the European monetary union. Prior to the occurrence of
the event or events described in clause (A) or (B) of the preceding sentence,
each amount payable hereunder in any Optional Currency will, except as otherwise
provided herein, continue to be payable only in that Optional Currency.
(ii) The Borrower agrees, at the request of any Lender, to
compensate such Lender for any loss, cost, expense or reduction in return that
such Lender shall reasonably determine shall be incurred or sustained by such
Lender as a result of the implementation of the European monetary union and that
would not have been incurred or sustained but for the transactions provided for
herein. A certificate of the Lender setting forth the Lender's determination of
the amount or amounts necessary to compensate such Lender shall be delivered to
the Borrower, and shall be conclusive absent manifest error so long as such
determination is made on a reasonable basis. The Borrower shall pay such Lender
the amount shown as due on any such certificate within ten (10) days after
receipt thereof.
(iii) The parties hereto agree, at the time of or at any time
following the implementation of the European monetary union, to use reasonable
efforts to
enter into an agreement amending this Agreement in order to reflect
the implementation of such monetary union, to permit (if feasible) the Euro to
qualify as an Optional Currency under the terms and conditions of the definition
of such term and to place the parties hereto in the position with respect to the
settlement of payments of the Euro as they would have been with respect to the
settlement of the Optional Currencies it replaced.
2.14. Interbank Market Presumption. For all purposes of this
----------------------------
Agreement and each Note with respect to any aspects of the Euro-Rate, any Loan
under the Euro-Rate Option or any Optional Currency, each Lender and the Agent
shall be presumed to have obtained rates, funding, currencies, deposits, and the
like in the applicable interbank market regardless whether it did so or not;
and, each Lender's and the Agent's determination of amounts payable under, and
actions required or authorized by this Agreement shall be calculated, at each
Lender's and the Agent's option, as though each Lender and the Agent funded each
Portion of Loans under the Euro-Rate Option through the purchase of deposits of
the types and maturities corresponding to the deposits used as a reference in
accordance with the terms hereof in determining the Euro-Rate applicable to such
Loans, whether in fact that is the case.
2.15 Loan Account. The Agent shall open and maintain on its books a
------------
Loan Account in the name of the Borrower, with respect to (i) Loans made,
repayments and prepayments of the principal thereof, and the computation and
payment of interest thereon, (ii) Letters of Credit issued, or participated in,
as the case may be, and draws and reimbursements thereon or thereof, and (iii)
the computation and payment of the Fees due hereunder to the Lenders, the L/C
Issuer and the Agent, and the computation of other amounts due and sums paid to
the Agent hereunder. Upon the request of the Borrower to the Agent, the Agent
shall promptly furnish to the Borrower a statement of the Loan Account. The
failure to record any such amount shall not limit or otherwise affect the
obligations of the Borrower hereunder or under the Notes to repay all amounts
owed hereunder and thereunder together with all interest accrued thereon and all
other fees and charges provided herein. The Loan Account shall be conclusive
evidence as to the amount at any time due to the Lenders, the L/C Issuer and the
Agent from the Borrower except in the case of manifest error.
2.16. All Advances to Constitute One Loan. Notwithstanding the
-----------------------------------
limitations set forth herein, all Loans and all other Lender Obligations shall
constitute one loan and all Indebtedness and obligations of the Borrower to the
Lenders under this Agreement and all other Loan Documents shall constitute a
general obligation of the Borrower. The parties hereto agree that all of the
rights of the Agent, the L/C Issuer, the Lenders and the Borrower set forth in
this Agreement and the other Loan Documents shall apply to any amendment or
modification of or supplement to this Agreement and the other Loan Documents.
2.17. Use of Proceeds. The proceeds of the Loans shall be used
---------------
exclusively (i) to pay interest, Fees and other costs, and expenses hereunder
and under the other Loan Documents, (ii) to repay any Unreimbursed L/C Draw and
(iii) to fund capital expenditures, working capital, acquisitions and general
corporate purposes of the Borrower and its Subsidiaries. No proceeds of any
Loan may be used for any purpose which contravenes applicable law or any
provision of any Loan Document.
2.18. Letter of Credit Subfacility.
----------------------------
(a) At the request of the Borrower, the L/C Issuer will issue for the
account of the Borrower and its Subsidiaries, on the terms and conditions
hereinafter set forth (including without limitation Article V hereof), one or
more Letters of Credit in Dollars or Optional Currency; provided, however, no
-------- -------
Letter of Credit shall have an expiry date later than the earlier of twelve (12)
months from the date of issuance or fifteen (15) days prior to the Expiration
Date; and provided, further, however, that in no event shall (i) the Dollar
-------- ------- -------
Equivalent of the Stated Amount of the Letters of Credit issued pursuant to this
Section 2.18 exceed, at any one time, $10,000,000 minus the unpaid balance of
-----
any unreimbursed L/C Draws, or (ii) the Dollar Equivalent sum of aggregate
outstanding principal balance of the Loans, the aggregate unpaid balance of any
Unreimbursed L/C Draws and the aggregate Stated Amount of the Letters of Credit
issued by the L/C Issuer under this Section 2.18 exceed, at any one time, the
aggregate Revolving Credit Commitments.
(b) (i) The Borrower shall pay (A) to the L/C Issuer for its own
account a fronting fee in Dollars equal to 1/8 of 1% per annum (the "L/C
Fronting Fee") on the aggregate daily (computed at the opening of business and
on the basis of a year of 360 days and actual days elapsed) Stated Amount of the
outstanding Standby Letters of Credit for the period in question, (B) to the
Agent for the ratable account of the Lenders a fee (the "Standby Letter of
Credit Fee") equal to the Applicable Standby Letter of Credit Fee per annum, as
determined below, on the aggregate daily (computed at the opening of business
and on the basis of a year of 360 days and actual days elapsed) Stated Amount of
the outstanding Letters of Credit for the period in question, and (C) to the
Agent for the ratable account of the Lenders a fee (the "Commercial Letter of
Credit Fee") equal to the then current standard fee charged by the L/C Issuer
for the issuance of Commercial Letters of Credit (the Standby Letter of Credit
Fee and the Commercial Letter of Credit Fee shall be collectively referred to as
the "Letter of Credit Fee"). The Letter of Credit Fee and the L/C Fronting Fee
shall be payable (A) quarterly in arrears on the last Business Day of each
Fiscal Quarter occurring during the term of this Agreement, (B) on the
Expiration Date or (C) upon acceleration of the Notes. Any issuance of an
amendment to extend the stated expiration date of a Letter of Credit or an
amendment to increase the Stated Amount of a Letter of Credit shall be treated
as an issuance of a new Letter of Credit for purposes of calculation of the
Letter of Credit Fee and the L/C Fronting Fee due and payable hereunder. After
the occurrence of an Event of Default and during the continuation thereof, the
rate at which the Letter of Credit Fee is calculated shall be increased by two
hundred (200) basis points (2%) above the pre-default rate.
(ii) The Borrower shall also pay to the L/C Issuer for the L/C
Issuer's own account the L/C Issuer's customary documentation fees payable with
respect to the Letters of Credit as the L/C Issuer may generally charge from
time to time. Without limitation, the foregoing shall include all charges and
expenses paid or incurred by the L/C Issuer in connection with any Letter of
Credit, including without limitation: (A) correspondents' charges, if any, (B)
any and all reasonable out-of-pocket expenses and charges of the L/C Issuer in
connection with the performance, administration, interpretation, collection and
enforcement of this Agreement and any Letter of Credit, including all reasonable
legal fees and expenses, and (C) any and all applicable reserve or similar
requirements and any and all premiums, assessments, or levies imposed upon the
L/C Issuer by any Official Body.
(iii) If by reason of (A) any change in any Law or any change in
the interpretation or application by any judicial or regulatory authority of any
Law which
occurs after the date hereof or (B) compliance by the L/C Issuer with any
direction, request or requirement which occurs after the date hereof (whether or
not having the force of law) of any Official Body:
(1) the L/C issuer shall be subject to any tax, levy, charge or
withholding of any nature or to any variation thereof or to any penalty with
respect to the maintenance or fulfillment of its obligations under this Section
2.18, whether directly or by such being imposed on or suffered by the L/C
Issuer;
(2) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of the Letters of Credit; or
(3) there shall be imposed on the L/C Issuer any other condition
regarding this Section 2.18 or the Letters of Credit;
and if the result of any of the foregoing is to directly or indirectly increase
the cost to the L/C Issuer of issuing or maintaining any Letter of Credit, or to
reduce the amount receivable in respect thereof by, the L/C Issuer, then and in
any such case the L/C Issuer may, at any time after the additional cost is
incurred or the amount receivable is reduced, notify the Borrower and the Agent,
and the Borrower shall pay on demand such amounts as the L/C Issuer may specify
to be necessary to compensate the L/C Issuer for such additional cost or reduced
receipt, together with interest on such amount from the date of the notice of
such event which results in such increased cost or reduction in amount
receivable until payment in full thereof at a rate equal at all times to the
Base Rate. The determination by the L/C Issuer of any amount due pursuant to
this Subsection 2.18(b)(iii) as set forth in a certificate setting forth the
calculation thereof, shall, in the absence of manifest error, be final and
conclusive and binding on all of the parties hereto.
For purposes of this Agreement, the term "Applicable Standby Letter of Credit
Fee" shall mean the rate per annum set forth in the chart below which
corresponds to the range of ratios in which the Borrower's Consolidated Senior
Indebtedness to Consolidated EBITDA Ratio as at the end of the preceding Fiscal
Quarter falls:
Consolidated Senior Indebtedness Applicable Letter of
to Consolidated EBITDA Ratio Credit Fee
- -----------------------------------------------------------------------------------------------------
Less than 0.5 to 1.0 .50%
- -----------------------------------------------------------------------------------------------------
Equal to or greater than 0.5 to 1.0 but less than 1.0 to 1.0
.625%
- -----------------------------------------------------------------------------------------------------
Equal to or greater than 1.0 to 1.0 but less than or equal to 1.5 to
1.0 .75%
- -----------------------------------------------------------------------------------------------------
Equal to or greater than 1.5 to 1.0 but less than or equal to 2.0 to
1.0 .875%
- -----------------------------------------------------------------------------------------------------
Equal to or greater than 2.0 to 1.0 1.00%
- -----------------------------------------------------------------------------------------------------
All adjustments shall be determined as of the date the Borrower's financial
statements and Compliance Certificate are required to be delivered pursuant to
items (a), (b) and (c) of Section 6.02. The foregoing notwithstanding, the
Applicable Letter of Credit Fee from the Closing Date to and including the
December 1998 Delivery Date shall be .50%.
(c) Immediately upon the issuance of each Letter of Credit and each
increase in the Stated Amount thereof, each Lender hereby agrees to irrevocably
purchase and shall be deemed to have irrevocably purchased from the L/C Issuer
an undivided, full risk, non-recourse participation in such Letter of Credit and
drawings thereunder in an amount equal to such Lender's Ratable Share of the
maximum amount which is or at any time may become available to be drawn
thereunder. In the event that the L/C Issuer is required for any reason to
refund or repay to the Borrower, any guarantor or any other Person all or any
portion of any amount remitted to the L/C Issuer pursuant to this Agreement, the
Lenders shall promptly remit to the L/C Issuer, upon three (3) Business Days'
demand therefor, their respective Ratable Shares of the amount which is so
refunded or repaid.
(d) In the event any restrictions are imposed upon the L/C Issuer or
any of the Lenders by any Law or any Official Body having jurisdiction over the
banking activities of the L/C Issuer or any Lender which would prevent the L/C
Issuer from issuing the Letters of Credit or amending the Letters of Credit or
would prevent any Lender from honoring its obligations under this Section 2.18,
the commitment of the L/C Issuer to issue the Letters of Credit or enter into
any amendment with respect thereto shall be immediately suspended. If any Lender
believes any such restriction would prevent such Lender from honoring its
obligations under this Section 2.18, it shall promptly notify the Agent. The
Agent shall promptly notify the Borrower, the L/C Issuer and the other Lenders
of the existence and nature of (i) any restriction which would cause the
suspension of the commitment of the L/C Issuer to issue the Letters of Credit or
to enter into amendments with respect thereto and (ii) any restriction which
would prevent any Lender from honoring its obligations under this Section 2.18.
The Borrower will thereupon undertake reasonable efforts to obtain the
cancellation of all outstanding Letters of Credit; provided, however, that
-------- -------
the refusal of any beneficiary of a Letter of Credit to surrender such Letter of
Credit will not be an Event of Default hereunder, provided that the Borrower
shall undertake good faith efforts to obtain substitute letters of credit for
the then existing and outstanding Letters of Credit. Nothing contained in this
Section 2.18 shall be deemed a termination of the Revolving Credit Commitments
and, in the event of a suspension of the commitment of the L/C Issuer to issue
Letters of Credit as set forth above, the Borrower may continue to borrow under
the Revolving Credit Commitments provided the requirements of Section 5.02 are
complied with.
(e) When the Borrower desires the issuance of a Letter of Credit, the
Borrower shall deliver a duly completed Application for Letter of Credit to the
L/C Issuer, with a copy to the Agent, no later than 11:00 A.M. (Pittsburgh,
Pennsylvania time) at least three (3) Business Days, or such shorter period as
may be agreed to by the L/C Issuer, in advance of the proposed date of issuance.
Upon satisfaction of the conditions set forth in Section 5.01, if applicable,
and Section 5.02, the L/C Issuer shall be obligated to issue the Letter of
Credit and shall notify the Agent and each Lender of such issuance. In
determining whether to pay under a Letter of Credit, the L/C Issuer shall be
responsible only to determine that the documents and certificates required to be
delivered under the Letter of Credit have been delivered and that they comply on
their face with the requirements of the Letter of Credit.
(f) In the event of any request for drawing under a Letter of Credit
by the beneficiary thereof, the L/C Issuer shall immediately notify the Borrower
and the Agent, and the Borrower shall reimburse, or cause the reimbursement of,
the L/C Issuer on demand as set
forth in the applicable Application for Letter of Credit in an amount in same
day funds equal to the amount of such drawing; provided, however, that anything
contained in this Agreement to the contrary notwithstanding, unless the Borrower
shall have notified the Agent and the L/C Issuer prior to such time that the
Borrower intends to reimburse the L/C Issuer for all or a portion of the amount
of such drawing with funds other than the proceeds of Loans, the Borrower shall
be deemed to have given a Loan Request to the Agent requesting the Lenders to
make Loans on the first Business Day immediately following the date on which
such drawing is honored in an aggregate amount equal to the excess of the amount
of such drawing over the amount received by the L/C Issuer from such other funds
in reimbursement thereof (the "Unreimbursed L/C Draw"), plus accrued interest on
such amount at the rate set forth in Subsection 2.08. Any such Loan shall be
deemed advanced to the Borrower. If the Borrower shall be deemed to have given a
Loan Request, then, subject to satisfaction or waiver of the conditions
specified in Section 5.02, the Lenders shall, all as set forth in Section
2.18(g) hereof, on the first Business Day immediately following the date of such
drawing, make Loans in the aggregate amount of the Unreimbursed L/C Draw plus
accrued interest on such amount at the applicable rate set forth in Section
2.08. The proceeds of any such Loans shall be applied directly by the Agent upon
receipt from the Lenders to reimburse the L/C Issuer for the Unreimbursed L/C
Draw plus accrued interest on such amount. The foregoing shall not limit or
impair the obligation of the Borrower to reimburse the L/C Issuer on demand.
(g) In the event that the Borrower shall fail to reimburse the L/C
Issuer on demand as provided in the applicable Application for Letter of Credit
and Section 2.18(f) above in an amount equal to the amount of any drawing
honored by the L/C Issuer under a Letter of Credit plus accrued interest, the
L/C Issuer shall promptly notify the Agent and each Lender of the Unreimbursed
L/C Draw plus accrued interest on such amount of such drawing and of such
Lender's respective participation therein. Each Lender shall make available to
the L/C Issuer an amount equal to its respective participation in same day
funds, at the office of the L/C Issuer specified in such notice, not later than
12:00 Noon (Pittsburgh, Pennsylvania time) on the Business Day after the date
specified in such notice by the L/C Issuer. In the event that any Lender fails
to make available to the L/C Issuer the amount of such Lender's participation in
such Letter of Credit as provided in this Section 2.18(g), the L/C Issuer shall
be entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Effective Rate for three (3) Business Days and
thereafter at the Base Rate. Nothing in this Section 2.18(g) shall be deemed to
prejudice the right of any Lender to recover its Ratable Share of the
Unreimbursed L/C Draw from the L/C Issuer pursuant to this Section 2.18(g) in
the event that it is determined by a court of competent jurisdiction that
payment with respect to a Letter of Credit by the L/C Issuer constituted gross
negligence or willful misconduct on the part of the L/C Issuer. The L/C Issuer
shall distribute to each Lender which has paid all amounts payable by it under
this Section 2.18(g) with respect to a Letter of Credit such other Lender's
Ratable Share of all payments received by the L/C Issuer from the Borrower in
reimbursement of drawing honored by the L/C Issuer under the Letter of Credit
when such payments are received.
(h) The obligations of the Borrower under this Agreement to reimburse
the L/C Issuer for all drawings upon the Letters of Credit shall be absolute,
unconditional and irrevocable, and shall not be subject to any right of set-off
or counterclaim and shall be paid or performed strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including the
following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
Letter of Credit or any of the Loan Documents;
(ii) any amendment or waiver of any provision of all or any of the
Loan Documents;
(iii) the existence of any claim, set-off, defense or other rights
which the Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such beneficiary
or any such transferee may be acting), the L/C Issuer, the Agent or any Lender
(other than the defense of payment to the L/C Issuer in accordance with the
terms of this Agreement) or any other Person, whether in connection with this
Agreement, the Loan Documents or any transaction contemplated hereby or thereby
or any unrelated transaction;
(iv) any draft, demand, certificate, statement or document
presented under any Letter of Credit, appearing on its face to be valid and
sufficient, but proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(v) payment by the L/C Issuer under any Letter of Credit against
presentation of any document which does not comply with the terms of the Letter
of Credit, provided that such payment shall not have constituted gross
negligence or willful misconduct of the L/C Issuer;
(vi) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, not resulting from gross negligence or
willful misconduct of the L/C Issuer; and
(vii) the fact that a Default or Event of Default shall have
occurred and be continuing.
(i) This Agreement is intended to supplement each Application for
Letter of Credit executed by the Borrower and delivered to the L/C Issuer.
Whenever possible this Agreement is to be construed as consistent with each
Application for Letter of Credit but, to the extent that the provisions of this
Agreement and each Application for Letter of Credit conflict, the terms of this
Agreement shall control.
(j) Obligations Absolute. Notwithstanding any other provision of this
--------------------
Agreement, each Lender hereby agrees that its obligation to participate in each
Letter of Credit issued in accordance herewith and its obligation to make the
payments to be made by it under this Section 2.18 is absolute, irrevocable and
unconditional and shall not be affected by any event, condition or circumstance
whatever. The failure of any Lender to make any such payment shall not relieve
any other Lender of its funding obligation hereunder on the date due, but no
Lender shall be responsible for the failure of any other Lender to meet its
funding obligations hereunder.
(k) In addition to amounts payable as elsewhere provided in this
Section 2.18, the Borrower hereby agrees to protect, indemnify, pay and save the
Agent or the L/C Issuer harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Agent or the L/C Issuer may incur or be subject to as
a consequence, direct or indirect, of (i) the issuance of the Letters of Credit
or any amendment thereto, other than as a result of the gross negligence or
willful misconduct of the Agent or the L/C Issuer as determined by a court of
competent jurisdiction, (ii) the failure of the L/C Issuer to honor a draw under
any Letter of Credit if the L/C Issuer in good faith and upon advice of counsel
believes that it is prohibited from making such payment as a result of any
requirement of Law or of any Official Body, or (iii) any material breach by the
Borrower of any representation, warranty, covenant, term or condition in, or the
occurrence of any default under, any document related to the issuance or any
amendment of the Letters of Credit. If any proceeding shall be brought or
threatened against the Agent or the L/C Issuer by reason of or in connection
with any event described in clauses (i) through (iii) above, the Agent shall
promptly notify the Borrower in writing, and the Borrower shall assume the
defense thereof, including the employment of counsel and payment of all costs of
litigation. Notwithstanding the preceding sentence, the Agent and the L/C Issuer
shall have the right to employ its own counsel and to determine its own defense
of such action in any such case, but the fees and expenses of such counsel shall
be at the expense of the Agent or the L/C Issuer, as the case may be, unless (x)
the employment of such counsel shall have been authorized in writing by the
Borrower, (y) the Borrower, after the aforementioned notice of the action, shall
not have employed counsel to have charge of such defense or (z) if the position
of the Borrower is adverse or contrary to the position advocated by the Agent or
the L/C Issuer, as the case may be. In each case described in clauses (x), (y)
and (z) immediately above the reasonable fees and expenses of counsel for the
Agent or the L/C Issuer, as the case may be shall be borne by the Borrower. The
Borrower shall not be liable for any settlement of any such action affected
without its consent.
(l) The L/C Issuer is hereby expressly authorized and directed to
honor any request for payment which is made under and in compliance with the
terms of any Letter of Credit without regard to, and without any duty on the L/C
Issuer's part to inquire into, the existence of any disputes or controversies
between the Borrower, the beneficiary of any Letter of Credit or any other
Person, or the respective rights, duties or liabilities of any of them or
whether any facts or occurrences represented in any of the documents presented
under any Letter of Credit are true or correct. Furthermore, the Borrower fully
understands and agrees that the L/C Issuer's sole obligation to the Borrower
shall be limited to honoring requests for payment made under and in compliance
with the terms of any Letter of Credit, the Application for Letter of Credit
therefor and this Agreement and the L/C Issuer's obligation remains so limited
even if the L/C Issuer may have assisted the Borrower in the preparation of the
wording of any Letter of Credit or any documents required to be presented
thereunder or that the L/C Issuer may otherwise be aware of the underlying
transaction giving rise to any Letter of Credit and this Agreement.
(m) As between the Borrower and the L/C Issuer, the Borrower assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit by,
the beneficiaries of the Letters of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer shall not be responsible: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for or
the issuance or amendment of the Letters of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign the Letters of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of a
beneficiary of a Letter of Credit to comply fully with conditions required in
order to draw upon such Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telecopy, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms; (vi) for any loss
or delay in the transmission or otherwise of any document required in order to
make a draw under the Letters of Credit or of the proceeds thereof; (vii) for
the misapplication by a beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; (viii) for any consequences arising
from causes beyond the control of the L/C Issuer, including, without limitation,
any Law; and (ix) for any other circumstances whatsoever in making or failing to
make payment under a Letter of Credit; except that the Borrower shall have a
claim against the L/C Issuer, and the L/C Issuer shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower by a court of competent
jurisdiction to be the result of (i) the L/C Issuer's willful misconduct or
gross negligence in determining whether documents presented under a Letter of
Credit comply with the terms of the Letter of Credit, (ii) the L/C Issuer's
willful misconduct or gross negligence in paying a draw under a Letter of Credit
to any Person other than the beneficiary of such Letter of Credit or its lawful
successor, representative or assign (or as otherwise directed in writing by the
beneficiary of such Letter of Credit) or (iii) the L/C Issuer's willful failure
to pay under a Letter of Credit after the presentation to it by the beneficiary
of such Letter of Credit or its lawful successor, representative or assign of a
sight draft and certificate or other documents strictly complying with the terms
and conditions of such Letter of Credit, unless the L/C Issuer in good faith and
upon advice of counsel believes that it is prohibited by law or other legal
authority from making such payment. None of the above shall affect, impair, or
prevent the vesting of any of the L/C Issuer's rights or powers hereunder.
(n) Except for the L/C Issuer's obligations to issue Letters of Credit
hereunder and its obligations under such Letters of Credit, the L/C Issuer shall
have no liability to the Borrower from a reduction of the L/C Issuer's credit
rating or any deterioration in its financial condition.
(o) The Borrower shall bear and pay all reasonable expenses of every
kind (including all reasonable attorneys' fees) of the enforcement of any of the
L/C Issuer's rights under this Agreement or the Letters of Credit, or of any
claim or demand by the L/C Issuer against the Borrower, or of any actual or
attempted sale, exchange, enforcement, collection, maintenance, retention,
insurance, compromise, settlement, release, delivery on trust receipt, or other
security agreement, or delivery of any such security, and of the receipt of
proceeds thereof, and will repay to the L/C Issuer any such expenses incurred by
the L/C Issuer.
(p) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the L/C Issuer
under or in connection with the Letters of Credit or the related sight drafts or
certificates or documents, if
taken or omitted in good faith, shall not put the L/C Issuer under any resulting
liability to the Borrower.
(q) Whenever appropriate to prevent unjust enrichment and to the end
that the Borrower shall bear substantially all of the risks relative to any
Letter of Credit and the underlying transactions, the L/C Issuer shall be
subrogated (for purposes of defending against the Borrower's claims and
proceeding against others to the extent of the L/C Issuer's liability to the
Borrower) to the Borrower's rights against any Person who may be liable to the
Borrower on any underlying transaction, to the rights of any holder in due
course or Person with similar status against the Borrower, and to the rights of
the beneficiary or its assignee or person with similar status against the
Borrower.
(r) Except and to the extent inconsistent with the specific provisions
hereof, this Agreement, each Letter of Credit hereunder and all transactions in
connection therewith shall be interpreted, construed and enforced according to:
(i) the "Uniform Customs and Practice for Documentary Credits" (1993 Revision),
International Chamber of Commerce Publication No. 500 and subsequent revisions
thereof which shall supersede inconsistent provisions of applicable law to the
extent not prohibited by applicable law and (ii) the laws of the Commonwealth of
Pennsylvania, including, without limitation, the Uniform Commercial Code, and
excluding conflict of laws rules.
2.19. Taxes.
-----
(a) No Deductions. All payments made by the Borrower hereunder and
-------------
under each Note shall be made free and clear of and without deduction for any
present or future taxes, levies, imposts, deductions, charges, or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on the net
income of any Lender and all income and franchise taxes applicable to any Lender
of the United States (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities 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 or under any Note, (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 2.19(a) each Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall timely pay the full amount deducted
to the relevant tax authority or other authority in accordance with applicable
law.
(b) Stamp Taxes. In addition, the Borrower agrees to pay any present
-----------
or future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made hereunder or from
the execution, delivery, or registration of, or otherwise with respect to, this
Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) Indemnification for Taxes Paid by a Lender. The Borrower shall
------------------------------------------
indemnify each Lender for the full amount of Taxes or Other Taxes (including
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.19(c)) paid by any Lender and any liability
(including penalties, interest, and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date a Lender makes written demand therefor.
(d) Certificate. Within 30 days after the date of any payment of any
-----------
Taxes or Other Taxes by the Borrower on behalf of a Lender, the Borrower shall
furnish to each Lender, at its address referred to herein, the original or a
certified copy of a receipt evidencing payment thereof. If no Taxes are payable
in respect of any payment by the Borrower, the Borrower shall, if so requested
by a Lender, provide a certificate of an officer of the Borrower to that effect.
(e) Withholding. Each Lender that is not incorporated under the laws
-----------
of the United States of America or a state thereof agrees that it will deliver
to the Borrower and the Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be (assuming that it is entitled to do so), and (ii) two duly completed
copies of Internal Revenue Service Form W-8 or W-9 or successor applicable form.
Each such Lender also agrees to deliver to the Borrower and the Agent two
further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from
withholding tax or after the occurrence of any event requiring a change in the
most recent form previously delivered by it to the Borrower and the Agent, and
such extensions or renewals thereof as may reasonably be requested by the
Borrower or the Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Such Lender shall certify (i) in the case of Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes (assuming
that it is entitled to do so) and (ii) in the case of Form W-8 or W-9, that it
is entitled to an exemption from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other agreement
--------
of the Borrowers hereunder, the agreements and obligations of the Borrower
contained in this Section 2.19 shall survive the payment in full of principal
and interest hereunder and under any instrument delivered hereunder.
2.20. Payments. All payments and prepayments to be made in
--------
respect of principal, interest, Unreimbursed L/C Draws, Fees, or other amounts
due from the Borrower hereunder (except those Optional Currency payments and
prepayments made pursuant to Section 2.13(f) hereof) shall be payable prior to
11:00 A.M. (Pittsburgh, Pennsylvania time) on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and without setoff, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. Such
payments shall be made to the Agent at the Principal Office for the ratable
account of the Lenders or L/C Issuer, as the case may be, in Dollars and in
immediately available funds, and the Agent shall promptly distribute such
amounts to the Lenders or L/C Issuer, as the case may be, in immediately
available funds in accordance with the terms and provisions of Section 9.10 of
this Agreement. The Agent's, the L/C Issuer's and each Lender's statement of
account, ledger or other relevant
record shall, in the absence of manifest error, be conclusive as the statement
of the amount of principal of and interest on the Loans, the Unreimbursed L/C
Draws, Fees and other amounts owing under this Agreement and shall be deemed an
"account stated." Notwithstanding anything herein to the contrary, (i) any
administration or underwriting fee paid by the Borrower to the Agent shall be
solely for the account of the Agent, (ii) any L/C Fronting Fees paid by the
Borrower shall be solely for the account of the L/C Issuer and (iii) any
interest paid on any Unreimbursed L/C Draw to the extent a Lender has not been
required to honor or has not honored its funding obligations pursuant to Section
2.18(g) hereof shall be solely for the account of the L/C Issuer.
