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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1994
Commission File Number: 0-15457
C.I.S. TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 73-1199382
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6100 SOUTH YALE, SUITE 1900, TULSA, OKLAHOMA 74136
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 918/496-2451
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 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 30, 1995, there were 30,093,706 shares of the Registrant's Common
Stock outstanding. The aggregate market value of Common Stock held by non-
affiliates of the Registrant, based upon the closing sale price of the Common
Stock on March 30, 1995 as reported on the NASDAQ National Market System, was
approximately $60,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
C.I.S. Technologies, Inc. 1994 Annual Report (certain portions incorporated by
reference into Parts II and IV)
Proxy Statement for Annual Meeting of Shareholders, dated March 27, 1995
(certain portions incorporated by reference into Part III).
Total Pages: 230
Exhibit Index Page: 11
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TABLE OF CONTENTS
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PAGES
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Part I:
Item 1: Business...............................................3-8
Item 2: Properties.............................................. 8
Item 3: Legal Proceedings....................................... 8
Item 4: Submission of Matters to a Vote of Security Holders..... 8
Part II:
Item 5: Market for Registrant's Common Equity and Related
Shareholder Matters.................................... 9
Item 6: Selected Financial Data................................. 9
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
Item 8: Financial Statements and Supplementary Data............. 9
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 9
Part III:
Item 10: Directors and Executive Officers of the Registrant..... 10
Item 11: Executive Compensation................................. 10
Item 12: Security Ownership of Certain Beneficial Owners
and Management........................................ 10
Item 13: Certain Relationships and Related Transactions......... 10
Part IV:
Item 14: Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................. 11-13
Signatures................................................................ 14-15
Report of Independent Accountants........................................... R-1
Financial Statement Schedules............................................... S-1
Exhibits..................................................................... 18
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PART I
ITEM 1. BUSINESS
GENERAL
C.I.S. Technologies, Inc. ("the Company") develops and markets computer-based
healthcare reimbursement management programs and (ii) offers professional
consulting and reimbursement assistance services to over 900 healthcare clients
(primarily acute-care 100+ bed hospitals and physician practices) across the
country. The Company's services are designed to improve the cash flows and
reduce the administrative costs of its healthcare clients.
RECENT DEVELOPMENTS
Acquisition of AMSC, Inc. In November, 1994 the Company completed the
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acquisition of 100% of the outstanding capital stock of AMSC, Inc. for a total
consideration of $5 million, which consisted of a combination of cash, notes and
the Company's common stock. AMSC is the nation's leading reseller of The
Medical Manager(R) physician practice management software and provides complete
automated business office solutions for medical service organizations (MSOs) and
physician-hospital organizations (PHOs), as well as individual physicians and
small practices. The Company believes that this acquisition positions it to
take advantage of the untapped potential in the physician market, and assist in
the building of integrated delivery systems. Unlike the hospital market,
relatively few physician claims are currently billed electronically and, with
AMSC, the Company has potential access to approximately 800,000 additional
claims per month. There is also an opportunity for the Company to enter the
physician market with not only claims automation solutions, but also
professional services, decision support services and financial services.
Relationship with GE Capital. In late October, 1994, the Company entered into
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several agreements with General Electric Capital Corporation ("GE Capital"). GE
Capital acquired 840,336 newly issued common shares of the Company's stock for
$2 million. GE Capital also provided a $2 million three-year term loan, which
funds were used in acquiring AMSC, Inc. (see above discussion), as well as a $5
million, three-year revolving credit facility to be used for working capital and
acquisitions. The two companies also have entered into a strategic alliance to
provide accounts receivable funding to the healthcare industry through a newly
formed and equally-owned business entity. Precision Funding(SM) is the name of
the service under which the funding product will be marketed.
Relationship with Bankers Trust. In late November, 1994 the Company entered
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into an agreement with a subsidiary of Bankers Trust New York Corporation
("Bankers Trust") in connection with a strategic alliance to pursue
opportunities in cash management and data services in the healthcare industry.
Pursuant to the agreement, Bankers Trust acquired 2,384,182 shares, and warrants
to acquire an additional 500,000 shares, of newly issued convertible preferred
stock and 1,615,818 shares of newly issued common stock for $10 million. By
utilizing Bankers Trust's decision support services and the Company's database
and market segment expertise, the two companies will look for opportunities to
meet the growing need in the healthcare industry for relative performance on
costs as well as treasury functions including cash management, lock box
operation and cash reconciliation.
PRODUCTS AND SERVICES
The focus of reimbursement management is the accurate and efficient billing of
third-party insurance payers and the efficient operation of the hospital's
billing office. The Company has developed services which will assist hospitals
in reducing administrative costs and improving cash flows. A brief description
of each of the Company's services follows:
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Electronic Data Interchange ("EDI") Services. EDI is the automated transfer of
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business data between two or more parties, using electronic technology to speed
the exchange of data and reduce paperwork, human error and administrative costs.
Approximately 52% of total revenue in 1994 was derived from electronic data
interchange, of which 87% is considered to be recurring. The Company has
several products and services which are part of the EDI Services offering that
are described in more detail below.
PREMIS(R) or Electronic Claims Management. The foundation of the Company's
business is its proprietary electronic claims management software. The software
is PC-based and resides at the hospital billing office. Claim information from
the hospital's central computer is downloaded into the PC, where the software
edits (based upon approximately 10,000 payer specific edit requirements) and
formats the data. The software isolates claims with errors and then assists the
billing clerk in correcting the claims. "Clean" or error-free claims are then
transmitted via modem to the Company's clearinghouse computer in Tulsa, where
the information is re-formatted and transmitted to the various insurance payers.
The Company's claims management system provides transmission security and
comprehensive accounting reports, and is capable of processing a variety of
health insurance claims (e.g. Medicare, Medicaid, commercial, managed care),
amounting to an "all-payer" approach. Use of the Company's electronic claims
management system reduces its clients' claims rejection rate to less than 1%,
resulting in more timely payment of claims and improved operating efficiency,
thereby decreasing days in accounts receivable and administrative costs. During
1994, the Company processed over 24 million claims worth $45 billion, which
positions it as the largest independent claims clearinghouse in the United
States.
The Company generally charges its clients fees for initial licensing, training
and installation. After the claims management system is operational, clients
are charged a monthly claims processing fee, based upon either the number of
patient beds or the number of claims processed during the month, as well as a
monthly fee for ongoing software maintenance and an annual software license
renewal fee. Revenue from PREMIS or electronic claims management is generally
considered to be recurring because client retention is high and services are
typically provided over a long period of time.
The Company completed a significant revision of its PREMIS software and released
PREMIS 2.0 in July, 1994. PREMIS 2.0 includes additional functionality that
enhances the value that clients receive from use of the software. PREMIS
replaces the previous electronic claims management system as the Company's core
product and current users of the previous electronic claims management system
will be converted to PREMIS over the next few years.
POSTPRO(TM) or Electronic Remittance Posting. For every claim a hospital
submits, the insurance payer responds with documentation called a remittance
advice. The remittance advice contains valuable data about the claim, whether
it was accepted or rejected, when payment should be received by the hospital and
what the payment will be. Information on these remittance advices must be
manually entered into the hospital's mainframe computer, and painstakingly re-
entered and maintained in the various reports required by Medicare, Medicaid and
other payers. POSTPRO eliminates the need for rekeying remittance information
by uploading an electronic remittance file from the insurance payer into the
hospital's information system. POSTPRO automatically reconciles cash deposits
with remittance data, calculates and posts contractuals and/or adjustments for
managed care contracts, facilitates secondary billing, and generates meaningful
reports for managing reimbursement. A major revision of POSTPRO, POSTPRO
Version 2, was released in late 1994, creating a standard format that will allow
for faster installations and more consistent applications to all clients.
Eligibility Services. Through strategic alliances with other companies, the
Company began offering eligibility services to clients during 1994. Eligibility
services gives hospitals direct access to payer computer files that can
instantly verify patient insurance eligibility, benefits coverage and
exceptions. This not only supplies the information needed upfront to reduce re-
submissions of claims due to missing or inaccurate data, but also
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helps determine, before patients are discharged from the hospital, secondary
coverage and what out-of-pocket expenses the patients will need to pay (such as
a deductible or remaining balance).
Reimbursement Services. One of the roadblocks to efficiency and cash flow in
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the hospital business office is the lack of accuracy in billing. While the
Company's claims management programs specialize in moving information
efficiently between hospitals and insurance payers, the Company's Reimbursement
Services Division (formerly Hospital Billing Analysis, Inc., "HBA") provides
several services that help ensure that hospitals capture all appropriate
charges. Charge recovery services are performed at the hospital by the
Company's skilled revenue auditors. These auditors compare insurance claims to
patient files, verifying that all chargeable items and services have been
accurately billed. The auditors also perform rebilling, follow-up and
collections services for the claims they identify. This service, which also
identifies charges which were erroneously included in such claims, has
historically identified net undercharges amounting to 3%-5% of the value of the
claims examined. The Company is paid a percentage of the net undercharges
identified and collected.
Reimbursement Services also include: a Defense Audit program which provides
hospitals with specially trained medical auditors to act on their behalf when
dealing with insurance carriers; Patient Audit Request Services, which provides
hospitals with third-party intervention to respond to patient questions or
disputes in regard to billing issues; a Concurrent Audit program, whereby the
Company's auditors review claims as they are generated by the hospital's billing
office to help ensure that hospital charges are accurate upon initial submission
of claims to insurance companies; and Supplemental Audit Support Services,
designed to assist hospitals in evaluating, training and supplementing their
existing internal auditing staffs.
