-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SsGANUKW7ZmKqoa++Md/RFDWplfmLMN9oScasK5AsWw4SH7foJwrdJl4VLEKlI0m LdD6/+MtrTAZ19T1oFngIg== 0000707606-97-000007.txt : 19970815 0000707606-97-000007.hdr.sgml : 19970815 ACCESSION NUMBER: 0000707606-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEMS & COMPUTER TECHNOLOGY CORP CENTRAL INDEX KEY: 0000707606 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 231701520 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11521 FILM NUMBER: 97661182 BUSINESS ADDRESS: STREET 1: GREAT VALLEY CORPORATE CTR STREET 2: 4 COUNTRY VIEW RD CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6106475930 MAIL ADDRESS: STREET 1: GREAT VALLEY CORP CTR STREET 2: 4 COUNTRY VIEW RD CITY: MALVERN STATE: PA ZIP: 19355 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1997 or / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ . 0-11521 (Commission File Number) SYSTEMS & COMPUTER TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-1701520 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) Great Valley Corporate Center 4 Country View Road Malvern, Pennsylvania 19355 (Address of principal executive offices) Registrant's telephone number, including area code: (610) 647-5930 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 16,289,975 Common shares, $.01 par value, as of August 6, 1997 Page 1 of 18 consecutively numbered pages SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES INDEX PART I, UNAUDITED FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1997 and September 30, 1996 Condensed Consolidated Statements of Operations - Three Months Ended June 30, 1997 and 1996 Condensed Consolidated Statements of Operations - Nine Months Ended June 30, 1997 and 1996 Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 1997 and 1996 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Operations and Financial Condition PART II, OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K SIGNATURES SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) June 30, September 30, 1997 1996 (UNAUDITED) (NOTE) ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,750 $ 12,303 Receivables, including $64,204 and $55,146 of earned revenues in excess of billings, net of allowance for doubtful accounts of $2,609 and $1,590 102,176 77,161 Prepaid expenses and other receivables 13,178 10,208 -------- -------- TOTAL CURRENT ASSETS 126,104 99,672 PROPERTY AND EQUIPMENT--net of accumulated depreciation 37,861 35,222 CAPITALIZED COMPUTER SOFTWARE COSTS, net of accumulated amortization 14,213 10,510 COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated amortization 8,275 8,740 OTHER ASSETS AND DEFERRED CHARGES 6,646 9,115 -------- -------- TOTAL ASSETS $193,099 $163,259 ======== ======== SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) June 30, September 30, 1997 1996 (UNAUDITED) (NOTE) LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,597 $ 6,674 Current portion of long-term debt 7,385 200 Income taxes payable 485 398 Accrued expenses 23,657 12,358 Deferred revenue 10,051 12,653 -------- -------- TOTAL CURRENT LIABILITIES 49,175 32,283 LONG-TERM DEBT, less current portion 750 31,590 DEFERRED TAXES AND OTHER LONG-TERM LIABILITIES 2,960 2,590 STOCKHOLDERS' EQUITY Preferred stock, par value $.10 per share--authorized 3,000 shares, none issued Common stock, par value $.01 per share-- authorized 24,000 shares, issued 17,317 and 15,245 shares 173 152 Capital in excess of par value 89,408 60,526 Retained earnings 54,202 39,687 -------- -------- 143,783 100,365 Less Held in treasury, 1,151 common shares--at cost (2,959) (2,959) Notes receivable from stockholders (610) (610) -------- -------- 140,214 96,796 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $193,099 $163,259 ======== ======== Note: The condensed consolidated balance sheet at September 30, 1996 has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) For the Three Months Ended June 30, 1997 1996 Revenues: OnSite services $24,715 $22,068 Software sales 20,460 12,760 Maintenance and enhancements 12,602 10,545 Software services 17,156 10,703 Interest and other revenue 161 240 ------- ------- 75,094 56,316 Expenses: Cost of OnSite services 20,056 18,196 Cost of software sales and maintenance and enhancements 11,556 9,825 Cost of software services 14,199 9,206 Selling, general and administrative 18,608 13,343 Interest expense 0 637 ------- ------- 64,419 51,207 Income before income taxes 10,675 5,109 Provision for income taxes 4,270 2,197 ------- ------- Net Income $ 6,405 $ 2,912 ======= ======= Per common share: Net income Primary $ 0.39 $ 0.19 Fully diluted $ 0.37 $ 0.19 Common shares and equivalents outstanding Primary 16,544 15,045 Fully diluted 17,355 17,130 See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) For the Nine Months Ended June 30, 1997 1996 Revenues: OnSite services $ 70,149 $ 62,079 Software sales 50,554 33,382 Maintenance and enhancements 38,003 30,923 Software services 43,899 29,917 Interest and other revenue 406 590 ------- ------- 203,011 156,891 Expenses: Cost of OnSite services 57,190 50,210 Cost of software sales and maintenance and enhancements 33,063 27,833 Cost of software services 36,150 27,116 Selling, general and administrative 51,064 39,660 Interest expense 1,123 1,724 ------- ------- 178,590 146,543 Income before income taxes 24,421 10,348 Provision for income taxes 9,906 4,407 ------- ------- Net Income $14,515 $ 5,941 ======= ======= Per common share: Net income Primary $ 0.95 $ 0.39 Fully diluted $ 0.87 $ 0.39 Common shares and equivalents outstanding Primary 15,271 15,096 Fully diluted 17,293 15,096 See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) For the Nine Months Ended June 30, 1997 1996 OPERATING ACTIVITIES Net income $14,515 $ 5,941 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 9,527 7,701 Provision for doubtful accounts 1,732 803 Changes in operating assets and liabilities: (Increase) in receivables (26,745) (15,611) (Increase) in other current assets, principally prepaid expenses (2,970) (2,862) Increase in accrued expenses 11,299 2,971 (Decrease) in deferred revenue (2,602) (9,084) Other, net 620 (381) -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,376 (10,522) INVESTING ACTIVITIES Purchase of property and equipment (7,297) (7,455) Capitalized computer software costs (5,633) (5,408) Proceeds from sale or maturity of investments available-for-sale 0 13,504 Purchase of subsidiary assets, net of cash acquired 0 (657) -------- -------- NET CASH (USED IN) INVESTING ACTIVITIES (12,930) (16) FINANCING ACTIVITIES Principal payments on short-term debt (1,700) (1,600) Proceeds from borrowings 7,700 12,100 Repurchase and retirement of Company stock (1,271) 0 Proceeds from exercise of stock options 1,330 373 Redemption of subordinated debentures not converted (58) 0 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 6,001 10,873 (DECREASE)INCREASE IN CASH & CASH EQUIVALENTS (1,553) 335 CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 12,303 1,602 -------- -------- CASH & CASH EQUIVALENTS-END OF PERIOD $10,750 $ 1,937 ======== ======== SUPPLEMENTAL INFORMATION Noncash investing and financing actvities: Conversion of subordinated debentures to common stock 30,294 0 See notes to condensed consolidated financial statements. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands, except per share amounts) June 30, 1997 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 1O-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1996. Operating results for the three and nine-month periods ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. NOTE A--RECLASSIFICATION Certain prior year information has been reclassified to conform with the current year format. NOTE B--CASH AND CASH EQUIVALENTS Cash equivalents--Cash equivalents are defined as short-term highly liquid investments with a maturity of three months or less at the date of purchase. NOTE C--INCOME PER SHARE Primary income per share is computed using the weighted average number of common shares outstanding, plus, to the extent dilutive, common stock equivalents. Fully diluted income per share is based on an increased number of shares that would be outstanding assuming the exercise of stock options when the Company's stock price at the end of the period is higher than the average stock price within the respective period, plus to the extent dilutive, the increased number of shares that would be outstanding, assuming conversion of the 6 1/4% convertible subordinated debentures at the beginning of the period presented. Net income used in the calculation of fully diluted income per share in each period presented is adjusted for interest expense (net of tax) on the convertible subordinated debentures. See Note F--New Accounting Standards. NOTE D--STOCK REPURCHASE In October 1996, the Company repurchased 185 shares of common stock at $15 per share, originally issued in the acquisition of Adage Systems International, Inc. in June 1995. The purchase of treasury stock reduced stockholders' equity. All of these shares have subsequently been retired. Pursuant to the stock repurchase, the Company agreed to pay $1,271 immediately, and signed a note for $1,500 with amounts payable in October 1997 and 1998. NOTE E--BOND REDEMPTION On April 9, 1997, the Company called for redemption on May 9, 1997 all of its outstanding 6 1/4% convertible subordinated debentures due September 1, 2003. The Company issued 1,816 shares of common stock for the conversion of bonds with a principal amount of $27.3 million. The Company redeemed bonds not converted with a principal, accrued interest, and premium amount of $58. NOTE F--NEW ACCOUNTING STANDARDS On October 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). The Statement requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be sold or discarded. As the Company's accounting policies prior to the adoption of SFAS 121 have provided for similar accounting treatment, the effect of adoption was not material to the Company's financial condition or results of operations. Also on October 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". The Statement requires that companies with stock-based compensation plans either recognize compensation expense based on new fair-value accounting methods or continue to apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and disclose in its annual financial statements pro forma net income and earnings per share assuming the fair value method had been applied. The Company has elected to adopt the disclosure alternative, which will be presented in its year-end financial statements, and continue accounting for its stock-based compensation plans under the provisions of APB 25. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" (SFAS 128), which is effective for periods ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements primary earnings per share will exclude the dilutive effect of stock options and fully diluted earnings per share must include the dilutive effect of stock options even if the dilutive effect is immaterial. The impact is expected to result in an increase in primary earnings per share for the nine months ended June 30, 1997 and 1996 of $.05 and $.03 per share, respectively. The impact of SFAS 128 on the calculation of primary earnings per share for the quarters ended June 30, 1997 and 1996 and the calculation of fully diluted earnings per share for the these quarters and the nine-month periods then ending is not expected to be material. NOTE G--OTHER Product development expenditures, including software maintenance expenditures, for the nine months ended June 30, 1997 and 1996, were approximately $18,890 and $15,085, respectively. After capitalization these amounts were approximately $13,257 and $9,677, respectively, and were charged to operations as incurred. For the same periods, amortization of capitalized software costs amounted to $1,929 and $832, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION The purpose of this section is to give interpretive guidance to the reader of the financial statements. RESULTS OF OPERATIONS The following table sets forth: (a) certain income statement items as a percentage of total revenues and (b) for revenues, the percentage change for each item from the prior year comparative period. % of Total Revenues % Change from Prior Year Three Mos. Nine Mos. Three Mos. Nine Mos. Ended Ended Ended Ended June 30, June 30, June 30, June 30, 1997 1996 1997 1996 Revenues: OnSite services 33% 39% 35% 40% 12% 13% Software sales 27% 23% 25% 21% 60% 51% Maintenance and enhancements 17% 19% 19% 20% 20% 23% Software services 23% 19% 21% 19% 60% 47% ---- ---- ---- ---- Total 100% 100% 100% 100% 33% 29% Expenses: Cost of services, sales and maintenance and enhancements 61% 66% 62% 67% Selling, general and administrative 25% 24% 25% 25% Interest expense 0% 1% 1% 1% Income before income taxes 14% 9% 12% 7% The following table sets forth the gross profit for each of the following revenue categories as a percentage of revenue for each such category and the total gross profit as a percentage of total revenue (excluding interest and other revenue). The Company does not separately present the cost of maintenance and enhancements revenue as it is impracticable to separate such cost from the cost of software sales and services. Three Months Nine Months Ended Ended June 30, June 30, 1997 1996 1997 1996 Gross Profit: OnSite services 19% 18% 18% 19% Software sales and maintenance and enhancements 65% 58% 63% 57% Software services 17% 14% 18% 9% --- --- --- --- Total 39% 34% 38% 33% Revenues The 12% and 13% increases in OnSite services revenues in the third quarter and first nine months of fiscal year 1997 are primarily the result of (1) increases in outsourcing services provided to the City of Indianapolis and MediaOne (formerly Continental Cablevision, Inc.), (2) first quarter contracts with the University of Memphis and Norshipco and (3) new contracts signed in the third quarter including the University of Montevallo. These increases were partially offset by decreased revenues compared to the prior year periods resulting from contracts which ended during the period. Software sales increased 60% in the third quarter of fiscal year 1997 compared with the third quarter of fiscal year 1996 due primarily to increased licenses of ADAGE Enterprise Resource Planning (ERP) software to the manufacturing market and BANNER software licenses to the higher education market. Software sales increased 51% in the first nine months of fiscal year 1997 compared with the corresponding period in fiscal year 1996 due primarily to increased licenses of ADAGE ERP software in the second and third quarters, increased BANNER software licenses to the higher education market during the third quarter, and increased licenses of BANNER Customer Information System (CIS) software to the utility market in the first and second quarters of fiscal year 1997. The 20% and 23% increases in maintenance and enhancements revenues in the third quarter and first nine months of fiscal year 1997 are the result of the growing installed base of clients primarily in the higher education market and the utility marketplace. In addition, the Company continues to experience a high annual renewal rate on maintenance contracts. Software services revenue increased 60% and 47% in the third quarter and first nine months of fiscal year 1997, compared with the corresponding periods of fiscal year 1996, primarily as the result of increases in implementations and integration services in the U.S. and international utility markets and the higher education market and increases in ADAGE ERP implementations and support services to the manufacturing market. Gross Profit Gross profit increased as a percentage of total revenue (excluding interest and other revenue) from 34% to 