2.21. Judgment Currency.
-----------------
(a) Currency Conversion Procedures for Judgments. If for the purposes
--------------------------------------------
of obtaining judgment in any court it is necessary to convert a sum due
hereunder or under a Note in any currency (the "Original Currency") into another
currency (the "Other Currency"), the parties hereby agree, to the fullest extent
permitted by Law, that the rate of exchange used shall be that at which in
accordance with normal banking procedures each Lender could purchase the
Original Currency with the Other Currency after any premium and costs of
exchange on the Business Day preceding that on which final judgment is given.
(b) Indemnity in Certain Events. The obligation of the Borrower in
---------------------------
respect of any sum due from the Borrower to any Lender hereunder shall,
notwithstanding any judgment in an Other Currency, whether pursuant to a
judgment or otherwise, be discharged only to the extent that, on the Business
Day following receipt by any Lender of any sum adjudged to be so due in such
Other Currency, such Lender may in accordance with normal banking procedures
purchase the Original Currency with such Other Currency. If the amount of the
Original Currency so purchased is less than the sum originally due to such
Lender in the Original Currency, the Borrower agrees, as a separate obligation
and notwithstanding any such judgment or payment, to indemnify such Lender
against such loss.
ARTICLE III
LOAN DISBURSEMENT ACCOUNT, GUARANTEES, ETC.
------------------------------------------
3.01. Loan Disbursement Account. The Borrower shall maintain at all
-------------------------
times during this Agreement with the Agent, at the Agent's office in Pittsburgh,
Pennsylvania, a demand deposit account (the "Loan Disbursement Account"), into
which proceeds of Loans and other monies transferred to the Borrower hereunder
shall be deposited from time to time. The Loan Disbursement Account shall be in
the name of the Borrower and, subject to the other provisions of this Agreement
and the other Loan Documents, monies therein shall be disbursed as directed by
the Borrower, from time to time. To secure the payment and performance of Lender
Obligations, the Borrower hereby pledges and assigns, and grants to the Agent
for the benefit of the Agent, the L/C Issuer and the Lenders, a lien on and
security interest in the Loan Disbursement Account, all funds from time to time
deposited or held therein, all interest and other income derived therefrom, and
all proceeds of all the foregoing.
3.02. Designation of Subsidiary Guarantors. Each Subsidiary of the
------------------------------------
Borrower incorporated or organized in the United States of America or in a state
thereof, whether now in existence or hereafter acquired shall be automatically
designated as a Subsidiary Guarantor by
the Lenders. Any Subsidiary designated as a Subsidiary Guarantor shall continue
as a Subsidiary Guarantor until released in writing by all of the Lenders.
3.03. Foreign Subsidiaries. The Borrower shall, and shall cause
--------------------
each of its domestic Subsidiaries, to pledge to the Agent for the benefit of the
Lenders 65% of its ownership interest in each Subsidiary not incorporated or
organized in the United States of America or a state thereof.
3.04. Further Cooperation. The Borrower shall perform, or cause each
-------------------
other Loan Party to perform, on the reasonable request of the Agent and at the
Borrower's expense, such reasonable acts as may be necessary or reasonably
advisable to carry out the intent of this Agreement and the other Loan
Documents. Without limiting the generality of the preceding sentence, the
Borrower shall cause each newly-created or acquired Subsidiary Guarantor to
execute and deliver a Subsidiary Guaranty to the Agent with a reasonable period
of time following the creation or acquisition of such Subsidiary Guarantor and
shall execute and deliver or cause the relevant Loan Party to execute and
deliver a Pledge Agreement relating to the equity interest in any hereafter
acquired or created foreign Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Representations and Warranties. The Borrower represents and warrants to the
------------------------------
Agent, each of the Lenders and the L/C Issuer as follows:
4.01. Organization and Qualification.
------------------------------
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, the Borrower has the lawful power to own or lease its properties
and to engage in the business it presently conducts or proposes to conduct; and
the Borrower is duly licensed or qualified and in good standing in each
jurisdiction listed on Schedule 4.01 hereto and in all other jurisdictions where
-------------
the property owned or leased by it or the nature of the business transacted by
it makes such licensing or qualification necessary, except for those
jurisdictions where the Borrower's non-qualification would not cause there to be
a Material Adverse Change.
(b) Each Subsidiary of the Borrower is a corporation, business
trust, limited liability company or limited partnership, as the case may be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, shown on
Schedule 4.01; each Subsidiary of the Borrower has the lawful power to own or
- -------------
lease its properties and to engage in the business it presently conducts or
proposes to conduct; and each Subsidiary of the Borrower is duly licensed or
qualified and in good standing in each jurisdiction listed on Schedule 4.01
-------------
hereto and in all other jurisdictions where the property owned or leased by it
or the nature of the business transacted by it makes such licensing or
qualification necessary, except for those jurisdictions where such Subsidiary's
non-qualification would not cause there to be a Material Adverse Change.
4.02. Capitalization and Ownership. As of September 30, 1998, the
----------------------------
authorized capital stock of the Borrower consists of 200,000,000 shares of
common stock of which
49,041,861 shares were issued and outstanding, and 20,000,000 shares of
preferred stock, of which one (1) share is issued and outstanding. All of the
capital stock of the Borrower has been validly issued and is fully paid and non-
assessable. Except as set forth in Schedule 4.02, there are no options, warrants
-------------
or other rights outstanding to purchase any such capital stock.
4.03. Subsidiaries. Except for the Subsidiaries and investments in
------------
other Persons set forth in Schedule 4.03, the Borrower does not own directly or
-------------
indirectly any capital stock of any other Person, is not a partner (general or
limited) of any partnership, is not a party to any joint venture and does not
own (beneficially or of record) any equity interest or similar interest in any
other Person.
4.04. Power and Authority. The Borrower and each other Loan
-------------------
Party has full power to enter into, execute, deliver, carry out and perform this
Agreement and the Loan Documents to which it is a party, to incur the
Indebtedness contemplated by the Loan Documents and to perform its obligations
under the Loan Documents to which it is a party and all such actions have been
duly authorized by all necessary corporate proceedings on its part.
4.05. Validity and Binding Effect. This Agreement has been,
---------------------------
and each Loan Document, when executed and delivered by the Borrower and each
other Loan Party, will have been, duly and validly executed and delivered by the
Borrower or such Loan Party. This Agreement and each of the other Loan
Documents executed and delivered by the Borrower and each Loan Party will
constitute legal, valid and binding obligations of the Borrower or such Loan
Party, enforceable against the Borrower or such Loan Party in accordance with
their respective terms, except to the extent that enforceability of any of the
Loan Documents may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance.
4.06. No Conflict.
-----------
(a) Neither the execution and delivery by the Borrower of this
Agreement or the Loan Documents to which the Borrower is a party, nor the
consummation of the transactions herein or therein contemplated, nor compliance
with the terms and provisions hereof or thereof by the Borrower will (i)
conflict with, constitute a default under or result in any breach of (A) the
terms and conditions of the articles of incorporation, by-laws or other
organizational documents of the Borrower or (B) any Law or any agreement or
instrument or order, writ, judgment, injunction or decree to which the Borrower
is a party or by which it is bound or to which it is subject, which conflict,
default or breach would cause a Material Adverse Change, or (ii) result in the
creation or enforcement of any Lien upon any property (now or hereafter
acquired) of the Borrower (other than the Permitted Liens).
(b) Neither the execution and delivery by a Loan Party of a
Subsidiary Guaranty or Pledge Agreement to which such Loan Party is a party, nor
the consummation of the transactions contemplated by this Agreement or the other
Loan Documents, nor compliance with the terms and provisions hereof or thereof
by such Loan Party will (i) conflict with, constitute a default under or result
in any breach of (A) the terms and conditions of the articles of incorporation,
by-laws or other organizational documents of such Subsidiary or (B) any Law or
any agreement or instrument or order, writ, judgment, injunction or decree to
which such Loan Party is a party or by which it is bound or to which it is
subject, which conflict, default or
breach would cause a Material Adverse Change, or (ii) result in the creation or
enforcement of any Lien upon any property (now or hereafter acquired) of such
Loan Party (other than the Permitted Liens).
4.07. Litigation. Except for the litigation set forth on Schedule
---------- --------
4.07, there are no actions, suits, proceedings or investigations pending or, to
- ----
the knowledge of the Borrower, threatened against the Borrower or any Subsidiary
of the Borrower, at law or in equity, before any Official Body which
individually or in the aggregate, if adversely determined, would be likely to
result in any Material Adverse Change. Neither the Borrower nor any Subsidiary
of the Borrower is in violation of any order, writ, injunction or decree of any
Official Body which could be expected to result in any Material Adverse Change.
4.08. Financial Statements.
--------------------
(a) Financial Statements. The Borrower has delivered to the
--------------------
Agent the consolidated annual financial statements of the Borrower and its
Subsidiaries for the Fiscal Year ended December 31, 1997, and the consolidated
quarterly financial statements of the Borrower and its Subsidiaries for the
Fiscal Quarter ended September 30, 1998. All such financial statements are
complete and correct in all material respects and fairly present the
consolidated financial condition of the Borrower and its Subsidiaries in all
material respects and the results of their operations as of the dates and for
the periods referred to, and have been prepared in accordance with GAAP
throughout the period included.
(b) Accuracy of Financial Statements. The Borrower and its
--------------------------------
Subsidiaries have no material liabilities, contingent or otherwise, that are not
disclosed in the financial statements referred to in clause (a) above and that
would be required to be disclosed in accordance with GAAP, except for those
incurred since the date of such financial statements in the ordinary course of
business and, in the case of quarterly financial statements, subject to year end
audit adjustments.
4.09. Margin Stock; Section 20 Subsidiaries. Neither the Borrower nor
-------------------------------------
any of its Subsidiaries engage or intend to engage principally, or as one of its
important activities, in the business of incurring Indebtedness or extending
credit to others (including, without limitation, any of the Subsidiaries of the
Borrower) for the purpose, immediately, incidentally or ultimately, of
purchasing or carrying margin stock (within the meaning of any Margin
Regulation). No part of the proceeds of any Loan has been or will be used,
immediately, incidentally or ultimately, to purchase or carry any margin stock
or to extend credit to others (including, without limitation, any of its
Subsidiaries) for the purpose of purchasing or carrying any margin stock or to
refund or retire Indebtedness originally incurred for such purpose, or for any
purpose which entails a violation of or which is inconsistent with the
provisions of the Margin Regulations. The Borrower does not intend to hold, and
shall not permit its Subsidiaries to hold, margin stock. Neither the Borrower
not any of its Subsidiaries intends to use any portion of the proceeds of the
Loans, directly or indirectly, to purchase during the underwriting period, or
for thirty (30) days thereafter, Ineligible Securities being underwritten by a
Section 20 Subsidiary.
4.10. Full Disclosure. Neither this Agreement nor any Loan
---------------
Document, nor any certificate, statement, agreement or other document furnished
to the Agent, the L/C Issuer or
any Lender in connection herewith or therewith, contains any misstatement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to the Borrower
which materially adversely affects the business, property, assets, financial
condition, results of operations or prospects of the Borrower and its
Subsidiaries, taken as a whole, which has not been set forth in this Agreement
or the Loan Documents or in the certificates, statements, agreements or other
documents furnished in writing to the Agent, the Lenders or the L/C Issuer prior
to or at the date hereof in connection with the transactions contemplated hereby
and thereby.
4.11. Tax Returns and Payments. The Borrower is a member of
------------------------
an affiliated group of companies which files consolidated federal tax returns.
All such federal tax returns that are required by law to be filed have been
filed or properly extended. All taxes, assessments and other governmental
charges levied upon members of such affiliated group or any of their respective
properties, assets, income or franchises which are due and payable have been
paid in full other than (i) those presently payable without penalty or interest,
(ii) those which are being contested in good faith by appropriate proceedings
and (iii) those which, if not paid, would not, in the aggregate, constitute a
Material Adverse Change; and as to each of items (i), (ii) and (iii) the
affiliated group has established reserves for such claim as have been determined
to be adequate by application of GAAP consistently applied. There are no
agreements or waivers extending the statutory period of limitations applicable
to any consolidated federal income tax return of the Borrower and its
consolidated Subsidiaries for any period, except as set forth on Schedule 4.11.
-------------
4.12. Consents and Approvals. No consent, approval, exemption, order
----------------------
or authorization of, or a registration or filing with any Official Body or any
other Person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the Loan Documents to
which the Borrower or any Loan Party is a party, except as listed on Schedule
--------
4.12 attached hereto, all of which items set forth on Schedule 4.12 shall have
- ---- -------------
been obtained or made on or prior to the Closing Date.
4.13. No Event of Default; Compliance with Instruments. No
------------------------------------------------
event has occurred and is continuing and no condition exists or will exist after
giving effect to the borrowings to be made on the Closing Date under the Loan
Documents which constitutes an Event of Default or a Default. Neither the
Borrower nor any of its Subsidiaries is in violation of (i) any term of its
certificate of incorporation, by-laws or other organizational documents or (ii)
any material agreement or instrument to which it is a party or by which it or
any of its properties may be subject or bound where such violation would
constitute a Material Adverse Change.
4.14. Compliance with Laws. The Borrower and its Subsidiaries are in
--------------------
compliance in all material respects with all applicable Laws (other than
Environmental Laws, which are addressed in Section 4.20) in all jurisdictions in
which the Borrower, and its Subsidiaries, are presently or will be doing
business except where the failure to do so would not, individually or in the
aggregate, constitute a Material Adverse Change.
4.15. Investment Company; Public Utility Holding Company. Neither the
--------------------------------------------------
Borrower nor any Loan Party is an "investment company" registered or required to
be registered under the Investment Company Act of 1940 or under the "control" of
an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended from time to time, and shall not become such an "investment company" or
under such "control. " Neither the Borrower nor any Loan Party is a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" within the meaning the Public Utility Holding Company Act of
1935, as amended from time to time. The Borrower is not subject to any Law of
any Official Body (in each case whether United States federal, state or local,
or other) having jurisdiction over the Borrower, which purports to restrict or
regulate its ability to borrow money, or to extend or obtain credit, or to
pledge its interests in the Loan Disbursement Account. No other Loan Party is
subject to any Law of any Official Body (in each case whether United States
federal, state or local, or other) having jurisdiction over such Loan Party
which purports to restrict or regulate its ability to borrow money or to extend
or obtain credit.
4.16. Plans and Benefit Arrangements. Except as set forth on Schedule
------------------------------ --------
4.16 hereto:
- ----
(a) The Borrower and each member of the ERISA Group are in
compliance in all material respects with any applicable provisions of ERISA with
respect to all Benefit Arrangements, Plans and Multiemployer Plans. There has
been no Prohibited Transaction with respect to any Benefit Arrangement or any
Plan (other than a Multiemployer Plan) or, to the knowledge of the Borrower,
with respect to any Multiemployer Plan or Multiple Employer Plan, which could
result in any material liability of the Borrower or any other member of the
ERISA Group. The Borrower and all members of the ERISA Group have made when due
any and all payments required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto.
With respect to each Plan and, to the knowledge of Borrower, each Multiemployer
Plan, the Borrower and each member of the ERISA Group (i) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, (ii) have not incurred any liability to the PBGC (other than for premiums
not yet due) and (iii) have not had asserted against them any penalty for
failure to fulfill the minimum funding requirements of ERISA.
(b) To the best of the Borrower's knowledge, each Multiemployer
Plan and Multiple Employer Plan is able to pay benefits thereunder when due.
(c) Neither the Borrower nor any other member of the ERISA Group
has instituted or intends to institute proceedings to terminate any Plan.
(d) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(e) Neither the Borrower nor any other member of the ERISA Group
has incurred or reasonably expects to incur any material withdrawal liability
under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the
Borrower nor any other member of the ERISA Group has been notified by any
Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan or
Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the knowledge of the Borrower, no Multiemployer Plan or Multiple
Employer Plan is reasonably expected to be reorganized or terminated, within the
meaning of Title IV of ERISA.
(f) To the extent that any Benefit Arrangement is insured, the
Borrower and all members of the ERISA Group have paid when due all premiums
required to be paid for all periods ending through and including the Closing
Date. To the extent that any Benefit Arrangement is funded other than with
insurance, the Borrower and all members of the ERISA Group have made when due
all contributions, to the extent required by applicable Law or the terms of such
Benefit Arrangement to be paid for all periods ending through and including the
Closing Date.
4.17. Title to Properties. The Borrower and each of its Subsidiaries
-------------------
have good title to, or a valid leasehold interest in, all their respective real
and personal property, except to the extent the failure to have such title or
leasehold interests is not reasonably likely, individually or in the aggregate,
to result in a Material Adverse Change, and none of such property is subject to
any Lien except Permitted Liens.
4.18. Insurance. There are in full force and effect for the benefit of
---------
the Borrower and its Subsidiaries insurance policies and bonds providing
adequate coverage from reputable and financially sound insurers in amounts
sufficient to insure the assets and risks of the Borrower and its Subsidiaries
in accordance with prudent business practice in the industry of the Borrower and
its Subsidiaries. No notice has been given or claim made and to the knowledge of
the Borrower, no grounds exist, to cancel or void any of such policies or bonds
or to reduce the coverage provided thereby.
4.19. Employment Matters. The Borrower and each Subsidiary of the
------------------
Borrower are in compliance with all employee benefit plans, employment
agreements, collective bargaining agreements and labor contracts (the "Labor
Contracts") and all applicable federal, state and local labor and employment
Laws including, but not limited to, those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, except
where the failure to comply would not constitute a Material Adverse Change.
There are no outstanding grievances, arbitration awards or appeals therefrom
arising out of the Labor Contracts or current or, to the knowledge of the
Borrower, threatened strikes, picketing, handbilling or other work stoppages or
slowdowns at facilities of the Borrower or any Subsidiary of the Borrower which
in any case would constitute a Material Adverse Change. All payments due from
Borrower or any of its Subsidiaries on account of employee health and welfare
insurance which could reasonably be expected to have a Material Adverse Change
if not paid have been paid or accrued as a liability on the books of Borrower or
such Subsidiary.
4.20. Environmental Matters. Except as disclosed on Schedule
--------------------- --------
4.20 hereto:
- ----
(a) The Borrower has not received any Environmental Complaint
from any Official Body or private Person alleging that the Borrower, any
Subsidiary of the Borrower or any prior or subsequent owner of any of the
Property is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. (S)9601, et seq.,
in connection with the Property which Environmental Complaint is reasonably
expected to
result in any Material Adverse Change, and the Borrower has no reason to believe
that such an Environmental Complaint is reasonably likely to be received. There
are no pending or, to the knowledge of the Borrower, threatened Environmental
Complaints relating to the Borrower, any Subsidiary of the Borrower or, to the
Borrower's knowledge, without any inquiry, any prior or subsequent owner of the
Property pertaining to, or arising out of, any Environmental Conditions in
connection with the Property, which Environmental Complaints are reasonably
expected to result in any Material Adverse Change.
(b) Except for conditions, violations or failures which
individually and in the aggregate are not reasonably likely to result in a
Material Adverse Change, there are no circumstances at, on or under the Property
that constitute a breach of or non-compliance with any of the Environmental
Laws, and there are no past or present Environmental Conditions at, on or under
the Property or, to the knowledge of the Borrower, without any inquiry at, on or
under adjacent property, that prevent compliance with the Environmental Laws at
the Property.
(c) Neither the Property nor any structures, improvements,
equipment, fixtures, activities or facilities thereon or thereunder contain or
use Regulated Substances except in compliance with Environmental Laws, other
than such containment or use which individually and in the aggregate is not
reasonably likely to result in any Material Adverse Change. There are no
processes, facilities, operations, equipment or any other activities at, on or
under the Property, or, to the Borrower's knowledge, without any inquiry, at, on
or under adjacent property, that currently result in the release or threatened
release of Regulated Substances on to the Property in violation of the
Environmental Laws, except to the extent that such releases or threatened
releases are not likely to result in a Material Adverse Change.
(d) There are no underground storage tanks, or underground
piping associated with such tanks, used for the management of Regulated
Substances at, on or under the Property that are not in compliance with all
Environmental Laws, other than those with respect to which the failure to comply
with Environmental Laws is not reasonably likely, either individually or in the
aggregate, to result in a Material Adverse Change, and there are no abandoned
underground storage tanks or underground piping associated with such tanks,
previously used for the management of Regulated Substances at, on or under the
Property that have not been either abandoned in place, or removed, in accordance
with the Environmental Laws, other than those with respect to which the failure
to comply with Environmental Laws is not reasonably likely, either individually
or in the aggregate, to result in a Material Adverse Change.
(e) The Borrower and each Subsidiary of the Borrower have all
material permits, licenses, authorizations and approvals necessary under the
Environmental Laws for the conduct of the respective businesses of the Borrower
and each Subsidiary of the Borrower as presently conducted, other than those
with respect to which the failure to comply with Environmental Laws is not
reasonably likely, either individually or in the aggregate, to result in a
Material Adverse Change. The Borrower and each Subsidiary of the Borrower have
submitted all notices, reports and other filings required by the Environmental
Laws to be submitted to an Official Body which pertain to past and current
operations on the Property, except for any failure to submit which would not be
reasonably likely to result in a Material Adverse Change.
(f) Except for violations which individually and in the
aggregate are not likely to result in a Material Adverse Change during the
Borrower's and each Loan Party's ownership or lease of the Property, all past
and present on-site generation, storage, processing, treatment, recycling,
reclamation or disposal of Solid Waste at, on, or under the Property and all
off-site transportation, storage, processing, treatment, recycling, reclamation
or disposal of Solid Waste has been done in accordance with the Environmental
Laws.
4.21. Senior Debt Status. The obligations of the Borrower
------------------
under this Agreement and the Notes rank at least pari passu in priority of
---- -----
payment with all other Indebtedness of the Borrower, except Indebtedness of the
Borrower to the extent secured by Permitted Liens. The obligations of a
Subsidiary Guarantor under a Subsidiary Guaranty executed by such Subsidiary
Guarantor rank at least pari passu in priority of payment with all other
---- -----
Indebtedness of such Subsidiary Guarantor except Indebtedness of such Subsidiary
Guarantor to the extent secured by Permitted Liens. There is no Lien upon or
with respect to any of the properties or income of the Borrower or any of its
Subsidiaries which secures Indebtedness or other obligations of any Person
except for Permitted Liens.
4.22. Solvency. On the date hereof, and as of the date of
--------
each advance of the Loan and issuance or renewal of any Letter of Credit, as
the case may be, and after giving effect to such advance or the issuance or
renewal of a Letter of Credit, each of the Borrower and each Loan Party is, and
will be, Solvent.
4.23. Material Contracts; Burdensome Restrictions. All
-------------------------------------------
material contracts relating to the business operations of each Loan Party,
including all employee benefit plans and Labor Contracts, are valid, binding and
enforceable upon such Loan Party and each of the other parties thereto in
accordance with their respective terms, and there is no material default
thereunder with respect to such Loan Party, and there is no material default
thereunder, to the Loan Parties' knowledge, with respect to parties other than
such Loan Party. No contract, lease, agreement or other instrument to which
Borrower or any of its Subsidiaries is a party or is bound and no provision of
any applicable Law or governmental regulation would reasonably be expected to
have a Material Adverse Change.
4.24 Patents, Trademarks, Copyrights, Licenses, Etc. The
-----------------------------------------------
Borrower and each of its Subsidiaries owns or possesses all the material
patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises, permits and rights necessary to own and operate its
properties and to carry on its business as presently conducted and planned to be
conducted by the Borrower or such Subsidiary, without known possible, alleged or
actual conflict with the rights of others.
4.25 Year 2000 Problem. The Borrower and its Subsidiaries
-----------------
have reviewed areas within their business and operations which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the risk that certain computer applications used by the
Borrower or its Subsidiaries (or any of their respective material suppliers,
customers or vendors) may be unable to recognize and perform properly date-
sensitive functions involving dates prior to and after December 31, 1999 (the
"Year 2000 Problem"). The Year 2000 Problem will not result in any Material
Adverse Change.
4.26. Brokers. No broker or finder acting on behalf of Borrower
-------
brought about the obtaining, making or closing of the loans made pursuant to
this Agreement, and Borrower has no obligation to any other Person in respect of
any finder's or brokerage fees in connection with the loans contemplated by this
Agreement.
4.27. No Material Adverse Change. No event has occurred since
--------------------------
September 30, 1998, and is continuing which has had or would reasonably be
expected to have a Material Adverse Change.
ARTICLE V
CONDITIONS OF LENDING OR ISSUANCE OF LETTER OF CREDIT
-----------------------------------------------------
The obligation of each Lender to make the Loans hereunder, or of the L/C
Issuer to issue Letters of Credit hereunder is subject to the performance by the
Borrower of its obligations to be performed hereunder at or prior to the making
of any such Loans or the issuance of any such Letter of Credit, as the case may
be, and to the satisfaction of the following further conditions.
5.01. Conditions to Initial Borrowings. On the Closing Date
--------------------------------
the following actions shall be completed or satisfied to the sole satisfaction
of the Agent:
(a) The representations and warranties of the Borrower or the
other Loan Parties contained in Article IV and in the other Loan Documents
executed and delivered by the Borrower or any of the other Loan Parties in
connection with the Closing shall be true and accurate in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific date or times referred to therein), and the Borrower, and each other
Loan Party, shall have performed, observed and complied with all covenants and
conditions hereof and contained in the other Loan Documents; no Event of Default
or Default under this Agreement shall have occurred and be continuing or shall
exist; no Material Adverse Change shall have occurred; and there shall be
delivered to the Agent, for the benefit of each Lender, the L/C Issuer and the
Agent, a certificate of the Borrower, dated the Closing Date and signed by the
Chief Executive Officer, President, Chief Financial Officer or Vice President
Finance of the Borrower, to each such effect.
(b) There shall be delivered to the Agent for the benefit of
each Lender and the L/C Issuer a certificate dated the Closing Date and signed
by the secretary or an assistant secretary of the Borrower, certifying as
appropriate as to:
(i) all corporate action taken by the Borrower in connection
with this Agreement and the other Loan Documents;
(ii) the names, offices and titles of the Borrower's officer
or officers authorized to sign this Agreement and the other Loan Documents and
the true signatures of such officer or officers and the identities of the
Authorized Officers permitted to act on behalf of the Borrower for purposes of
this Agreement and the other Loan Documents
and the true signatures of such officers, on which the Agent, each Lender and
the L/C Issuer may conclusively rely;
(iii) (A) copies of the Borrower's organizational documents,
including its articles of incorporation as in effect on the Closing Date
certified by the Secretary of the Commonwealth of Pennsylvania as well as a copy
of the Borrower's by-laws and (B) a certificate as to the continued existence
and good standing of the Borrower issued by the Secretary of the Commonwealth of
Pennsylvania;
(iv) all corporate or partnership action taken by each other
Loan Party in connection with each Subsidiary Guaranty or Pledge Agreement
executed by such Loan Party ;
(v) the names, offices and titles of each Loan Party's
officer or officers authorized to sign each Subsidiary Guaranty or Pledge
Agreement and the true signatures of such officer or officers and the identities
of the Authorized Officers permitted to act on behalf of each Loan Party for
purposes of each Subsidiary Guaranty or Pledge Agreement and the true signatures
of such officers, on which the Agent, each Lender and the L/C Issuer may
conclusively rely; and
(vi) (A) copies of each Loan Party's organizational
documents, as in effect on the Closing Date, certified, by the Secretary of
State of the state of its organization and (B) a certificate as to the continued
existence and good standing of each Loan Party issued by the Secretary of State
of the state of its organization.
(c) This Agreement and the other Loan Documents required by the Agent
to be executed and delivered by the Borrower or another Loan Party at the
Closing shall have been duly executed and delivered by the Borrower to the Agent
for the benefit of the Lenders, the L/C Issuer and the Agent.
(d) There shall be delivered to the Agent for the benefit of each
Lender a written opinion of Buchanan Ingersoll Professional Corporation for the
Borrower and the other Loan Parties, dated the Closing Date and in form and
substance reasonably satisfactory to the Agent and its counsel as to the matters
set forth on Exhibit "F".
-----------
(e) All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to the Agent and its counsel, and the
Agent shall have received all such other counterpart originals or certified or
other copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to the Agent and
said counsel, as the Agent or said counsel may reasonably request.