Revenue from Reimbursement Services is considered to be recurring because client
retention is high and services are typically provided over a long period of
time. Approximately 35% of total revenue in 1994 was derived from Reimbursement
Services.
Professional Services. Hospitals often have a shortage of trained billing
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office personnel and a backlog of claims to be processed. Other times,
hospitals require assistance with converting from one hospital information
system to another. Through its variety of comprehensive professional services,
the Company provides experienced and highly trained personnel to work on-site,
in conjunction with the Company's electronic claims management system, providing
assistance through temporary situations which otherwise would disrupt the normal
billing process.
Many hospitals have found that subcontracting, or "outsourcing", with outside
vendors for food service, emergency room, linen service, waste disposal and
laboratory work can be more cost effective than if the hospital were to itself
provide such services. The Company has found that a number of hospitals can
also benefit from subcontracting all or certain specific functions of their
business office. Acting as a strategic partner with a hospital, the Company's
Professional Services staff can perform all hospital business office functions
related to the reimbursement cycle, from the initial verification of insurance
coverage through the final resolution and payment of the insurance claim. The
Company's Professional Services provide several immediate and measurable
benefits to the hospital business office: needed programs and changes can be
implemented in less time; overhead and operating budgets can be reduced;
necessary expertise to accomplish an objective is readily available; and new
technology is accessible without the usual heavy investment.
Charges for Professional Services are based upon negotiated fees, which can be a
percentage of the claim value submitted through the electronic claims management
system, a percentage of cash collected or a fixed fee, depending on the length
of the project and the level of service provided. Revenue from Professional
Services is generally considered to be non-recurring because the services
provided are under special circumstances that rarely last longer than a few
months. Approximately 8% of total revenue during 1994 was derived from
Professional Services.
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Physician Services. Through its newly acquired subsidiary, AMSC, Inc., the
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Company plans to expand its services to the physician and emerging integrated
delivery systems markets. AMSC is the nation's leading reseller of The Medical
Manager physician practice management software and provides complete automated
business office solutions for medical service organizations and physician-
hospital organizations, as well as individual physicians. During 1994,
approximately 5% of the Company's revenue was derived from Physician Services.
Decision Support Services. The Company's electronic claims management system
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processes approximately $4 billion of healthcare claims per month. As a result,
the Company has established one of the largest data bases of current healthcare
information available. As part of the strategic alliance with Bankers Trust
(see above), the Company plans to market this statistical and tactical
information in an aggregate format to hospitals, hospital associations, state
and federal agencies and other entities.
MARKETING AND CUSTOMERS
The Company markets its reimbursement management services to acute-care
hospitals with greater than 100 beds, of which there are approximately 2,500 in
the United States. The Company markets its physician services to physician
practices across the country. Currently, the Company's EDI, Audit, Professional
and Physician Services are utilized by over 900 clients in 38 states. The
Company's services are marketed by direct sales and account service personnel on
a decentralized basis. Regional offices are maintained in Atlanta, Georgia;
Chicago, Illinois; Dallas, Texas; Orlando, Florida; Palm Springs, California and
Philadelphia, Pennsylvania.
During 1995, the Company's marketing activities will consist primarily of
selling its reimbursement management services to both new and existing clients,
and focusing on the newly emerging integrated delivery systems. Cross-selling
opportunities between the Company's clients will continue to be explored.
During 1994, the Company did not have any customers accounting for more than 10%
of total revenue.
SOFTWARE MAINTENANCE AND DEVELOPMENT
Software Maintenance. To ensure the continuous flow of information, the
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Company's electronic claims management software must be updated to reflect
changes in the rules, regulations and requirements of third-party insurance
payers. To accomplish the updates, the Company regularly obtains current claims
specifications from each insurance payer. Company personnel then translate each
set of specifications to a format that can be used for programming purposes.
Once the specifications are programmed and approved by the Company, the
Company's electronic claims software is then updated and distributed to clients.
Because the requirements of third-party insurance payers change so frequently,
the Company releases updated software to clients on a monthly basis. The
Company's other software products, such as eligibility verification and
remittance posting, generally do not require continuous updates.
Software Development for New States. Currently, the Company offers its
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electronic claims management services in 32 states. Because of its all-payer
approach to claims management, the Company limits its claims management to those
states in which it has first met the requirements for processing Medicare and
Medicaid claims, in addition to commercial claims (the Company currently has the
ability to manage commercial claims in all 50 states). Thus, before the Company
begins managing claims in a new state, the complex and varied requirements of
Medicare and Medicaid fiscal intermediaries must be obtained, translated,
programmed and approved in a process similar to that of software maintenance.
Once claims management has begun, the software will require continuous updating
(see "Software Maintenance" above).
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PATENTS, TRADEMARKS AND COPYRIGHTS
The Company has obtained or has applied for all such copyright, trademark and
product and service tradename protection as it deems appropriate for its
software, documentation and product and service tradenames. The Company also
relies upon secrecy and non-disclosure agreements with its employees and
consultants and upon provisions of trade secret and unfair competition laws to
protect its proprietary interests.
The Company has no patents or patent applications pending and does not currently
intend to seek such patent protection. All currently available software
underlying the Company's EDI Services are only usable by its own clients. The
Company's claims editing and transmission software must be constantly maintained
due to changing requirements of the insurance carriers and other payers and
cannot be used independent of the Company's host computer system located in
Tulsa, Oklahoma.
SEASONAL EFFECTS
There are no material seasonal effects on the business of the Company.
COMPETITIVE CONDITIONS
Healthcare reimbursement management has emerged within the last 10 years as an
industry comprised mainly of smaller, privately-owned firms. These firms are
primarily regional or local and, because of their smaller size, tend to
specialize in only one or two areas of reimbursement management (such as claims
processing, follow-up and collections or charge recovery). There are larger
firms, such as Blue Cross/Blue Shield ("BCBS"), which have developed electronic
claims processing programs, but are limited to processing BCBS claims generally
and Medicaid claims only in those states where BCBS is the fiscal intermediary.
There are other electronic claims clearinghouses that have the ability to, and
in some instances do, compete with the Company for claims processing at
competitive rates. Some hospitals have attempted to develop claims processing
capabilities, with limited success.
The Company is aware of approximately twelve firms which claim to be "all-payer"
in their claims processing capabilities. Based upon contacts with
representatives of health insurance companies, trade publications and
associations, the Health Care Financing Administration and its client base, the
Company believes that of these twelve firms, the Company is the only firm whose
reimbursement management services include electronic payer specific editing; a
large number of insurance carriers accepting electronic claims; installation,
training and support services; and the ability to offer comprehensive on-site
reimbursement management services. In addition, the Company is developing and
presently offers healthcare providers a variety of technology-based, electronic
reimbursement management services that are unavailable from any other single
source.
Even though barriers to entry are currently believed to be high due to the time
and expense related to system development and maintenance, there can be no
assurance that well-capitalized competitors, potentially including affiliates of
health insurance companies themselves, will not develop claims management and
related services which are directly competitive with, or even superior to, those
of the Company. In addition, the industry trend towards transmission and format
standards could reduce these barriers to entry.
The Company is aware of approximately eight national or regional firms, all of
which are privately owned, which offer Reimbursement Services. The Company also
competes in any given geographic location with any number of local providers of
such services. Some hospitals also perform charge recovery and audit services
in-house. Although the Company is not aware of any charge recovery and audit
firm which competes with the Company on a national level or offers the Company's
variety of reimbursement management programs, competition by local and regional
firms is often intense.
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Additionally, the current administration in Washington, D.C., as well as various
governmental agencies, continue to discuss healthcare reform, which will likely
include mandatory electronic processing of all healthcare transactions. The
Company continues to stay informed of decisions being made on a national level,
but is unable to predict the effect on its competitive environment at this time.
EMPLOYEES
As of March 30, 1995, the Company had 411 full-time, 30 part-time and 4
temporary employees.
ITEM 2. PROPERTIES
The Company's corporate offices are comprised of 43,424 square feet in a high-
rise office building in Tulsa, Oklahoma. The Tulsa offices are leased for a
period ending July 31, 1999.
The Company's Reimbursement Services Division leases office space in Palm
Springs, California (see "Item 13. Certain Relationships and Related
Transactions").
The Company also leases office space in Albany, New York; Atlanta, Georgia;
Chicago, Illinois; Dallas, Texas; Los Angeles, California; North Bergen, New
Jersey; Orlando, Florida; Philadelphia, Pennsylvania and San Francisco,
California.
The Company considers that its properties are generally suitable and adequate
for its current needs.