39% for the third quarter of fiscal year 1997 and from 33% to 38% for the first nine months of fiscal year 1997 as compared with the respective periods in the prior fiscal year. The increase in the software sales and maintenance and enhancements gross profit was the result of significant growth in license fee revenue. The software services margin increased primarily as a result of increases in the utility business gross margin. In the first nine months of fiscal year 1996, the cost of software services reflected increased expenditures in the utility business. In the second quarter of fiscal year 1996, the Company recorded a contract loss provision of $1.25 million to reflect the cost of satisfying certain obligations relating to the CIS product for U.S. utilities. These obligations were satisfied in the first quarter of fiscal year 1997. The increases in gross profit for the three and nine-month periods ended June 30, 1997 were offset by decreases in the international utility business where additional costs were incurred in the third quarter as a result of contract delays and overruns. Seasonality Certain factors have resulted in quarterly fluctuations in operating results, including variability of software license fee revenues, seasonal patterns of capital spending by clients, the timing and receipt of orders, competition, pricing, new product introductions by the Company or its competitors, levels of market acceptance for new products, and general economic and political conditions. While the Company has historically generated a greater portion of license fees in total revenue in the last two fiscal quarters, the non-seasonal factors cited above may have a greater effect than seasonality on the Company's results of operations. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION The Company's cash and cash equivalents balance was $10.8 million and $12.3 million at June 30, 1997 and September 30, 1996, respectively. Cash provided by operating activities was $5.3 million for the first nine months of fiscal year 1997 compared to cash used of $10.5 million for the prior-year period. Operating cash flows have increased primarily due to an increase in income before depreciation and amortization. Additionally, increases in other accrued expenses are primarily the result of employee related accruals and increases in client equipment purchase obligations resulting from OnSite services contracts. The increases in accounts receivable at June 30, 1997 compared to September 30, 1996 balances are due to increases in revenues and the timing of billings on the Company's software services contracts and software licenses. The Company provides OnSite services and software-related services, including systems implementation and integration services. Contract fees from OnSite services are typically based on multi-year contracts ranging from five to 10 years and provide a recurring revenue stream throughout the term of the contract. Software services contracts usually have shorter terms than OnSite services contracts, and billings are sometimes milestone based. During the beginning of a typical OnSite services contract, services are performed and expenses are incurred by the Company at a greater rate than in the later part of the contract. Billings usually remain constant during the term of the contract and, in some cases, when a contract term is extended, the billing period is also extended over the new life of the contract. Revenue is usually recognized as work is performed. The resulting excess of revenues over billings is reflected on the Company's Consolidated Balance Sheet as unbilled accounts receivable. As an OnSite contract proceeds, services are performed and expenses are incurred at a lesser rate, resulting in billings exceeding revenue recognized, which causes a decrease in the unbilled accounts receivable, as will the achievement of a milestone in a software services contract. During the first nine months of fiscal year 1997, the Company's primary use of $12.9 million cash for investing activities was the purchase of equipment and capitalization of newly developed software. During the first nine months of fiscal year 1996, the uses of cash for equipment purchases and software capitalization were largely offset by the proceeds from the sale or maturity of available-for-sale investments. The Company signed a long-term lease agreement in May 1997 for a new office building in its Malvern campus. The Company anticipates that it will begin to incur fit-up and remodeling costs in approximately the second quarter of fiscal year 1998 and rent payments should begin shortly thereafter. Fiscal year 1997 capitalized software expenditures are expected to remain at approximately the same level as fiscal year 1996 expenditures. Although there has been a reduction in the capitalization of costs related to ADAGE ERP software, a major version of which was completed and released in November 1996, these reductions should be offset by increases in the capitalization of costs related to the continual development of Banner products, particularly higher education software. Financing activities provided cash of $6.0 million and $10.9 million at June 30, 1997 and 1996, respectively. During the first nine months of fiscal year 1997, cash was primarily provided by borrowings on the Company's senior revolving credit facility. This was offset by cash used to repurchase and subsequently retire 185 thousand shares of stock originally issued in connection with the purchase of Adage Systems International, Inc. in June 1995. Pursuant to the stock repurchase, the Company signed a note for $1.5 million with amounts payable in October 1997 and 1998. Similarly, cash was primarily provided during the first nine months of fiscal year 1996 by borrowings on the Company's credit facility. On April 9, 1997, the Company announced that it called for redemption all of its outstanding 6 1/4% convertible subordinated debentures due September 1, 2003. The redemption date was May 9, 1997. Of the $27.3 million principal amount of debentures outstanding at April 8, 1997, all but $55 thousand were converted into shares of the Company's common stock. This resulted in the issuance of 1,816 thousand shares of common stock. The Company has a senior revolving credit facility, available for general corporate purposes, which was renegotiated during the quarter ended June 30, 1997. The amended agreement provides for a permanent increase in the amount of the revolving credit to $30 million. The credit facility agreement expires in June 1999 with optional annual extensions. As long as borrowings are outstanding and as a condition precedent to new borrowings, the Company must comply with certain covenants, and the Company is prohibited from paying any dividends other than stock dividends. At June 30, 1997 $6.2 million was outstanding. The Company repaid these amounts in July 1997 using cash provided by operations. The Company believes that its cash and cash equivalents, cash provided by operations, and borrowing arrangements should satisfy its needs for the foreseeable future. Contingencies A purported class action complaint was filed against the Company and certain of its officers and directors on October 4, 1995. The plaintiff filed an amended complaint on November 28, 1995. The amended complaint alleged violations of certain disclosure and related provisions of the Federal Securities Laws. The amended complaint sought damages in unspecified amounts as well as equitable relief. In April 1996, the Company's motion to dismiss the amended complaint was granted in part and denied in part. On February 3, 1997, the plaintiff filed a Second Amended Complaint alleging violations of certain disclosure and related provisions of the Federal Securities Laws and negligent misrepresentation. On February 18, 1997, the Company filed a motion to dismiss the plaintiff's Second Amended Complaint, which