(f) No Material Adverse Change shall have occurred since September 30,
1998, and no material litigation shall have been instituted by or against the
Borrower or any Subsidiary or any of their respective material properties or
assets; and there shall be delivered to the Agent for the benefit of each
Lender, the L/C Issuer and the Agent a certificate of the Borrower dated the
Closing Date and signed by the Chief Executive Officer,
President, Chief Financial Officer or Vice President Finance of the Borrower to
each such effect.
(g) The Borrower shall deliver evidence acceptable to the Agent that
adequate insurance in compliance with Section 6.05 hereof is in full force and
effect.
(h) All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 4.12 shall have been obtained.
-------------
(i) The making and/or assumption of any Loan or the issuance of a
Letter of Credit or assumption of any reimbursement liability with regard
thereto, shall not contravene any Law applicable to the Borrower, any other Loan
Party, the Agent, the Lenders or the L/C Issuer.
(j) Except as set forth on Schedule 4.07, no action, suit, proceeding,
-------------
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court or other Official Body (i) with respect to the
Borrower or its Subsidiaries or this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby to enjoin,
restrain or prohibit, or to obtain damages in respect of, their performance
under this Agreement or any other Loan Documents or the consummation of the
transactions contemplated hereby or thereby or (ii) which in the reasonable
opinion of Agent would have a Material Adverse Change.
(k) The Agent on its own behalf and on behalf of the Lenders and the
L/C Issuer shall be in receipt of all Fees due and payable on or prior to the
Closing Date and all reimbursable expenses incurred on or prior to the Closing
Date.
(l) The Credit Agreement dated May 30, 1997, as amended, by and among
Mastech Systems Corporation, the lenders party thereto and PNC Bank, National
Association as agent, shall be terminated and all amounts due thereunder shall
have been paid in full.
(m) All matters and circumstances set forth as qualifications,
limitations, exceptions, additional matters or other materials set forth in the
Schedules hereto provided by or on behalf of the Borrower or its Subsidiaries
shall be acceptable to the Agent, the L/C Issuer and the Lenders in their
reasonable discretion.
5.02. Each Additional Loan or Issuance of a Letter of Credit. At the
------------------------------------------------------
time of making any Loans or the issuance of, or renewal of, a Letter of Credit
and after giving effect to the proposed borrowings or issuance:
(a) the representations and warranties of the Borrower contained
in Article IV hereof and in the other Loan Documents shall be true and correct
in all material respects on and as of the earlier of: (x) the date of such
additional Loan or issuance of a Letter of Credit or (y) the specific dates or
times referred to therein, with the same effect as though such representations
and warranties have been made on and as of such date;
(b) the Borrower shall have performed and complied in all material
respects with all covenants and conditions hereof;
(c) no Default or Event of Default shall have occurred and be
continuing or shall exist;
(d) no Material Adverse Change shall have occurred;
(e) the making of any Loan or the issuance of any Letter of Credit
shall not contravene any Law applicable to the Borrower, any of the Lenders or
the L/C Issuer;
(f) the Borrower shall have delivered to the Agent, as regards a
Loan, a duly executed and completed Loan Request and with respect to the
issuance of a Letter of Credit, the Borrower shall have delivered a duly
executed Application for Letter of Credit therefor and otherwise complied with
the reasonable requirements of the L/C Issuer not inconsistent with the terms
hereof; and
(g) Total Utilization shall not exceed the aggregate Revolving
Credit Commitments; provided, however, that prior to the advance of any Loan on
-------- -------
a Borrowing Date the proceeds of which will repay any Unreimbursed L/C Draw, for
the purpose of calculating Total Utilization and compliance with this Subsection
5.02(f) on such date, the existing Total Utilization immediately prior to such
advance shall be reduced pro tanto by the dollar amount of the Loans to
---------
be advanced on such Borrowing Date which will be used to repay any outstanding
Unreimbursed L/C Draws.
5.03. Location of Closing. The Closing shall take place at
-------------------
10:00 A.M., Pittsburgh, Pennsylvania time, on the Closing Date at the offices of
Tucker Arensberg, P.C., 1500 One PPG Place, Pittsburgh, Pennsylvania 15222, or
at such other time and place as the parties agree.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that, until payment in full of the
Loans and interest thereon, payment in full of all Letter of Credit
reimbursement obligations and interest thereon, satisfaction of all of the
Borrower's other obligations hereunder and termination of the Revolving Credit
Commitments, and the expiration and cancellation of all Letters of Credit issued
hereunder, the Borrower shall comply, or cause compliance, at all times with the
affirmative covenants set forth in Sections 6.01 through and including Section
6.14.
6.01. Preservation of Existence, Etc.
-------------------------------
(a) The Borrower shall maintain its corporate existence and its
license or qualification and its good standing in the state of its incorporation
and in each other jurisdiction in which its ownership or lease of property or
the nature of its businesses makes such license or qualification necessary
(except for such other jurisdictions in which such failure to be so licensed or
qualified individually and in the aggregate would not result in a Material
Adverse Change).
(b) Each Subsidiary of the Borrower shall maintain its corporate
existence and its license or qualification and its good standing in the
jurisdiction of its incorporation and in each other jurisdiction in which its
ownership or lease of property or the nature of its businesses makes such
license or qualification necessary (except as otherwise permitted under Section
7.04 and except for such other jurisdictions in which such failure to be so
licensed or qualified individually and in the aggregate would not result in a
Material Adverse Change).
6.02. Accounting System; Reporting Requirements. The Borrower will
-----------------------------------------
maintain, and will cause its Subsidiaries to maintain, a system of accounting
established and administered in accordance with GAAP, and will and will cause
its Subsidiaries to set aside on its books all such proper reserves as shall be
required by GAAP. Further, the Borrower will:
(a) deliver to the Agent, for redelivery to the Lenders, within
forty-five (45) days after the end of each of the first three (3) Fiscal
Quarters in each Fiscal Year of the Borrower, (A) consolidated balance sheet as
at the end of such period for the Borrower and its Subsidiaries, (B)
consolidated statements of income for such period for the Borrower and its
Subsidiaries and, in the case of the second and third quarterly periods, for the
period from the beginning of the current Fiscal Year to the end of such
quarterly period, and (C) consolidated statements of cash flow for such period
for the Borrower and its Subsidiaries and, in the case of the second and third
quarterly periods, for the period from the beginning of the current Fiscal Year
to the end of such quarterly period; and each such statement shall set forth, in
comparative form, corresponding figures for the corresponding period in the
immediately preceding Fiscal Year; and all such statements shall be prepared in
reasonable detail and certified, subject to changes resulting from year-end
adjustments, by the chief financial officer, treasurer or controller of the
Borrower;
(b) deliver to the Agent, for redelivery to the Lenders, within 90
days after the end of each Fiscal Year of the Borrower, (A) consolidated balance
sheets as at the end of such year for the Borrower and its Subsidiaries, (B)
consolidated statements of income for such year for the Borrower and its
Subsidiaries, (C) consolidated statements of cash flow for such year for the
Borrower and its Subsidiaries, and (D) consolidated statements of shareholders
equity for such year for the Borrower and its Subsidiaries; and each such
statement shall set forth, in comparative form, corresponding figures for the
immediately preceding Fiscal Year; and all such financial statements shall
present fairly in all material respects the financial position of the Borrower
and its consolidated Subsidiaries, as at the dates indicated and the results of
its operations and its cash flow for the periods indicated, in conformity with
GAAP; and the Borrower shall cause each of the consolidated financial statements
described in clauses (A) through (D) of this Section 6.02(b) to be certified
without limitation as to scope or material qualification by Arthur Andersen
L.L.P. or other independent certified public accountants acceptable to the
Required Lenders;
(c) deliver to the Agent, together with each delivery of financial
statements pursuant to items (a) and (b) above for redelivery to the Lenders, a
Compliance Certificate of the Borrower substantially in the form of Exhibit
-------
"E" hereto, properly completed and signed by the chief financial officer,
- ---
treasurer or controller of the Borrower, (A) stating (1) that such officer has
reviewed the terms of the Loan Documents and has made, or caused to
be made under his supervision, a review of the transactions and condition of the
Borrower and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence during
such accounting period, and (2) that the Borrower does not have knowledge of the
existence, as at the date of such Compliance Certificate, of any condition or
event which constitutes an Event of Default or a Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Borrower has taken or is taking or
proposes to take with respect thereto, and (B) demonstrating in reasonable
detail compliance as at the end of such accounting period with the restrictions
contained in Section 7.12 hereof;
(d) promptly give written notice to the Agent, for redelivery to
the Lenders, of the happening of any event (which is known to the Borrower)
which constitutes an Event of Default or a Default hereunder, but in no event
shall any such notice be given later than five (5) Business Days after the
Borrower knows or should have known of such event;
(e) promptly give written notice to the Agent, for redelivery to
the Lenders, of any pending or, to the knowledge of the Borrower, overtly
threatened claim in writing, litigation or threat of litigation which arises
between the Borrower, or any of its Subsidiaries, and any other party or parties
(including, without limitation, any Official Body) which claim, litigation or
threat of litigation, individually or in the aggregate, is reasonably likely to
cause a Material Adverse Change, any such notice to be given not later than five
(5) Business Days after any of the Borrower becomes aware of the occurrence of
any such claim, litigation or threat of litigation;
(f) promptly deliver to the Agent, but in no event later than
twenty (20) days after the mailing or filing thereof, for redelivery to the
Lenders, copies of (A) all reports, notices and proxy statements sent by the
Borrower to its shareholders, and (B) all regular and periodic reports and
definitive proxy materials (including but not limited to Forms 10-K, 10-Q and 8-
K) filed by the Borrower with any securities exchange or the Federal Securities
and Exchange Commission;
(g) promptly deliver to the Agent, but in no event later than
twenty (20) days after Borrower receives the same, for redelivery to the
Lenders, copies of any management letters addressed to the Borrower by its
independent certified public accountant; and
(h) such other reports and information as the Agent or the
Required Lenders may from time to time reasonably request.
6.03. Notices Regarding Plans and Benefit Arrangements.
------------------------------------------------
(a) Promptly upon becoming aware of the occurrence thereof, notice
(including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto)
shall be given to the Agent, for redelivery to the Lenders, by the Borrower of:
(i) any Reportable Event with respect to the Borrower or any
member of the ERISA Group,
(ii) any Prohibited Transaction which could subject the
Borrower or any member of the ERISA Group to a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal
Revenue Code in connection with any Plan, Benefit Arrangement or any trust
created thereunder, if such tax and/or penalty is reasonably likely to result in
a Material Adverse Change,
(iii) any assertion of material withdrawal liability with
respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a Multiemployer
Plan by the Borrower or any member of the ERISA Group under Title IV of ERISA
(or assertion thereof), where such withdrawal is likely to result in material
withdrawal liability,
(v) any cessation of operations (by the Borrower of any member
or the ERISA Group) at a facility in the circumstances described in Section
4062(e) of ERISA,
(vi) withdrawal by the Borrower or any member of the ERISA
Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or any member of the ERISA
Group to make a payment to a Plan required to avoid imposition of a lien under
Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA, or
(ix) any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to materially
increase or materially reduce the unfunded benefit liability or obligation to
make periodic contributions.
(b) Promptly after receipt thereof, copies of (i) all notices
received by the Borrower or any member of the ERISA Group of the PBGC's intent
to terminate any Plan administered or maintained by the Borrower or any member
of the ERISA Group, or to have a trustee appointed to administer any such Plan;
and (ii) at the request of the Agent or any Lender each annual report (IRS Form
5500 series) and all accompanying schedules, the most recent actuarial reports,
the most recent financial information concerning the financial status of each
Plan administered or maintained by the Borrower or any member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of the Borrower or any member of the ERISA Group in which any of their
respective personnel participate or from which such personnel may derive a
benefit, and each Schedule B (Actuarial Information) to the annual report filed
by the Borrower or any member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan shall be given to the Agent by the
Borrower, for redelivery to the Lenders.
(c) Promptly upon the filing thereof, copies of any PBGC Form 200,
500, 600 or 601, or any successor form, filed with the PBGC in connection with
the termination of any Plan, for redelivery to the Lenders.
6.04. Payment of Liabilities, Including Taxes, etc. The
--------------------------------------------
Borrower shall duly pay and discharge, and shall cause its Subsidiaries to pay
and discharge (subject, where applicable, to specified grace periods and, in the
case of trade payables, to normal payment practices) promptly as and when the
same shall become due and payable, all liabilities which singularly are in
excess of $100,000 or which in the aggregate exceed $500,000 to which they are
subject or which are asserted against them, including all taxes, assessments and
governmental charges upon them or any of their properties, assets, income or
profits, prior to the date on which penalties attach thereto; provided, however,
-------- -------
the Borrower may choose not to pay any such liabilities, including taxes,
assessments or charges, if the same are being contested in good faith and for
which such reserves (including reserves for any additional amounts which would
be payable as a result of the failure to discharge timely any such liabilities)
or other appropriate provisions, if any, as shall be required by GAAP shall have
been made.
6.05. Maintenance of Insurance. The Borrower shall insure,
------------------------
and shall cause its Subsidiaries to insure, their respective properties and
assets against loss or damage in such amounts as similar properties and assets
are insured by prudent companies in similar circumstances carrying on similar
businesses, and with reputable and financially sound insurers, including self-
insurance to the extent customary. The Borrower will furnish to the Agent for
redelivery to the Lenders on the Closing Date and thereafter simultaneously with
the delivery of the annual financial information delivered pursuant to Section
6.02(b) a certificate of the Borrower executed by an Authorized Officer of the
Borrower certifying that such insurance is in force, is adequate in nature and
amount and complies with the Borrower's obligations under this Section 6.05.
6.06. Maintenance of Properties and Leases. The Borrower and
------------------------------------
its Subsidiaries shall maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties useful
or necessary to their respective businesses, and from time to time, the Borrower
will make or cause to be made all appropriate repairs, renewals or replacements
thereof.
6.07. Maintenance of Permits and Franchises. The Borrower
-------------------------------------
and its Subsidiaries shall maintain in full force and effect all franchises,
permits and other authorizations necessary for the ownership and operation of
their respective properties and business if the failure so to maintain the same,
individually or in the aggregate, would constitute a Material Adverse Change.
6.08. Visitation Rights. The Borrower shall permit, and
-----------------
shall cause its Subsidiaries to permit, any of the officers or authorized
employees or representatives of the Agent or any of the Lenders to visit and
inspect any of the properties of the Borrower, or a Subsidiary of the Borrower,
and to examine and make excerpts from its books and records and discuss its
respective business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Lenders may reasonably
request, provided that
each Lender shall provide the Borrower, or the Subsidiary of the Borrower, as
the case may be, and the Agent with reasonable notice prior to any visit or
inspection and that only the Agent and its authorized employees or
representatives are permitted to conduct audits. After the occurrence of an
Event of Default and during the continuance thereof the Agent and the Lenders
shall have the right of visitation and inspection without prior notice.
6.09. Keeping of Records and Books of Account. The Borrower,
---------------------------------------
and its Subsidiaries, shall maintain and keep proper books of record and account
which enable the Borrower to issue financial statements in accordance with GAAP
and as otherwise required by applicable Laws of any Official Body having
jurisdiction over the Borrower and its Subsidiaries, and in which full, true and
correct entries shall be made in all material respects of all their respective
dealings and business and financial affairs.
6.10. Plans and Benefit Arrangements. The Borrower shall,
------------------------------
and shall cause each member of the ERISA Group to, comply with ERISA, the
Internal Revenue Code and other applicable Laws applicable to Plans and Benefit
Arrangements except where such failure, alone or in conjunction with any other
failure, would not result in a Material Adverse Change. Without limiting the
generality of the foregoing, the Borrower shall cause all of its Plans and all
Plans maintained by any member of the ERISA Group to be funded in accordance
with the minimum funding requirements of ERISA and shall make, and cause each
member of the ERISA Group to make, in a timely manner, all contributions due to
Plans, Benefit Arrangements and Multiemployer Plans.
6.11. Compliance with Laws. The Borrower and its Subsidiaries shall
--------------------
comply with all applicable Laws (other than Environmental Laws) in all respects,
provided that they shall not be deemed to be a violation of this Section 6.11 if
any failure to comply with any Law would not result in fines, penalties, other
similar liabilities or injunctive relief which in the aggregate would constitute
a Material Adverse Change.
6.12. Use of Proceeds. The Borrower will use the proceeds of
---------------
the Loans only for lawful purposes in accordance with Section 2.17 hereof as
applicable and such uses shall not contravene any applicable Law or any other
provision hereof. The Borrower will permit the use of the Letters of Credit only
for lawful purposes in accordance with Section 2.18 hereof as applicable, and
such uses shall not contravene any applicable Law or any other provision hereof.
The Borrower and its Subsidiaries shall not use any portion of the proceeds of
the Loans, directly or indirectly, to purchase during the underwriting period,
or for thirty (30) days thereafter, Ineligible Securities being underwritten by
a Section 20 Subsidiary.
6.13. Environmental Laws.
------------------
(i) The Borrower and its Subsidiaries shall comply in all material
respects, subject to the disclosure set forth in Schedule 4.20, with all
-------------
Environmental Laws and shall obtain and comply in all material respects with and
maintain any and all licenses, approvals, registrations or permits required by
Environmental Laws;
(ii) The Borrower and its Subsidiaries shall conduct and complete
in all material respects all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws and
promptly comply in all material
respects with all lawful orders and directives of all Official Bodies respecting
Environmental Laws, except to the extent that the same are being contested in
good faith by appropriate and lawful proceedings diligently conducted and for
which such reserves or other appropriate provisions, if any, required by GAAP
shall have been made; and
(iii) The Borrower shall defend, indemnify and hold harmless the
Agent and the Lenders, and their respective employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of or noncompliance with any Environmental Laws applicable to the real
property owned or operated by the Borrower or any of its Subsidiaries, or any
orders, requirements or demands of any Official Bodies related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.
6.14. Senior Debt Status. The obligations of the Borrower
------------------
under this Agreement and the Notes will rank at least pari passu in priority of
payment with all other Indebtedness of the Borrower except Indebtedness of the
Borrower to the extent secured by Permitted Liens. The obligations of each other
Loan Party under a Subsidiary Guaranty executed by it will rank at least pari
passu in priority of payment with all other Indebtedness of such Loan Party
except Indebtedness of such Loan Party to the extent secured by Permitted Liens.
ARTICLE VII
NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that, until payment in full of the Loans and
interest thereon, payment in full of all Letter of Credit reimbursement
obligations and interest thereon, satisfaction of all of the Borrower's other
obligations hereunder and termination of the Revolving Credit Commitments, and
the expiration and cancellation of all Letters of Credit issued hereunder, the
Borrower shall comply, or cause the compliance, with the negative covenants set
forth in this Article VII.
7.01. Indebtedness. The Borrower and its Subsidiaries shall
------------
not on a consolidated basis at any time, create, incur, assume or suffer to
exist any Indebtedness (including Indebtedness secured by Permitted Liens),
except:
(a) Indebtedness under the Loan Documents;
(b) Existing Indebtedness as set forth on Schedule 7.01 hereto
-------------
(including any extensions or renewals thereof provided there is no increase in
the amount thereof or other significant adverse change in the terms thereof);
(c) Indebtedness of a Subsidiary of the Borrower to the Borrower
or to another Subsidiary of the Borrower or the Indebtedness of the Borrower to
a Subsidiary of the Borrower;
(d) Indebtedness with respect to foreign exchange hedging
transactions entered into in the ordinary course of business to manage foreign
currency risk for the Borrower and/or one or more of its Subsidiaries;
(e) Indebtedness incurred pursuant to Interest Hedge Agreements;
(f) Indebtedness due sellers of Persons or assets acquired
pursuant to Sections 7.03 or 7.04 hereof, including without limitation notes the
principal amount of which may vary as a function of the performance of the
Person or assets acquired; and
(g) Other Indebtedness not covered by items (a) through (f) above,
provided that the aggregate amount of such Indebtedness permitted by this item
(g) shall not exceed $10,000,000 at any one time outstanding.
7.02. Liens. The Borrower and its Subsidiaries shall not at
-----
any time create, incur, assume or suffer to exist any Lien on any of their
respective property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens. Further,
neither the Borrower nor any of its Subsidiaries shall enter into any agreement
with any Person (other than the Lenders pursuant hereto) which prohibits or
limits the ability of the Borrower or any of its Subsidiaries to create, incur,
assume or suffer to exist any Lien in favor of the Agent for the benefit of the
Lenders upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
7.03. Loans, Acquisitions and Investments. The Borrower and
-----------------------------------
its Subsidiaries shall not at any time make any loan or advance to, or purchase
or otherwise acquire any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) or other equity interest in,
or assets of, or any other investment or interest in, or make any capital
contribution to, any other Person, or agree to or become liable to do any of the
foregoing, except for:
(a) trade credit extended on usual and customary terms in the
ordinary course of business;
(b) fixed assets, equipment or Inventory acquired in the ordinary
course of business;
(c) loans and advances to employees to meet expenses incurred by
such employees in the ordinary course of business, including without limitation
relocation expenses;
(d) Cash Equivalents;
(e) investments, capital contributions and advances by the
Borrower in existence as of the date hereof, which investments, capital
contributions and advances are set forth on Schedule 7.03 hereof;
-------------
(f) investments and capital contributions by the Borrower in, and
loans and advances by Borrower to, a third Person so long as after giving effect
to each such
investment or capital contribution the Borrower shall not have caused a
violation of the Loan Documents;
(g) loans, advances and capital contributions by a Subsidiary of
the Borrower to the Borrower or any of the Borrower's other Subsidiaries or
loans, advances and capital contributions by the Borrower to any of its
Subsidiaries; and
(h) the Borrower or any Subsidiary may acquire the assets or
securities of any other Person provided that (A) at the time of such acquisition
no Default or Event of Default shall have occurred and be continuing or be
caused by such acquisition, (B) the acquired Person, if a domestic Person, shall
become a Subsidiary Guarantor simultaneously with such acquisition and shall
execute all Loan Documents required of a Subsidiary Guarantor, (C) the
Borrower's or the relevant Subsidiary's equity ownership interest in the
acquired Person, if a foreign Person owned by a domestic Subsidiary, shall be
pledged to the Agent for the benefit of the Lenders; provided, however, the
-----------------
maximum amount of such acquired Person's equity pledged to the Agent shall not
exceed 65% of the acquired Person's equity capitalization or such lesser amount
as is the maximum amount allowed to be pledged pursuant to the laws of the
jurisdiction of such Subsidiary's organization, (D) the board of directors or
other equivalent governing body of such acquired Person shall have approved such
acquisition, (E) the acquired Person is engaged in the information technology
business or a business related thereto, and (F) the Borrower shall have provided
the Agent, for redelivery to the Lenders, at least three (3) Business Days prior
to such acquisition, with a certificate stating that (i) such acquisition will
not violate any covenants of this Agreement and (ii) establishing that, on a pro
forma basis after taking into account the acquisition, the Borrower is in
compliance with the financial covenants set forth in Section 7.12; provided,
--------
however, for the purposes of this Section 7.03, the ratio of the Borrower's pro
- -------
forma Consolidated Senior Indebtedness to pro forma Consolidated EBITDA for the
four (4) most recently completed Fiscal Quarters shall not exceed 1.75:1.00.
7.04. Liquidations, Mergers and Consolidations. The Borrower
----------------------------------------
shall not, and shall not permit any Subsidiary of Borrower to, dissolve,
liquidate or wind-up its affairs, or become a party to any merger, consolidation
or other business combination, whether accounted for under GAAP as a purchase or
a pooling of interests and regardless of whether the value of the consideration
paid or received is comprised of cash, common or preferred stock or other equity
interests, or other assets, or sell, lease, transfer, or otherwise dispose of
all or substantially all of its assets, provided that:
--------
(a) any Subsidiary of Borrower may consolidate or merge into the
Borrower or another Subsidiary of the Borrower;
(b) any Subsidiary of the Borrower may sell, lease, transfer or
otherwise dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or another Subsidiary of the Borrower;
and
(c) the Borrower or any Subsidiary may consolidate or merge with
any Person, provided that (A) such Person must be engaged in the information
technology business or a business related thereto, (B) if the Borrower is a
party to such merger or consolidation, the Borrower is the surviving Person, (C)
at the time of the consolidation or
merger no Default or Event of Default shall have occurred and be continuing or
be caused by such consolidation or merger, (D) the surviving Person, if a
domestic Person and if not the Borrower, shall become a Subsidiary Guarantor,
(E) the consolidation or merger shall not be contested by such Person and shall
be approved by such Person's board of directors or other governing body, and (F)
the Borrower shall have provided the Agent, for redelivery to the Lenders, at
least three (3) Business Days prior to such merger or consolidation, with a
certificate stating that (i) such merger or consolidation will not violate any
covenants of this Agreement and (ii) establishing that, on a pro forma basis
after taking into account such merger or consolidation, the Borrower is in
compliance with the financial covenants set forth in Section 7.12; provided,
--------
however, for the purposes of this Section 7.04, the ratio of the Borrower's pro
- -------
forma Consolidated Senior Indebtedness to pro forma Consolidated EBITDA for the
four (4) most recently completed Fiscal Quarters shall not exceed 1.75:1.00.
7.05. Dispositions of Assets or Subsidiaries. Excluding the
--------------------------------------
payment of cash as consideration for assets purchased by, or services rendered
to, the Borrower or any Subsidiary, neither the Borrower nor any of its
Subsidiaries shall sell, convey, assign, lease, or otherwise transfer or dispose
of, voluntarily or involuntarily, any of its properties or assets, tangible or
intangible (including but not limited to sale, assignment, discount or other
disposition of Receivables, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares or beneficial
interests or partnership interests in Subsidiaries), except:
(a) any sale, transfer or disposition of surplus, obsolete or worn
out assets of the Borrower or a Subsidiary;
(b) any sale, transfer or lease of inventory by the Borrower or
any Subsidiary of the Borrower in the ordinary course of business;
(c) any sale, transfer or lease of assets by any Subsidiary of the
Borrower to the Borrower or any other Subsidiary of the Borrower or by the
Borrower to any Subsidiary of the Borrower; or
(d) any sale, transfer or lease of assets, other than those
specifically excepted pursuant to clauses (a) through (c) above, which in any
one sale, transfer or lease of assets, or in any number of sales, transfers or
leases of assets occurring in any consecutive twelve month period, involves the
sale, transfer or lease of assets resulting in net proceeds of not more than
$1,000,000 (measured with respect to a series of sales, transfers or leases of
assets on the day of the first sale).
7.06. Affiliate Transactions. Except as set forth on Schedule 4.02 and
---------------------- -------------
as set forth on Schedule 7.06, neither the Borrower nor any Subsidiary of the
-------------
Borrower shall enter into or carry out any material transaction (including,
without limitation, purchasing property or services or selling property or
services) with an Affiliate which is not a Subsidiary unless such transaction is
not otherwise prohibited by this Agreement or the other Loan Documents, is
entered into in the ordinary course of business upon fair and reasonable arm's-
length terms and conditions which are fully disclosed to the Agent and is in
accordance with all applicable Law.
7.07. Subsidiaries, Partnerships and Joint Ventures. Except
---------------------------------------------
as permitted by Sections 7.03 and 7.04, (i) neither the Borrower nor any
Subsidiary of the Borrower shall own or create any Subsidiaries other than those
listed in Schedule 4.03 or 7.03; and (ii) neither the Borrower nor any
---------------------
Subsidiary of the Borrower shall become or agree to become a general partner in
any general or limited partnership or a joint venturer in any joint venture,
without the consent of the Required Lenders, such consent not to be unreasonably
withheld.
7.08. Continuation of or Change in Business. Neither the
-------------------------------------
Borrower nor any Subsidiary of the Borrower shall engage in any business other
than the information technology business or a business related thereto, and the
Borrower shall not permit any material change in such business.
7.09. Plans and Benefit Arrangements. The Borrower shall not, and shall
------------------------------
not permit any member of the ERISA Group to:
(a) fail to satisfy the minimum funding requirements of ERISA and
the Internal Revenue Code with respect to any Plan;
(b) request a minimum funding waiver from the Internal Revenue
Service with respect to any Plan;
(c) engage in a Prohibited Transaction with any Plan, Benefit
Arrangement or Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA, would
constitute a Material Adverse Change;
(d) fail to make when due any contribution to any Multiemployer
Plan that the Borrower or any member of the ERISA Group may be required to make
under any agreement relating to such Multiemployer Plan, or any Law pertaining
thereto;
(e) withdraw (completely or partially) from any Multiemployer Plan
or be deemed under Section 4062(e) of ERISA to withdraw from any Multiple
---------------
Employer Plan, where any such withdrawal is likely to result in a material
liability of the Borrower or any member of the ERISA Group;
(f) terminate, or institute proceedings to terminate, any Plan,
where such termination is likely to result in a material liability to the
Borrower or any member of the ERISA Group;
(g) make any amendment to any Plan with respect to which security
is required under Section 307 of ERISA; or
(h) fail to give any and all notices and make all disclosures and
governmental filings required under ERISA or the Internal Revenue Code, where
such failure is likely to result in a Material Adverse Change.