ITEM 3. LEGAL PROCEEDINGS
As of March 30, 1995, there were no material pending legal proceedings to which
the Company or any of its subsidiaries is a party or of which any of its
property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Company during the
fourth quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Incorporated by reference herein from page 34 of the Company's 1994 Annual
Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference herein from page 16 of the Company's 1994 Annual
Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
Incorporated by reference herein from pages 17 and 18 of the Company's 1994
Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference herein from pages 19 through 32 of the Company's 1994
Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference herein from pages 3, 11, 12 and 21 of the Company's
Proxy Statement dated March 27, 1995.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference herein from pages 13 through 18 of the Company's Proxy
Statement dated March 27, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference herein from page 2 of the Company's Proxy Statement
dated March 27, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference herein from page 20 of the Company's Proxy Statement
dated March 27, 1995.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
--------------------
The following financial statements contained in the Company's 1994 Annual
Report to Shareholders are incorporated in other parts of this Report by
reference:
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Annual Report
Page Number
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Consolidated Balance Sheets at December 31, 1994 and 1993..... 20
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992....................... 21
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1993 and 1992........... 22
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992....................... 23
Notes to Consolidated Financial Statements.................... 25-32
Report of Independent Accountants............................. 19
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Page(s) in
Form 10-K
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2. FINANCIAL STATEMENT SCHEDULES
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Report of Independent Accountants.................................... R-1
Schedule II - Valuation and Qualifying Accounts...................... S-1
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All other schedules have been omitted since they are not required, are not
applicable, or because the information required is included in the financial
statement and notes thereto.
3. EXHIBITS
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<CAPTION>
Page(s) of this Form or Report
Exhibit Number Exhibit Description previously filed*
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(3) Articles of Incorporation and By-laws: Form 10-K filed March 31, 1990
a. Certificate of Incorporation of Registrant Form 10-K filed March 31, 1990
b. Bylaws of Registrant
(4) Instruments defining the rights of security Form S-3 Registration Statement
holders, including indentures effective February 5, 1991
(9) Voting trust agreement N/A
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<CAPTION>
Page(s) of this Form or Report
Exhibit Number Exhibit Description previously filed*
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(10) Material contracts:
a. Office Space Lease Agreement between Page 19
Metropolitan Life Insurance Co. and C.I.S.,
Inc.
b. Amended and Restated C.I.S. Form 10-K filed March 26, 1993
Technologies, Inc. Stock Option Plan,
effective October 26, 1989
c. Credit Agreement and Annex A to Credit Page 45
Agreement between C.I.S. Technologies, Inc.
and General Electric Capital Corporation
d. Stock Purchase Agreement between Page 105
General Electric Capital Corporation and
C.I.S. Technologies, Inc.
e. Registration Rights Agreement between Page 123
General Electric Capital Corporation and
C.I.S. Technologies, Inc.
f. Stock and Warrant Purchase Agreement Page 146
between BT Holdings (New York), Inc. and
C.I.S. Technologies, Inc. and related Warrant
to Purchase Shares of Series A Participating
Convertible Preferred Stock
g. Form of Certificate of Designation and Page 172
Terms of the Series A Participating
Convertible Preferred Stock of C.I.S.
Technologies, Inc.
h. Assets Purchase Agreement between Page 189
C.I.S. Technologies, Inc. and Healthcare
Research Systems, Inc.
i. Limited Transferable Warrant to Purchase Page 202
Shares of Common Stock
(11) Statement re: computation of per share 1994 Annual Report to Shareholders,
earnings page 31
(12) Statement re: computation of ratios N/A
(13) Annual report to security holders, Form 10-Q Page 211
or quarterly report to security holders:
The Registrant's 1994 Annual Report to
Shareholders (certain portions of which are
incorporated herein by reference and are
identified by reference to page numbers
thereof in the text of this report. Such Annual
Report, except for those portions thereof
which are expressly incorporated by reference
in this filing, is furnished for the information of
the Commission and is not to be deemed
"filed" as part of this filing or otherwise).
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<CAPTION>
Page(s) of this Form or Report
Exhibit Number Exhibit Description previously filed*
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(16) Letter re: change in certifying accountant N/A
(18) Letter re: change in accounting principles N/A
(21) Subsidiaries of the Registrant Page 229
(22) Published report regarding matters submitted N/A
to vote of security holders
(24) Power of Attorney N/A
(27) Financial Data Schedule Page 230
(28) Information from reports furnished to state N/A
insurance regulatory authorities
</TABLE>
* Incorporated herein by reference
(b) REPORTS ON FORM 8-K
During the fourth quarter of 1994, specifically on November 17, 1994, one
Report on Form 8-K was filed reporting the acquisition of AMSC, Inc.
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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.
C.I.S. TECHNOLOGIES, INC.
Date: April 14, 1995 By /s/ Philip D. Kurtz
-------------------- -------------------------------------
PHILIP D. KURTZ,
Chief Executive Officer
(Principal Executive Officer)
Date: April 14, 1995 By /s/ Richard A. Evans
------------------- -------------------------------------
RICHARD A. EVANS,
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 14, 1995 By /s/ James L. Hersma
------------------- -------------------------------------
JAMES L. HERSMA, Director
Date: April 14, 1995 By /s/ Philip D. Kurtz
------------------- -------------------------------------
PHILIP D. KURTZ, Director
Date: April 14, 1995 By /s/ Nathan H. Peck, Jr.
------------------- -------------------------------------
NATHAN H. PECK, JR., Director
Date: April 14, 1995 By /s/ John D. Platt
------------------- -------------------------------------
JOHN D. PLATT, Director
Date: April 14, 1995 By /s/ Dennis D. Pointer
------------------- -------------------------------------
DENNIS D. POINTER, Director
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Date: April 14, 1995 By /s/ Robert J. Simmons
------------------- -----------------------------------
ROBERT J. SIMMONS, Director
Date: April 14, 1995 By /s/ N. Thomas Suitt
------------------- -----------------------------------
N. THOMAS SUITT, Director
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REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of C.I.S. Technologies,
Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from
page 19 of the 1994 Annual Report to Shareholders of C.I.S. Technologies, Inc.
In connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 11 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
February 7, 1995
R-1
<PAGE>
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Balance at Additions: Additions: Deductions: Balance
beginning Charged to Subsequent Write-offs at end
of period expense collections of accounts of period
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts
1994................................ $ 318,920 $ 2,957 $ 232 $ 1,441 $ 320,668
========== =========== =========== =========== ===========
1993................................ $ 361,433 $ 51,325 $ - $ 93,838 $ 318,920
========== =========== =========== =========== ===========
1992................................ $ 241,070 $ 212,712 $ - $ 92,349 $ 361,433
========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Balance at Balance
beginning at end
of period Additions Deductions of period
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Valuation allowance -
Deferred Tax Asset
1994....................................... $ 2,281,058 $ - $ 1,046,129 $ 1,234,929
============== =============== ============== ==============
1993....................................... $ - $ 3,311,514* $ 1,030,456 $ 2,281,058
============== =============== ============== ==============
1992....................................... $ - $ - $ - $ -
============== =============== ============== ==============
</TABLE>
* Represents initial valuation allowance recorded at date of adoption of
Statement of Financial Accounting Standards No. 109.
S-1
<PAGE>
EXHIBIT 10(a)
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT ("Lease") is made and entered into effective as of
(but not necessarily on) the _____ day of ________, 199__, between METROPOLITAN
LIFE INSURANCE COMPANY, a New York corporation ("Landlord"), and C.I.S., INC.,
an Oklahoma corporation ("Tenant").
WITNESSETH:
1. DEFINITIONS.
-----------
(a) "Base Rent" shall mean $512,031.00 per annum ($42,669.25 per month),
payable as provided in paragraph 5 of this Lease and adjusted as provided in
paragraph 6 of this Lease.
(b) "Basic Costs" shall mean all direct and indirect costs and expenses in
each calendar year of operation, maintaining, repairing, managing, and owning
One Warren Place, plus One Warren Place's allocable share from time to time of
the operating expenses for the Warren Place Common Areas. Basic Costs shall not
include the cost of capital improvements, depreciation, interest, and principal
payments on mortgage and other nonoperating debts of Landlord. Basic Costs
shall however, include the amortization of capital improvements which are
primarily for the purpose of reducing Basic Costs, or which are required by
governmental authorities.
(c) "Brokers" shall mean collectively, Koll Management Services, Inc. and
Tooman Collins Associates, Inc.
(d) "Building" shall mean the office building situated on the real property
described in Exhibit "B" attached hereto and incorporated herein, commonly known
as "One Warren Place".
(e) "Building Grade" shall mean the type, brand and/or quality of materials
Landlord designates from time to time and to be the minimum quality to be used
in the Building or the exclusive type, grade or quality of material to be used
in the Building.
(f) "Building Standard Improvements" shall mean those improvements to the
Premises described on Exhibit "D" attached hereto and incorporated herein, which
Landlord has agreed to provide, subject to Tenant's compliance with requirements
set forth in Exhibit "D".
(g) "Commencement Date" shall mean August 1, 1994.
(h) "Common Areas" shall mean those areas within the Building devoted to
corridors, elevator foyers, restrooms, mechanical rooms, janitorial closets,
electrical and telephone closets, vending areas and other similar facilities
provided for the common use and benefit of tenants generally and/or the public.
(i) "Ground Lease" shall mean the certain Ground Lease under which Landlord
derives its interest in the property
1
<PAGE>
described on Exhibit "B" attached hereto and which is evidenced of record by
Memorandum of Ground Lease, recorded in Book 4619, beginning at page 543, of the
records of the County Clerk of Tulsa County, Oklahoma, together with all
amendments, extensions, renewals, and replacements of such Ground Lease.
(j) "Lease Term" shall mean the period of time commencing with the
Commencement Date and continuing to and including the last day of the sixtieth
(60th) full calendar month after the Commencement Date.
(k) "Master Ground Lease" shall mean the certain Master Ground Lease (i)
which originally covered, without limitation, all of Warren Place, (ii) which is
evidenced of record by Memorandum of Master Ground Lease, recorded in Book 4547,
beginning at page 2800, of the records of the County Clerk of Tulsa County,
Oklahoma, and (iii) under which the master ground lessee has the right to
identify, develop, maintain and use certain "Common Areas", as defined in the
Master Ground Lease, for the benefit of Warren Place, together with all
amendments, extensions, renewals, and replacements of such Master Ground Lease.