motion is presently pending before the Court. Management believes the claims in the Second Amended Complaint are without merit and intends to contest the allegations vigorously. While management, based on its investigation to date, believes that resolution of this action will not have a materially adverse effect on the Company's consolidated financial position, the ultimate outcome of this matter cannot presently be determined. New Accounting Standards On October 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). The Statement requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be sold or discarded. As the Company's accounting policies prior to the adoption of SFAS 121 have provided for similar accounting treatment, the effect of adoption was not material to the Company's financial condition or results of operations. Also on October 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". The Statement requires that companies with stock-based compensation plans either recognize compensation expense based on new fair-value accounting methods or continue to apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and disclose in its annual financial statements pro forma net income and earnings per share assuming the fair value method had been applied. The Company has elected to adopt the disclosure alternative, which will be presented in its year-end financial statements, and continue accounting for its stock-based compensation plans under the provisions of APB 25. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" (SFAS 128), which is effective for periods ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements primary earnings per share will exclude the dilutive effect of stock options and fully diluted earnings per share must include the dilutive effect of stock options even if the dilutive effect is immaterial. The impact of FAS 128 on the calculation of primary and fully diluted earnings per share is not expected to be material. Cautionary Statement The matters discussed herein and elsewhere that are forward-looking statements including statements concerning the Company's or management's intentions, beliefs, expectations or predictions for the future, are based on current management expectations that involve risks and uncertainties which could cause actual results to differ materially from those anticipated. Potential risks and uncertainties that could affect the Company's future operating results include without limitation, the effect of publicity on demand for the Company's products and services, general economic conditions, the Company's ability to attract and retain highly skilled technical, managerial, sales and marketing personnel, continued market acceptance of the Company's products and services, the timing of the receipt of software licenses, the timing of services contracts and renewals, the timing and complexity of large transactions, continued competitive and pricing pressures in the marketplace, the Company's ability to develop and market new and updated products and enhancements cost effectively and on a timely basis, and the Company's ability to complete fixed-price contracts profitably. The Company is investing in the development of new products and in improvements to existing products; however, software development is a complex and creative process that can be difficult to accurately schedule and predict. Since a significant part of the Company's business results from software licensing, the Company's business is characterized by a high degree of operating leverage. The Company's expense levels are based, in significant part, on the Company's expectations as to future revenues and are therefore relatively fixed in the short term. If software licensing revenues do not meet expectations, net income is likely to be disproportionately adversely affected. There can be no assurance that the Company will be able to increase or even maintain its current level of profitability on a quarterly or annual basis in the future. It is therefore possible that in one or more future quarters the Company's operating results will be below expectations. In such event, the price of the Company's common stock could be adversely affected. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES PART II Item 1. Legal Proceedings On October 4, 1995, John J. Wallace filed a purported class action lawsuit in the United States District Court for the Eastern District of Pennsylvania against the Company; Michael J. Emmi, Chairman of the Board, President and Chief Executive Officer of the Company; Michael D. Chamberlain, Senior Vice President and a director of the Company; and Eric Haskell, Senior Vice President, Finance and Administration, Treasurer and Chief Financial Officer of the Company. The plaintiff filed an amended complaint on November 28, 1995. The amended complaint alleged that the defendants violated sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making misstatements and omissions regarding the Company's financial performance in the second half of fiscal year 1995. The class period alleged is from June 5, 1995 through October 2, 1995. The amended complaint seeks damages in unspecified amounts as well as equitable relief. In April 1996, the Company's Motion to Dismiss the Amended Complaint was granted in part and denied in part. On February 3, 1997, the plaintiff filed a Second Amended Complaint alleging violations of certain disclosure and related provisions of the Federal Securities Laws and negligent misrepresentation. On February 18, 1997, the Company filed a motion to dismiss the plaintiff's Second Amended Complaint, which motion is presently pending before the Court. Management believes the claims in the Second Amended Complaint are without merit and intends to contest the allegations vigorously. While management, based on its investigation to date, believes that resolution of this action will not have a materially adverse effect on the Company's consolidated financial position, the ultimate outcome of this matter cannot be presently determined. Item 6(a). Exhibits Exhibit 10.1 -- Amendment and Modification to Credit Agreement dated as of April 8, 1997 among Registrant and SCT Software & Resource Management Corporation as Borrowers and Mellon Bank, N.A. Exhibit 10.2 -- Second Amendment and Modification to Credit Agreement dated as of April 8, 1997 among Registrant and SCT Software & Resource Management Corporation as Borrowers and Mellon Bank, N.A. Exhibit 10.3 -- Third Amendment and Modification to Credit Agreement dated as of June 4, 1997 among Registrant and SCT Software & Resource Management Corporation as Borrowers and Mellon Bank, N.A. Exhibit 11 -- Statement re: Computation of Per Share Earnings Exhibit 27 -- Financial Data Schedule Item 6(b). Reports on Form 8-K The registrant filed a current report on Form 8-K dated April 9, 1997. Under Item 5, the registrant gave notice that it elected to redeem and will redeem on May 9, 1997 all of its outstanding, authenticated and registered 6 1/4 % Convertible Subordinated Debentures Due 2003. As of April 8, 1997, the principal amount of Debentures outstanding was $27,295. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION (Registrant) Date: 08/14/97 /s/ Eric Haskell ________________________________ Eric Haskell Senior Vice President, Finance and Administration, Treasurer and Chief Financial Officer EX-11 2 EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