7.10. Fiscal Year. Neither the Borrower nor any Subsidiary
-----------
of the Borrower shall change its Fiscal Year from a period beginning January 1
and ending on the immediately succeeding December 31.
7.11. Changes in Organizational Documents. The Borrower
-----------------------------------
shall not, and shall not permit any other Loan Party to, amend in any respect
its certificate or articles of incorporation without providing at least ten (10)
calendar days' prior written notice to the Agent and the Lenders and, in the
event such change would be materially adverse to the Lenders as determined by
the Agent in its sole but reasonable discretion, obtaining the prior written
consent of the Required Lenders.
7.12. Financial Covenants.
-------------------
(a) Minimum Consolidated Net Worth. The Borrower will not at any
------------------------------
time permit its Consolidated Net Worth to be less than an amount equal to the
sum of (i) $123,940,000 plus (ii) 50% of the positive Consolidated Net Income
for the Fiscal Quarter ending December 31, 1998, plus (iii) 50% of the positive
Consolidated Net Income for each Fiscal Year ending after December 31, 1998,
plus (iv) an amount equal to 100% of net cash proceeds from the issuance by the
Borrower after September 30, 1998, of additional equity securities or other
equity capital investments.
(b) Interest Coverage. As of the last day of each Fiscal Quarter,
-----------------
the Borrower shall not permit its ratio, measured on a rolling four Fiscal
Quarter basis, of Consolidated EBIT to Consolidated Interest Expense to be less
than 5.0:1.0.
(c) Consolidated Senior Indebtedness to Consolidated EBITDA Ratio.
-------------------------------------------------------------
As of the last day of each Fiscal Quarter, the Borrower shall not permit its
Consolidated Senior Indebtedness to Consolidated EBITDA Ratio to exceed 2.5 to
1.0.
(d) Liquidity Ratio. As of the last day of each Fiscal Quarter,
---------------
the Borrower shall not permit the ratio of the (A) the sum of its (1)
Consolidated Cash, (2) Consolidated Cash Equivalents, and (3) Consolidated
Receivables to (B) its Consolidated Senior Indebtedness to be less than
1.25:1.00.
ARTICLE VIII
DEFAULT
-------
8.01. Events of Default. An "Event of Default" shall mean
-----------------
the occurrence or existence of any one or more of the following events or
conditions (whatever the reason therefor and whether voluntary, involuntary or
effected by operation of Law):
(a) (i) The Borrower shall fail to pay any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity, whether by acceleration or otherwise) when due, or (ii) the Borrower
shall fail to pay any Unreimbursed L/C Draw when due, or (iii) the Borrower
shall fail to pay any interest on any Loan, any Unreimbursed L/C Draw, any Fee,
or any other amount owing hereunder or under any other Loan Documents after such
interest, Fee or other amount becomes due in
accordance with the terms hereof or thereof and such failure shall continue for
a period of five (5) days;
(b) Any representation or warranty made at any time by the
Borrower herein or in any other Loan Document or by any other Loan Party in any
Loan Document executed by such Loan Party, or in any certificate, other
instrument or statement furnished pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading in any material respect as of the
time it was made or furnished;
(c) The Borrower shall default in the observance or performance of
any covenant contained in Section 6.14 or Article VII hereof;
(d) The Borrower shall default in the observance or performance of
any other covenant, condition or provision hereof, or of any other Loan Document
and, if remediable, such default shall continue unremedied for a period of
thirty (30) days after any officer of the Borrower becomes aware of the
occurrence thereof; or any other Loan Party shall default in the observance or
performance of any other covenant, condition or provision contained in any other
Loan Document executed by such Loan Party, and such default shall continue
unremedied for a period of thirty (30) days after any officer of such Loan Party
becomes aware of the occurrence thereof;
(e) A default or event of default shall occur at any time under
the terms of any agreements involving Indebtedness under which the Borrower or
any Subsidiary of the Borrower may be obligated as borrower, guarantor or
otherwise in excess of One Million Dollars ($1,000,000) in the aggregate, and
such breach, default or event of default consists of the failure to pay (beyond
any period of grace permitted with respect thereto, whether waived or not) any
Indebtedness when due (whether at stated maturity, by acceleration or otherwise)
or if such breach or default causes the acceleration of any such Indebtedness or
such breach or default permits the acceleration of any Indebtedness;
(f) Any judgments or orders for the payment of money in excess of
One Million Dollars ($1,000,000) in the aggregate shall be entered against the
Borrower or any of its Subsidiaries, by a court having jurisdiction in the
premises which judgments are not satisfied, discharged, vacated, bonded or
stayed pending appeal within a period of thirty (30) days from the respective
date of entry;
(g) Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof (except to the extent that
enforceability of any of the Loan Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance) or shall in any way be terminated (except in accordance with terms)
or become or be declared ineffective or inoperative or shall in any way be
challenged or contested or cease to give or provide the respective rights,
titles, interests, remedies, powers or privileges intended to be created thereby
in all material respects;
(h) A notice of lien, levy or assessment in excess of One Million
Dollars ($1,000,000) in the aggregate is filed of record with respect to all or
any part of the assets of the Borrower or a Subsidiary Guarantor by the United
States, or any department, agency or instrumentality thereof, or by any state,
county, municipal or other governmental agency, including, without limitation,
the PBGC, or if any taxes or debts in excess of One Million Dollars ($1,000,000)
owing at any time or times hereafter to any one of these becomes payable and the
same is not paid within thirty (30) days after the same becomes payable, or if
such notice is filed or such payment is not so made, unless the Borrower or such
Subsidiary Guarantor (i) contests such lien, assessment, tax or debt in good
faith by appropriate and lawful proceedings diligently conducted but only so
long as such proceedings could not subject the Agent, the Lenders or the L/C
Issuer to any criminal penalties, (ii) establishes such reserves or other
appropriate provisions, if any, as shall be required by GAAP and (iii) pays such
Lien, assessment, tax or debt in accordance with the terms of any final
judgments or orders relating thereto within thirty (30) days after the entry of
such judgments or orders;
(i) The Borrower or any other Loan Party ceases to be Solvent or
admits in writing its inability to pay debts as they mature;
(j) Any of the following occurs: (i) any Reportable Event, which
constitutes grounds for the termination of any Plan by the PBGC or the
appointment of a trustee to administer or liquidate any Plan, shall have
occurred and be continuing; (ii) proceedings shall have been instituted or other
action taken to terminate any Plan, or a termination notice shall have been
filed with respect to any Plan; (iii) a trustee shall be appointed to administer
or liquidate any Plan; (iv) the PBGC shall give notice of its intent to
institute proceedings to terminate any Plan or Plans or to appoint a trustee to
administer or liquidate any Plan and, in the case of the occurrence of (i),
(ii), (iii) or (iv) of this Section 8.01(j), the amount of Borrower's liability
or the liability of the other members of the ERISA Group is likely to exceed
five percent (5%) of the Consolidated Net Worth; (v) the Borrower or any member
of the ERISA Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) the Borrower or any member of the ERISA Group shall
make any amendment to a Plan with respect to which security is required under
Section 307 of ERISA; (vii) the Borrower or any member of the ERISA Group shall
withdraw completely or partially from a Multiemployer Plan; (viii) the Borrower
or any member of the ERISA Group shall withdraw (or shall be treated under
Section 4062(e) of ERISA as having withdrawn) from a Multiple Employer Plan; or
(ix) any applicable Law is adopted, changed or interpreted by any Official Body
with respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), any such occurrence would be reasonably likely to
materially and adversely affect the total enterprise represented by the Borrower
and the other members of the ERISA Group;
(k) The Borrower or any other Loan Party is enjoined, restrained
or in any way prevented by court order from conducting all or any material part
of its business and such injunction, restraint or other preventive order is not
stayed or dismissed within thirty (30) days after the entry thereof;
(l) (i) except for the Founding Shareholders and their Affiliates,
any Person or group of Persons (within the meaning of Sections 13(g) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership of
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) 20% or more of the voting capital stock of the
Borrower; provided, however, so long as the Founding Shareholders or their
-----------------
Affiliates own at least 40% of the voting capital stock of the Borrower, another
Person or group of Persons may acquire beneficial ownership of not more than 30%
of the voting capital stock of the Borrower;
(ii) within a period of twelve (12) consecutive months,
individuals who were directors of the Borrower on the first day of such period
and/or individuals who become directors of the Borrower pursuant to a nomination
or election that was recommended or approved by the individuals who were
directors on the first day of such period shall cease to constitute a majority
of the board of directors of the Borrower; or
(iii) the Borrower or a Subsidiary shall own less than 80% of
the voting capital stock or voting partnership or other equity interest of any
Loan Party other than the Borrower;
(m) A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
the Borrower, or another Loan Party, in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, or a receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or similar official) of the Borrower, or another Loan Party, for
any substantial part of such Person's property, or for the winding-up or
liquidation of such Person's affairs, and such proceeding shall remain
undismissed or unstayed and in effect for a period of sixty (60) consecutive
days or such court shall enter a decree or order granting any of the relief
sought in such proceeding;
(n) The Borrower, or another Loan Party, shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay debts as
they become due, or shall take any action in furtherance of any of the
foregoing;
(o) any of the Loan Documents shall cease to be in full force and
effect or shall be declared to be null and void by a court of competent
jurisdiction; or
(p) any garnishment proceeding concerning a sum in excess of One
Million Dollars ($1,000,000) shall be instituted by attachment, levy or
otherwise, against any deposit account maintained by the Borrower or another
Loan Party with any Lender.
8.02. Consequences of Event of Default.
--------------------------------
(a) If an Event of Default specified in any of items (a) through
(l) or item (o) or (p) of Section 8.01 hereof shall occur and be continuing, the
Lenders shall be under no further obligation to make Loans hereunder, the L/C
Issuer shall be under no further obligation to issue or amend Letters of Credit
hereunder and the Agent may, and upon the
request of the Required Lenders shall, by written notice to the Borrower,
terminate the Revolving Credit Commitment and declare the unpaid principal
amount of the Notes then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Borrower to the Lenders, the Agent
and the L/C Issuer hereunder and under the other Loan Documents to be forthwith
due and payable, and the same shall thereupon become and be immediately due and
payable to the Agent for the benefit of each Lender, the Agent and the L/C
Issuer without presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived; and
(b) If any Event of Default specified in item (m) or (n) of
Section 8.01 hereof shall occur, the Lenders shall be under no further
obligations to make Loans hereunder, the L/C Issuer shall be under no further
obligation to issue or amend Letters of Credit hereunder, the Revolving Credit
Commitment shall be terminated and the unpaid principal amount of the Notes then
outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrower to the Lenders, the Agent and the L/C Issuer
hereunder and under the other Loan Documents shall be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; further, during the sixty (60) day period
referred to in item (m) the Lenders shall be under no further obligation to make
Loans and the L/C Issuer shall be under no further obligation to issue or amend
Letters of Credit hereunder; and
(c) If an Event of Default shall occur and be continuing, any
Lender, the Agent or the L/C Issuer to whom any obligation is owed by the
Borrower hereunder or under any other Loan Document, of such Lender, Agent or
L/C Issuer and any branch, subsidiary or affiliate of such Lender, Agent or L/C
Issuer anywhere in the world shall each have the right, in addition to all other
rights and remedies available to it, without notice to the Borrower, to set-off
against and apply to the then unpaid balance of all the Loans and all other
obligations of the Borrower hereunder or under any other Loan Document, any debt
owing to, and any other funds held in any manner for the account of, the
Borrower by such Lender, the Agent or the L/C Issuer or by such branch,
subsidiary or affiliate, including, without limitation, all funds in all deposit
accounts (whether time or demand, general or special, provisionally credited or
finally credited, or otherwise) now or hereafter maintained by the Borrower for
its own account (but not including funds held in custodian or trust accounts)
with such Lender, the Agent or the L/C Issuer or such branch, subsidiary or
affiliate. Such right shall exist in each case whether or not any Lender, the
Agent or the L/C Issuer shall have made any demand under this Agreement or any
other Loan Document, whether or not such debt owing to or funds held for the
account of the Borrower is or are matured or unmatured and regardless of the
existence or adequacy of any other security, right or remedy available to any
Lender, the Agent or the L/C Issuer; and
(d) In addition to all of the rights and remedies contained in
this Agreement or in any of the other Loan Documents, the Agent, the L/C Issuer
and the Lenders shall have all of the rights and remedies of a creditor under
applicable Law, all of which rights and remedies shall be cumulative and non-
exclusive, to the extent permitted by Law. The Agent may, and upon the request
of the Required Lenders shall, exercise all post-default rights granted to the
Agent, the L/C Issuer and the Lenders under the Loan Documents or applicable
Law; and
(e) Upon the occurrence of any Event of Default described in the
foregoing Sections 8.01(m) or (n) or upon the declaration by the Required
Lenders of any other Event of Default and the termination of the Revolving
Credit Commitments, the obligation of the L/C Issuer to issue or amend Letters
of Credit shall terminate, the L/C Issuer or the Agent may provide written
demand to any beneficiary of a Letter of Credit to present a draft against such
Letter of Credit, and an amount equal to the maximum amount which may at any
time be drawn under the Letters of Credit then outstanding (whether or not any
beneficiary of such Letters of Credit shall have presented, or shall be entitled
at such time to present, the drafts or other documents required to draw under
the Letters of Credit) shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Borrower; provided that the foregoing
shall not affect in any way the obligations of the Lenders to purchase from the
L/C Issuer participations in the unreimbursed amount of any drawings under the
Letters of Credit as provided in Section 2.18(c). So long as the Letters of
Credit shall remain outstanding, any amounts declared due pursuant to this
Section 8.02(e) with respect to the outstanding Letters of Credit when received
by the Agent shall be deposited and held by the Agent in an interest bearing
account denominated in the name of the Agent for the benefit of the Agent, the
Lenders and the L/C Issuer over which the Agent shall have sole dominion and
control of withdrawals (the "Cash Collateral Account") as cash collateral for
the obligation of the Borrower to reimburse the L/C Issuer in the event of any
drawing under the Letters of Credit and upon any drawing under such Letters of
Credit in respect of which the Agent has deposited in the Cash Collateral
Account any amounts declared due pursuant to this Section 8.02(e), the Agent
shall apply such amounts held by the Agent to reimburse the L/C Issuer for the
amount of such drawing. In the event that any Letter of Credit in respect of
which the Agent has deposited in the Cash Collateral Account any amounts
described above is cancelled or expires or in the event of any reduction in the
maximum amount available at any time for drawing under the Letters of Credit
outstanding, the Agent shall apply the amount then in the Cash Collateral
Account designated to reimburse the L/C Issuer for any drawings under the
Letters of Credit less the maximum amount available at any time for drawing
under the Letters of Credit outstanding immediately after such cancellation,
expiration or reduction, if any, to the payment in full of the outstanding
Lender Obligations, and second, to the payment of any excess, to the Borrower.
ARTICLE IX
THE AGENT
---------
9.01. Appointment and Grant of Authority. Each of the
----------------------------------
Lenders and the L/C Issuer hereby appoints PNC Bank, National Association, and
PNC Bank, National Association, hereby agrees to act, as the Agent under this
Agreement and the other Loan Documents. The Agent shall have and may exercise
such powers under this Agreement and the other Loan Documents as are
specifically delegated to it by the terms hereof or thereof, together with such
other powers as are incidental thereto. Without limiting the foregoing, the
Agent, on behalf of the Lenders and the L/C Issuer, is authorized to execute all
of the Loan Documents (other than this Agreement) and to accept all of the Loan
Documents and all other agreements, documents or instruments reasonably required
to carry out the intent of the parties to this Agreement.
9.02. Delegation of Duties. The Agent may perform any of its
--------------------
duties hereunder by or through agents or employees (provided such delegation
does not constitute a
relinquishment of duties as the Agent hereunder) and, subject to Sections 9.07
and 10.03 hereof, shall be entitled to engage and pay for the advice or services
of any attorneys, accountants, or other experts concerning all matters
pertaining to duties hereunder and to rely upon any advice so obtained.
9.03. Reliance by Agent on Lenders for Funding. Unless the
----------------------------------------
Agent shall have received notice from a Lender prior to any Borrowing Date that
such Lender will not make available to the Agent such Lender's portion of net
disbursements of Loans, the Agent may assume that such Lender has made such
portion available to the Agent and the Agent may, in reliance upon such
assumption, make Loans to the Borrower. If and to the extent that such Lender
has not made such portion available to the Agent on or prior to any Borrowing
Date, such Lender and the Borrower severally agree to repay to the Agent
immediately upon demand, in immediately available funds, such unpaid amount,
together with interest thereon for each day from the applicable Borrowing Date
until such amount is repaid to the Agent, at (i) in the case of the Borrower, at
the rate of interest then in effect for such Loan and (ii) in the case of such
Lender, at the Federal Funds Effective Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount shall constitute a Loan made by
such Lender for purposes of this Agreement. The failure by any Lender to pay its
portion of a Loan made by the Agent shall not relieve any other Lender of the
obligation to pay its portion of net disbursements of Loans on any Borrowing
Date, but no Lender shall be responsible for the failure of any other Lender to
make its net share of Loans to be made by such other Lender on such Borrowing
Date.
9.04. Non-Reliance on Agent. Each Lender and the L/C Issuer
---------------------
agree that (i) it has, independently and without reliance on the Agent, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its Subsidiaries and decision to enter
into this Agreement and (ii) that it will, independently and without reliance
upon the Agent, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. Except as otherwise provided
herein or under any other Loan Document, the Agent shall not have any duty to
keep the Lenders or the L/C Issuer informed as to the performance or observance
by the Borrower of this Agreement or any other document referred to or provided
for herein or to inspect the properties or books of the Borrower or any of its
Subsidiaries. The Agent, in the absence of gross negligence or willful
misconduct, shall not be liable to any Lender or the L/C Issuer for their
failure to relay or furnish to the Lender any information.
9.05. Responsibility of Agent and Other Matters.
-----------------------------------------
(a) Ministerial Nature of Duties. As between the Lenders, the L/C
----------------------------
Issuer and itself, the Agent shall not have any duties or responsibilities
except those expressly set forth in this Agreement or in the other Loan
Documents, and those duties and responsibilities shall be subject to the
limitations and qualifications set forth in this Article IX. The duties of the
Agent shall be ministerial and administrative in nature.
(b) Limitation of Liability. As between the Lenders, the L/C
-----------------------
Issuer and the Agent, neither the Agent nor any of its directors, officers,
employees or agents shall be liable, in the absence of gross negligence or
willful misconduct, for any action taken or omitted
(whether or not such action taken or omitted is within or without the Agent's
responsibilities and duties expressly set forth in this Agreement) under or in
connection with this Agreement or any other instrument or document in connection
herewith. Without limiting the foregoing, neither the Agent nor any of its
directors, officers, employees or its agents, shall be responsible for, or have
any duty to examine (i) the genuineness, execution, validity, effectiveness,
enforceability, value or sufficiency of (A) this Agreement or any of the other
Loan Documents or (B) any other document or instrument furnished pursuant to or
in connection with this Agreement, (ii) the collectability of any amounts owed
by the Borrower to the Agent, the Lenders or the L/C Issuer, (iii) the
truthfulness of any recitals or statements or representations or warranties made
to the Agent or the Lenders in connection with this Agreement, (iv) any failure
of any party to this Agreement to receive any communication sent, including any
telegram, telex, teletype, telecopy, bank wire, cable, or telephone message or
any writing, application, notice, report, statement, certificate, resolution,
request, order, consent letter or other instrument or paper or communication
entrusted to the mails or to a delivery service, or (v) the assets or
liabilities or financial condition or results of operations or business or
creditworthiness of the Borrower or any of its Subsidiaries.
(c) Reliance. The Agent shall be entitled to act, and shall be
--------
fully protected in acting upon, any telegram, telex, teletype, telecopy, bank
wire or cable or any writing, application, notice, report, statement,
certificate, resolution, request, order, consent, letter or other instrument or
paper or communication believed by the Agent in good faith to be genuine and
correct and to have been signed or sent or made by a proper Person. The Agent
may consult counsel and shall be entitled to act, and shall be fully protected
in any action taken in good faith, in accordance with advice given by counsel.
The Agent may employee agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected by
the Agent with reasonable care. The Agent shall not be bound to ascertain or
inquire as to the performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the other Loan Documents on the part of
the Borrower.
9.06. Actions in Discretion of Agent; Instructions from the
-----------------------------------------------------
Lenders. The Agent agrees, upon the written request of the Required Lenders,
- -------
to take or refrain from taking any action of the type specified as being within
the Agent's rights, powers or discretion herein or under any Loan Documents,
provided that the Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this Agreement or any
other Loan Document or applicable Law. In the absence of a request by the
Required Lenders, the Agent shall have authority, in its sole discretion, to
take or not to take any such action, unless this Agreement specifically requires
the consent of the Required Lenders or all of the Lenders. Any action taken or
failure to act pursuant to such instructions or discretion shall be binding on
the Lenders and the L/C Issuer, subject to Section 9.05(b) hereof. Subject to
the provisions of Section 9.05(b), no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.
9.07. Indemnification. To the extent the Borrower does not
---------------
reimburse and save harmless the Agent according to the terms hereof for and from
all costs, expenses and disbursements in connection herewith, such costs,
expenses and disbursements, shall be borne by the Lenders ratably in accordance
with respective Lender's Ratable Share. Each Lender hereby agrees on such basis
(i) to reimburse the Agent for such Lender's Ratable Share
of all such reasonable costs, expenses and disbursements on request and (ii) to
the extent of each such Lender's Ratable Share, to indemnify and save harmless
the Agent against and from any and all losses, obligations, penalties, actions,
judgments and suits and other costs, expenses and disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent, other than as a consequence of gross negligence or willful misconduct on
the part of the Agent, arising out of or in connection with this Agreement, the
other Loan Documents or any other agreement, instrument or document in
connection herewith or therewith, or any request of the Required Lenders,
including without limitation the reasonable costs, expenses and disbursements in
connection with defending itself against any claim or liability related to the
exercise or performance of any of its powers or duties under this Agreement, the
other Loan Documents, or any of the other agreements, instruments or documents
delivered in connection herewith or the taking of any action under or in
connection with any of the foregoing.
9.08. Agent's Rights as Lender. With respect to the Revolving Credit
------------------------
Commitment of the Agent as Lender hereunder, any Loans of the Agent under this
Agreement, the Agent's Ratable Share of any Unreimbursed L/C Draws, the
participation as a Lender, and as to PNC Bank, as the L/C Issuer under this
Agreement the other Loan Documents and any other agreements, instruments and
documents delivered pursuant hereto, and the issuance of any Letter of Credit
under the terms hereof, the Agent shall have the same rights and powers, duties
and obligations under this Agreement, the other Loan Documents or any other
agreement, instrument or document as any Lender and may exercise such rights and
powers and shall perform such duties and fulfill such obligations as though it
were not the Agent. The Agent may accept deposits from, lend money to, and
generally engage, and continue to engage, in any kind of business with the
Borrower or any of its Subsidiaries.
9.09. Notice of Default. The Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of an Event of Default unless the
Agent has received written notice from a Lender or the Borrower referring to
this Agreement, describing such Event of Default and stating that such notice is
a "notice of default".
9.10. Payment to Lenders. Except as otherwise set forth in
------------------
Section 9.03 hereof, promptly after receipt from the Borrower of any principal
repayment of the Loans or any Unreimbursed L/C Draw, interest due on the Loans
or any Unreimbursed L/C Draws, and any Fees (other than the underwriting fee and
the administration fee paid to the Agent and the L/C Fronting Fee paid to the
L/C Issuer) or other amounts due under any of the Loan Documents, the Agent
shall distribute to each Lender that Lender's Ratable Share of the funds so
received except that funds received from the Borrower or another Loan Party to
reimburse the L/C Issuer for drawings on Letters of Credit (other than a
Lender's Ratable Share of such reimbursement payment to the extent such Lender
has complied fully with any funding obligations under Section 2.18(g) hereof) or
to fund any risk participant in the Letters of Credit or to pay the L/C Fronting
Fee shall be paid solely for the account of L/C Issuer. If the Agent fails to
distribute collected funds received by 2:00 P.M. on any Business Day by 3:00
P.M. of such Business Day or collected funds received after 2:00 P.M. on any
Business Day by 3:00 P.M. the next Business Day the funds shall bear interest
until distributed at the Federal Funds Effective Rate. The Agent agrees to make
its best efforts to provide telephonic notice to each Lender that it is in
receipt of funds from the Borrower and the day on which it will commence a wire
transfer of such Lender's share of such funds.
9.11. Holders of Notes. The Agent may deem and treat any
----------------
payee of any Note as the owner thereof for all purposes hereof unless and until
written notice of the assignment or transfer thereof shall have been filed with
the Agent. Any request, authority or consent of any Person who at the time of
making such request or giving such authority or consent is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
9.12. Equalization of Lenders. Each borrowing and each
-----------------------
payment or prepayment by, or for the account of, the Borrower with respect to
principal, interest, Fees, or other amounts due from the Borrower hereunder to
the Lenders with respect to the Loans, shall (except as provided in Section
2.10, 2.12, 2.18(b) or 9.03 hereof) be made in proportion to the Loans
outstanding from each Lender or, if no such Loans are then outstanding, in
proportion to the Ratable Share of each Lender. Each payment of Unreimbursed L/C
Draws shall be made for the account of the L/C Issuer. The Lenders agree among
themselves that, with respect to all amounts received by any Lender (in its
capacity solely as a Lender) or any such holder for application on any
obligation hereunder or under any Note or under any such participation, whether
received by voluntary payment, by realization upon security, by the exercise of
the right of set-off or banker's lien, by counterclaim or by any other non-pro
rata source, equitable adjustment will be made in the manner stated in the
following sentence so that, in effect, all such excess amounts will be shared
ratably among the Lenders and such holders in proportion to their interest in
payments under the Notes, except as otherwise expressly provided herein. The
Lenders or any such holder receiving any such amount shall purchase for cash,
from each of the other Lenders, an interest in such Lender's Loans in such
amount as shall result in a ratable participation by the Lenders and each such
holder in the aggregate unpaid amount under the Notes, provided that if all or
any portion of such excess amount is thereafter recovered from the Lender or the
holder making such purchase, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, together with interest or other
amounts, if any, required by Law (including court order) to be paid by the
Lender or the holder making such purchase.
9.13. Successor Agent. The Agent may resign as the Agent
---------------
upon sixty (60) days' written notice to the Lenders and the Borrower. If such
notice shall be given, the Lenders shall appoint from among the Lenders a
successor agent for the Lenders, during such 60-day period, which successor
agent shall be reasonably satisfactory to the Borrower, to serve as agent
hereunder and under the several documents, the forms of which are attached
hereto as exhibits, or which are referred to herein. If at the end of such 60-
day period the Lenders have not appointed such a successor, the Agent shall
procure a successor reasonably satisfactory to the Lenders and the Borrower, to
serve as agent for the Lenders hereunder and under the several documents, the
forms of which are attached hereto as exhibits, or which are referred to herein.
Any such successor agent shall succeed to the rights, powers and duties of the
Agent. Upon the appointment of such successor agent or upon the expiration of
such 60-day period (or any longer period to which the Agent has agreed), the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After any retiring Agent's resignation hereunder as
the Agent, the provisions of this Article IX shall inure to the benefit of such
retiring Agent as to any actions taken or omitted to be taken by it while it was
the Agent under this Agreement.
9.14. Calculations. In the absence of gross negligence or
------------
willful misconduct, the Agent shall not be liable for any error in computing the
amount payable to any Lender whether in respect of the Loans, fees or any other
amounts due to the Lenders or the L/C Issuer under this Agreement. In the event
an error in computing any amount payable to any Lender or the L/C Issuer is
made, the Agent, the Borrower and each affected Person shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and any compensation therefor will be calculated at the Federal
Funds Effective Rate.
9.15. Beneficiaries. Except as expressly provided herein,
-------------
the provisions of this Article IX are solely for the benefit of the Agent, the
Lenders and the L/C Issuer, and the Borrower shall not have any rights to rely
on or enforce any of the provisions hereof. In performing its functions and
duties under this Agreement, the Agent shall act solely as agent of the Lenders
and does not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for the Borrower.