(l) "Normal Business Hours" shall mean 8:00 a.m. to 6:00 p.m. on Monday
through Friday and 9:00 a.m. to 1:00 p.m. on Saturday, exclusive of normal
business holidays, as determined by Landlord.
(m) "One Warren Place" shall mean the property described in Exhibit "B"
attached hereto and incorporated herein and the improvements constructed
thereon, including, without limitation, the Building.
(n) "Premises" shall mean all of the space within the Building which is
highlighted on the floor plans of the 19th and 18th floors of the Building
attached to this Lease as Exhibit "C" and incorporated herein. The Premises
contain approximately 42,424 square feet of Rentable Area.
(o) "Prior Leases" shall mean the certain Lease Agreement dated August 16,
1991, between Landlord and Tenant, as amended by First Amendment to Lease
Agreement dated as of September 20, 1991, between Landlord and Tenant, the
certain Lease Agreement dated as of April 1, 1992, between Landlord and Tenant,
as amended by First Amendment to Lease Agreement dated as of March 31, 1993, and
the certain Lease Agreement dated as of September 21, 1993, together with all
other amendments, extensions, renewals and replacements of each of such Lease
Agreements.
(p) "Rent" shall mean all sums of money payable by Tenant to Landlord under
the terms of this Lease, including, without limitation, Base Rent, additions to
Base Rent as provided in paragraph 6, and all other payments to Landlord
hereunder.
(q) "Rentable Area" of the Premises shall mean (i) the "Usable Area" within
the Premises (i.e., the gross area enclosed by the surface of the exterior glass
walls, the mid-point of any walls separating portions of the Premises from those
of adjacent
2
<PAGE>
tenants, the slab penetration line of all walls separating the Premises from
Service Areas, and the corridor side of walls separating the Premises from
Common Areas) plus (ii) a pro rata part of the Common Areas within the Building,
such pro ration based upon the ratio of the Usable Area within the Premises to
the total Usable Area within the Building including the area encompassed by any
columns or any other structural elements which provide support to the Premises
and/or the Building. Rentable Area shall not include any Services Areas. The
Rentable Area in the Building is 453,853 square feet. The stipulated number of
square feet of Rentable Areas of the Premises, as set forth in paragraph 1(n),
and the Building, as set forth above, are Landlord's current estimates of such
Rentable Areas and such figures may be revised, at Landlord's election, if
Landlord's architect determines either or both of such estimates to be
inaccurate in any material degree after examination of the final drawings of the
Premises and the Building.
(r) "Service Areas" shall mean those areas within the outside walls of the
Building used for elevator mechanical rooms, building stairs, fire towers,
elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts (but shall
not include any such areas for the exclusive use of a particular Tenant).
(s) "Substantially Complete" or "Substantially Completed" or "Substantial
Completion" shall mean, with respect to that portion of the Premises located on
the 18th floor of the Building, or any part thereof, completion of construction
required by the Work Letter to the point that Landlord's Architect (defined in
the Work Letter) has issued a Certificate of Substantial Completion.
(t) "Warren Place" shall mean the real property described in Exhibit "A"
attached hereto and incorporated herein and the improvements constructed
thereon.
(u) "Warren Place Common Areas" shall mean the "Common Areas" established
from time to time under the terms of the Master Ground Lease.
(v) "Work Letter" shall mean the certain Work Letter in the form of Exhibit
"D" attached hereto and incorporated herein which will be signed by Landlord and
Tenant contemporaneously with execution of this Lease.
2. LEASE GRANT.
-----------
(a) The Lease Term shall begin on the Commencement Date and shall continue
in force during the Lease Term, unless this Lease is sooner terminated under any
other term or provision hereof.
(b) Subject to Tenant's compliance with the requirements set forth in the
Work letter, Landlord will proceed to complete the Work (as defined in the Work
Letter). Landlord will endeavor to Substantially Complete the Work on or before
the Commencement Date. In the event the Work is not Substantially Completed by
the Commencement Date, regardless of cause, Landlord shall not have any
liability to Tenant, and the Commencement Date set forth
3
<PAGE>
in paragraph 1(g) shall not be affected. Regardless of whether or not the Work
is Substantially Completed in any portion of the Premises, there shall not be
any abatement of Base Rent, Rent or other Tenant obligations with respect to
that portion of the Premises situated on the 19th floor of the Building;
provided, however, solely with respect to that portion of the 18th floor of the
Building in which Work is not Substantially Completed on the Commencement Date:
(i) if Tenant has not delayed completion of plans for the Work, (ii) if Tenant
has not delayed Landlord in its efforts to Substantially Complete the Work,
(iii) if Tenant is not in default hereunder and (iv) if Tenant is not in use or
occupancy of such portion of the Premises, then for each day after the
Commencement Date that a portion of the Premises on the 18th floor of the
Building is not Substantially Completed, the Base Rent per square foot of
Rentable Area in such portion of the Premises shall be abated for the same
number of days, beginning with the Commencement Date. Landlord's Architect will
determine the number of square feet of Rentable Area in that portion of the
Premises on the 18th floor of the Building which is not Substantially Complete.
If Tenant has delayed completion of plans for the Work or has delayed Landlord's
efforts to Substantially Complete the Work or is in default hereunder or is
occupying space on the 18th floor in which Work is yet to be completed, then
there shall not be any abatement of Base Rent, Rent or other Tenant obligations
with respect to such portion of the Premises.
4. USE.
---
Subject to the restrictions set forth in this paragraph 4, the Premises
shall be used and occupied for general office use associated with computer
services and for no other purposes. The Tenant will not make or permit to be
made any use of the Premises or any part thereof which would violate any of the
covenants, agreements, terms, provisions and conditions of this Lease, the
Ground Lease, or the Master Ground Lease or which directly or indirectly is
forbidden by public law, ordinance or governmental regulation or which may be
dangerous to life, limb, or property, or which may invalidate or increase the
premium cost of the policy of insurance carried on the Building or covering its
operation, and Tenant will not suffer or permit the Premises or any part thereof
to be used in any manner or allow anything to be brought into or kept therein
which, in the judgment of Landlord, shall in any way impair or tend to impair
the character, reputation or appearance of One Warren Place as a high quality
office building, or which will impair or interfere with or tend to impair or
interfere with any of the services performed by Landlord for One Warren Place or
any services performed for the Warren Place Common Areas. Further, Tenant will
not make or permit to be made any use of the Premises or any part thereof as a
Bank (herein defined), a medical office, a hospital or a clinic. For the
purpose of this paragraph the term "Bank" shall mean (i) the principal office of
a national banking association chartered under federal law ("National Bank"),
the principal office of a state banking corporation chartered under the Oklahoma
Banking Code of 1965 [6 O.S. (1991), 101, et seq.] ("State Bank"), the principal
office of a savings and loan association ("Savings and Loan Association"), or
the principal
4
<PAGE>
office of a credit union ("Credit Union"), (ii) branch offices of a National
Bank, State Bank, Savings and Loan Association or Credit Union which are
providing savings and/or checking facilities, or (iii) a walk-up or drive-in
teller or automatic teller facility of a National Bank, a State Bank, a Savings
and Loan Association or a Credit Union.
5. BASE RENT.
---------
(a) At all times during the Lease Term Tenant shall pay to Landlord,
without any prior demand or notice and without any deduction, offset or
counterclaim whatsoever, the Base Rent and all other sums of money constituting
Rent hereunder, and Tenant specifically agrees that its nonpayment of any Rent
due hereunder shall entitle the Landlord to exercise all rights and remedies as
are herein provided. The annual Base Rent for each calendar year or portion
thereof during the Lease Term, together with any estimated adjustment thereto
pursuant to paragraph 6 hereof then in effect, shall be due and payable in
advance, in twelve (12) equal installments on the first day of each calendar
month during the Lease Term, and Tenant hereby agrees to pay such Base Rent and
any adjustments thereto to Landlord at Landlord's address set forth herein (or
such other address as may be designated by Landlord in writing from time to
time) monthly, in advance, and without demand. If the Lease Term commences on a
day other than the first day of the month or terminates on a day other than the
last day of a month, then the installments of Base Rent and any adjustments
thereto for such month or months shall be prorated, based on the number of days
in such month.
(b) In addition to the foregoing Base Rent, Tenant agrees to pay Landlord
all charges for any service, goods, or materials furnished by Landlord under
this Lease within ten (10) days after Landlord renders a statement therefor to
Tenant. Should any monthly installment of Base Rent or other payment due
hereunder not be paid on or before ten (10) days after said installment or other
payment is due and payable hereunder, then, and in that event, Tenant agrees to
pay a late payment charge equal to the amount determined by multiplying twenty
percent (20%) per annum by the amount of the unpaid installment or other payment
due hereunder, as the case may be, by a fraction the numerator of which is the
number of days which elapse after the due date through the date of payment in
full of such installment or other payment, as the case may be, together with the
late payment charge, and the denominator of which is 365; provided, however,
nothing herein contained shall ever entitle Landlord, upon the arising of any
contingency whatsoever, to receive or collect any late payment charge hereunder
or pursuant to any other provision of this Lease including, but not limited to,
paragraph 27 hereof determined, at a rate in excess of the highest lawful rate
allowed by the laws of the State of Oklahoma on any money obligation hereunder
and in no event shall Tenant be obligated to pay any late payment charge thereon
determined at a rate in excess of such lawful rate.