Three months ended Nine months ended June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996 PRIMARY Average shares outstanding 15,539,888 14,066,445 14,552,365 14,061,623 Net effect of dilutive stock options-- based on the treasury stock method using average market price 1,004,451 978,503 718,348 1,034,288 ----------- ----------- ----------- ----------- Total 16,544,339 15,044,948 15,270,713 15,095,911 =========== =========== =========== =========== Net income $ 6,405,000 $ 2,912,000 $14,515,000 $ 5,941,000 =========== =========== =========== =========== Net income per share $0.39 $0.19 $0.95 $0.39 ===== ===== ===== ===== FULLY DILUTED Average shares outstanding 15,539,888 14,066,445 14,552,365 14,061,623 Net effect of dilutive stock options-- based on the treasury stock method using the end of period market price, if higher than average market price 1,209,024 978,503 1,209,024 1,034,288 Assumed conversion of 6 1/4% convertible subordinated debentures 606,556 2,085,000 1,531,945 0 ----------- ----------- ----------- ----------- Total 17,355,468 17,129,948 17,293,334 15,095,911 =========== =========== =========== =========== Net Income $ 6,405,000 $ 2,912,000 $14,515,000 $ 5,941,000 Add 6 1/4 % convertible subordinated debenture interest, net of income tax effect 0 300,000 521,000 0 Net income, as adjusted $ 6,405,000 $ 3,212,000 $15,036,000 $ 5,941,000 =========== =========== =========== =========== Net income per share $0.37 $0.19 $0.87 $0.39 ===== ===== ===== =====
EX-27 3
5 The schedule contains summary financial information extracted from the June 30, 1997 financial statements and is qualified in its entirety by reference to such financial statements. 9-MOS SEP-30-1997 JUN-30-1997 10,750,000 0 104,785,000 2,609,000 0 126,104,000 64,350,000 26,489,000 193,099,000 49,175,000 750,000 0 0 173,000 140,041,000 193,099,000 202,605,000 203,011,000 126,403,000 177,467,000 0 0 1,123,000 24,421,000 9,906,000 14,515,000 0 0 0 14,515,000 0.95 0.87
EX-10 4 AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT THIS AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the "Amendment") is made as of the 8th day of April, 1997, by and among SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE & RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively, "Borrowers" and individually a "Borrower") and MELLON BANK, N.A. ("Bank"). BACKGROUND A. By a Credit Agreement dated June 20, 1994, (the "Credit Agreement"), by and among Bank and Borrowers, Bank agreed, inter alia, to extend to Borrowers a revolving credit facility in the principal amount of up to Twenty Million Dollars ($20,000,000.00) (the "Revolving Credit"), as further evidenced by that certain Promissory Note dated June 20, 1994 payable to Bank in the original principal amount of Twenty Million Dollars ($20,000,000.00) (the "Revolving Credit Note"). B. Borrowers have requested that Bank (i) extend through June 20, 1999 the Maturity Date of the Revolving Credit; and (ii) amend certain financial and other covenants contained in the Credit Agreement; all of which Bank is willing to do on the terms set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. CAPITALIZED TERMS. Capitalized terms not otherwise defined herein will have the meanings set forth therefor in the Credit Agreement. 2. EXTENSION. The "Maturity Date" as defined in Section 1.01 of the Credit Agreement is hereby amended to be "June 20, 1999." 3. QUICK ASSETS. The definition of "Consolidated Quick Assets" contained in Section 1.01 of the Credit Agreement is hereby amended to be as follows: "'Consolidated Quick Assets'. At any date of determination the total cash, marketable securities and billed accounts receivable of the Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP." 4. FINANCIAL AND OTHER COVENANTS. The following provisions of the Credit Agreement are hereby amended as follows: (a) Section 6.02(a) is hereby deleted and replaced with the following: "(a) Asset Coverage Ratio. Permit the ratio of (i) Borrowers' Quick Assets plus 0% of Borrowers' unbilled receivables to (ii) Borrowers' Consolidated Current Liabilities plus the outstanding balance of all Debt to Bank, to fail to exceed 1.0 to 1.0 measured as of the end of each fiscal quarter of the Company." (b) Section 6.02(c) is hereby deleted and replaced with the following: "(c) Debt Coverage Ratio. Permit the ratio of Senior Debt to Consolidated Cash Flow, all determined as of the end of each fiscal quarter for the four (4) fiscal quarters then ended, to exceed (i) 2.5 to 1.0 as of September 30, 1997 and as of the end of each fiscal quarter thereafter through and including June 30, 1998 and (ii) 1.5 to 1.0 as of September 30, 1999 and as of the end of each fiscal quarter thereafter." (c) Dividends. Section 6.02(g) is hereby deleted and replaced with the following: "(g) Dividends, Etc. Declare or pay any dividends, purchase or otherwise acquire for value any of its capital stock now or hereafter outstanding, or make any distribution of assets to its stockholders as such, or permit any of its Subsidiaries to purchase or otherwise acquire for value any stock of the Company; provided, however, that as long as no Event of Default or Potential Event of Default exists, Borrowers may declare or pay dividends, repurchase their capital stock or make distributions of assets to shareholders as long as the dividends and distributions are payable in capital stock of the Borrowers or (ii) the aggregate amount of all non-stock dividends, repurchases and distributions effected after March 20, 1997 does not exceed $5,000,000.00." 5. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES. Each Borrower covenants and agrees to execute and deliver to Bank, or to cause to be executed and delivered to Bank, contemporaneously herewith, at the sole cost and expense of Borrowers, any and all documents, agreements, statements, resolutions, certificates, consents and information as Bank may require in connection with the matters or actions described herein. Each Borrower further covenants and agrees to execute and deliver to Bank or to cause to be executed and delivered at the sole cost and expense of Borrowers, from time to time, any and all other documents, agreements, statements, certificates and information as Bank shall reasonably request to evidence or effect the terms hereof, the Credit Agreement, as amended, or any of the other Loan Documents. 6. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does hereby: (a) ratify, confirm and acknowledge that the Credit Agreement, as amended, and the other Loan Documents continue to be and are valid, binding and in full force and effect; (b) covenant and agree to perform all obligations of Borrowers contained herein, under the Note, and under the Credit Agreement, as amended, and the other Loan Documents; (c) acknowledge and agree that such Borrower has no defense, set-off, counterclaim or challenge against the payment of any sums owing under Loan Documents, the enforcement of any of the terms of the Credit Agreement, as amended, or the other Loan Documents; (d) acknowledge and agree that except as previously disclosed to and consented to by Bank in writing, all representations and warranties of Borrowers contained in the Credit Agreement and/or the other Loan Documents are true, accurate and correct on and as of the date hereof as if made on and as of the date hereof; (e) represent and warrant that no Event of Default or Potential Event of Default exists and all information described in the foregoing Background is true, accurate and complete; (f) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof is intended to constitute a novation of the Credit Agreement or any of the other Loan Documents, and does not constitute a release, termination or waiver of any of the guarantees, rights or remedies granted to the Bank therein, which guarantees, rights and remedies are hereby ratified, confirmed, extended and continued as security for the obligations of Borrowers to Bank under the Credit Agreement and the other Loan Documents, including, without limitation, this Amendment; (g) acknowledge and agree that a Borrower's failure to comply with or perform any of its covenants, agreements or obligations contained in this Amendment shall constitute an Event of Default under the Credit Agreement and each of the Loan Documents; and (h) acknowledge and confirm that SCT Software & Technology Services, Inc. merged with and into Borrowing Subsidiary with Borrowing Subsidiary being the surviving corporation, and SCT Public Sector, Inc. changed its corporate name to "SCT Government Systems, Inc." 7. COSTS AND EXPENSES. Borrowers shall pay to Bank all costs and expenses incurred by Bank in connection with the review, preparation and negotiation of this Amendment and all documents in connection therewith, including, without limitation, all of Bank's attorneys' fees and costs. 