ARTICLE X
GENERAL PROVISIONS
------------------
10.01. Amendments and Waivers. The Required Lenders, or the
----------------------
Agent with the consent in writing of the Required Lenders, and the Borrower may,
subject to the provisions of this Section 10.01, from time to time enter into
written supplemental agreements to this Agreement and the other Loan Documents
for the purpose of adding or deleting any provisions or otherwise changing,
varying or waiving in any manner the rights of the Lenders, the Agent or the
obligor thereunder or the conditions, provisions or terms thereof or waiving any
Event of Default thereunder or consenting to an action of any of the Borrower or
any of its Subsidiaries, but only to the extent specified in such written
agreements; provided, however, that no such supplemental agreement shall,
without the consent of all the Lenders:
(a) waive an Event of Default by the Borrower in any payment of
principal, interest, Fees or other amounts due hereunder and under any of the
other Loan Documents, or otherwise postpone any scheduled payment date of any of
the foregoing;
(b) reduce the interest rate relating to the Loans or change the
definition of the terms Base Rate, Prime Rate, Applicable Euro-Rate Margin,
Euro-Rate, Euro-Rate Interest Period, Euro-Rate Reserve Percentage or Federal
Funds Effective Rate so as to decrease the interest rate relating to the Loans;
(c) change the Expiration Date;
(d) reduce any Fee due the Lenders;
(e) increase the maximum principal amount of either Revolving
Credit Commitment of any Lender, or increase the maximum Stated Amount of
Letters of Credit which may be issued and outstanding under the terms hereof;
(f) change the definition of the term Required Lenders;
(g) release any Subsidiary Guarantor or any collateral; or
(h) amend or waive the provisions of this Section 10.01.
Any such supplemental agreement shall apply equally to each of the Lenders and
the L/C Issuer and shall be binding upon the Borrower, the Lenders, the Agent,
all future holders of the Notes and all Participants. In the case of any waiver,
the Borrower, the Lenders, the L/C Issuer, the Agent shall be restored to its
former position and rights, and any 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 impair any right consequent thereon.
10.02. Taxes. The Borrower shall pay any and all stamp,
-----
document, transfer and recording taxes, filing fees and similar impositions
payable or hereafter determined by the Agent, the Lenders or the L/C Issuer to
be payable in connection with this Agreement, the other Loan Documents and any
other documents, instruments and transactions pursuant to or in connection with
any of the Loan Documents. The Borrower agrees to save the Agent, the Lenders
and the L/C Issuer harmless from and against any and all present and future
claims or liabilities with respect to, or resulting from, any delay in paying or
failure to pay any such taxes or similar impositions other than resulting from
the gross negligence or willful misconduct of the Agent, the Lenders or the L/C
Issuer.
10.03. Costs and Expenses, etc.
-----------------------
(a) The Borrower shall:
(i) pay or reimburse the Agent for all reasonable out-of-
pocket costs and expenses incurred by the Agent in connection with (A) the
preparation, negotiation and execution of this Agreement, any other Loan
Documents or any instrument or document prepared in connection herewith or
therewith; (B) the completion of the Agent's "due diligence" permitted as a
condition of the closing; (C) the syndication efforts of the Agent with respect
to this Agreement and the commitments hereunder; and (D) the consummation of the
transactions contemplated hereby and thereby (including, without limitation, in
each case the reasonable fees and out-of-pocket expenses of the counsel to the
Agent as agreed in the Agent's Letter); and
(ii) reimburse the Agent, the L/C Issuer and each Lender on
demand for all reasonable out-of-pocket costs and expenses incurred by the
Agent, the L/C Issuer or such Lender in connection with the enforcement of or
preservation of any of its Liens, rights, powers, interests or remedies under
this Agreement or any other Loan Document (including, without limitation, in
each case the reasonable fees and out-of-pocket expenses of the respective
counsel to the Agent, the L/C Issuer and each Lender).
(b) All of such costs, expenses and indemnities shall be payable
by the Borrower to the Agent, the Lenders or the L/C Issuer as appropriate upon
demand or as otherwise agreed upon by the Agent, the Lenders or the L/C Issuer
as appropriate and the Borrower, and shall constitute Lender Obligations under
this Agreement.
10.04. Notices.
-------
(a) Notice to the Borrower. All notices required to be delivered
----------------------
to the Borrower pursuant to this Agreement shall be in writing and shall be sent
to the following address, by hand delivery, recognized national overnight
courier service with all charges prepaid, telex, telegram, telecopier or by
United States certified mail, postage prepaid:
Mastech Corporation
1004 McKee Road
Oakdale, Pennsylvania 15071
Attention: Vice President Finance
Telephone: (412) 490-9349
Telecopier: (412) 787-9225
(b) Notice to the Agent. All notices required to be delivered to
-------------------
the Agent pursuant to this Agreement shall be in writing and shall be sent to
the following address, by hand delivery, recognized national overnight courier
service with all charges prepaid, telex, telegram, telecopier or by United
States certified mail, postage prepaid:
PNC Bank, National Association
Vice President
Telephone: 412-762-3627
Telecopier: 412-762-8672
(c) Notice to L/C Issuer. All notices required to be sent to the
--------------------
L/C Issuer pursuant to this Agreement shall be in writing and shall be sent to
the following address by hand delivery, recognized national overnight courier
service with all charges prepaid, telex, telegram, telecopier or by United
States certified mail, postage prepaid:
PNC Bank, National Association
Multibank Loan Administration
One PNC Plaza, 22nd Floor
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: Arlene M. Ohler
Vice President
Telephone: 412-762-3627
Telecopier: 412-762-8672
(d) Notice to Lenders. All notices required to be sent to the
-----------------
Lenders pursuant to this Agreement shall be in writing and shall be sent to the
notice address of each Lender as set forth on Schedule 1.01 (a) hereto or such
-----------------
Lender's signature page to the Assignment and Assumption Agreement executed by
it as a Purchasing Lender, as the case may be, by hand delivery, overnight
courier service with all charges prepaid, telex, telegram,
telecopier or other means of electronic data communication or by the United
States mail, first class postage prepaid. All such notices shall be effective
three days after mailing, the date of telecopy transmission or when received,
whichever is earlier. The Borrower, the Lenders, the L/C Issuer and the Agent
may each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
10.05. Participation and Assignment.
----------------------------
(a) Sale of Participation.
---------------------
(i) Any Lender may, in the ordinary course of its commercial
lending business and in accordance with applicable law, and without the consent
of the Borrower, at any time sell to one or more Participants (which
Participants may be Affiliates of such Lender) Participations in the Revolving
Credit Commitment of such Lender or any Loan, the Note, or other interest of
such Lender hereunder. In the event of any such sale of a Participation, such
Lender's obligations under this Agreement to the Borrower shall remain
unchanged, such Lender shall remain solely responsible for its performance under
this Agreement, such Lender shall remain the holder of the Note made payable to
it for all purposes under this Agreement (including all voting rights hereunder)
and the Borrower shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents.
(ii) As between a Participant and that Participant's selling
Lender only, the sole issues on which the Participant shall have a contractual
right to vote are: (A) an increase in such Lender's Revolving Credit Commitment,
(B) any change of the term Base Rate, Euro-Rate, Euro-Rate Reserve Percentage,
or Applicable Euro-Rate Margin so as to decrease the interest rate relating to
the Loans, (C) extension of the term of either Revolving Credit Commitment, or
(D) postponement of the scheduled payment of principal, interest or Fees due
under any of the Loan Documents.
(b) Assignments. Subject to the remaining provisions of this
------------
Section 10.05(b), any Lender may at any time, in the ordinary course of its
commercial lending business, in accordance with applicable law, sell to one or
more Purchasing Lenders (which Purchasing Lender may be affiliates of the
Transferor Lender), all or a portion of its rights and obligations under this
Agreement and the Note then held by it, pursuant to an Assignment and Assumption
Agreement substantially in the form of Exhibit "G" and satisfactory to
-----------
the Agent, executed by the Transferor Lender, such Purchasing Lender, the Agent
and the Borrower; subject, however to the following requirements:
(i) The Agent and the Borrower must each give its prior
consent to any such assignment which consent shall not be unreasonably withheld;
it being agreed that it shall not be deemed unreasonable for the Borrower to
decline to consent to such assignment if (A) such assignment would result in
incurrence of additional costs to the Borrower under Section 2.10, 2.11 or 2.12,
or (B) the proposed assignee has not provided to the Borrower any tax forms
received under Section 10.05(d); provided, however, no consent is required for
-------- -------
the transfer by a Lender to its Affiliate so long as the conditions in clauses
(A) and (B) immediately above are satisfied;
(ii) Each such assignment must be in a minimum amount of
$5,000,000, or, if in excess of $5,000,000, in integral multiples of $1,000,000;
(iii) each such assignment shall be of a constant, and not a
varying, percentage of the Transferor Lender's Revolving Credit Commitment,
outstanding Loans and all other rights and obligations under this Agreement and
the other Loan Documents; and
(iv) The Transferor Lender shall pay to the Agent, for its own
Account, a fee of $3,500 for each such assignment (the "Assignment Fee").
Upon the execution, delivery, acceptance and recording of any such Assignment
and Assumption Agreement, from and after the Transfer Effective Date determined
pursuant to such Assignment and Assumption Agreement, (i) the Purchasing Lender
thereunder shall be a party hereto as a Lender and, to the extent provided in
such Assignment and Assumption Agreement, shall have the rights and obligations
of a Lender hereunder with a Revolving Credit Commitment as set forth therein,
and (ii) the Transferor Lender thereunder shall, to the extent provided in such
Assignment and Assumption Agreement, be released from its obligations under this
Agreement as a Lender. Such Assignment and Assumption Agreement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender as a Lender and the resulting
adjustment of Ratable Share arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such Transferor Lender
under this Agreement and the Notes. On or prior to the Transfer Effective Date,
the Borrower shall execute and deliver to the Agent, in exchange for the
surrendered Note held by the Transferor Lender, a new Note to the order of such
Purchasing Lender in an amount equal to the Revolving Credit Commitment assumed
by it and purchased by it pursuant to such Assignment and Assumption Agreement,
and a Note to the order of the Transferor Lender in an amount equal to the
Revolving Credit Commitment retained by it hereunder.
(c) Assignment Register. The Agent shall maintain at its address
-------------------
referred to in Section 10.04(b) a copy of each Assignment and Assumption
Agreement delivered to it and a register (the "Register") for the recordation of
the names and addresses of the Lenders and the amount of the Loans owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent, the Lender and the
L/C Issuer may treat each Person whose name is recorded in the Register as the
owner of the Loans recorded therein for all purposes of this Agreement. The
Register shall be available at the office of the Agent for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Withholding of Income Taxes. At least five (5) Business Days
---------------------------
prior to the first date on which interest or fees are payable hereunder for the
account of any Purchasing Lender or Participant, each Purchasing Lender or
Participant that is not incorporated under the laws of the United States or a
state thereof shall deliver to the Borrower and the Transferor Lender two duly
completed copies of United
States Internal Revenue Service Form W-9, 4224 or 1001 or other applicable form
prescribed by the Internal Revenue Service. Such form shall certify that such
Purchasing Lender or Participant is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
Federal income taxes, or is subject to such tax at a reduced rate under an
applicable tax treaty or under United States Internal Revenue Service Form W-8,
or another applicable form or a certificate of such Purchasing Lender or
Participant indicating that no such exemption or reduced rate is allowable with
respect to such payments. Each Purchasing Lender or Participant which delivers a
Form W-8, W-9, 4224 or 1001 further undertakes to deliver to the Borrower and
its Transferor Lender two additional copies of such form (or a successor form)
on or before the date that such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from
withholding tax or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably required by the Borrower or its
Transferor Lender, either certifying that such Purchasing Lender or Participant
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States Federal income taxes or is subject
to such tax at a reduced rate under an applicable tax treaty or stating that no
such exemption or reduced rate is allowable. The Borrower, in the case of a
Purchasing Lender or Transferor Lender in the case of a Participant shall be
entitled to withhold United States Federal income taxes at the full withholding
rate, unless the Purchasing Lender or Participant as the case may be establishes
an exemption, or at the applicable reduced rate, as established pursuant to this
provisions of this Section 10.05(d).
(e) Assignments to Federal Reserve Bank. In addition to the
-----------------------------------
assignments permitted above, any Lender may assign and pledge all or any portion
of its Loans and Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations and duties
hereunder or under the other Loan Documents.
10.06. Successors and Assigns. This Agreement shall be
----------------------
binding upon the Borrower and the Agent, the Lenders, the L/C Issuer and their
respective successors and assigns, and shall inure to the benefit of the
Borrower, the Agent, the Lenders, the L/C Issuer and respective successors and
assigns; provided, however, that the Borrower shall not assign its rights or
-------- -------
duties hereunder or under any of the other Loan Documents without the prior
written consent of the Lenders.
10.07. No Implied Waivers; Cumulative Remedies; Writing Required. No
---------------------------------------------------------
course of dealing and no delay or failure of the Agent or any Lender in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof; nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Lenders under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Lender of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
10.08. Severability. Any provision of this Agreement which
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or enforceability
without invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.09. Indemnity. The Borrower hereby agrees to indemnify
---------
the Agent, the Lenders, the L/C Issuer, and the directors, officers, employees,
attorneys, agents and Affiliates or all of the foregoing (each of the foregoing
an "Indemnified Person") against, and hold each of them harmless from, any loss,
liabilities, damages, claims, costs and expenses (including reasonable
attorneys' fees and disbursements) suffered or incurred by any Indemnified
Person (except those caused by such Indemnified Person's gross negligence or
willful misconduct, ) arising out of, resulting from or in any manner connected
with, the execution, delivery and performance of each of the Loan Documents, the
Lender Obligations and any and all transactions related to or consummated in
connection with the Lender Obligations, including, without limitation, losses,
liabilities, damages, claims, costs and expenses suffered or incurred by any
Indemnified Person arising out of or related to investigating, preparing for,
defending against, or providing evidence, producing documents or taking any
other action in respect of any commenced or threatened litigation,
administrative proceeding or investigation under any Federal securities law or
by any Official Body of any jurisdiction, or at common law or otherwise, that is
alleged to arise out of or is based on (i) any untrue statement or alleged
untrue statement of any material fact of the Borrower or any Affiliate of the
Borrower in any document or schedule filed with the Securities and Exchange
Commission or any other Official Body, (ii) any omission or alleged omission to
state any material fact required to be stated in such document or schedule, or
necessary to make the statements made therein, in light of the circumstances
under which made, not misleading; (iii) any actual or alleged acts, practices or
omissions of the Borrower, any other Loan Party, or any of their respective
directors, officers, partners, employees, attorneys, agents or Affiliates,
related to the making of any acquisition, purchase of shares or assets pursuant
thereto, financing of such purchases or the consummation of any other
transactions contemplated by any such acquisitions that are alleged to be in
violation of any Federal securities law or of any other statute, regulation or
other law of any jurisdiction applicable to the making of any such acquisition,
the purchase of shares or assets pursuant thereto, the financing of such
purchases or the consummation of the other transactions contemplated by any such
acquisition; or (iv) any withdrawals, termination or cancellation of any such
proposed acquisition for any reason whatsoever. The indemnity set forth in this
Section 10.09 shall be in addition to any other obligations or liabilities of
the Borrower to the Agent, the Lenders or the L/C Issuer, or at common law or
otherwise. The provisions of this Section 10.09 shall survive the payment of the
Lender Obligations and the termination of this Agreement and the other Loan
Documents.
10.10 Confidentiality. The Agent, the Lenders and the L/C
---------------
Issuer shall keep confidential and not disclose to any Person, other than to
their respective directors, officers, employees, Affiliates and agents, and to
actual and potential Purchasing Lenders and Participants, all non-public
information concerning the Borrower and the Borrower's Affiliates which comes
into the possession of the Agent, the Lenders or the L/C Issuer during the term
hereof. Notwithstanding the foregoing, the Agent, the Lenders and the L/C Issuer
may disclose information concerning the Borrower (i) in accordance-with normal
banking practices and the Agent's, such Lender's or the L/C Issuer's policies
concerning disclosure of such information in connection with syndication or
sales of Participations, subject to informing the recipient of such
information of the duties of confidentiality hereunder, (ii) pursuant to what
the Agent, such Lender or the L/C Issuer believes to be the lawful requirements
or request of any Official Body regulating banks or banking, (iii) as required
by governmental regulation or rule, judicial process or subpoena; provided
however, if permitted by law, the Agent, or such Lender shall notify the
Borrower and permit the Borrower, at the Borrower's cost, to contest such
subpoena; and (iv) to their respective attorneys, accountants and auditors who
have been informed of the confidentiality hereunder.
10.11. Survival. All representations, warranties, covenants
--------
and agreements of the Borrower contained herein or in the other Loan Documents
or made in writing in connection herewith shall survive the issuance of the
Notes and the Letters of Credit and shall continue in full force and effect so
long as the Borrower may borrow hereunder and so long thereafter until payment
in full of all the Notes and the Lender Obligations is made. The obligations of
the Borrower under Sections 2.13, 2.19, 2.21, 6.13, 10.02, 10.03 and 10.09 shall
survive the termination of this Agreement and the discharge of the other
obligations of the Borrower hereunder, and any other Loan Documents, and shall
also survive the payment in full of all Lender Obligations, the termination of
the Revolving Credit Commitment in accordance with the provisions of this
Agreement and the termination or expiration of all Letters of Credit in
accordance with their respective terms.
10.12. GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL
-------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF
LAWS, EXCEPTING APPLICABLE FEDERAL LAW AND EXCEPT ONLY TO THE EXTENT PRECLUDED
BY THE MANDATORY APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
10.13. FORUM. THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING
-----
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS TO
WHICH THE BORROWER IS A PARTY MAY BE COMMENCED IN THE COURT OF COMMON PLEAS OF
ALLEGHENY COUNTY, PENNSYLVANIA OR IN THE DISTRICT COURT OF THE UNITED STATES FOR
THE WESTERN DISTRICT OF PENNSYLVANIA, AND THE PARTIES HERETO AGREE THAT A
SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN EITHER OF SUCH
COURTS SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED
PERSONALLY OR BY CERTIFIED MAIL TO THE PARTIES AT THEIR ADDRESSES SET FORTH IN
SECTION 10.04, OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. FURTHER, THE BORROWER HEREBY SPECIFICALLY CONSENTS TO THE PERSONAL
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA AND
THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF PENNSYLVANIA
AND WAIVES AND HEREBY ACKNOWLEDGES THAT IT IS ESTOPPED FROM RAISING ANY
OBJECTION BASED ON FORUM NON CONVENIENS, ANY CLAIM THAT EITHER SUCH COURT LACKS
--------------------
PROPER VENUE OR ANY OBJECTION THAT EITHER SUCH COURT LACKS PERSONAL JURISDICTION
OVER THE BORROWER SO AS TO PROHIBIT EITHER SUCH COURT FROM ADJUDICATING ANY
ISSUES RAISED IN A COMPLAINT FILED WITH EITHER SUCH COURT AGAINST THE BORROWER
BY THE AGENT, THE LENDERS OR THE L/C ISSUER CONCERNING THIS AGREEMENT OR THE
OTHER LOAN
DOCUMENTS OR PAYMENT TO THE LENDERS. THE BORROWER HEREBY ACKNOWLEDGES AND AGREES
THAT THE CHOICE OF FORUM CONTAINED IN THIS SECTION 10.13 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN ANY FORUM OR THE TAKING OF
ANY ACTION UNDER THE LOAN DOCUMENTS TO ENFORCE THE SAME IN ANY APPROPRIATE
JURISDICTION.
10.14. Non-Business Days. Whenever any payment hereunder or
-----------------
under the Notes is due and payable on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in each such case be included in computing interest in connection
with such payment.
10.15. Integration. This Agreement and the other Loan
-----------
Documents constitute the entire agreement between the parties relating to this
financing transaction and they supersede all prior understandings and
agreements, whether written or oral, between the parties hereto relating to the
transactions provided for herein.
10.16. Counterparts. This Agreement and any amendment hereto
------------
may be executed in several counterparts and by each party on a separate
counterpart, each of which, when so executed and delivered, shall be an
original, but all of which together shall constitute but one and the same
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the other party against
whom enforcement is sought. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be as effective as delivery of a
manually executed counterpart of this Agreement.
10.17. Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
(a) Notional Funding. Each Lender shall have the right from time
----------------
to time, without notice to the Borrower, to deem any branch, subsidiary or
affiliate (which for the purposes of this Section 10.17 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls such Lender) of such Lender to have made,
maintained or funded any Loan in Dollars or in any Optional Currency to which
the Euro-Rate Option applies at any time, provided that immediately following
(on the assumption that a payment were then due from the Borrower to such other
office) and as a result of such change the Borrower would not be under any
greater financial obligation to such Lender hereunder, pursuant to Section 2.08,
2.10, 2.11 or 2.12 hereof than it would have been in the absence of such change.
Notional funding offices may be selected by each Lender without regard to a
Lender's actual methods of making, maintaining or funding the Loans or any
sources of funding actually used by or available to such Lender.
(b) Actual Funding. Each Lender shall have the right from time to
--------------
time to make or maintain any Loan by arranging for a branch, subsidiary or
affiliate of such Lender to make or maintain such Loan subject to the last
sentence of this Section 10.17(b). If any Lender causes a branch, subsidiary or
affiliate to make or maintain any part of the Loans hereunder, all terms and
conditions of this Agreement shall, except where the context clearly requires
otherwise, be applicable to such part of the Loans to the same extent as if such
Loans were made or maintained by such Lender but in no event shall any Lender's
use of such a branch,
subsidiary or affiliate to make or maintain any part of the Loans hereunder
cause such Lender or such branch, subsidiary or affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay any
other compensation to any such Lender (including, without limitation, any
expenses incurred or payable pursuant to Section 2.08, 2.10, 2.11 or 2.12
hereof) which would otherwise not be incurred.
10.18 WAIVER OF JURY TRIAL. THE BORROWER, EACH LENDER, THE AGENT AND THE
--------------------
L/C ISSUER EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY COURT AND IN ANY
ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE BORROWER, THE LENDERS, THE AGENT,
THE L/C ISSUER OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY, AS
TO ALL MATTERS AND THINGS ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER
LOAN DOCUMENTS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Credit Agreement to be executed by their respective duly
authorized officers as of the date first written above.
MASTECH CORPORATION, a Pennsylvania
corporation
By: (SEAL)
----------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
in its capacities as Agent and L/C
Issuer and as a Lender
By: (SEAL)
----------------------------
Name:
Title:
FLEET NATIONAL BANK
By: (SEAL)
----------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By: (SEAL)
----------------------------
Name:
Title:
CHASE MANHATTAN BANK
By: (SEAL)
----------------------------
Name:
Title:
EX-10.25
8
LEASE AGREEMENT DATED OCTOBER 14, 1998
Exhibit 10.25
PARKRIDGE OFFICE CENTER
BUILDING ONE
OFFICE LEASE
LANDLORD: PARK RIDGE ONE ASSOCIATES
TENANT: MASTECH SYSTEMS CORPORATION
Dated for reference purposes as of : October 14, 1998
PARK RIDGE ONE ASSOCIATES
Basic Lease Information
Lease Date: October 14, 1998
----------------
Tenant: Mastech Systems Corporation
---------------------------
Address: Suite 500
---------
Park Ridge One, Pittsburgh, PA 15275
------------------------------------
Contact Person: Jeff McCandless, Vice President of Finance
------------------------------------------
with a copy to: Daniel Daugherty, Manager of Contracts and Legal Affairs
--------------------------------------------------------
Phone:
------------------------------------------------------------------
Landlord: Park Ridge One Associates
-------------------------
Address: C/O Grubb & Ellis Management Services, Inc.
-------------------------------------------
600 Six PPG Place
-----------------
Pittsburgh, PA 15222
--------------------
Phone: (412) 281-0100
--------------
Building: As described in Paragraph 1.1 of the Lease.
-------------------------------------------
Total Rentable Area of
Building Office Space: 99,066 Rentable Square Feet
---------------------------
Suite: 500 and 130
-----------
Floor(s): 1st and 5th
-----------
Rentable Area: 25,599
------
Term: 5 years
-------
Proposed Commencement Date: This lease shall commence sixty (60) days after
CNG Energy Services Corporation vacates the
property in full and based on a walkthrough and
written signoff by Tenant, but not later than
December 15, 1998.
Expiration Date (subject
to Lease Provisions): December 14, 2003
-----------------
Annual Base Rental: $20.50 per rentable square feet. Five Hundred
----------------------------------------------
Twenty-Four Thousand Seven Hundred Seventy-Nine
-----------------------------------------------
and 50/100 ($524,779.50) Dollars
--------------------------------
Tenant's Share of Excess
Expenses (Subject to
Lease Provisions): 25.8%
-----
Tenant's Share of Excess
Taxes (Subject to Lease
Provisions): 25.8%
-----
Excess Taxes Base: Base Year is 1999
-----------------
Excess Expenses Base: Base Year is 1999
-----------------
Use: General office
--------------
Security Deposit: None
----
Date Prior to Which
Tenant Shall Deliver Plans: None
----
Other:
-----------------------------------------------------------------------
Broker: Grubb & Ellis Company, 600 PPG Place, Pittsburgh, PA 15222
-----------------------------------------------------------
Oxford Development Company, One Oxford Center, Pgh., PA 15219
-------------------------------------------------------------
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease.
Park Ridge One Associates,
a Delaware limited partnership Mastech Systems Corporation
By: ________________________________ ______________________________________
a Delaware corporation
General Partner
By: ________________________________ By: ___________________________________
Its: ________________________________ Its: ___________________________________
AUTHORIZED AGENT FOR
PARK RIDGE ONE ASSOCIATES
a Pennsylvania limited partnership
TABLE OF CONTENTS
ARTICLE PAGE
1. PREMISES.............................................................1
2. TERM.................................................................1
3. ANNUAL BASE RENTAL; ADDITIONAL RENT..................................2
4. ADDITIONAL RENT FOR EXCESS OPERATING EXPENSES AND TAXES..............3
5. TERMS OF PAYMENT.....................................................7
6. CONSTRUCTION OF THE PREMISES.........................................7
7. COMMON AREA MAINTENANCE..............................................8
8. CONDUCT OF BUSINESS BY TENANT........................................8
9. ALTERATIONS AND TENANT'S PROPERTY....................................8
10. REPAIRS..............................................................9
11. LIENS...............................................................10
12. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS.....................11
(i)
13. SUBORDINATION.......................................................11
14. INABILITY TO PERFORM................................................12
15. DESTRUCTION.........................................................12
16. EMINENT DOMAIN......................................................14
17. ASSIGNMENT..........................................................15
18. SUBLETTING..........................................................17
19. UTILITIES...........................................................18
20. DEFAULT.............................................................20
21. INDEMNITY...........................................................23
22. TENANT'S INSURANCE..................................................24
23. LIMITATION OF LANDLORD'S LIABILITY..................................24
24. ACCESS TO PREMISES..................................................25
25. NOTICES.............................................................25
(ii)
26. NO WAIVER...........................................................26
27. TENANT'S CERTIFICATES...............................................26
28. RULES AND REGULATIONS...............................................27
29. SECURITY DEPOSIT....................................................27
30. AUTHORITY...........................................................27
31. MISCELLANEOUS.......................................................28
(iii)
EXHIBIT A - FLOOR PLAN
EXHIBIT B - DESCRIPTION OF LAND
EXHIBIT C - WORK AGREEMENT
EXHIBIT D - FORM OF SUBORDINATION OF MORTGAGE AGREEMENT
EXHIBIT E - RULES AND REGULATIONS
EXHIBIT F - LICENSE AGREEMENT
(iv)
OFFICE LEASE
THIS LEASE is made and entered into this 14th day of October, 1998, by and
between PARK RIDGE ONE ASSOCIATES L.P., a Pennsylvania limited partnership,
(herein called "Landlord"), and MASTECH SYSTEMS CORPORATION (herein called
"Tenant").
WITNESSETH:
Landlord and Tenant hereby covenant and agree as follows:
1. PREMISES
1.1 Upon and subject to the terms, covenants and conditions hereinafter
set forth, Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord those premises (herein called the "Premises") in the building known as
Park Ridge Office Center, Building One, in Findlay Township, Pennsylvania
(herein called the "Building") , comprising the area substantially as shown on
the floor plan or plans attached hereto as Exhibit A. The Premises are located
on the floors of the Building that are specified in the Basic Lease information.
The term "Building" includes the LAND upon which the Building stands and which
is described in Exhibit B attached hereto (the "Land"), all easements and rights
appurtenant to the Land and Building, all parking facilities located on the
Land, and all improvements serving the Building and designated from time-to-time
by Landlord as Land or common areas appurtenant to the Building, together with
utilities, facilities, drives, walkways and other amenities appurtenant to or
servicing the Building.
2. TERM
2.1 The Premises are leased for a term (herein called the "Term") to
commence and end on the dates respectively specified in the Basic Lease
Information, unless the Term shall sooner terminate as hereinafter provided.