6. BASE RENT ADJUSTMENTS.
---------------------
The Base Rent payable hereunder shall be adjusted upward
5
<PAGE>
from time to time in accordance with the following provisions:
(a) Tenant's Base Rent is based, in part, upon annual Basic Costs not
exceeding the actual Basic Costs for calendar year 1993. Tenant shall pay as an
adjustment to Base Rent hereunder an amount (per each square foot of Rentable
Area within the Premises) equal to the excess ("Excess") from time to time of
(i) actual Basic Costs per square foot of Rentable Area in the Building over
(ii) the Basic Costs for calendar year 1993 divided by the number of square feet
of Rentable Area in the Building; provided, however, for purposes of this Lease,
Landlord's calculation of Basic Costs for each year after 1993 will be limited
as follows: (A) Landlord will limit increases in each category of expenses,
except the tax and insurance categories, to ten percent (10%) of the prior
years' total cost; and (B) there shall not be any limit on increases in the tax
and insurance expense categories. Landlord may collect such additional Base
Rent in arrears on a yearly basis. Landlord shall also have the option to make
a good faith estimate of the Excess for each upcoming calendar year and upon
thirty (30) days' written notice to Tenant may require the monthly payment of
Base Rent adjusted in accordance with such estimate. Any amounts paid based on
such an estimate shall be subject to adjustment pursuant to paragraph 6(b) when
actual Basic Costs are available for each calendar year.
(b) By April 1 of each calendar year during the Lease Term and by April 1
of the year following the calendar year in which the Lease Term terminates, or
as soon thereafter as practical, Landlord shall furnish to Tenant a statement of
Landlord's actual Basic Costs for the previous calendar year. If for any
calendar year additional Base Rent collected for the prior year, as a result of
Landlord's estimate of Basic Costs, is in excess of the additional Base Rent
actually due during such prior year, then Landlord shall refund to Tenant any
overpayment (or at Landlord's option, apply such amount against Rent due or to
become due hereunder). Likewise, Tenant shall pay to Landlord, on demand, any
underpayment with respect to the prior year.
(c) Tenant at its own expense shall have the right no more frequently than
once per calendar year, following prior written notice to Landlord, to examine
Landlord's books and records relating to Basic Costs, during normal business
hours only, and at a time agreed upon by the Landlord and Tenant; or at
Landlord's sole discretion, Landlord will provide an audit prepared by an
independent certified public accountant.
(d) Notwithstanding any language herein seemingly to the contrary, if the
Building is not fully occupied during any calendar year of the Lease Term, Basic
Costs and the Excess for purposes of paragraphs 6(a) and 6(b) hereof shall be
determined as if the Building had been fully occupied during such year. For the
purposes of this Lease, "fully occupied" shall mean occupancy of ninety-five
percent (95%) of the Rentable Area in the Building.
7. SERVICES TO BE FURNISHED BY LANDLORD.
------------------------------------
6
<PAGE>
Landlord agrees to furnish Tenant the following services, if Tenant is not
in default:
(a) Domestic water at those points of supply provided for general use of
other tenants in the Building, central heat and air conditioning in season, at
such temperatures and in such amounts as are considered by Landlord to be
standard or as required by governmental authority; provided however, heating and
air conditioning service at times other than for Normal Business Hours for the
Building, shall be furnished only upon the written request of Tenant delivered
to Landlord prior to 3:00 p.m. of the prior business day such usage is
requested. (For purposes of any such request, the term "business day" shall
mean Monday through Friday other than State or Federal holidays. A request for
heating or air-conditioning service on a Sunday or at times other than Normal
Business Hours on a Saturday must be delivered not later than 3:00 p.m. on the
preceding business day, as defined above.) Tenant shall bear the entire cost of
such additional service as such costs are determined by Landlord from time to
time.
(b) Routine maintenance and electric lighting service for all Common Areas
and Service Areas of the Building in the manner and to the extent deemed by
Landlord to be standard.
(c) Janitorial service as contracted by Landlord, Mondays through Fridays,
exclusive of normal business holidays; provided, however, if Tenant's floor
covering or other improvements require special treatment, Tenant shall pay the
additional cleaning cost attributable thereto as Rent upon presentation of a
statement therefor by Landlord.
(d) Subject to the provisions of paragraph 13, facilities to provide all
electrical current required by Tenant in its use and occupancy of the Premises.
(e) All Building Grade fluorescent bulb replacement in the Premises
necessary to maintain the lighting provided as a part of the Building Standard
Improvements and fluorescent and incandescent bulb replacement in the Common
Areas and Service Areas.
(f) Security in the form of limited access to the Building during other
than Normal Business Hours shall be provided in such form as Landlord deems
appropriate. Landlord may require those tenants requesting access to the
Building during other than Normal Business Hours to pay a fee for such access
partially to reimburse Landlord for the cost of the system which limits after-
hours access. Landlord, however, shall have no liability to Tenant, its
employees, agents, invitees or licensees for losses due to theft or burglary, or
for damages done by unauthorized persons on the Premises and neither shall
Landlord be required to insure against any such losses. Tenant shall cooperate
fully in Landlord's efforts to maintain security in the Building and shall
follow all regulations promulgated by Landlord with respect thereto.
The failure by Landlord to any extent to furnish, or the
7
<PAGE>
interruption or termination of these defined services in whole or in part,
shall not render Landlord liable in any respect nor be construed as an eviction
of Tenant, nor work an abatement of Rent, nor relieve Tenant from the obligation
to fulfill any covenant or agreement hereof. Should any of the equipment or
machinery used in the provision of such services for any cause cease to function
properly, Tenant shall have no claim for offset or abatement of Rent or damages
on account of an interruption in service occasioned thereby or resulting
therefrom.
8. IMPROVEMENTS TO BE MADE BY LANDLORD; PAYMENTS REQUIRED OF TENANT.
----------------------------------------------------------------
Simultaneously with execution of this Lease, Landlord and Tenant will sign
a Work Letter in the form of Exhibit "D" attached to this Lease. Except as
otherwise provided in the Work letter, all installations and improvements now or
hereafter placed on the Premises other than or in excess of Building Standard
Improvements shall be for Tenant's account and at Tenant's cost (and Tenant
shall pay ad valorem taxes and increases in insurance thereon or attributable
thereto), which cost shall be payable by Tenant to Landlord upon demand as Rent.
Tenant shall pay all sums which it is required to pay under the Work Letter.
9. MAINTENANCE AND REPAIR OF PREMISES BY LANDLORD.
----------------------------------------------
Except as otherwise expressly provided herein, Landlord shall not be
required to make any repairs to the Premises or the Building.
10. GRAPHICS.
--------
Landlord shall provide and install, at Tenant's cost, all letters or
numerals on doors in the Premises; all such letters and numerals shall be in the
standard graphics for the Building and no others shall be used or permitted on
the Premises or elsewhere on One Warren Place, without Landlord's prior written
consent. Landlord will install, at Tenant's cost, on the sign monument, located
directly north of One Warren Place a single sign provided by Tenant which
conforms in all respects to current signage on the sign monument, including
size, shape, color and quality and which sign is in all respects acceptable to
Landlord, in its sole subjective discretion. Further, Tenant shall not install
any signage or lighting whatsoever in or on the Premises, the Building or One
Warren Place without Landlord's prior written consent.
11. CARE OF THE PREMISES BY TENANT.
------------------------------
Tenant agrees not to commit or allow any waste to be committed on any
portion of the Premises or any other part of One Warren Place or Warren Place,
and at the termination of this Lease agrees to deliver up the Premises to
Landlord in as good condition as at the Commencement Date, ordinary wear and
tear excepted.
12. REPAIRS AND ALTERATIONS BY TENANT.
---------------------------------
8
<PAGE>
Tenant covenants and agrees with Landlord, at Tenant's own cost and expense
to repair or replace any damage done to Warren Place, One Warren Place, the
Building, the Premises, or any part of any of such property, caused by Tenant or
Tenant's agents, employees, invitees, or visitors, and such repairs shall
restore the damaged property to as good a condition as it was in prior to such
damage, and shall be effected in compliance with all applicable laws; provided;
however, if Tenant fails to make such repairs or replacements promptly, Landlord
may, at its option, make repairs or replacements, and Tenant shall pay the cost
thereof to Landlord on demand as Rent. Tenant agrees with Landlord not to make
or allow to be made any alterations to the Premises, install any vending
machines on the Premises, or place signs anywhere in One Warren Place or the
Warren Place Common Areas, without first obtaining written consent of Landlord
in each such instance, which consent may be given on such conditions as Landlord
may elect. The Tenant shall not contract for any work or service which might
involve the employment of labor incompatible with the Building employees or
employees or contractors doing work or performing services by or on behalf of
the Landlord. Any and all alterations to the Premises shall become the property
of Landlord upon termination of this Lease (except for movable equipment or
furniture owned by Tenant). Landlord may, nonetheless, require Tenant to remove
any and all fixtures, equipment and other improvements installed on the Premises
and thereafter to restore Premises. In the event that Landlord so elects, and
Tenant fails to remove such Improvements, Landlord may remove such improvements
at Tenant's cost, and Tenant shall pay Landlord on demand the cost of restoring
the Building Standard Improvements to the Premises.