8. INCONSISTENCIES. To the extent of any inconsistency between the terms, conditions and provisions of this Amendment and the terms, conditions and provisions of the Credit Agreement or the other Loan Documents, the terms, conditions and provisions of this Amendment shall prevail. All terms, conditions and provisions of the Credit Agreement and the other Loan Documents not inconsistent herewith shall remain in full force and effect and are hereby ratified and confirmed by Borrowers. 9. CONSTRUCTION. All references to the Credit Agreement therein or in any other Loan Documents shall be deemed to be a reference to the Credit Agreement as amended hereby. 10. NO WAIVER. Nothing contained herein and no actions taken pursuant to the terms hereof are intended to nor shall they constitute a waiver by the Bank of any rights or remedies available to Bank at law or in equity or as provided in the Credit Agreement or the other Loan Documents. Nothing contained herein constitutes an agreement or obligation by Bank to grant any further extensions of the Maturity Date. 11. BINDING EFFECT. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 12. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 13. HEADINGS. The headings of the sections of this Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Amendment. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION By: /s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] SCT SOFTWARE & RESOURCE MANAGEMENT CORPORATION By: /s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] MELLON BANK, N.A. By: /s/ Jacob E. Reiter Jacob E. Reiter, First Vice President ACKNOWLEDGMENT AND CONSENT The undersigned Guarantors hereby acknowledge and consent to the foregoing Amendment and agree that the foregoing Amendment shall not constitute a release or waiver of any of the obligations of the undersigned to the Bank under the terms of their respective Subsidiary Guaranty Agreements dated June 20, 1994, all of which are ratified and confirmed. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have executed this Acknowledgment and Consent, effective as of the date of the foregoing Agreement. SCT UTILITY SYSTEMS, INC. By: /s/ Eric Haskell Name/Title: Sr. VP SCT GOVERNMENT SYSTEMS, INC. (formerly known as "SCT Public Sector, Inc.") By: /s/ Eric Haskell Name/Title: Sr. VP SCT FINANCIAL CORPORATION By: /s/ Eric Haskell Name/Title: Sr. VP SCT INTERNATIONAL LIMITED By: /s/ Eric Haskell Name/Title: Sr. VP SCT PROPERTY, INC. By: /s/ Eric Haskell Name/Title: Sr. VP EX-10 5 SECOND AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT THIS SECOND AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the "Amendment") is made as of the 8th day of April, 1997, by and among SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE & RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively, "Borrowers" and individually a "Borrower") and MELLON BANK, N.A. ("Bank"). BACKGROUND A. By a Credit Agreement dated June 20, 1994, as amended by Amendment and Modification to Credit Agreement dated of even date (collectively, the "Credit Agreement"), by and among Bank and Borrowers, Bank agreed, inter alia, to extend to Borrowers a revolving credit facility in the principal amount of up to Twenty Million Dollars ($20,000,000.00) (the "Revolving Credit"), as further evidenced by that certain Promissory Note dated June 20, 1994 payable to Bank in the original principal amount of Twenty Million Dollars ($20,000,000.00) (the "Note"). B. Borrowers have requested that Bank (i) permanently increase the maximum amount of the Revolving Credit to $30,000,000.00; and (ii) provide for a temporary increase in the Revolving Credit of $5,000,000.00 to a total of $35,000,000.00; all of which Bank is willing to do on the terms set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. CAPITALIZED TERMS. Capitalized terms not otherwise defined herein will have the meanings set forth therefor in the Credit Agreement. 2. PERMANENT INCREASE. (a) The definition of "Revolving Commitment" contained in Section 1.01 of the Credit Agreement is hereby amended to be "$30,000,000.00 plus the Temporary Increase until the Temporary Increase expires as provided in Section 2.01(a)(1) of the Credit Agreement." (b) The reference to "Twenty Million Dollars ($20,000,000.00)" contained in Section 2.01(a) of the Credit Agreement is hereby deleted and replaced with "Thirty Million Dollars ($30,000,000.00)". 3. THE NOTE. The form of Note attached to the Credit Agreement as Exhibit "A" is hereby deleted and replaced with the form of Amended and Restated Note attached hereto as Exhibit "A" (the "Amended and Restated Note"). 4. TEMPORARY INCREASE. The following is hereby added to and made a part of the Credit Agreement as Section 2.01(a)(1) thereof: "2.01(a)(1) Temporary Increase in the Revolving Commitment. Notwithstanding the limitation on the aggregate outstanding amount of the Revolving Loans contained in Section 2.01(a) above, subject to the other terms and conditions of this Agreement, the maximum amount of the Revolving Loans shall be increased by the principal amount of Five Million Dollars ($5,000,000.00) (the "Temporary Increase"). The Temporary Increase shall be available to Borrowers under the Revolving Commitment for a period (the "Redemption Period") commencing on April 9, 1997 and terminating upon the first to occur of (i) October 9, 1997; or (ii) the date of an advance under the Term Loan contemplated in that certain Commitment Letter dated March 20, 1997 from Bank to Borrowers. Borrowers shall use proceeds of the Temporary Increase solely to fund redemption payments by Borrowers on the Subordinated Indenture. Upon expiration of the Redemption Period, the Temporary Increase shall expire and the maximum amount available to Borrowers under the Revolving Loans shall automatically, without further action by or notice to or consent of Borrowers, reduce to Thirty Million Dollars ($30,000,000.00). All sums advanced under the Temporary Increase shall be evidenced by Borrowers' joint and several promissory note in the principal amount of Five Million Dollars ($5,000,000.00) (the "Increase Note"), which shall be in the form attached hereto as Exhibit "A-I", with the blanks appropriately filled in. The entire outstanding principal amount of the Increase Note, and all accrued but unpaid interest thereon, shall be due and payable in full upon the expiration of the Redemption Period. Accrued interest on the Increase Note shall be payable at all times, at the rates and in the same manner as accrued interest on the Note, provided that Borrower may not select an As-offered Interest Period or an Interest Period for any Eurodollar Loan for sums advanced under the Temporary Increase if such As-offered Interest Period or Interest Period extends beyond the expiration of the Redemption Period. Until the expiration of the Redemption Period and except as provided in this Section 2.01(a)(1), advances shall be available under the Temporary Increase in the same manner and subject to the same limitations as advances under the original Revolving Commitment. All Revolving Loans shall be made under the Note until the aggregate amount of outstanding advances thereunder equals Thirty Million Dollars ($30,000,000.00); thereafter, advances shall be made under the Increase Note in accordance with the foregoing. All principal payments actually received by Bank from Borrowers on Revolving Loans shall be applied as follows: (i) first, to repayment of all principal advanced and outstanding under the Increase Note, then (ii) to payment of principal advanced and outstanding under the Note. Except to the extent necessary to avoid confusion or inconsistency with the terms of this Section 2.01(a)(1), all references in this Agreement and the other Loan Documents to the "Note" shall mean the Note and the Increase Note, collectively." 