If, on or prior to the date set forth in the Basic Lease Information for the
commencement of the Term (the "Proposed Commencement Date") , Landlord fails to
deliver possession of the Premises, either (a) because Landlord's Work (as
hereinafter defined in Article 6 hereof) shall not have been substantially
completed, or (b) because a previous occupant is holding over, or (c) because of
any other cause or reason beyond the reasonable control of Landlord, then the
following provisions shall apply; (i) the Term shall not commence on the
Proposed Commencement Date but shall, instead, commence on the date fixed by
Landlord in a notice to Tenant, which notice shall state that the Premises are,
or prior to the commencement date fixed in such notice will be, substantially
completed and ready for occupancy by Tenant; (ii) neither the validity of this
Lease nor the obligations of Tenant under this Lease shall be affected by such
failure to deliver possession, except that the Term shall begin as provided in
clause (i) above; (iii) Tenant shall have no claim against Landlord failure to
deliver possession of the Premises on the date originally fixed therefor; (iv)
in no event shall the expiration date of the Term be extended beyond the date
specified in the Basic Lease Information.
2.2 The dates upon which the Term shall commence and terminate pursuant to
this Article 2 are herein called the "Commencement Date" and the "Expiration
Date" respectively.
2.3 Notwithstanding anything to the contrary herein contained, in the
event that the Term shall not have commenced on or before such date as shall be
three (3) months from the Commencement Date set forth in the Basic Lease
Information and such delay in commencement shall not have been caused by the
Tenant or any event included in Section 31.16 hereof, then this Lease shall be
automatically terminated without any further act of either party hereto and both
parties hereto shall be released from all obligations hereunder. If such delay
shall have been caused by the Tenant or an event included in Section 31.16 then
this Lease may only be terminated at the option of the Landlord.
2.4 Tenant shall have a five (5) year renewal option at a rate consistent
with the then current Base Rental Rates for Class A suburban office properties
in Pittsburgh, Pennsylvania.
3. ANNUAL BASE RENTAL; ADDITIONAL RENT
3.1 Tenant shall pay to Landlord during the Term the Annual Base Rental
specified in the Basic Lease Information (herein called the "Annual Base
Rental"), which sum shall be payable by Tenant in equal consecutive monthly
installments on or before the first day of each month, in advance, at the
address specified for Landlord in the Basic Lease Information, or such other
place as Landlord shall designate, without any prior demand therefor and without
any deductions, counterclaims or setoffs whatsoever. If the Commencement Date
should occur on a day other than the first day of a calendar month, or the
Expiration Date should occur on a day other than the last day of a calendar
month, then the monthly installment of Annual Base Rental for such fractional
month shall be prorated upon a daily basis based upon a thirty (30) day month.
Tenant shall have the right to audit all operating expense and real estate tax
reports once per year. All such statements shall be prepared in accordance with
GAAP. If such reports are over-stated by five percent or more, Landlord shall
be responsible for the cost of the audit and Tenant shall have the right to
conduct additional audits.
3.2 Tenant shall pay to Landlord all charges and other amounts required
under this Lease and the same shall constitute additional rent hereunder (herein
called "Additional Rent"), including, without limitation, any sums due resulting
from the provisions of Articles 4 and 19 hereof. All such amounts and charges
shall be payable to Landlord at the place where the Annual Base Rental is
payable. Landlord shall have the same remedies for a default in the payment of
Additional Rent as for a default in the payment of Annual Base Rental.
3.3 Tenant shall have a free rent period of three and one-half (3 1/2)
months beginning on the Commencement Date.
4. ADDITIONAL RENT FOR EXCESS OPERATING EXPENSES AND TAXES
4.1 For purposes of this Article 4, the following terms shall have the
meanings hereinafter set forth;
(a) "Tenant's Share of Excess Expenses" for any Expense Year (as
hereinafter defined) shall be calculated by multiplying the amount of Excess
Expenses (as hereinafter defined) by the fraction which is derived by dividing
the Rentable Area of the Premises by the Total Rentable Area of Building Office
Space.
(b) "Tenant's Share of Excess Taxes" for any Tax Year (as hereinafter
defined) shall be calculated by multiplying the amount of Excess Taxes (as
hereinafter defined) by the fraction which is derived by dividing the Rentable
Area of the Premises by the total Rentable Area of the Building.
(c) "Tax Year" shall mean each twelve (12) consecutive month period
commencing January 1st of each year during the Term, provided that Landlord,
upon notice to Tenant, may change the Tax Year from time-to-time to any other
twelve (12) consecutive month period and, in the event of any such change,
Tenant's share of Excess Taxes (as hereinafter defined) shall be equitably
adjusted for the Tax Years involved in any such change.
(d) "Real Estate Taxes" shall mean all taxes, assessments and charges
levied upon or with respect to the Building or any improvements, fixtures and
equipment of Landlord used in the operation thereof, or Landlord's interest in
the Building or such other property. Real Estate Taxes shall include, without
limitation, all general real property taxes and general and special assessments,
charges, fees or assessments for all governmental services or purported benefits
to the Building, service payments in lieu of taxes, all business privilege
taxes, and any tax, fee or excise on the act of entering into this Lease or any
other lease of space in the Building, or on the use or occupancy of the Building
or any part thereof, or on the rent payable under any Lease or in connection
with the business of renting space under any lease or in connection with the
business of renting space in the Building, that are now or hereafter levied or
assessed against Landlord by the United States of America, the Commonwealth of
Pennsylvania, or any political subdivision, public corporation, district or
other political or public entity, and shall also include any other tax, fee or
other excise, however described, that may be levied or assessed as a substitute
for, or as an addition to, in whole or in part, any other Real Estate Taxes
(including, without limitation, any municipal income tax) and any license fees,
tax measured or imposed upon rents, or other tax or charge upon Landlord's
business of leasing the Building, whether or not now customary or in the
contemplation of the parties on the date of this Lease. Real Estate Taxes shall
not include transfer, inheritance or capital stock taxes or income taxes
measured by the net income of Landlord from all sources, unless, due to a change
in the method of taxation or any of such taxes is levied or assessed against
Landlord as a substitute for, or as an addition to, in whole or in part, any
other tax that would otherwise constitute a Real Estate Tax. Real Estate Taxes
shall also include reasonable legal fees, costs and disbursements incurred in
connection with proceedings to contest, determine or reduce Real Estate Taxes.
If Real Estate taxes are reduced for any reason (i.e., successful proceedings to
contest taxes, etc.), then the reduction should be passed on to Tenant.
Provided that no reduction shall result in an amount that would be less than the
Base Year amount. However, in the event that Real Estate Taxes are replaced
with a tax on Tenant's income, operations or other element that may be described
as a Tenant based tax, then Landlord will reduce Tenant's rent by the taxed
amount even if such action shall reduce Tenant's share of Real Estate Taxes
below the Base Year amount.
(e) "Excess Taxes" with respect to any Tax Year shall mean the amount,
if any, by which Real Estate Taxes for such Tax Year exceed the product obtained
by multiplying the number of square feet of Total Rentable Area of Building by
the Excess Taxes Base set forth in the Basic Lease Information.
(f) "Expense Year" shall mean each twelve (12) consecutive month
period commencing January 1st of each year during the Term, provided that
Landlord, upon notice to Tenant, may change the Expense Year from time-to-time
to any other twelve (12) consecutive month period, and, in the event of any such
change, Tenant's Share of Excess Expenses (as hereinafter defined) shall be
equitably adjusted for the Expense Years involved in any such change.
(g) "Expenses" shall mean the total cost and expenses paid or incurred
by Landlord in connection with the management, operation, maintenance and repair
of the Total Rentable Area of Building Office space, including, without
limitation, (i) building supplies and equipment, the cost of air conditioning,
electricity, steam, water, sewer rental and charges, heating, mechanical,
ventilating and elevator systems. and all other utilities, and the cost of
supplies and equipment and maintenance and service contracts in connection
therewith, and all taxes on such utilities; (ii) the cost of repairs, general
maintenance, cleaning and janitorial services; (iii) the cost of fire, extended
coverage, boiler, machinery, sprinkler, public liability, property damage,
earthquake, flood and other insurance and bonds; (iv) wages, salaries and other
labor costs, including taxes, insurance, retirement, medical, workers'
compensation, and other employee benefits; (v) fees, charges and other costs,
including management fees, consulting fees, legal fees and accounting fees, of
all independent contractors engaged by Landlord or reasonably charged by
Landlord if Landlord performs management services; (vi) the cost of supplying,
maintaining and operating security systems and service for the Building; (vii)
the cost of supplying, replacing and cleaning employee uniforms; (viii) the cost
of any capital improvements made to the Building and substantially benefiting
the Total Rentable Area of Building Office Space after completion of
construction such capital improvements as a labor-saving device or to effect
other economics in the operation or maintenance of the Building, or made to the
Building after the date of this Lease, that are required under any governmental
law or regulation that was not applicable to the Building at the time that
permits for the construction thereof were obtained, such cost to be amortized
over such reasonable period as Landlord shall determine, together with interest
on the unamortized balance at the rate of fifteen percent (15%) per annum or
such higher rate as may have been paid by Landlord on funds borrowed for the
purpose of constructing such capital improvements; (ix) costs incurred in the
preparation of Landlord's Tax Statement (as defined hereafter) and Landlord's
Expense Statement (as defined hereafter); and (x) any other expenses of any
other kind whatsoever reasonably incurred in managing, operating, maintaining,
and repairing all or any part of the Total Rentable Area of Building Office
Space. Notwithstanding the foregoing, "Expenses" shall not include above-
standard use of utilities by other tenants within the Building, costs associated
with renovation to the common areas of the Building, if any, necessary to bring
such areas into compliance with the Americans with Disabilities Act, 42 U.S.C.
(S) 1201 et. seq. ("ADA") and "capital expenditures" to the Building, as such
term may be defined by the United States tax code, or any court of competent
jurisdiction interpreting the same.
The total cost and expenses paid or incurred by Landlord in connection
with the following items shall not be included as "Expenses": (i) utilities
expenses which are separately metered for any individual tenant in the Building;
(ii) any expense for which Landlord in reimbursed by a specific tenant by reason
of a special agreement or requirement of the occupancy of the Building by such
tenant; (iii) expenses for services provided by Landlord for the exclusive
benefit of a given tenant or tenants for which Landlord is directly reimbursed
by such tenant or tenants; and (iv) costs incurred by Landlord in the leasing of
space in the
Building or procuring now tenants. For purposes of such calculations, expenses
shall be increased to what they would have been if the Total Rentable Area of
Building Office Space was ninety-five (95%) occupied and Landlord paid such
expenses during any period in which the Total Rentable Area of Building Office
Space is less than ninety-five percent (95%) occupied. Tenant shall have the
right to review a detailed breakdown of Expenses and Real Estate Taxes.
(h) "Excess Expenses" with respect to any Expense Year shall mean the
amount, if any, by which Expenses for such Expense Year exceed the product
obtained by multiplying the number of square feet of Total Rentable Area of
Building Office Space by the Excess Expenses Base set forth in the Basic Lease
Information.
4.2 Tenant shall pay to Landlord on account of Tenant's Share of Excess
Taxes and as Additional Rent one twelfth (1/12th) of the amount of Tenant's
Share of Excess Taxes for each Tax Year on or before the first day of each month
during such Tax Year, in advance, in an amount estimated by Landlord and billed
by Landlord to Tenant; provided that Landlord shall have the right initially to
determine such monthly estimates and to revise such estimates from time-to-time.
With reasonable promptness after Landlord has received the tax bills for any Tax
Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's
Tax Statement") setting forth the amount of Real Estate Taxes for such Tax Year
and the amount of Tenant's Share of Excess Taxes, if any. If the actual amount
of Tenant's Share of Excess Taxes for such Tax Year exceeds the estimated amount
of Tenant's Share of Excess Taxes paid by Tenant for such difference between the
amount paid by Tenant and the actual Tax Year and the amount of Tenant's Share
of actual amount of Tenant's Share of Excess Taxes estimated amount of Tenant's
Share of Excess Tax Year, then Tenant shall pay to Landlord the difference
between the amount of estimated Tenant's Share of Excess Taxes paid by Tenant
and the actual amount of Tenant's Share of Excess Taxes within thirty (30) days
after receipt of Landlord's Tax Statement, and if the total amount of estimated
Tenant's Share of Excess Taxes paid by Tenant for any such Tax Year shall exceed
the actual amount of Tenant's Share of Excess Taxes for such Tax Year, then such
excess shall be credited against the next installment of the estimated amount of
Tenant's Share of Excess Taxes due from Tenant to Landlord hereunder.
4.3 Tenant shall pay to Landlord on account of Tenant's Share of Excess
Expenses and an Additional Rent one twelfth (1/12th) of the amount of Tenant's
Share of Excess Expenses for each Expense Year on or before the first day of
each month of such Expense Year, in advance, in an amount estimated by Landlord
and billed by Landlord to Tenant; provided that Landlord shall have the right
initially to determine such monthly estimates and to revise such estimates from
time-to-time. With reasonable promptness after the expiration of each Expense
Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's
Expense Statement"), certified by an officer of the managing agent of Landlord,
setting forth in reasonable detail the Expenses for the Expense Year, and the
amount of Tenant's Share of Excess Expenses, if any. If the actual amount of
Tenant's Share of Excess Expenses for such Expense Year exceeds the estimated
amount of Tenant's Share of Excess Expenses paid by Tenant for such Expense
Year, then Tenant shall pay to Landlord the difference between the amount of
estimated Tenant's Share of Excess Expenses paid by Tenant and the actual Amount
of Tenant's Share of Excess Expenses within fifteen (15) days after the receipt
of Landlord's Expense Statement, and if the total amount of estimated Tenant's
Share of Excess
Expenses paid by Tenant for any such Expense Year shall exceed the actual
amount of Tenant's Share of Excess Expenses for such Expense Year, then such
excess shall be credited against the next installment of the estimated amount
of Tenant's Share of Excess Expenses due from Tenant to Landlord hereunder.
4.4 If the Commencement Date or Expiration Date of this Lease shall occur
on a date other than the beginning or end of a Tax Year or Expense Year, the
amount of Tenant's Share of Excess Taxes, if any, and the amount of Tenant's
Share of Excess Expenses, if any, for the Tax Year and the Expense Year in which
the Commencement Date or Expiration Date falls shall be in the proportion that
the number of days in such partial year in which the Commencement Date or
Expiration Date occurs bears to 365; provided, however, Landlord may, pending
the determination of the amount, if any, of Excess Taxes and Excess Expenses for
such partial Tax Year and Expense Year, furnish Tenant with statements of
estimated Excess Taxes, estimated Excess Expenses, and the amount of Tenant's
Share of each for such partial Tax Year and Expense Year. Within fifteen (15)
days after receipt of such estimated statement, Tenant shall remit to Landlord,
as Additional Rent, the amount of Tenant's Share of such Excess Taxes and
Tenant's Share of such Excess Expenses. After such Excess Taxes and such Excess
Expenses have been finally determined and Landlord's Tax Statement and
Landlord's Expense Statement have been furnished to Tenant pursuant to Sections
4.2 and 4.3 hereof, then, if there shall have been an underpayment of the amount
of either Tenant's Share of Excess Taxes or Tenant's Share of Excess Expenses,
Tenant shall remit the amount of such underpayment to Landlord within fifteen
(15) days of receipt of such statements, and, if there shall have been an
overpayment, Landlord shall remit the amount of any such overpayment to Tenant
within fifteen (15) days of the issuance of such statements.
5. TERMS OF PAYMENT
5.1 Tenant shall pay to Landlord, within fifteen (15) days after delivery
by Landlord to Tenant of bills or statements therefor; (a) sums equal to all
expenditures made and monetary obligations incurred by Landlord including,
without limitation, expenditures made and obligations incurred for reasonable
counsel fees, in connection with the remedying by Landlord for Tenant's account
pursuant to the provisions of Article 20 hereof; (b) sums equal to all losses,
costs, liabilities, damages and expenses referred to in Article 20 hereof; (c)
sums equal to all expenditures made and monetary obligations incurred by
Landlord, including, without limitation, expenditures made and obligations
incurred for reasonable counsel fees, in collecting or attempting to collect the
Annual Base Rental, any Additional Rent or any other sum of money accruing under
this Lease or in enforcing or attempting to enforce any rights of Landlord under
this Lease or pursuant to law; and (d) all other sums of money (other than
Annual Base Rental and Additional Rent which are to be due and payable) accruing
from Tenant to Landlord under the provisions of this Lease. Any sum of money
(other than Annual Base Rental) accruing from Tenant to Landlord pursuant to any
provision of this Lease, including, without limitation, the provisions of
Exhibit C attached hereto, whether prior to or after the Commencement Date, may,
at Landlord's option, be deemed Additional Rent. All obligations of the Tenant
under this Lease, including without limitation the Tenant's obligations under
this Section 5.1, shall survive the expiration or sooner termination of the
Term.
5.2 If Tenant shall fail to pay any Annual Base Rental or Additional Rent
after the date same in due and payable, such unpaid amounts shall be subject to
a late payment charge
equal to two percent (2%) per month of such unpaid amounts (the "Default Rate")
in each instance to cover Landlord's additional administrative costs and cost
of funds resulting from Tenant's failure. Such late payment charge shall be
paid to Landlord together with such unpaid amounts. Such late payment charge
shall not diminish or impair any other remedies available to Landlord.
6. CONSTRUCTION OF THE PREMISES
6.1 Prior to the Commencement Date, Tenant will perform the work and make
the installations in the Premises substantially as set forth as Building
Standard Work in Exhibit C annexed hereto and made a part hereof (such work and
installations being herein called "Tenant's Work"). Tenant, through the
services of LV Construction Corporation, whom the Landlord approves, shall, when
construction progress so permits, notify Landlord in advance of the approximate
date on which Tenant's Work will be substantially completed in accordance with
Exhibit C and will notify Landlord when Tenant's Work is in fact so completed.
Commencement of Tenant's Work shall constitute delivery of possession of the
Premises to Tenant and notice to Tenant of the Commencement Date pursuant to
construction of the Building or the Premises shall not affect or change this
Lease or invalidate same. It is agreed that by occupying the Premises, Tenant
formally accepts same and acknowledges that the Premises are in the condition
called for hereunder. Failure of Landlord to deliver possession of the Premises
within the time and in the condition provided for in this Lease will not give
rise to any claim for damages by Tenant against Landlord or Landlord's
contractor. Landlord shall disburse to Tenant an Allowance ("Tenant's
Allowance") of $15 per square foot of Rentable Area based upon invoices
received. Payment shall be made within fifteen (15) days of receipt. Any final
balance will be paid thirty (30) days after construction has been completed
(including punch list items) and after the parties approve of the construction
finish. In the event Tenant incurs less than $15.00 per square foot, Landlord
shall credit the balance to Tenant in the form of rent credits.
7. COMMON AREA MAINTENANCE
7.1 The manner in which the common areas are maintained and operated and
the expenditures therefor shall be in accordance with Class A suburban office
buildings in the Pittsburgh, Pennsylvania area, and the use of such areas and
facilities shall be subject to such reasonable rules and regulations as Landlord
shall make from time-to-time. The term "common areas' an used herein shall mean
the pedestrian sidewalks, hallways, lobby, corridors, delivery areas, elevators
and stairs not contained in the leased areas, public bathrooms and all other
areas or improvements that may be provided by Landlord for the convenience and
use of the tenants of the Building and their respective sub-tenants, agents,
employees, customers, invitees and any other licensees of Landlord.
7.2 The purpose of attached Exhibit A is to show the location of the
Premises in the Building and Landlord hereby reserves the right, at any time and
from time-to-time, to make alterations or additions to the Building and the
common areas. Landlord also reserves the right at any time and from time-to-
time to construct other improvements in the Building (including within the
common areas) and to enlarge same and make alterations therein or additions
thereto.
8. CONDUCT OF BUSINESS BY TENANT
8.1 Tenant shall use and occupy the Premises during the Term of this Lease
solely for the uses specified in the Basic Lease Information and for no other
use or uses without the prior written consent of Landlord.
8.2 Tenant and all sublessees or assignees of Tenant shall not use or
occupy, or permit the use or occupancy of, the Premises or any part thereof for
any use other than the sole uses specifically set forth in the Basic Lease
Information or in any illegal manner, or in any manner that, in Landlord's
judgment, would adversely affect or interfere with any services required to be
furnished by Landlord to Tenant or to any other tenant or occupant of the
Building, or with the proper and economical rendition of any such service, or
with the use or enjoyment of any part of the Building by any other tenant or
occupant.
9. ALTERATIONS AND TENANT'S PROPERTY
9.1 Tenant shall not make or permit any additions or alterations to the
mechanical, plumbing, HVAC or electrical systems in the Building and shall not
make or permit any alterations which affect the Building, installations,
additions or improvements, structural or otherwise (herein collectively called
"Alterations"), in or to the Premises without Landlord's prior written consent.
All Alterations permitted by Landlord and made by or on behalf of Tenant or any
person claiming through or under Tenant shall be made and performed (a) at
Tenant's cost and expense and at such time and in such manner as Landlord may
designate, (b) by contractors or mechanics approved by Landlord, (c) so that
same shall be at least equal in quality, value, and utility to the original work
or installation, (d) in accordance with the Rules and Regulations for the
Building adopted by Landlord from time-to-time and in accordance with all
applicable laws and regulations of governmental authorities having jurisdiction
over the Premises, (e) pursuant to plans, drawings and specifications which have
been reviewed and approved by Landlord prior to the commencement of the
Alterations, and (f) subject to all other terms and conditions of this Lease
including but not limited to Article 11.
9.2 All appurtenances, fixtures, improvements, additions and other
property attached to or installed in the Premises by Landlord or on behalf of
Tenant, at Landlord's expense, shall be and remain the property of Landlord.
However, Landlord may require at Landlord's discretion the removal by Tenant of
property which has been attached to or installed in the Premises. Tenant shall
pay to Landlord or its designees the cost of repairs of any damages to the
Premises or Building and/or losses caused by the removal of such property. All
appurtenances, fixtures, improvements, additions and other property, whether
permanent or temporary, attached to or installed in the Premises by Tenant, at
Tenant's expense, or at the joint expense of Landlord and Tenant, shall be and
remain the property of Tenant, except if located above the ceiling or below the
floor, as long as Tenant removes the property without damage to the Building or
the Premises.
9.3 Any furnishings and personal property placed in the Premises that are
removable without damage to the Building or the Premises, whether the property
of Tenant or leased by Tenant, are herein called "Tenant's Property". Any
replacements of any property of Landlord, whether made at Tenant's expense or
otherwise, shall be and remain the property of Landlord. Any of Tenant's
Property remaining on the Premises at the expiration of the Term shall be
removed by Tenant at Tenant's cost and expense, and Tenant shall, at its cost
and expense, repair any damage to the Premises or the Building caused by such
removal. Any of Tenant's Property not removed from the Premises prior to the
Expiration Date shall, after written notice to Tenant to remove Tenant's
Property and Tenant's failure thereafter to remove same within ten (10) days,
at Landlord's option, become the property of Landlord or Landlord may remove
such Tenant's Property, and Tenant shall pay to Landlord Landlord's cost of
removal and of any repairs in connection therewith within ten (10) days after
Tenant's receipt of a bill therefor. Tenant's obligation to pay any such costs
shall survive any termination of this Lease.
10. REPAIRS
10.1 Tenant shall take good care of the Premises and, at Tenant's cost and
expense, shall make all repairs and replacements, as and when Landlord deems
reasonably necessary, to preserve the Premises in good working order and in a
clean, safe and sanitary condition. Landlord shall not be liable for and,
except as provided in Article 15 hereof, there shall be no abatement of Annual
Base Rental with respect to any injury to or interference with Tenant's business
arising from any repairs, maintenance, alteration or improvement in or to any
portion of the Building, including the Premises, or in or to the fixtures,
appurtenances and equipment therein.
10.2 All repairs and replacements made by or on behalf of Tenant or any
person claiming through or under Tenant shall be made and performed (a) at
Tenant's cost and expense and at such time and in such manner as Landlord may
designate, (b) by contractors or mechanics approved by Landlord, (c) so that
same shall be at least equal in quality, value, and utility to the original work
or installation, (d) in accordance with the Rules and Regulations for the
Building adopted by Landlord from time-to-time and in accordance with all
applicable laws and regulations of governmental authorities having jurisdiction
over the Premises, (e) pursuant to plans, drawings and specifications which have
been reviewed and approved by Landlord prior to the commencement of the repairs
or replacements and subject to all other terms and conditions of this Lease,
including, but not limited to, Article 11. If Landlord gives Tenant notice of
the necessity of any repairs or replacements required to be made under Section
10.1 and Tenant fails to commence diligently to effect the same within ten (10)
days thereafter, Landlord may proceed to make such repairs or replacements and
the expenses incurred by Landlord in connection therewith shall be due and
payable from Tenant upon demand as Additional Rent; provided, that Landlord's
making any such repairs or replacements shall not be deemed a waiver of Tenant's
default in failing to make the same. In addition, should Landlord determine
that emergency repairs or replacements of the Premises are necessitated, then
Landlord may proceed to make such repairs or replacements without prior notice
to the Tenant and the reasonable expenses incurred by Landlord in connection
therewith shall be due and payable from Tenant upon demand as Additional Rent.
11. LIENS
11.1 Tenant shall keep the Premises and Building free from any liens
arising out of any work performed, material furnished or obligations incurred by
or for Tenant or any person or entity claiming through or under Tenant. Prior
to Tenant performing any construction or other work on or about the Premises for
which a lien could be filed against the Premises or the Building, Tenant shall
enter into a written "no lien' agreement with the contractor who is to
perform such work, and such agreement shall be filed and recorded in accordance
with the Mechanics' Lien Law of Pennsylvania, prior to the commencement of such
work. Notwithstanding the foregoing, if any mechanics' or other lien shall be
filed against the Premises or the Building purporting to be for labor or
material furnished or to be furnished at the request of the Tenant, then Tenant
shall at its expense cause such lien to be discharged of record by payment,
bond or otherwise, within ten (10) days after the filing thereof. If Tenant
shall fail to cause such lien to be discharged of record within such ten-day
period, in addition to any other remedy available to it for such a default,
Landlord may cause such lien to be discharged by payment, bond or otherwise,
without investigation as to the validity thereof or as to any offsets or
defenses thereto, and Tenant shall, upon demand, reimburse Landlord for all
amounts paid and costs incurred including attorneys' fees, in having such lien
discharged of record.
12. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS
12.1 Tenant, at Tenant's cost and expense, shall comply with all laws,
orders and regulations of federal, state, county and municipal authorities, and
with all directions, pursuant to law, of all public officers, that shall impose
any duty upon Landlord or Tenant with respect to the Premises or the use or
occupancy thereof, except that Tenant shall not be required to make any
structural Alterations in order to comply unless such Alterations shall be
necessitated or occasioned, in whole or in part, by the acts, omissions or
negligence of Tenant or any person claiming through or under Tenant, or any of
their servants, employees, contractors, agents, visitors or licensees, or by the
use or occupancy or manner of use or occupancy of the Premises by Tenant or any
such person. Any work or installations made or performed by or on behalf of
Tenant or any person claiming through or under Tenant pursuant to the provisions
of this Article shall be made in conformity with, and subject to the provisions
of, Sections 9.1 and 10.2 and Article 11 hereof.
12.2 Tenant shall not do anything, or permit anything to be done in or
about the Premises which shall (a) invalidate or be in conflict with the
provisions of any fire or other insurance policies covering the Building or any
property or any property located therein, or (b) result in a refusal by fire
insurance companies of good standing to insure the Building or any such property
in amounts required by Landlord's Mortgage (as hereinafter defined) or
reasonably satisfactory to Landlord, or (c) subject Landlord to any liability or
responsibility for injury to any person or property by reason of any business
operation being conducted in the Premises, or (d) cause any increase in the fire
insurance rates applicable to the Building or property located therein at the
beginning of the Term or at any time thereafter. Landlord shall carry "All
Risk" Insurance at replacement value for the Building. Said policy shall name
Tenant as an additional insured. For the purpose of this Article, the term
"insurance" shall include, without limitation, Fire, Extended Coverage,
Vandalism and Malicious Mischief, Boiler, Rent and Business Interruption,
Liability and Sprinkler Leakage, all of which shall be provided for the Building
by Landlord in reasonable amounts. Landlord covenants to use its best efforts
to keep such insurance premiums as low as reasonably possible, giving allowance
to the protection of Landlord and Tenant contemplated under this Lease.
13. SUBORDINATION
13.1 Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, Tenant agrees that this
Lease and Tenant's tenancy hereunder are and shall be automatically subject and
subordinate at all times to (a) the lien of a first mortgage that may now exist
or hereafter be executed in any amount for which the Building, or Landlord's
interest or estate in any of said items is specified as security; and (b)
renewals, modifications, consolidations, replacements, and extensions of any of
the foregoing. Notwithstanding the foregoing, Landlord and the holder of such
first mortgage lien on the Building (the "Landlord's Mortgagee") shall have the
right to partially subordinate or cause to be subordinated such lien to this
Lease and Tenant agrees to promptly execute the form of agreement set forth in
Exhibit D upon request of Landlord's Mortgagee. In the event that any such
first mortgage is foreclosed or a conveyance in lieu of foreclosure is made for
any reason, Tenant shall, at the option of Landlord's Mortgagee or the grantee
or purchaser in foreclosure, notwithstanding any subordination of any such lien
to this Lease, attorn to and become the Tenant of the successor in interest to
Landlord at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord, Landlord's Mortgagee, or
by Landlord's successor in interest and in the form requested by Landlord,
Landlord's Mortgagee, or by Landlord's successor in interest, any additional
documents evidencing the priority or subordination of this Lease with respect to
the lien of any such first mortgage including a Subordination, Non-Disturbance
and Attachment Agreement satisfactory to Landlord, Landlord's Mortgagee, and
Landlord's successors in interest.