13. USE OF ELECTRICAL SERVICES BY TENANT.
------------------------------------
Tenant's use of electrical services furnished by Landlord shall be subject
to the following:
(a) Tenant's electrical equipment shall be restricted to that equipment
which individually does not have a rated capacity greater than .5 kilowatts per
hour and/or require voltage other than 120/208 volts, single phase. Tenant's
lighting shall not have a design load greater than an average of two (2) watts
per square foot. Collectively, Tenant's equipment and lighting shall not have
an electrical design load greater than an average of two and one-half (2-1/2)
watts per square foot.
(b) If Tenant's consumption of electrical services exceeds either the rated
capacities and/or design loads as per paragraph 13(a), then Tenant shall remove
such equipment and/or lighting to achieve compliance within ten (10) days after
receiving notice from Landlord. Alternatively, upon receiving Landlord's prior
written approval, such equipment and/or lighting may remain in the Premises,
subject to the following:
(i) Tenant shall pay for all costs of installation and maintenance of
submeters, wiring, air conditioning and other items required by Landlord, in
Landlord's discretion, to accommodate Tenant's excess design loads and
capacities.
9
<PAGE>
(ii) Tenant shall pay to Landlord, upon demand, the cost of the excess
demand and consumption of electrical service at rates determined by Landlord,
which shall be in accordance with any applicable laws.
(iii) Landlord may, at its option, upon not less than thirty (30) days'
prior written notice to Tenant, discontinue the availability of such
extraordinary utility service. If Landlord gives any such notice, Tenant will
contract directly with the public utility for the supplying of such utility
service to the Premises.
14. PARKING.
-------
During the Lease Term, Tenant shall have the nonexclusive use in common
with Landlord, other tenants of the Building, their guests and invitees, of One
Warren Place's nonreserved, common automobile parking areas (outside the parking
garage), driveways, and footways, subject to rules and regulations for the use
thereof as prescribed from time to time by Landlord. No specific designated
parking spaces are to be assigned to Tenant. Landlord shall have the right to
reserve parking spaces as it elects and to condition use thereof on such terms
as it elects. With respect to the One Warren Place parking garage, (a) Tenant
will be provided the use of one hundred forty-one (141) non-exclusive and
unreserved parking spaces, and (b) Tenant will be provided the use of the
fifteen (15) parking spaces in the location shown on Exhibit "G" attached to
this Lease and made a part hereof, which fifteen (15) parking spaces shall be
marked (in a manner determined by Landlord) "Reserved Parking Only"; provided,
however, (i) Landlord shall have the right, from time to time, to relocate the
reserved parking spaces to another location in the One Warren Place parking
garage, but not on the top level of the One Warren Place parking garage, (ii)
Landlord shall have no obligation or responsibility to Tenant for enforcing the
reservation of these reserved parking spaces or for patrolling the area in which
the reserved parking spaces are located, (iii) Landlord shall have no liability
or responsibility to Tenant for the unauthorized use of such reserved parking
spaces, and (iv) such authorized use of the reserved parking spaces shall not
result in any diminution of Tenant's obligations hereunder and shall not in any
way whatsoever affect Landlord's rights and remedies under this Lease. Tenant
shall pay as rent for the one hundred forty-one (141) nonexclusive and
unreserved parking spaces at the rate of $7.50 per space per month (plus sales
tax) during the Lease Term. Tenant shall pay rent for the other fifteen (15)
parking spaces in the One Warren Place parking garage which are marked "Reserved
Parking Only" at the rate of $20.00 per space per month (plus sales tax) during
the first sixty (60) months of the Lease Term and at the rate established under
paragraph 3(e) during any renewal period of the Lease Term. All parking in the
One Warren Place parking garage shall be subject to rules and regulations for
the use thereof as may be prescribed by Landlord from time to time, and Landlord
reserves the right to assign or reserve such parking spaces as it may elect, in
its sole subjective discretion. Tenant shall not sublease any of its parking
spaces or assign any rights thereto. No vehicle in excess of seventy-two (72)
inches in height shall
10
<PAGE>
be allowed access to the One Warren Place parking garage, and vehicles which are
unmoved or abandoned for more than three (3) days will be removed from the One
Warren Place parking garage and impounded at Tenant's expense. Tenant shall be
responsible for any damage to the One Warren Place parking garage caused by the
holder of an access card issued to Tenant which arises from use of the One
Warren Place parking garage, including, without limitation, any personal injury,
property damage or theft. Tenant shall, upon request of Landlord, execute a
parking agreement or parking agreements which further detail Tenant's
obligations in regard to the above-referenced parking spaces. With respect to
access cards to the One Warren Place parking garage, Tenant covenants and agrees
as follows:
(a) Landlord will issue to Tenant one (1) access card for each of the one
hundred fifty-six (156) parking spaces provided to Tenant under the terms of
this paragraph 14.
(b) Only one vehicle per access card shall have access to the One Warren
Place parking garage.
(c) Tenant shall at all times maintain with Landlord a list of access cards
held by Tenant, which list shall be in form, scope and substance satisfactory to
Landlord, in its sole subjective discretion, and shall identify the individual
to whom an access card has been issued, the vehicle used by such individual and
the license plate number of such vehicle.
(d) Tenant shall immediately report to Landlord any lost access card, and
Tenant shall pay Landlord's then current charge for a replacement access card,
which charge shall not be less than $30.00 per access card at any time.
(e) In the event of unauthorized or improper use of an access card, as
determined by Landlord in its sole judgment, Landlord may, in its sole
subjective discretion, (i) withdraw the access card and terminate Tenant's right
to use the parking space represented by the access card, all without terminating
or otherwise affecting Tenant's responsibilities, obligations and liabilities
under the covenants, agreements, terms, conditions and provisions contained in
this Lease and (ii) exercise any of Landlord's other rights and remedies against
Tenant.
(f) Each access card shall at all times remain the property of Landlord,
and Tenant shall surrender all access cards to Landlord immediately upon
termination of this Lease. Notwithstanding termination of this Lease, Tenant
shall pay to Landlord for each lost access card Landlord's then current charge
for a replacement access card, which charge shall not be less than $30.00 per
card at any time.
15. LAWS AND REGULATIONS.
--------------------
Tenant agrees to comply with all applicable laws, ordinances, rules and
regulations of any governmental entity or agency having jurisdiction of the
Premises.
16. BUILDING RULES.
--------------
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Tenant will comply with the rules and regulations of One Warren Place
adopted and altered by Landlord from time to time and with the rules adopted and
altered from time to time for the Warren Place Common Areas, and Tenant will
cause all of its agents, employees, invitees and visitors to comply with all
such rules. All changes to such rules will be sent by Landlord to Tenant in
writing. The current rules and regulations are listed in Exhibit "E" attached
to this Lease.
17. ENTRY BY LANDLORD.
-----------------
(a) On reasonable prior notice to the Tenant, Landlord may enter the
Premises to exhibit the Premises to prospective Tenants during the last twelve
(12) months of the Lease Term, and to any prospective purchaser, mortgagee, or
assignee of any mortgage on One Warren Place or any interest therein and to
others having a legitimate interest at any time during the Lease Term.
(b) Landlord may enter the Premises at any time in the event of an
emergency, and otherwise at reasonable times during Normal Business Hours, to
take any and all measures, including inspections, repairs, alterations,
additions and improvements to the Premises or to One Warren Place, as may be
necessary or desirable for the safety, protection or preservation of the
Premises or any other part of One Warren Place or the Landlord's interest
therein, or as may be necessary or desirable in the operation or improvement of
One Warren Place, or any part thereof, or in order to comply with all laws,
orders and requirements of governmental or other authority.
18. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Tenant shall not assign, sublease, transfer or encumber this Lease or
any interest therein. Any attempted assignment, sublease, transfer or
encumbrance by Tenant in violation of the terms and covenants of this paragraph
shall be void.
(b) If Tenant requests Landlord's consent to an assignment of this Lease or
subletting of all or part of the Premises, Landlord shall have the option
(without limiting Landlord's other rights hereunder) of terminating this Lease
upon thirty (30) days notice and of dealing directly with the proposed assignee.
If Landlord should fail to notify Tenant in writing of its decision within a
thirty (30) day period after Landlord is notified in writing of the proposed
assignment or sublease, Landlord shall be deemed to have refused to consent to
any assignment or subleasing, and to have elected to keep this Lease in full
force and effect.
(c) Tenant shall not, without consent of the Landlord, sublet this Lease to
the parent or subsidiary of a corporate lessee or assign this Lease in
connection with a consolidation, merger, or sale of controlling interest of the
Tenant.
(d) All cash or other proceeds of any assignment, sale or sublease of
Tenant's interest in this Lease, whether consented to by Landlord or not, shall
be paid to Landlord notwithstanding the fact that such proceeds exceed the Rent
called for hereunder,
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unless Landlord agrees to the contrary in writing, and Tenant hereby assigns all
rights it might have or ever acquire in any such proceeds to Landlord. This
covenant and assignment shall benefit Landlord and its successors in ownership
of the Building and shall bind Tenant and Tenant's heirs, executors,
administrators, personal representatives, successors and assigns. Any assignee,
sublessee or purchaser of Tenant's interest in this Lease (all such assignees,
sublessees and purchasers being hereinafter referred to as "Successors"), by
assuming Tenant's obligations hereunder shall be deemed to have assumed
liability to Landlord for all amounts paid to persons other than Landlord by
such Successor in consideration of any such assignment, sale or subletting, in
violation of the provisions hereof.