5. USAGE FEE. Borrowers and Bank hereby clarify and confirm that until the Temporary Increase expires as provided in Section 2.01(a)(1) of the Credit Agreement, the commitment fee required under Section 2.01(d) of the Credit Agreement shall be calculated on 5/16 of 1% per annum of the unused portion of the $35,000,000.00 then available under the Revolving Commitment, payable quarterly as provided in Section 2.01(d). After the Temporary Increase expires, the commitment fee shall be calculated on 5/16 of 1% per annum of the unused portion of the $30,000,000.00 then available under the Revolving Commitment, subject to an increase to 3/8 of 1% per annum upon the occurrence of an Event of Default. 6. DEFINED TERMS. Borrowers and Bank hereby agree that, except as necessary to avoid confusion or inconsistency with the terms of this Amendment or the other Loan Documents, all references in the Loan Documents to: (a) the "Note" shall include the Amended and Restated Note and the Increase Note executed pursuant to this Amendment, as each may hereafter be amended, and (b) "Loan Documents" includes, inter alia, this Amendment, the Amended and Restated Note and the Increase Note. 7. ADDITIONAL DOCUMENTS. Borrowers shall execute and deliver to Bank, at Borrowers' sole cost and expense, (i) the Amended and Restated Promissory Note in the form of Exhibit "A" attached hereto; (ii) the Increase Note in the form of Exhibit "A-I" attached hereto; and (iii) any and all other documents, agreements, corporate resolution, searches, certificates and opinions as Bank shall request in connection with the execution and delivery of this Amendment or any documents in connection herewith, or to further evidence effect, enforce or protect any of the terms hereof or the rights or remedies granted or intended to be granted to Bank herein or therein, each of which shall be in form and content applicable to Bank. At Borrowers' request, Bank has agreed to accept delivery of an opinion of Borrowers' and Guarantors' counsel on or before April 17, 1997. Borrowers agree that (i) such opinion shall be in form and content acceptable to Bank; and (ii) failure to deliver such opinion by the foregoing date shall, without further notice to or consent of Borrowers or Guarantors, constitute an Event of Default under the Credit Agreement and each of the other Loan Documents. 8. SECURITY. Each Borrower acknowledges, confirms and agrees that the Revolving Commitment, as permanently and temporarily increased hereby, the Amended and Restated Note, the Increase Note and all other Debt owing by Borrowers, or either of them, to Bank are and shall continue to be secured by all rights and remedies securing the Revolving Commitment, including, without limitation, all the Guaranties and all rights and remedies granted to Bank in the Credit Agreement and/or the other Loan Documents, which Guaranties, rights and remedies are hereby reaffirmed and continued as security for the foregoing; and all of the Loan Documents are hereby amended to reflect the same. 9. FURTHER ASSURANCES. Each Borrower covenants and agrees to execute and deliver to Bank or to cause to be executed and delivered at the sole cost and expense of Borrowers, from time to time, any and all other documents, agreements, statements, certificates and information as Bank shall reasonably request to evidence or effect the terms hereof, the Credit Agreement, as amended, or any of the other Loan Documents. 10. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does hereby: (a) ratify, confirm and acknowledge that the Credit Agreement, as amended, and the other Loan Documents continue to be and are valid, binding and in full force and effect; (b) covenant and agree to perform all obligations of Borrowers contained herein, under the Amended and Restated Note, the Increase Note, and under the Credit Agreement, as amended, and the other Loan Documents; (c) acknowledge and agree that such Borrower has no defense, set-off, counterclaim or challenge against the payment of any sums owing under Loan Documents, the enforcement of any of the terms of the Credit Agreement, as amended, or the other Loan Documents; (d) acknowledge and agree that except as previously disclosed to and consented to by Bank in writing, all representations and warranties of Borrowers contained in the Credit Agreement and/or the other Loan Documents are true, accurate and correct on and as of the date hereof as if made on and as of the date hereof; (e) represent and warrant that no Event of Default or Potential Event of Default exists and all information described in the foregoing Background is true, accurate and complete; (f) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof is intended to constitute a novation of the Credit Agreement or any of the other Loan Documents, and does not constitute a release, termination or waiver of any of the guarantees, rights or remedies granted to the Bank therein, which guarantees, rights and remedies are hereby ratified, confirmed, extended and continued as security for the obligations of Borrowers to Bank under the Credit Agreement and the other Loan Documents, including, without limitation, this Amendment; and (g) acknowledge and agree that a Borrower's failure to comply with or perform any of its covenants, agreements or obligations contained in this Amendment shall constitute an Event of Default under the Credit Agreement and each of the Loan Documents. 11. BANK FEE, COSTS AND EXPENSES. Upon execution of this Amendment, Borrowers shall pay to Bank a fee in the amount of Fifty Thousand Dollars ($50,000.00), which fee is payable to Bank in consideration for Bank's agreement to permanently and temporarily increase the Revolving Commitment as provided herein, is fully earned on the date hereof and is non-refundable for any reason. Borrowers shall also pay to Bank all costs and expenses incurred by Bank in connection with the review, preparation and negotiation of this Amendment and all documents in connection therewith, including, without limitation, all of Bank's attorneys' fees and costs. 12. INCONSISTENCIES. To the extent of any inconsistency between the terms, conditions and provisions of this Amendment and the terms, conditions and provisions of the Credit Agreement or the other Loan Documents, the terms, conditions and provisions of this Amendment shall prevail. All terms, conditions and provisions of the Credit Agreement and the other Loan Documents not inconsistent herewith shall remain in full force and effect and are hereby ratified and confirmed by Borrowers. 13. CONSTRUCTION. All references to the Credit Agreement therein or in any other Loan Documents shall be deemed to be a reference to the Credit Agreement as amended hereby. 14. NO WAIVER. Nothing contained herein and no actions taken pursuant to the terms hereof are intended to nor shall they constitute a waiver by the Bank of any rights or remedies available to Bank at law or in equity or as provided in the Credit Agreement or the other Loan Documents. Nothing contained herein constitutes an agreement or obligation by Bank to grant any further increases in the Revolving Commitment. 15. BINDING EFFECT. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 16. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 17. HEADINGS. The headings of the sections of this Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Amendment. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION By:./s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] SCT SOFTWARE & RESOURCE MANAGEMENT CORPORATION By: /s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] MELLON BANK, N.A. By: /s/ Jacob E. Reiter Jacob E. Reiter, First Vice President ACKNOWLEDGMENT AND CONSENT The undersigned Guarantors hereby acknowledge and consent to the foregoing Amendment and agree that (i) all sums advanced under the Amended and Restated Note and/or the Increase Note, each as referenced in the Amendment, constitute "Guarantied Obligations under the terms of their respective Subsidiary Guaranty Agreements dated June 20, 1994, (the "Guarantees"); and (ii) the foregoing Amendment shall not constitute a release or waiver of any of the obligations of the undersigned to the Bank under any of the Guarantees, all of which are hereby ratified and confirmed. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have executed this Acknowledgment and Consent, effective as of the date of the foregoing Agreement. SCT UTILITY SYSTEMS, INC. By: /s/ Eric Haskell Name/Title: Sr. VP SCT GOVERNMENT SYSTEMS, INC. (formerly known as "SCT Public Sector, Inc.") By: /s/ Eric Haskell Name/Title: Sr. VP SCT FINANCIAL CORPORATION By: /s/ Eric Haskell Name/Title: Sr. VP SCT INTERNATIONAL LIMITED By: /s/ Eric Haskell Name/Title: Sr. VP SCT PROPERTY, INC. By: /s/ Eric Haskell Name/Title: Sr. VP EX-10 6 THIRD AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT THIS THIRD AMENDMENT AND MODIFICATION TO CREDIT AGREEMENT (the "Amendment") is made as of the 4th day of June, 1997, by and among SYSTEMS & COMPUTER TECHNOLOGY CORPORATION ("Company"), SCT SOFTWARE & RESOURCES MANAGEMENT CORPORATION ("Borrowing Subsidiary") (collectively, "Borrowers" and individually a "Borrower") and MELLON BANK, N.A. ("Bank"). BACKGROUND A. By a Credit Agreement dated June 20, 1994, as amended by Amendment and Modification to Credit Agreement dated April 8, 1997, and by a Second Amendment and Modification to Credit Agreement dated April 8, 1997 by and among Bank and Borrowers (collectively, the "Credit Agreement"), each Bank agreed, inter alia, to (i) extend to Borrowers a revolving credit facility in the principal amount of up to Thirty Million Dollars ($30,000,000.00) (the "Revolving Credit"), as further evidenced by that certain Amended and Restated Promissory Note dated April 8, 1997 payable to Bank in the original principal amount of Thirty Million Dollars ($30,000,000.00) (the "A&R Note"); and (ii) make available a temporary increase in the Revolving Credit of Five Million Dollars ($5,000,000.00) to a total of Thirty-Five Million Dollars ($35,000,000.00), as further evidenced by that certain Note dated April 8, 1997 payable to Bank in the original principal amount of Five Million Dollars ($5,000,000.00) (the "Increase Note"). B. Borrowers have requested that Bank terminate the temporary increase, which Bank is willing to do on the terms set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. CAPITALIZED TERMS. Capitalized terms not otherwise defined herein will have the meanings set forth therefor in the Credit Agreement. 2. TEMPORARY INCREASE. (a) Section 2.01(a)(1) of the Credit Agreement is hereby deleted and not replaced. (b) The Increase Note shall be marked "canceled" or "void". (c) Commencing on the date hereof, the commitment fee required under Section 2.01(d) of the Credit Agreement shall be calculated as if the Temporary Increase had expired, i.e., the commitment fee shall be calculated on 5/16 of 1% per annum of the unused portion of the $30,000,000.00 then available under the Revolving Commitment, subject to an increase to 3/8 of 1% per annum upon the occurrence of an Event of Default. 3. FURTHER ASSURANCES. Each Borrower covenants and agrees to execute and deliver to Bank or to cause to be executed and delivered at the sole cost and expense of Borrowers, from time to time, any and all other documents, agreements, statements, certificates and information as Bank shall reasonably request to evidence or effect the terms hereof, the Credit Agreement, as amended, or any of the other Loan Documents. 4. FURTHER AGREEMENTS AND REPRESENTATIONS. Each Borrower does hereby: (a) ratify, confirm and acknowledge that the Credit Agreement, as amended, and the other Loan Documents continue to be and are valid, binding and in full force and effect; (b) acknowledge and agree that such Borrower has no defense, set-off, counterclaim or challenge against the payment of any sums owing under Loan Documents, the enforcement of any of the terms of the Credit Agreement, as amended, or the other Loan Documents; and (c) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof is intended to constitute a novation of the Credit Agreement or any of the other Loan Documents, and does not constitute a release, termination or waiver of any of the guarantees, rights or remedies granted to the Bank therein, which guarantees, rights and remedies are hereby ratified, confirmed, extended and continued as security for the obligations of Borrowers to Bank under the Credit Agreement and the other Loan Documents, including, without limitation, this Amendment. 5. COSTS AND EXPENSES. Borrowers shall pay to Bank all costs and expenses incurred by Bank in connection with the review, preparation and negotiation of this Amendment and all documents in connection therewith, including, without limitation, all of Bank's attorneys' fees and costs. 6. INCONSISTENCIES. To the extent of any inconsistency between the terms, conditions and provisions of this Amendment and the terms, conditions and provisions of the Credit Agreement or the other Loan Documents, the terms, conditions and provisions of this Amendment shall prevail. All terms, conditions and provisions of the Credit Agreement and the other Loan Documents not inconsistent herewith shall remain in full force and effect and are hereby ratified and confirmed by Borrowers. 7. CONSTRUCTION. All references to the Credit Agreement therein or in any other Loan Documents shall be deemed to be a reference to the Credit Agreement as amended hereby. 8. NO WAIVER. Nothing contained herein and no actions taken pursuant to the terms hereof are intended to nor shall they constitute a waiver by the Bank of any rights or remedies available to Bank at law or in equity or as provided in the Credit Agreement or the other Loan Documents. Nothing contained herein constitutes an agreement or obligation by Bank to grant any further increases in the Revolving Commitment. 9. BINDING EFFECT. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 10. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 11. HEADINGS. The headings of the sections of this Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Amendment. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION By: /s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] SCT SOFTWARE & RESOURCE MANAGEMENT CORPORATION By: /s/ Eric Haskell Eric Haskell, Senior Vice President [CORPORATE SEAL] MELLON BANK, N.A. By: /s/ Jacob E. Reiter Jacob E. Reiter, First Vice President ACKNOWLEDGMENT AND CONSENT The undersigned Guarantors hereby acknowledge and consent to the foregoing Amendment and agree that the foregoing Amendment shall not constitute a release or waiver of any of the obligations of the undersigned to the Bank under the terms of their respective Subsidiary Guaranty Agreements dated June 20, 1994, all of which are hereby ratified and confirmed. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have executed this Acknowledgment and Consent, effective as of the date of the foregoing Agreement. SCT UTILITY SYSTEMS, INC. By: /s/ Eric Haskell Name/Title: Sr. VP SCT GOVERNMENT SYSTEMS, INC. (formerly known as "SCT Public Sector, Inc.") By: /s/ Eric Haskell Name/Title: Sr. VP SCT FINANCIAL CORPORATION By: /s/ Eric Haskell Name/Title: Sr. VP SCT INTERNATIONAL LIMITED By: /s/ Eric Haskell Name/Title: Sr. VP SCT PROPERTY, INC. By: /s/ Eric Haskell Name/Title: Sr. VP -----END PRIVACY-ENHANCED MESSAGE-----