14. INABILITY TO PERFORM
14.1 If, by reason of the occurrence of any of the events of delay
specified in Section 31.16 hereof, Landlord is unable to furnish or is delayed
in furnishing any utility or service required to be furnished by Landlord under
the provision of Article 19 or of any other Article of this Lease or of any
collateral instrument, or is unable to perform or make or is delayed in
performing or making any installations, decorations, repairs, alterations,
additions or improvements, whether required to be performed or made under this
Lease or under any collateral instrument or is unable to fulfill or is delayed
in fulfilling any of Landlord's other obligations under this Lease or any
collateral instrument, no such inability or delay shall constitute an actual or
constructive eviction, in whole or in part, but shall entitle Tenant to an
abatement or diminution of Annual Base Rental for the portion of the Premises
rendered unusable. However, the same shall not impose any liability upon
Landlord or its agents by reason of inconvenience or annoyance to Tenant or by
reason by injury to or interruption of Tenant's business, or otherwise. If
Landlord's inability or delay in fulfilling its obligations, as described in
this Section, renders fifty percent (50%) or more of Tenant's space unusable by
Tenant for ninety (90) days or longer, then Tenant may terminate this Lease.
15. DESTRUCTION
15.1 If the Premises shall be damaged by fire or other casualty insured
against by Landlord's insurance policy covering the Building, and if Tenant
shall give prompt notice to Landlord of such damage, Landlord, at Landlord's
expense, shall repair such damage; provided, however, that Landlord shall have
no obligation to repair any damage to or to replace Tenant's Property,
Alterations or any other property or effects of Tenant. Except an otherwise
provided in this Article 15, if the entire Premises shall be rendered
untenantable by reason of any such damage, the Annual Base Rental and Additional
Rent shall abate for the period from
the date of such damage to the date when such damage to the Premises shall have
been repaired, and if only a part of the Premises shall be rendered
untenantable, the Annual Base Rental and Additional Rent shall abate for such
period in the proportion that the portion of the Rentable Area of the Premises
so rendered untenantable bears to the total Rentable Area of the Premises;
provided, however, if, prior to the date when all of such damage shall have
been repaired, any part of the Premises so damaged shall be rendered tenantable
or shall be used or occupied by Tenant or any person or persons claiming
through or under Tenant, then the amount by which the Annual Base Rental and
Additional Rent shall abate shall be equitably apportioned for the period from
the date of such use or occupancy to the date when all such damage shall have
been repaired.
15.2 Notwithstanding the provisions of Section 15.1 hereof, if, prior to
or during the Term (a) the Premises shall be so damaged by fire or other
casualty that, in Landlord's opinion, substantial alteration, demolition or
restoration of the Premises shall be required, or (b) the Building shall be so
damaged by fire or other casualty that, in Landlord's opinion, substantial
alteration, demolition or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged or rendered untenantable),
then, in any of such events, either party at their option, and with the written
consent of Landlord's Mortgagee, may give to the other party, within ninety (90)
days after such fire or other casualty, a thirty (30) days' notice of Expiration
Date of this Lease and, in the event such notice is given, this Lease and the
Term shall terminate upon the expiration of such thirty (30) days with the same
effect as if the date of expiration of such thirty (30) days were the Expiration
Date; and the Annual Base Rental and Additional Rent shall be apportioned as of
such date and any prepaid portion of Annual Base Rental or Additional Rent for
any period after such date shall be refunded by Landlord to Tenant. Tenant
shall be entitled to an abatement of Rent for the portion of Premises rendered
unusable during the thirty (30) day notice period.
15.3 Landlord shall attempt to obtain and maintain, throughout the Term,
in Landlord's casualty insurance policies, provisions to the effect that such
policies shall not be invalidated should the insured waive, in writing, prior to
loss, any or all right of recovery against any party for loss occurring to the
Building. In the event that at any time Landlord's casualty insurance carriers
shall exact an additional premium for the inclusion of such or similar
provisions, Landlord shall give Tenant notice thereof. In such event, if Tenant
agrees, in writing, to reimburse Landlord for such additional premium for the
remainder of the Term, Landlord shall require the inclusion of such or similar
provisions by Landlord's casualty insurance carriers. As long as such or
similar provisions are included in and to the extent that such a waiver is
permitted under Landlord's casualty insurance policies then in force, Landlord
hereby waives any right of recovery against Tenant, any other permitted occupant
of the Premises, and any of their servants, employees, or agents, for any lose
or damage to property occasioned by fire or other casualty that is an insured
risk under such policies. In the event that at any time Landlord's casualty
insurance carriers shall not permit such waivers in Landlord's casualty
insurance policies, the waivers set forth in the foregoing sentence shall be
deemed of no further force or effect.
15.4 Landlord or Tenant, acting for itself or for anyone claiming through
or under either Landlord or Tenant by way of subrogation or otherwise, hereby
waives any right of recovery against the other party for any loss or damage to
the Premises, Tenant's Property, Landlord's Property, or other property.
15.5 Nothing contained in this Lease shall relieve Landlord or Tenant of
any liability to the other party or to its insurance carriers which Landlord or
Tenant may have under law or under the provisions of this Lease in connection
with any damage to the Premises or the Building by fire or other casualty.
15.6 Notwithstanding the provisions of this Article 15, if any such damage
is due to the fault or neglect of Tenant, any person claiming through or under
Tenant, or any of their servants, employees, agents, contractors, visitors or
licensees, then there shall be no abatement of Annual Base Rental or Additional
Rent; an election by Landlord to carry rental interruption insurance shall in no
way affect the provisions of this Article 15 or a lack of rental abatement in
such a case.
16. EMINENT DOMAIN
16.1 If all of the Premises are condemned or taken in any manner for
public or quasi-public use, including, but not limited to, a conveyance or
assignment in lieu of a condemnation or taking, this Lease shall automatically
terminate as of the earlier of the date of the vesting of title or the date of
dispossession of Tenant as a result of such condemnation or other taking. If a
part of the Premises is so condemned or taken, this Lease shall automatically
terminate as to the portion of the Premises so taken as of the earlier of the
date of the vesting of title or the date of dispossession of Tenant as a result
of such condemnation or taking. If such portion of the Building is condemned or
otherwise taken so as to require, in the opinion of Landlord, a substantial
alteration or reconstruction of the remaining portions thereof, then this Lease
may be terminated by Landlord, as of the earlier of (a) the date of the vesting
of title, or the date of dispossession as a result of such condemnation or
taking, or (b) by written notice from Landlord to Tenant that the termination
shall occur on the sixtieth (60th) day following Landlord's receipt of notice of
the date on which said vesting or dispossession will occur. Tenant shall have
the right to terminate this Lease if a part of the Premises is condemned or
taken in any manner for public or quasi-public use, including, but not limited
to, a conveyance or assignment in lieu of a condemnation or taking.
16.2 This Lease shall not be affected if the taking authority by the
exercise of its power of eminent domain shall take the use or occupancy of the
Premises or any part thereof for a temporary period (hereinafter, "Temporary
Taking"). A Temporary Taking is a period of less than thirty (30) days. The
Tenant shall continue to pay, in the manner and at the times specified in this
Lease, the full amount of Annual Base, Additional Rent and other charges payable
by the Tenant under this Lease. Except only to the extent that the Tenant may
be prevented from so doing pursuant to the terms of the order of the taking
authority, Tenant shall continue to perform and observe all its other
obligations under this Lease, as though the Temporary Taking had not occurred.
Tenant shall be entitled to receive the entire Amount of any award made for the
"Temporary Taking" whether paid by way of damages, rent, or otherwise, unless
the period of temporary use or occupancy shall extend to or beyond the
Expiration Date of this Lease, in which case the award shall be apportioned
between Landlord and Tenant as of the Expiration Date, but Landlord shall in
that circumstance receive the entire portion of the award that is attributable
to physical damage to the Premises and the restoration thereof to the condition
immediately prior to the taking. The Tenant covenants that, upon the
termination of any Temporary Taking, prior to the Expiration Date, it will, at
its sole cost and
expense, restore the Premises, as nearly as may be reasonably possible, to the
condition in which the same ware immediately prior to the Temporary Taking.
16.3 Except as provided in the preceding Section 16.2 Landlord shall be
entitled to the entire award in any condemnation proceeding or other proceeding
for taking for public or quasi-public use, including, without limitation, any
award made for the value of the leasehold estate created by this Lease. No
award for any partial or entire taking shall be apportioned, and Tenant hereby
assigns to Landlord any award that may be made in such condemnation or other
taking, together with any and all rights of Tenant now or hereafter arising in
or to same or any part thereof; provided, however, that nothing contained herein
shall be deemed to give Landlord any interest in or to require Tenant to assign
to Landlord any award made to Tenant specifically for its relocation expenses or
the taking of personal property and fixtures belonging to Tenant; provided that
such award does not diminish or reduce the amount of the award payable to
Landlord.
16.4 In the event of a partial condemnation or other taking that does not
result in a termination of this Lease as to the entire Premises, then the Annual
Base Rental shall be adjusted in proportion to the portion of the Premises taken
by such condemnation or other taking.
17. ASSIGNMENT
17.1 Tenant shall not directly or indirectly, voluntarily or by operation
of law, sell, assign, encumber, pledge or otherwise transfer the Premises or
Tenant's leasehold estate hereunder (collectively, "Assignment"), without
Landlord's prior written consent in each instance.
17.2 If Tenant desires at any time to enter into an Assignment of this
Lease, it shall first give written notice to Landlord of its desire to do so,
which notice shall contain (a) the name of the proposed assignee, (b) the nature
of the proposed assignee's business to be carried on in the Premises, (c) the
terms and provisions of the proposed Assignment including any sum(s) payable to
Tenant as consideration for entering into the Assignment, (d) such financial and
other information as Landlord may reasonably request concerning the proposed
assignee.
17.3 At any time within thirty (30) days after Landlord's receipt of the
notice specified in Section 17.2 hereof, Landlord may by written notice to
Tenant elect to (a) take an Assignment of Tenant's leasehold estate specified in
Tenant's notice hereunder, (b) terminate this Lease, (c) consent to the
Assignment, or (d) disapprove the Assignment. In the event Landlord elects to
take an Assignment from Tenant an described in subsection (a) above, the rent
payable by Landlord as tenant thereunder shall be the lower of that not forth in
Tenant's notice or the Annual Base Rental payable by Tenant under this Lease at
the time of the Assignment. In the event Landlord elects the option not forth
in subsection (a) above, then Landlord shall have the right to use the Premises
for any legal purpose in its sole discretion and the right to further assign or
sublease the Premises without the consent of Tenant. If Landlord consents to
the Assignment within said sixty (60) day period, Tenant may thereafter within
ninety (90) days, enter into such Assignment, upon the terms and conditions set
forth in the notice furnished by Tenant to Landlord pursuant to Section 17.2
hereof; provided, that if any sum is payable to Tenant in consideration of
Tenant's entering into such Assignment, then
Tenant shall pay such sum to Landlord as Additional Rent prior to the execution
of the Assignment. In addition, if any amounts are payable to Tenant as rent
under the Assignment, then Tenant shall pay to Landlord monthly during the term
of such Assignment as Additional Rent an amount equal to any amount by which
the total of all such rent payable to Tenant exceeds the monthly Annual Base
Rental as escalated then payable by Tenant under the Lease.
17.4 No consent by Landlord to any Assignment by Tenant shall relieve
Tenant of any obligation to be performed by Tenant under this Lease, whether
arising before or after the Assignment. The consent by Landlord to any
Assignment shall not relieve Tenant from the obligations to obtain Landlord's
express written consent to any other or subsequent Assignment. Any Assignment
that is not in compliance with this Article 17 shall be void and, at the option
of Landlord, shall constitute a material default by Tenant under this Lease.
The acceptance of Annual Base Rental or Additional Rent by Landlord from a
proposed assignee shall not constitute the consent to such Assignment by
Landlord.
17.5 Any sale or other transfer, including by consolidation, merger or
reorganization, of a majority of the voting stock of Tenant, if Tenant in a
corporation, or any sale or other transfer of a majority of the partnership
interests in Tenant, if Tenant is a partnership, shall be an Assignment for
purposes of this Article 17. As used in this Section 17.5, the term "Tenant"
shall also mean any entity which has guaranteed Tenant's obligations under this
Lease, and the prohibition hereof shall be applicable to any sales or transfers
of the stock or partnership interests of said guarantor.
17.6 Each assignee shall assume, as provided in this Section 17.6, all
obligations of Tenant under this Lease and shall be and remain liable jointly
and severally with Tenant for the payment of Annual Base Rental and Additional
Rent, and for the performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the Term. No
Assignment otherwise permitted hereunder shall be binding on Landlord unless the
assignee or Tenant shall deliver to Landlord within ten (10) days of execution a
counterpart of the Assignment and an instrument in recordable form that contains
a covenant of assumption by the assignee satisfactory in substance and form to
Landlord, consistent with the requirements of this Section 17.6, but the failure
or refusal of the assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability an set forth above.
17.7 In no event shall this Lease be assigned or assignable by operation
of law or by voluntary or involuntary bankruptcy proceedings or otherwise, and
in no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency, reorganization or other debtor
relief proceedings.
17.8 Anything contained in the foregoing provisions of this Article 17 to
the contrary notwithstanding, neither Tenant nor any other person having an
interest in the possession, use, occupancy or utilization of space in the
Premises shall enter into any lease, sublease, license, concession or other
agreement for use, occupancy or utilization of space on the Premises which
provides for rental or other payment for such use, occupancy or utilization
based, in whole or in part, on the net income or profits derived by any person
from the premises leased, used, occupied or utilized, and any such purported
lease, sublease, license, concession or
other agreement shall be absolutely void and ineffective as a conveyance of any
right or interest in the possession, use, occupancy or utilization of any part
of the Premises.
18. SUBLETTING
18.1 Tenant shall not directly or indirectly, permit the Premises to be
occupied by anyone other than Tenant or sublet the Premises (collectively,
"Sublease") or any portion thereof without Landlord's prior written consent in
each instance.
18.2 If Tenant desires at any time to enter into a Sublease of the
Premises or any portion thereof, it shall first give written notice to Landlord
of its desire to do so, which notice shall contain (a) the name of the proposed
subtenant or occupant, (b) the nature of the proposed subtenant's or occupant's
business to be carried on in the Premises, (c) the portion(s) of the Premises to
be subject to Sublease and the square feet thereof and the other terms and
provisions of the proposed Sublease including any sum(s) payable to Tenant an
consideration for entering into the Sublease, and (d) such financial and other
information as Landlord may reasonably request concerning the proposed subtenant
or occupant.
18.3 At any time within sixty (60) days after Landlord's receipt of the
notice specified in Section 18.2 hereof, Landlord may by written notice to
Tenant elect to (a) Sublease itself the portion of the Premises specified in
Tenant's notice or any portion thereof, (b) terminate this Lease as to the
portion of the Premises that is specified in Tenant's notice or any portion
thereof, with a proportionate abatement in the Annual Base Rental, (c) consent
to the Sublease, or (d) withhold consent to the Sublease. In the event Landlord
elects to sublease from Tenant as described in subsection (a) above, the subrent
payable by Landlord to Tenant shall be the lower of that set forth in Tenant's
notice or the Annual Base Rental payable by Tenant under this Lease at the time
of the Sublease (or a proportionate amount thereof representing the portion of
the Premises subject to the Sublease if less than the entire Premises is subject
to the Sublease). In the event Landlord elects the option set forth in
subsection (a) above with respect to a portion of the Premises, then (i) Tenant
shall at all times provide reasonable and appropriate access to such portion of
the Premises and use of any common facilities, and (ii) Landlord shall have the
right to use such portion of the Premises for any legal purpose in its sole
discretion and the right to further sublease the portion of the Premises subject
to Landlord's election without the consent of Tenant. If Landlord consents to
the Sublease within said sixty (60) day period, Tenant may thereafter within
ninety (90) days, enter into such Sublease of the Premises or portion thereof,
upon the terms and conditions set forth in the notice furnished by Tenant to
Landlord pursuant to Section 18.2 hereof; provided, that if any sum is payable
to Tenant in consideration of Tenant's entering into such sublease, then Tenant
shall pay such sum to Landlord prior to the execution of the Sublease. In
addition, if any amounts are payable to Tenant as subrent under the Sublease,
Tenant shall pay to Landlord monthly during the term of such Sublease on account
as Additional Rent the amount by which such monthly subrent exceeds the product
of (i) the monthly Annual Base Rental then payable by Tenant under the Lease,
and (ii) the fraction derived by dividing the square feet of the portion of the
Premises subject to the Sublease by the Total Rentable Area of the Premises.
18.4 No consent by Landlord to any Sublease by Tenant shall relieve Tenant
of any obligation to be performed by Tenant under this Lease, whether arising
before or after the Sublease. The consent by Landlord to any Sublease shall not
relieve Tenant from the obligation to obtain Landlord's express written consent
to any other or subsequent Sublease.
Any Sublease that is not in compliance with this Article 18 shall be void and,
at the option of Landlord, shall constitute a material default by Tenant under
this Lease. The acceptance of Annual Base Rental or Additional Rent by
Landlord from a proposed sublessee shall not constitute the consent to such
Sublease by Landlord.
18.5 Each sublessee shall assume, as provided in this Section 18.5, all
obligations of Tenant under this Lease and shall be and remain liable jointly
and severally with Tenant for the payment of Annual Base Rental and Additional
Rent, and for the performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the Term. No
Sublease otherwise permitted hereunder shall be binding on Landlord unless the
sublessee or Tenant shall deliver to Landlord within ten (10) days of execution
a counterpart of the Sublease and an instrument in recordable form that contains
a covenant of assumption by the sublessee satisfactory in substance and form to
Landlord, consistent with the requirements of this Section 18.5, but the failure
or refusal of the sublessee to execute such instrument of assumption shall not
release or discharge the sublessee from its liability as set forth above.
18.6 Anything contained in the foregoing provisions of this section to the
contrary notwithstanding, neither Tenant nor any other person having an interest
in the possession, use, occupancy or utilization of space in the Premises shall
enter into any lease, sublease, license, concession or other agreement for use,
occupancy or utilization of space on the Premises which provides for rental or
other payment for such use, occupancy or utilization based, in whole or in part,
on the net income or profits derived by any person from the premises leased,
used, occupied or utilized and any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and ineffective an a
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
19. UTILITIES
19.1 As long as Tenant is not in default in the performance of its
obligations under this Lease, Landlord shall furnish to the Premises during the
period from 8:00 a.m. to 6:00 p.m., Monday through Friday, and from 9:00 a.m. to
1:00 p.m. on Saturdays, except for New Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving, Christmas and such other holidays as are generally
recognized in the Pittsburgh area and subject to rules and regulations from
time-to-time established by Landlord: (a) heating, air conditioning and
ventilation, (b) passenger elevator service, (c) electric current in amounts
required for normal lighting by building standard overhead fluorescent fixtures
and for normal fractional horsepower office machines, and (d) water for lavatory
and drinking purposes. It is understood that such passenger elevator service,
electric current and water will be available twenty-four (24) hours a day,
subject to Sections 19.2, 19.3, 19.4 hereof. Landlord shall provide janitorial
service five days per week generally consistent with that furnished in other
first-class office buildings in the central business district of Pittsburgh and
shall provide window washing as determined by Landlord.
19.2 Landlord may impose reasonable charges and establish reasonable rules
and regulations for the use of any heating, air conditioning, ventilation or
electric current by Tenant at any time other than during the hours set forth in
Section 19.1, and for the usage of any additional or unusual janitorial services
required because of any nonbuilding standard improvements in the Premises, the
carelessness of Tenant, the nature of Tenant's business
(including the operation of Tenant's business other than from 8:00 a.m. to 6:00
p.m., Monday through Friday and 9:00 a.m. to 1:00 p.m. on Saturdays) and the
removal of any refuse and rubbish from the Premises except for discarded
material placed in wastepaper baskets and left for emptying as an incident to
Landlord's normal cleaning of the Premises. Landlord shall not be required to
provide janitorial services for portions of the Premises used for preparing or
consuming food or beverages, for storage or as a mail room or storage room or
for similar purposes or as a lavatory other than the lavatory rooms shown an
Exhibit A attached hereto.
19.3 Landlord shall not be liable for any interruption in or failure to
furnish any services or utilities when such interruption or failure is caused by
acts of God, accidents, breakage, repairs, strikes, lockouts, other labor
disputes, the making of repairs, alterations or improvements to the Premises or
the Building, the inability to obtain an adequate supply of fuel, steam, water,
electricity, labor or other supplies, any event included in Section 31.6, or by
any other condition beyond Landlord's reasonable control, including, without
limitation, any governmental energy conservation program, and Tenant shall not
be entitled to any damages resulting from such failure nor shall such failure
relieve Tenant of the obligation to pay the Annual Base Rental and Additional
Rent reserved hereunder or constitute or be construed as a constructive or other
eviction of Tenant unless the damages are due to the gross negligence or wilful
misconduct by Landlord, its agents or its employees. In the event any
governmental entity promulgates or revises any statute, ordinance or building,
fire or other code or imposes mandatory or voluntary controls or guidelines on
Landlord or the Building or any part thereof, relating to the use or
conservation of energy, water, gas, light or electricity or the reduction of
automobile or other emissions or the provision of any other utility or service
provided with respect to this Lease or in the event Landlord is required or
elects to make alterations to any part of the Building in order to comply with
such mandatory or voluntary controls or guidelines, Landlord may, in its sole
discretion, comply with such mandatory or voluntary controls or guidelines or
make such alterations to the Building. Such compliance and the making of such
alterations shall in no event entitle Tenant to any damages, relieve Tenant of
the obligation to pay the full Annual Base Rental and Additional Rent reserved
hereunder or constitute or be construed as a constructive or other eviction of
Tenant.
19.4 Without the prior written consent of Landlord, which Landlord may
refuse in its sole discretion, Tenant shall not use any apparatus or device in
the Premises, including, without limitation, electronic data processing
machines, punch card machines and machines using, in the aggregate, current in
excess of 3 watts per square foot in area within the Premises (current in excess
of 3 watts per square foot of the Premises hereinafter called "Excessive
Current") or that will in any way increase the amount of electricity or water
usually furnished or supplied for use of the Premises as general office space;
nor connect any apparatus, machine or device with water pipes or electric
current (except through existing electrical outlets in the Premises), for the
purpose of using electric current or water. If Tenant shall utilize such
Excessive Current, Landlord shall have the right to install an electric current
meter in the Premises to measure the unit of electric current consumed on the
Premises. The cost of any such meter and separate conduit, wiring or panel
requirements and the installation, maintenance and repair thereof shall be paid
for by Tenant, and Tenant agrees to reimburse Landlord promptly upon demand
therefor by Landlord for all such Excessive Current as shown by said meter, at
the rates charged for such services by the local public utility furnishing the
same, plus any additional expense incurred in keeping the account of the
electric current so consumed. If the temperature otherwise maintained in any
portion of the Premises by the heating, air
conditioning or ventilation systems is affected as a result of (a) any lights,
machines or equipment (including without limitation electronic data processing
machines) used by Tenant in the Premises, (b) the occupancy of the Premises by
more than one person per one hundred seventy-five (175) square feet of rentable
area therein, or (c) an aggregate electrical load in excess of three (3) watts
per square foot in any room or area of the Premises, Landlord shall have the
right to install any machinery and equipment that Landlord reasonably deems
necessary to restore temperature balance, including, without limitation,
modifications to the standard air conditioning equipment, and the cost thereof,
including the cost of installation and any additional coat of operation and
maintenance incurred thereby, shall be paid by Tenant to Landlord as Additional
Rent hereunder upon demand by Landlord.
20. DEFAULT
20.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default on the part of Tenant:
(a) Nonpayment of Annual Base Rental or Additional Rent. Failure to
pay any installment of Annual Base Rental or Additional Rent due and payable
hereunder, upon the date when said payment is due, such failure continuing for a
period of five (5) business days after the due date thereof.
(b) Other Obligations. Failure to perform any obligation, agreement
or covenant under this Lease other than those matters specified in subparagraph
(a) of this Section 20.1, such failure continuing for ten (10) business days
after written notice by Landlord to Tenant of such failure.
(c) Abandonment. Vacation or abandonment of the Premises for a
continuous period in excess of ten (10) business days.
(d) Removal. Any removal or attempted removal, without the prior
approval of Landlord, of any of Tenant's equipment, appliances, or personal
property from the Premises for any reason other than the normal and usual
operation of Tenant's business.
(e) General Assignment. A general assignment by Tenant or Tenant's
guarantor (if any) for the benefit of creditors.
(f) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant or Tenant's guarantor (if any), or the filing of an involuntary petition
by Tenant's creditors or any of guarantor's creditors, which involuntary
petition remains undischarged for a period of ten (10) business days;
(g) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or any guarantor's assets or the Premises,
if such receivership remains undissolved for a period of ten (10) business days
after creation thereof;
(h) Attachment. The attachment, execution or other judicial seizure
of all or substantially all of Tenant's assets or any guarantor's assets or the
Premises, if such attachment or other seizure remains undismissed or
undischarged for a period of ten (10) business days after the levy thereof;
(i) Insolvency. The admission by Tenant or Tenant's guarantor (if
any) in writing of its inability to pay its debts as they become due, the filing
by Tenant or Tenant's guarantor (if any) of a petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, the
filing by Tenant or Tenant's guarantor (if any) of an answer admitting or
failing timely to contest a material allegation of a petition filed against
Tenant or Tenant's guarantor (if any) in any such proceeding or, if within ten
(10) days after the commencement of any proceeding against Tenant or Tenant's
guarantor (if any) seeking any reorganization, or arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed.
20.2 Upon the occurrence of any Event of Default by Tenant which is not
cured by Tenant within the grace periods, if any, specified in Section 20.1
hereof, Landlord shall have the following rights and remedies, in addition to
all other rights or remedies available to Landlord in law or equity:
(a) Landlord may cure or perform for the account of Tenant any such
matter or obligation in default by Tenant and Tenant shall immediately pay on
account as Additional Rent any expenditures made and the amount of any
obligations incurred in connection therewith, plus interest, from the date of
any such expenditure, at the Default Rate set forth in Section 5.2;
(b) Landlord may accelerate all Annual Base Rental and Additional Rent
due for the balance of the Term of this Lease and declare the same to be
immediately due and payable. In determining the amount of any future payments
payable to Landlord on account of Tenant's Share of Excess Taxes and Tenant's
Share of Excess Expenses, Landlord may make such determination based upon the
amount of Tenant's Share of Excess Expenses and Tenant's Share of Excess Taxes
paid or payable by Tenant for the full year immediately prior to such default;
(c) Landlord, at its option, may serve notice upon Tenant that this
Lease and the then unexpired Term hereof shall cease and expire and terminate on
the date specified in such notice, to be not less than five (5) days after the
date of such notice without any right on the part of the Tenant to save the
forfeiture by payment of any sum due or by the performance of any term,
provision, covenant, agreement or condition broken; and, thereupon and at the
expiration of the time limit in such notice, this Lease and the Term hereof
granted, as well as the right, title and interest of the Tenant hereunder, shall
wholly cease and expire and terminate in the same manner and with the same force
and effect (except as to Tenant's liability) as if the date fixed in such notice
were the date herein granted for expiration of the Term of this Lease.
Thereupon, Tenant shall immediately quit and surrender to Landlord the Premises
by summary proceedings, detainer, ejectment or otherwise and remove all
occupants thereof and, at Landlord's option, any property thereon without being
liable to indictment, prosecution or damages therefor. No such expiration or
termination of this Lease shall relieve Tenant of its liability and obligations
under this Lease, whether or not the Premises shall be relet. Applicable
Landlord/Tenant statutes of the Commonwealth of Pennsylvania shall control as to
any rights or remedies of the parties not otherwise set forth herein. As to any
conflict, the Lease shall be deemed controlling;
(d) Landlord may, at any time after the occurrence of any Event of
Default and after Landlord gives ten (10) days notice and an opportunity to
cure, re-enter and repossess the Premises and any part thereof and attempt in
its own name, as agent for Tenant, if this Lease not be terminated or in its own
behalf if this Lease be terminated, to relet all or any part of such Premises
for and upon such terms and to such person or firms or corporations and for such
period or periods as Landlord, in its sole discretion, shall determine,
including the term beyond the termination of this Lease; and Landlord shall not
be required to accept any tenant offered by Tenant or observe any instruction
given by Tenant about such reletting or do any act or exercise any care or
diligence with respect to such reletting or to the mitigation of damages. For
the purpose of such reletting, Landlord may decorate or make repairs, changes,
alterations or additions in or to the Premises as may be reasonably required in
order for Landlord to relet the Premises, but not to exceed fifteen (15) dollars
per square foot without Tenant's consent, provided however, that if Tenant
delays or withholds consent, the Landlord shall be relieved of any duty to relet
the Premises; and the cost of such decoration, repairs, changes, alterations or
additions shall be charged to and be payable by Tenant as: (a) Additional Rent
hereunder, or (b) in the event the Lease has been terminated, as damages.