19. LIENS.
-----
Tenant will not permit any mechanics', materialmen's, laborers' or other
liens to be placed upon the Premises or any other part of One Warren Place or
Warren Place and nothing in this Lease shall be deemed or construed in any way
as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any person for the performance of any labor or the
furnishing of any materials to the Premises, One Warren Place, Warren Place, or
any part thereof, nor as giving Tenant any right, power, or authority to
contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to any mechanics', materialmen's, laborers' or
other liens against the Premises, One Warren Place or Warren Place. In the
event any such lien is attached to the Premises, One Warren Place or Warren
Place, then, in addition to any other right or remedy of Landlord, Landlord may,
but shall not be obligated to, discharge the same. Any amount paid by Landlord
for any of the aforesaid purposes shall be paid by Tenant to Landlord on demand
as Rent.
20. PROPERTY INSURANCE.
------------------
Landlord shall maintain fire and extended coverage insurance on the
building in such amounts as Landlord may from time to time require; provided,
however, so long as Metropolitan Life Insurance Company, or any other company
having assets of $500,000,000.00, is the owner of the Building, it shall have
the right to self-insure against any and all perils and/or liabilities against
which it would otherwise be required to insure and it shall also have the right
to effect any such insurance by means of so called "blanket" or "umbrella"
policies of insurance. Any such insurance shall be maintained at the expense of
Landlord (the cost to Landlord being included as a part of the Basic Costs), and
payments for losses thereunder shall be made solely to Landlord and the
mortgagees of Landlord as their interest shall appear. Tenant shall maintain at
its expense, in an amount equal to full replacement cost, fire and extended
coverage insurance on all of its personal property, including removable trade
fixtures, located in the Premises and in such additional amounts as are required
to meet Tenant's obligations pursuant to paragraph 24 hereof. Tenant shall
provide Landlord with current certificates of insurance evidencing Tenant's
compliance with this paragraph 20 and
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paragraph 21. Tenant shall obtain the agreement of Tenant's insurers to notify
Landlord that a policy is due to expire at least thirty (30) days prior to such
expiration.
21. LIABILITY INSURANCE.
-------------------
Tenant shall, at its expense, maintain a policy or policies of
comprehensive general liability insurance with respect to its activities in One
Warren Place and Warren Place, with the premiums thereon fully paid on or before
due date, issued by and binding upon an insurance company approved by Landlord,
such insurance to afford minimum protection of not less than $1,000,000.00
combined single limit coverage of bodily injury, property damage or combination
thereof. Landlord shall not be required to maintain insurance against thefts
within the Premises, One Warren Place or Warren Place generally. Subject to
Landlord's rights to self-insure or provide "blanket" or "umbrella" policies of
insurance as set forth in the first sentence of paragraph 20, Landlord shall
maintain liability insurance with respect to the Building in the form of one or
more policies, such insurance to afford minimum protection of not less than
$1,000,000.00 combined single limit coverage of bodily injury, property damage
or combination thereof. The cost to Landlord of any such insurance shall be
included as a part of the Basic Costs.
22. INDEMNITY.
---------
Landlord shall not be liable to Tenant, or to Tenant's agents, servants,
employees, customers, or invitees for any injury to person or damage to property
caused by any act, omission, or neglect of Tenant, its agents, servants, or
employees, invitees, licensees or any other person entering Warren Place or One
Warren Place under the invitation of Tenant or arising out of the use of One
Warren Place by Tenant and the conduct of its business or out of a default by
Tenant in the performance of its obligations hereunder. Tenant hereby
indemnifies and holds Landlord harmless from all liability and claims for any
such damage or injury.
23. WAIVER OF SUBROGATION RIGHTS.
----------------------------
Except as otherwise provided in the next to the last sentence of paragraph
24, Landlord and Tenant each hereby waives on behalf of itself and its insurers
(none of which shall ever be assigned any such claim or be entitled thereto due
to subrogation or otherwise) any and all rights of recovery, claim, action, or
cause of action, against the other, its agents, officers, or employees, for any
loss or damage that may occur to the Premises, or any improvements thereto, or
the Building or any improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause or causes which are
insured against under the terms of the standard fire and extended coverage
insurance policies referred to in paragraph 20 hereof, regardless of whether
such insurance is actually maintained and regardless of the cause or origin,
including negligence of the other party hereto, its agents, officers, or
employees.
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24. CASUALTY DAMAGE.
---------------
If the Premises or any part thereof shall be damaged by fire or other
casualty, Tenant shall give prompt written notice thereof to Landlord. In case
the Building shall be damaged by fire or other casualty such that substantial
alteration or reconstruction of the Building shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by a casualty
affecting the Building) or in the event any mortgagee of Landlord's should
require that the insurance proceeds, or any portion thereof, payable as a result
of a casualty be applied to the payment of the mortgage debt or in the event of
any material uninsured loss to the Building or the Premises, Landlord may, at
its option, terminate this Lease by notifying Tenant in writing of such
termination within the later to occur of ninety (90) days after the date of such
casualty or ninety (90) days after the date of receipt of Tenant's notice
relating to the Premises. If Landlord does not thus elect to terminate this
Lease, Landlord shall commence and proceed with reasonable diligence to restore
the Premises to substantially the same condition in which they were immediately
prior to the happening of the casualty (without regard, however, to alterations
made by or on behalf of Tenant, without Landlord's prior written consent),
except the Landlord's obligation to restore shall not exceed the scope of the
work required to be done by Landlord in originally constructing the Premises and
installing Building Standard Improvements in the Premises, nor shall Landlord be
required to spend for such work an amount in excess of the insurance proceeds
actually received by Landlord for the Building and the Building Standard
Improvements in the Premises as a result of the casualty. When Building
Standard Improvements in the Premises have been restored by Landlord (to the
extent that insurance proceeds actually received by Landlord are sufficient to
complete such work), Tenant shall complete, at its sole cost and expense, the
restoration of the Premises, including, without limitation, the balance of the
Building Standard Improvements not completed by Landlord, the reconstruction of
all improvements in excess of Building Standard Improvements and the restoration
of Tenant's furniture and equipment. Such work to be performed by Tenant shall
not result in any type of mechanic's or materialman's lien affecting the
Building, the Premises or any portion thereof and shall result in the
reconstruction or restoration of said items by Tenant to a condition that is at
least equal in quality to the condition of said items existing prior to such
damage or destruction. Landlord shall have no liability to Tenant for the
Landlord's termination of the Lease in accordance with the provisions hereof, or
for any inconvenience or annoyance to Tenant or injury to the business or
property of Tenant resulting in any way from the occurrence of a casualty or the
repair of any damage or destruction related thereto, except that, subject to the
provisions of the next sentence, Landlord shall allow Tenant a fair diminution
of rent, as determined by Landlord, during the time and to the extent the
Premises are unfit for occupancy; provided, however, such unfitness for
occupancy shall not be construed to constitute an actual or constructive
eviction. If the Premises or any portion of One Warren Place be damaged by fire
or other casualty resulting from the fault or negligence of
15
<PAGE>
Tenant or any of Tenant's agents, employees, licensees, or invitees, the Rent
hereunder shall not be diminished, and regardless of whether this Lease is
terminated, Tenant shall be liable to Landlord for the cost of the repair and
restoration of the Premises and all other parts of One Warren Place including
all tenant improvements in the Building resulting therefrom to the extent such
cost and expenses exceed the amount of insurance proceeds actually received by
Landlord therefor, and Landlord shall retain all other rights and remedies that
Landlord may have at law, in equity or pursuant to this Lease. Anything in this
Lease to the contrary notwithstanding, if more than fifteen percent (15%) of the
Premises are damaged by fire or other casualty or if all or any portion of the
Premises is damaged by fire or other casualty during the last year of the term
(excluding the period during any renewal term, unless such fire or casualty
occurs during a renewal term) of this Lease, then Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination within
the later to occur of ninety (90) days after the date of receipt by Landlord of
Tenant's notice or within ninety (90) days after the date of such casualty.
25. CONDEMNATION.
------------
If the whole or substantially the whole of the Building or the Premises
should be taken for any public or quasi-public use, by right of eminent domain
or otherwise or should be sold in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Building or the
Premises is taken by the condemning authority. If less than the whole or
substantially the whole of the Building or the Premises is thus taken or sold,
Landlord (whether or not the Premises are affected thereby) may terminate this
Lease by giving written notice thereof to Tenant; in which event this Lease
shall terminate as of the date when physical possession of such portion of the
Building or Premises is taken by the condemning authority. If the Lease is not
so terminated upon any such taking or sale, the Base Rent payable hereunder
shall be diminished by an equitable amount, as determined by Landlord, and
Landlord shall, to the extent Landlord deems feasible, restore the Building and
the Premises to substantially their former condition, but such work shall not
exceed the scope of the work done by Landlord in originally constructing the
Building and installing Building Standard Improvements in the Premises, nor
shall Landlord in any event be required to spend for such work an amount in
excess of the amount received by Landlord as compensation for such taking.
Subject to the proviso at the end of this sentence, all amounts awarded upon a
taking of any part of all of Warren Place or One Warren Place shall belong to
Landlord, and Tenant shall not be entitled to, and expressly waives all claims
to, any such compensation; provided that if Landlord terminates this Lease based
on any such taking, Tenant shall have the right to appear and separately file a
claim for a separate award in an amount limited to Tenant's reasonable expenses
of moving from the Premises.