Tenant shall also pay to Landlord any reasonable brokerage and legal fees
expended by Landlord. Any sums collected by Landlord from any new tenant-
obtained on account of the Tenant shall be credited against the balance of the
Annual Base Rental and Additional Rent due hereunder as aforesaid. Tenant shall
pay to Landlord monthly, on the days when the Annual Base Rental due would have
been payable under this Lease, the amount due hereunder less the amount obtained
by Landlord from such new tenant;
(e) Landlord shall have the right of injunction, in the event of a
breach or threatened breach by Tenant of any of the agreements, conditions,
covenants or terms hereof, to restrain the same and the right to invoke any
remedy allowed by law or in equity, whether or not other remedies, indemnity or
reimbursements are herein provided. The rights and remedies given to Landlord
in this Lease are distinct, separate and cumulative remedies; and no one of
them, whether or not exercised by Landlord, shall be deemed exclusive of any of
the others.
(f) When this Lease shall be terminated by reason of the breach of any
provision hereof, either during the original Term of this Lease or any renewal
thereof, and also as soon as the Term hereby created or any renewal thereof
shall have expired, it shall be lawful for any attorney as attorney for Tenant
to file an agreement for entering in any court of competent jurisdiction an
amicable action and confession of judgment in ejectment against Tenant and all
persons claiming under Tenant for the recovery by Landlord of possession of the
Premises, for which this Lease or a true and correct copy thereof, shall be his
sufficient warrant; whereupon, if Landlord so desires, a writ of possession may
issue forthwith, without any prior writ or proceedings whatsoever, and provided
that if for any reason after such action shall have been commenced the same
shall be terminated and possession remain in or be restored to Tenant, Landlord
shall have the right upon any subsequent default or defaults, or upon the
termination of this Lease an hereinbefore set forth, to bring one or more
amicable action or actions as hereinbefore set forth to recover possession as
aforesaid.
21. INDEMNITY
21.1 Except as provided in Article 21.2, Tenant agrees to indemnify
Landlord against and save Landlord harmless from any and all loss, cost,
liability, damage and expense
including, without limitation, penalties, fines and reasonable counsel fees,
incurred in connection with or arising from any cause whatsoever in, on or
about the Premises, including, without limiting the generality of the foregoing
(a) any default by Tenant in the observance or performance of any of the terms,
covenants or conditions of this Lease on Tenant's part to be observed or
performed, or (b) the use or occupancy or manner of use or occupancy of the
Premises by Tenant or any person claiming through or under Tenant, or (c) the
condition of the Premises or any occurrence or happening on the Premises from
any cause whatsoever, or (d) any acts, omissions or negligence of Tenant or any
person claiming through or under Tenant, or of the contractors, agents,
servants, employees, visitors or licensees of Tenant or any such person, in, on
or about the Premises or the Building, either prior to, during, or after the
expiration of, the Term including, without limitation, any acts, omissions or
negligence in the making or performing of any Alterations. Tenant further
agrees to indemnify and save harmless Landlord, Landlord's agents, and the
lessor or lessors under all ground or underlying leases, from and against any
and all loss, cost, liability, damage and expense including, without
limitation, reasonable counsel fees, incurred in connection with or arising
from any claims by any persons by reason of injury to persons or damage to
property occasioned by any use, occupancy, condition, occurrence, happening,
act, omission or negligence referred to in the preceding sentence.
21.2 Except as provided in Article 21.1, Landlord agrees to indemnify
Tenant against and save Tenant harmless from any loss, cost, liability, damage
and expense that is caused by the negligence of Landlord, its agents or its
employees.
22. TENANT'S INSURANCE
22.1 Tenant shall procure at its cost and expense and keep in effect
during the Term (a) comprehensive general liability insurance including
contractual liability with a minimum combined single limit of liability of two
million dollars ($2,000,000); (b) reasonable and customary property insurance in
amounts sufficient to repair or replace Tenant's personal property and any
improvements or betterments in which the Tenant has an insurable property
interest; and (c) any other insurance reasonably required by Landlord. Such
insurance shall name Landlord as an additional insured, shall specifically
include the liability assumed hereunder by Tenant (provided that the amount of
such insurance shall not be construed to limit the liability of Tenant
hereunder), and shall provide that Landlord shall receive thirty (30) days'
written notice from the insurer prior to any cancellation or change of coverage.
Tenant shall deliver policies of such insurance or certificates thereof to
Landlord on or before the Commencement Date, and thereafter at least thirty (30)
days before the expiration dates of expiring policies; and, in the event Tenant
shall fail to procure such insurance, or to deliver such policies or
certificates, Landlord may, at its option, procure same for the account of
Tenant, and the cost thereof shall be paid to Landlord an Additional Rent within
five (5) days after delivery to Tenant of bills therefor. Tenant's compliance
with the provisions-of this Article 22 shall in no way limit Tenant's liability
under any of the other provisions of this Lease.
22.2 Neither party hereto shall be liable to the other party hereunder nor
to any insurer or other party claiming by way of subrogation through or under
such other party with respect to any loss or damage to the extent that such
other party shall be reimbursed or has the right to be reimbursed out of
insurance (without regard to any deductible provision in any policy) carried for
such other party's protection with respect to such loss or damage.
23. LIMITATION OF LANDLORD'S LIABILITY
23.1 Landlord represents and warrants it will enforce the standards of the
Building on tenants in the Building. However, Landlord shall not be responsible
for or liable to Tenant for any loss or damage that may be occasioned by or
through the acts or omissions of persons occupying adjoining premises or any
part of the premises adjacent to or connected with the Premises or any part of
the Building or for any loss or damage resulting to Tenant or its property from
burst, stopped or leaking water including sprinkler systems, gas or smoke, vapor
or other airborne contaminants, sewer or steam pipes or for any damage or loss
of property within the Premises from any causes whatsoever, including theft,
unless the same shall be the result of the negligence of Landlord, its agents or
it's employees. Landlord shall provide reasonable assistance to Tenant pursuing
a claim against a third party as long as there is no cost to Landlord.
24. ACCESS TO PREMISES
24.1 Landlord reserves and shall at all times have the right to enter the
Premises at all reasonable times to inspect same, to supply any service to be
provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers, mortgagees or tenants, and to alter, improve or repair the Premises
and any portion of the Building, without abatement of Annual Base Rental or
Additional Rent, and may for that purpose erect, use and maintain scaffolding,
pipes, conduits and other necessary structures in and through the Premises where
reasonably required by the character of the work to be performed, provided that
the entrance to the Premises shall not be blocked thereby, and further provided
that the business of Tenant shall not be interfered with unreasonably. Landlord
reserves and shall at all times during the six (6) month period prior to the
expiration of the Lease to have the right to enter the Premises to show the
Premises to prospective purchasers, mortgagees or tenants. Landlord shall also
at all times and after reasonable notice to Tenant, and written approval by
Tenant, have the right to enter the Premises to show third parties the Premises
for the purpose of letting other space in the Building. Access to the Premises
by Landlord shall be front door access and Tenant is not required to provide
access to safes or vaults. Tenant shall be entitled to a prorata abatement of
the rent if Landlord affirmatively or intentionally shuts down the Building, but
Tenant shall not be entitled to a prorata abatement if the Building is shut down
due to an act of God, an act of war or any other act not controlled by Landlord.
Tenant hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises or any other loss occasioned thereby. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the Premises, excluding Tenant's vaults and
safes, or special security areas (designated in advance), and Landlord shall
have the right to use any and all means that Landlord may deem necessary or
proper to open said doors in an emergency, in order to obtain entry to any
portion of the Premises, and any entry to the Premises or portions thereof
obtained by Landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Premises, or an eviction, actual or constructive, of Tenant
from the unlawful entry into, or a detainer of, the Premises, or an eviction,
actual or constructive, of Tenant from the Premises or any portion thereof.
Landlord shall also have the right at any time, without same constituting an
actual or constructive eviction and without incurring any liability to Tenant
therefor, to change the arrangement and/or location of entrances or passageways,
doors and doorways, and corridors, elevators, stairs, toilets and other public
parts of the Building.
25. NOTICES
25.1 Except as otherwise expressly provided in this Lease, any bills,
statements, notices, demands, requests or other communications given or required
to be given under this Lease shall be effective only if rendered or given in
writing, sent by registered or certified mail or delivered personally, (a) to
Tenant (i) at Tenant's address set forth in the Basic Lease Information, if sent
prior to Tenant's taking possession of the Premises, or (ii) at the Building if
sent subsequent to Tenant's taking possession of the Premises, or (iii) at any
place where Tenant or any agent or employee of Tenant may be found if sent
subsequent to Tenant's vacating, deserting, abandoning or surrendering the
Premises, or (b) to Landlord at Landlord's address set forth in the Basic Lease
Information, or (c) to such other address as either Landlord or Tenant may
designate as its new address for such purpose by notice given to the other in
accordance with the provisions of this Section 25.1. Any such bill, statement,
notice, demand, request or other communication shall be deemed to have been
rendered or given two (2) business days after the date when it shall have been
mailed as provided in this Section 25.1 if sent by registered or certified mail,
or upon the date personal delivery is made. If Tenant is notified of the
identity and address of: (i) the Landlord's Mortgagee, or (ii) the holder(s) of
any subordinate mortgage lien(s) on the Building ("Other Mortgagee(s)"), or
(iii) ground or other lessor ("Lessor(s)"), then Tenant shall give to such
Landlord's Mortgagee, Other Mortgagee(a), and Lessor(s) notice of any default by
Landlord under the terms of this Lease in writing sent by registered or
certified mail, and such Landlord's Mortgagee, Other Mortgagee(s), and Lessor(s)
shall be given a reasonable opportunity to cure such default prior to Tenant
exercising any remedy available to it.
26. NO WAIVER
26.1 No failure by Landlord to insist upon the strict performance of any
obligation of Tenant under this Lease or to exercise any right, power or remedy
consequent upon a breach thereof, no acceptance of full or partial Annual Base
Rental or Additional Rent during the continuance of any such breach, and no
acceptance of the keys to or possession of the Premises prior to the termination
of the Term by any employee of Landlord shall constitute a waiver of any such
breach or of such term, covenant or condition or operate as a surrender of this
Lease. No payment by Tenant or receipt by Landlord of a lesser amount than the
aggregate of all Annual Base Rental and Additional Rent then due under this
Lease shall be deemed to be other than on account of the first items of such
Annual Base Rental and Additional Rent then accruing or becoming due, unless
Landlord elects otherwise; and no endorsement or statement on any check and no
letter accompanying any check or other payment of Annual Base Rental or
Additional Rent in any such lesser amount and no acceptance of any such check or
other such payment by Landlord shall constitute an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance of such Annual Base Rental or Additional Rent or to
pursue any other legal remedy.
27. TENANT'S CERTIFICATES
27.1 Tenant, at any time, and from time-to-time upon not less than ten
(10) days' prior written notice from Landlord, will execute, acknowledge and
deliver to Landlord and, at Landlord's request, to any prospective purchaser,
Lessor, or Landlord's Mortgagee, or other Mortgagee of any part of the Building,
a certificate of Tenant certifying: (a) that Tenant has accepted the Premises
(or, if Tenant has not done so, that Tenant has not accepted the Premises and
specifying the reasons therefor), (b) the Tenant has entered into possession of
the Premises (c) the Commencement and Expiration Dates of this Lease, (d) the
amount of Annual Base Rental payable under the Lease (e) that this Lease is the
entire agreement between the parties and is unmodified and in full force and
effect (or, if there have been modifications, that same is in full force and
effect as modified and stating the modifications), and has not been assigned (f)
whether or not there are then existing any defenses against the enforcement of
any of the obligations of Tenant under this Lease (and, if so, specifying same),
(g) whether or not there are then any defaults by Landlord in the performance of
its obligations under this Lease (and, if so, specifying same), (h) that Tenant
has received all required contributions from Landlord on account of Tenant's
improvements, (i) the dates, if any, to which
the Annual Base Rental and Additional Rent and other charges under this Lease
have been paid and the amounts of said Annual Base Rental and Additional Rent,
and that no Annual Base Rental, Additional Rent, or security deposit has been
paid in advance of its due date, and (j) any other information that may
reasonably be required by any of such persons. It is intended that any such
certificate of Tenant delivered pursuant to this Section 27.1 may be relied
upon by Landlord and any prospective purchaser, Lessor, Landlord's Mortgagee,
or other Mortgagee(s) of any part of the Building. Tenant's failure to deliver
such Certificate within said ten day period shall be a default hereunder and
shall be conclusive upon Tenant that this Lease is in full force and effect and
unmodified, and that there are no uncured defaults in Landlord's performance
hereunder.
28. RULES AND REGULATIONS
28.1 Tenant shall faithfully observe and comply with the rules and
regulations attached to this Lease as Exhibit E and all modifications thereof
and additions thereto from time-to-time put into effect by Landlord. Subject to
its obligations as set forth in Section 23 hereof, Landlord shall not be
responsible for the nonperformance by any other tenant or occupant of the
Building of any said rules and regulations. In the event of an express and
direct conflict between the terms, covenants, agreements and conditions of this
Lease and the terms, covenants, agreements and conditions of such rules and
regulations, an modified and amended from time-to-time by Landlord, this Lease
shall control.
29. SECURITY DEPOSIT
[This space left intentionally blank]
30. AUTHORITY
30.1 If Landlord or Tenant signs as a corporation or a partnership, each
of the persons executing this Lease on behalf of either Landlord or Tenant does
hereby covenant and warrant that the party on whose behalf such person is
executing this Lease is a duly authorized and existing entity, that such party
has and is qualified to do business in Pennsylvania, has full right and
authority to enter into this Lease and that the persons signing on behalf of
Landlord or Tenant (as the case may be) are authorized to do so. Upon either
party's request, the other party shall provide the requesting party with
evidence reasonably satisfactory to the requesting party confirming the
foregoing covenants and warranties.
31. MISCELLANEOUS
31.1 The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. The words used in neuter gender include the
masculine and feminine. If there is more than one Tenant, the obligations under
this Lease imposed on Tenant shall be joint and several. The captions preceding
the articles of this Lease have been inserted solely as a
matter of convenience and such captions in no way define or limit the scope or
intent of any provision of this Lease.
31.2 The terms, covenants and conditions contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and, except as otherwise
provided herein, their respective personal representatives, successors and
assigns; provided, however, upon the sale, assignment or transfer by the
Landlord named herein (or by any subsequent landlord) of its interest in the
Building, as owner or lessor, including any transfer by operation of law, the
Landlord (or any subsequent landlord) shall be relieved from all subsequent
obligations or liabilities under this Lease, and all obligations subsequent to
such sale, assignment or transfer (but not any obligations or liabilities that
have accrued prior to the date of such sale, assignment or transfer) shall be
binding upon the grantee, assignee or other transferee; any such grantee,
assignee, or other transferee shall, by accepting such interest, shall be deemed
to have assumed such subsequent obligations and liabilities. Notwithstanding
anything to the contrary set forth herein, if Landlord's Mortgagee or Other
Mortgagee(s) shall succeed to Landlord's interests hereunder, then Landlord's
Mortgagee or Other Mortgagee(s) shall not be deemed to have assumed any
obligations or liabilities under this Lease which arose prior to the date any
such Mortgagee shall have requested Tenant to attorn to such Mortgagee. A lease
of the entire Building to a person other than for occupancy thereof shall be
deemed a transfer within the meaning of this Section 31.2.
31.3 If any provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and
enforceable to the full extent permitted by law.
31.4 This Lease and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with the laws of the Commonwealth
of Pennsylvania.
31.5 Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or an option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.
31.6 This instrument, including the Exhibits hereto, which are made a part
of this Lease, contains the entire agreement between the parties and all prior
negotiations and agreements are merged herein. Neither Landlord nor Landlord's
agents have made any representations or warranties with respect to the Premises,
the Building or this Lease except as expressly set forth herein, and no rights,
easements or licenses are or shall be acquired by Tenant by implication or
otherwise unless expressly set forth herein.
31.7 The review, approval, inspection or examination by Landlord of any
item to be reviewed, approved, inspected or examined by Landlord under the terms
of this Lease or the Exhibits attached hereto shall not constitute the
assumption of any responsibility by Landlord for either the accuracy or
sufficiency of any such item or the quality or suitability of such item for its
intended use. Any such review approval, inspection or examination by Landlord
is for the sole purpose of protecting Landlord's interests in the Building and
under this Lease, and no third parties, including, without limitation, Tenant or
any person or entity claiming through or under
Tenant, or the contractors, agents, servants, employees, visitors or licensees
of Tenant or any such person or entity, shall have rights hereunder.
31.8 Upon the expiration or sooner termination of the Term, Tenant will
quietly and peacefully surrender to Landlord the Premises in the condition in
which they are required to be kept as provided in Article 9 hereof, ordinary
wear and tear excepted. Tenant shall surrender the Premises to Landlord at the
end of the Term hereof, without-notice of any kind.
31.9 Upon Tenant paying the Annual Base Rental and Additional Rent and
performing all of Tenant's obligations under this Lease, Tenant may peacefully
and quietly enjoy the Premises during the Term as against all persons or
entities lawfully claiming by or through Landlord; subject, however, to the
provisions of this Lease.
31.10 Tenant covenants and agrees that no diminution of light, air or view
by any structure that may hereafter be erected (whether or not by Landlord)
shall entitle Tenant to any reduction of Annual Base Rental or Additional Rent
under this Lease, result in any liability of Landlord or Tenant, or in any other
way affect this Lease or Tenant's obligations hereunder.
31.11 Any holding over after the expiration of the Term with the written
consent of Landlord shall be construed to be a tenancy from month-to-month at
one hundred twenty-five percent (125%) of the Annual Base Rental herein
specified (prorated on a monthly basis), unless Landlord shall specify a
different rent in its sole discretion, together with an amount estimated by
Landlord for the monthly Additional Rent payable under this Lease, and shall
otherwise be on the terms and conditions herein specified so far as applicable.
Any holding over without Landlord's consent shall constitute a default by Tenant
and entitle Landlord to exercise any remedies provided in Article 20 hereof or
otherwise. Notwithstanding the foregoing, in the event Landlord consents to
Tenant's holding over and there is a resulting month-to-month tenancy under the
terms provided herein, then either Tenant or Landlord may terminate said month-
to-month tenancy upon thirty (30) days prior written notice.
31.12 Neither this Lease nor any term or provision hereof may be changed,
waived, discharged or terminated orally, and no breach thereof shall be waived,
altered or modified, except by a written instrument signed by the party against
which the enforcement of the change, waiver, discharge or termination is sought.
Any right to change, waive, discharge, alter or modify, or terminate this Lease
shall be subject to the prior express written consent of Landlord's Mortgagee.
No waiver of any breach shall affect or alter this Lease, but each and every
term, covenant and condition of this Lease shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
31.13 Tenant is hereby granted non-exclusive use of the parking areas and
facilities ("Common Area") in common with other tenants, Landlord and their
respective licensees and invitees. Landlord shall provide to Tenant, at no
additional charge, four (4) parking spaces per 1,000 square feet Rentable Area
that Tenant leases from Landlord. Landlord reserves the right to relocate or
substitute parking areas and facilities from time to time and Landlord further
reserves the right to alter, modify and construct buildings and other
improvements within the Land or Common Areas and/or sever or subdivide the Land
or Common Areas; provided that in Landlord's reasonable judgment, the ingress
and egress to the Building and the use of the Building by Tenant shall not be
materially and substantial interfered with. Landlord reserves the
right to close off the Common Areas at such time and in such manner as to
prevent the public dedication thereof. Tenant shall not park in other parking
areas.
31.14 Notwithstanding anything contained herein to the contrary, Tenant
agrees that Landlord shall have no personal liability with respect to any of the
provisions of this Lease and Tenant shall look solely to the estate and property
of Landlord in the Land and the Building of which the Premises form a part for
the satisfaction of Tenant's remedies, including without limitation, the
collection of any judgment or the enforcement of any other judicial process
requiring the payment or expenditure of money by Landlord with respect to any of
Landlord's obligations under this Lease. Tenant's rights under this Article
31.14 shall, however, be subject to the prior rights of the Landlord's Mortgagee
and Other Mortgagee(s) with liens covering all or part of the Land or Building.
Other than as provided in this Article 31.4, no other assets of Landlord or any
principal of Landlord shall be subject to levy, execution or other judicial
process for the satisfaction of Tenant's claim and in the event Tenant obtains a
judgment against Landlord, the judgment docket shall be so noted. This Section
shall inure to the benefit of Landlord's successors and assigns and their
respective principals.
31.15 Landlord shall not hold any employee, officer or director of Tenant
liable for claims or damages to the Premises under this Lease unless the claims
or damages resulted form the gross negligence or willful misconduct of the
employees, officers or directors.
31.16 Anything in this Agreement to the contrary notwithstanding,
providing such cause is not due to the willful act or gross neglect of Landlord
or Tenant, either party shall not be deemed in default with respect to the
performance of any of the terms, covenants and conditions of this Lease, except
payment of rent, additional rent or any other payments required under this
Lease, if the same shall be due to any strike, lock-out, civil action, war-like
operation, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, inability to obtain any
material, service or financing, through act of God or other cause beyond the
control of Landlord or Tenant.
31.17 Neither Landlord nor Tenant shall record this Lease without the
written consent of the other party, and any attempt on either party's part to
record either the Lease or a memorandum thereof without the other party's
consent first obtained in writing shall constitute an immediate Event of Default
by Tenant or Landlord (as the case may be) hereunder, entitling the other party
to pursue any and all the remedies available to it in such event.
31.18 No reference to any specific right or remedy shall preclude Landlord
from exercising any other right or from having any other remedy or from
maintaining any action to which it may otherwise be entitled at law or in
equity. No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof, or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of any
such breach, agreement, term, covenant or condition. No waiver by Landlord of
any breach by Tenant under this lease or of any breach by any other tenant under
any other lease of any portion of Building shall affect or alter this Lease in
any way whatsoever.
31.19 Tenant, at its sole cost and expense, shall comply with and shall
cause the Premises to comply with (a) all federal, state, county, municipal and
other governmental
statutes, laws, rules, orders, regulations and ordinances affecting the
Premises or any part thereof, or the use thereof, whether or not any such
statutes, laws, rules, orders, regulations or ordinances which may be hereafter
enacted involve a change of policy on the part of the governmental body
enacting the same, and (b) all rules, orders and regulations of the National
Board of Fire Underwriters or Landlord's fire insurance rating organization or
other bodies exercising similar functions in connection with the prevention of
fire or the correction of hazardous conditions, which apply to the Premises
except Landlord, at its sole cost and expense, shall cause the base Building
specifications of the Premises to comply with all federal, state, county,
municipal, and other governmental statutes, laws, rules, orders, regulations
and ordinances.
31.20 If two or more individuals, corporations, partnerships or other
business associations (or any combination of two or more thereof) shall sign
this Lease as Tenant, the liability of each such individual, corporation,
partnership or other business association to pay Annual Base Rental and
Additional Rent and perform all other obligations hereunder shall be deemed to
be joint and several, and all notices, payments and agreements given or made by,
with or to any one of such individuals, corporations, partnerships or other
business associations shall be deemed to have been given or made by, with or to
all of them. In like manner, if Tenant shall be a partnership or other business
association, the members of which are, by virtue of statute or federal law,
subject to personal liability, the liability of each such member shall be joint
and several.
31.21 Each party warrants and represents to the other that no broker,
agent, or finder, except that shown in the Basic Lease Information, has been
involved in the transactions contemplated hereby. Both parties hereto agree to
indemnify and hold harmless the other against any and all claims, actions,
damages, liabilities (including attorney's fees and expenses) with respect to
any commission, fee, or charge made by any broker, agent, or finder, not so
listed, which is made by reason of any action or agreement by such party.
31.22 No payment by Tenant or receipt by Landlord of a lesser amount than
the Annual Base Rental and Additional Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Annual Base Rental or
Additional Rent, nor shall any endorsement or statement or any check or any
letter accompanying any check or payment as Annual Base Rental and/or Additional
Rent be deemed an accord and satisfaction of Landlord's right to recover the
balance of such Annual Base Rental and/or Additional Rent or preclude any remedy
provided by this Lease.
31.23 Any intention to create a joint venture or partnership relation
between the parties hereto is hereby expressly disclaimed.
31.24 All agreements, covenants and indemnifications contained herein or
made in writing pursuant to the terms of this Lease by or on behalf of the
Landlord or Tenant shall be deemed material and shall survive the expiration or
sooner termination of this Lease.
31.25 Except in the case of USAirways, Tenant shall have a right of first
refusal to lease the space contained in the Building. The right of refusal
shall be exercised within thirty (30) days of Landlord's written notice to
Tenant of Landlord's receipt of notice of interest by a financially qualified
third party to lease such space. Tenant shall have no right of first offer and
Landlord need not provide Tenant with notice if an Event of Default has occurred
pursuant to Article 20.
31.26 Disputes relating to issues regarding Landlord's performance of its
obligations hereunder shall be submitted to arbitration in accordance with the
rules of the American Arbitration Association. The decision of the panel shall
be final and nonappealable. No submission or right of submission of any such
matter to arbitration shall affect any other rights of the parties to judicial
determination or confession of judgment or otherwise preclude the Court of
Common Pleas of
Allegheny County from exercising its jurisdiction over any other matter
including, but not limited to Tenant's obligations hereunder.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
WITNESS: PARK RIDGE ONE ASSOCIATES,
a Delaware limited partnership
By: ___________________________________
a Delaware corporation
General Partner
By: __________________________________
Its: __________________________________
AUTHORIZED AGENT FOR
PARK RIDGE ONE ASSOCIATES,
a Pennsylvania limited partnership
ATTEST: MASTECH SYSTEMS CORPORATION
_________________________________ By: ___________________________________
Its: ___________________________________
EX-23.0
9
REPORT OF ARTHUR ANDERSEN LLP
EXHIBIT 23.0
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
Mastech Corporation:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Mastech Corporation and subsidiaries
included in this Form 10-K, and have issued our report thereon dated February 9,
1999. Our audits were made for the purpose of forming an opinion on those basic
financial statements taken as a whole. The schedule listed in the index in Item
14(a) 2 of the Form 10-K is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
February 9, 1999
EX-23.1
10
CONSENT OF ARTHUR ANDERSEN LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports,
included in this Form 10-K, into the Company's previously filed Registration
Statements on Form S-8 (File Nos. 333-20033 and 333-71057) and on Form S-3
(File Nos. 333-58217 and 333-73365).
/s/ ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
March 26, 1999
EX-27.1
11
FINANCIAL DATA SCHEDULE
5
1,000
YEAR
DEC-31-1998
JAN-01-1998
DEC-31-1998
36,455
47,153
85,097
1,728
0
177,747
22,489
5,661
215,781
47,556
0
0
0
491
157,716
215,781
0
390,871
262,178
336,831
3,470
1,413
(3,321)
53,891
20,459
33,432
0
0
0
33,432
0.68
0.67
EX-27.2
12
RESTATED FINANCIAL DATA SCHEDULE
5
1,000
YEAR
DEC-31-1996
JAN-01-1996
DEC-31-1996
46,566
0
32,552
675
0
84,905
5,654
1,520
89,038
36,280
0
0
0
233
49,355
89,038
0
162,939
119,268
148,608
875
300
331
13,125
4,136
8,989
0
0
0
3,698
0.09
0.09
EX-27.3
13
RESTATED FINANCIAL DATA SCHEDULE
5
1,000
3-MOS 3-MOS
DEC-31-1998 DEC-31-1997
JAN-01-1998 JAN-01-1997
MAR-31-1998 MAR-31-1997
83,412 43,830
0 0
70,663 40,047
1,311 869
0 0
166,031 90,357
13,495 7,365
3,161 1,790
178,292 95,932
47,696 40,854
0 0
0 0
0 0
490 233
128,250 51,722
178,292 49,588
0 0
81,586 48,339
55,283 34,758
70,647 55,090
0 0
353 250
0 0
11,611 3,867
4,667 1,698
6,944 2,169
0 0
0 0
0 0
6,944 2,169
0.14 0.05
0.14 0.05
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