26. DAMAGES FROM CERTAIN CAUSES.
---------------------------
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<PAGE>
Landlord shall not be liable to Tenant for any loss or damage to any
property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, vandalism, malicious mischief, earthquake, flood, strike,
insurrection, war, court order, requisition, or order of governmental body or
authority or by any other cause beyond the control of Landlord. Further,
subject to paragraph 34 of this Lease, Landlord shall not be liable for any
damage or inconvenience which may arise through repair or alteration of any part
of the Warren Place, One Warren Place or the Premises.
27. EVENTS OF DEFAULT/REMEDIES.
--------------------------
(a) The following events shall be deemed to be events of default by Tenant
under this Lease: (i) Tenant shall fail to comply with any of the terms,
provisions or covenants of this Lease or any other agreement between Landlord
and Tenant (including, without limitation, the Work Letter), all of which terms,
provisions and covenants shall be deemed material; (ii) the leaseholder
hereunder demised shall be taken on execution or other process of law in any
action against Tenant; (iii) Tenant notifies Landlord, at any time prior to the
Commencement Date, that Tenant does not intend to take occupancy of the Premises
upon the commencement of the Lease Term or Tenant shall fail to promptly move
into and take possession of the Premises when the Premises are ready for
occupancy or shall cease to do business in or abandon any substantial portion of
the Premises; (iv) Tenant shall become insolvent or unable to pay its debts as
they come due, or Tenant notifies Landlord that it anticipates either condition;
(v) Tenant takes any action or notifies Landlord that Tenant intends to file a
petition under any section or chapter of the Bankruptcy Code, as amended from
time to time, or under any similar law of statute of the United States or any
State thereof; or a petition shall be filed against Tenant under any such
statute or Tenant or any creditor of Tenant notifies Landlord that it knows such
a petition will be filed or Tenant notifies Landlord that it expects such a
petition to be filed; (vi) a receiver or trustee shall be appointed for Tenant's
leasehold interest in the Premises or for all or a substantial part of the
assets of Tenant; or (vii) Tenant shall default under any of the terms,
provisions or covenants of the Sublease.
(b) Upon the occurrence of any event or events of default by Tenant,
whether enumerated in this paragraph or not, Landlord shall have the option to
pursue any one or more of the following remedies without any notice or demand
for possession whatsoever (and without limiting the generality of the foregoing,
Tenant hereby specifically waives notice and demand for payment of rent or other
obligations due and waives any and all other notices or demand requirements
imposed by applicable law): (i) terminate this Lease in which case Tenant shall
immediately surrender the Premises to Landlord; (ii) terminate Tenant's right to
occupy the Premises and reenter and take possession of the Premises (without
terminating this Lease); (iii) enter upon the Premises and do whatever Tenant is
obligated to do under the terms of this Lease; and Tenant agrees to reimburse
Landlord on demand for any expense which Landlord may incur in effecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that
17
<PAGE>
Landlord shall not be liable for any damages resulting to Tenant from such
action; and (iv) exercise all other remedies available to Landlord at law or in
equity, including, without limitation, injunctive relief of all varieties.
In the event Landlord elects to reenter or take possession of the Premises
after Tenant's default, Tenant hereby waives notice of such reentry or
repossession and of Landlord's intent to reenter or retake possession. Landlord
may, without prejudice to any other remedy which it may have for possession or
arrearages in Rent, expel or remove Tenant and any other person who may be
occupying said Premises or any part thereof. In addition, the provisions of
paragraph 30 hereof shall apply with respect to the period from and after the
giving of notice of such termination to Tenant. All Landlord's remedies shall
be cumulative and not exclusive. Forbearance by Landlord to enforce one or more
of the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default.
(c) This paragraph 27 shall be enforceable to the maximum extent not
prohibited by applicable law, and the unenforceability of any portion thereof
shall not thereby render unenforceable any other portion. Tenant and Landlord
hereby agree that no action or inaction by Landlord or its agents, servants or
employees, except written notice to Tenant as provided herein or judicial
proceedings, shall be sufficient to evidence or effect termination of this
Lease.
(d) Landlord shall be in default hereunder in the event Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations hereunder within thirty (30) days of the receipt by
Landlord of written notice from Tenant of the alleged failure to perform. In no
event shall Tenant have the right to terminate or rescind this Lease as a result
of Landlord's default as to any covenant or agreement contained in this Lease or
as a result of the breach of any promise or inducement hereof, whether in the
Lease or elsewhere. Tenant hereby waives such remedies of termination and
rescission and hereby agrees that Tenant's remedies for default hereunder and
for breach of any promise or inducement shall be limited to a suit for damages
and/or injunction. In addition, Tenant hereby covenants that, prior to the
exercise of any such remedies, it will give the mortgagees holding mortgages on
One Warren Place, or any interest therein, notice and a reasonable time to cure
any default by Landlord.
28. PEACEFUL ENJOYMENT.
------------------
Tenant shall, and may peacefully have, hold and enjoy the Premises, subject
to the other terms hereof and the terms of the Ground Lease and Master Ground
Lease, provided that Tenant pays the Rent to be paid by Tenant and performs all
of Tenant's covenants and agreements herein contained. This covenant and any
and all other covenants of Landlord shall be binding upon Landlord and its
successors only with respect to breaches occurring during its or their
respective periods of ownership of the Tenant's interest hereunder.
Landlord shall be entitled to
18
<PAGE>
cause Tenant to relocate from the Premises to other space ("Relocation Space")
within Warren Place or the Building at any time after reasonable written notice
of Landlord's election (not in excess of ninety (90) days) is given to Tenant;
provided, however, so long as (a) no default has occurred under the terms of
this Lease, and (b) Tenant has not attempted to sublease any part of the
Premises or to assign this Lease, Landlord will not exercise its right to
relocate Tenant. Any relocation of Tenant pursuant to this paragraph shall be
entirely at the expense of Landlord or the third party replacing Tenant in the
Premises. Such a relocation shall not terminate or otherwise affect or modify
this Lease except that from and after the date of such relocation, "Premises"
shall refer to the Relocation Space into which Tenant has been moved, rather
than the original Premises as herein defined.
29. CERTAIN RIGHTS RESERVED TO THE LANDLORD.
---------------------------------------
The Landlord reserves the following rights:
(a) To name the Building and to change the name and street address of the
Building at any time, without responsibility to Tenant for any advertising,
billboards, printed materials or any other items of expense incurred by Tenant
in regard to a prior Building name or street address.
(b) To install and maintain a sign on the exterior and interior of the
Building.
(c) To designate all sources furnishing sign painting and lettering, ice,
drinking water, towels, toilet supplies, shoe shining, vending machines, mobile
vending service, catering, and like services used on the Premises or in One
Warren Place.
(d) To constantly have pass keys to the Premises.
(e) During the last ninety (90) days of the term, if during or prior to
that time the Tenant vacates the Premises, to decorate, remodel, repair, alter
or otherwise prepare the Premises for reoccupancy, without affecting Tenant's
obligation to pay Rent for the Premises.
30. HOLDING OVER.
------------
In the event Tenant or any of its successors in interest hold over the
Premises, or any part thereof, after the expiration or other termination of this
Lease or in the event Tenant continues to occupy the Premises after the
termination of Tenant's right of possession pursuant to paragraph 27(b)(ii)
hereof, unless otherwise agreed in writing, such holding over shall constitute
and be construed as a tenancy at will at a daily Base Rent equal to one-
thirtieth (1/30) of an amount equal to two (2) times the most recent Base Rent
payable under this Lease, as adjusted pursuant to paragraph 6(a) hereof. All
other terms, covenants and conditions of this Lease shall continue to be in full
force and effect; provided no holding over by Tenant after the expiration of the
Lease Term shall be construed to extend the Lease Term. The Tenant hereby
indemnifies and agrees to hold
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Landlord harmless against any cost, expense, damages, or other liability,
including, without limitation, the cost of defending any claim or action by a
third party, resulting from Tenant's continued occupancy of the Premises after
the Lease Term.
31. SUBORDINATION.
-------------
Tenant accepts this Lease and the Premises subject and subordinate to the
terms of the Ground Lease, the Master Ground Lease, and all future ground leases
(except as otherwise specifically provided in any such document), and Tenant
further accepts this Lease subject and subordinate to any first mortgage, deed
of trust or other lien presently existing or hereafter placed upon the Premises,
upon the Building, upon One Warren Place, or upon Warren Place, in whole or in
part, and to any renewals, refinancing and extensions thereof; provided,
however, any such subordination to a first mortgage, deed of trust or other lien
shall be evidenced by a Subordination, Non-Disturbance and Attornment Agreement
in the form of Exhibit "F" attached hereto, which Tenant specifically covenants
and agrees to execute and deliver from time to time as may be requested by
Landlord. However, Tenant also agrees that any such first mortgagee shall have
the right at any time to subordinate such mortgage, deed of trust or other lien
to this Lease on such terms and subject to such conditions as such mortgagee may
deem appropriate in its discretion. Landlord is hereby irrevocably vested with
full power and authority to subordinate this Lease to any mortgage, deed of
trust or other lien now existing or hereafter placed upon the Premises, the
Building, One Warren Place or Warren Place, in whole or in part, and Tenant
agrees upon demand to execute such further instruments subordinating this Lease
or attorning to the holder of any such liens as Landlord may request. The terms
of this Lease are subject to approval by the Landlord's permanent lender(s), and
such approval is a condition precedent to Landlord's obligations hereunder.
Such lender(s) shall have discretion as to whether or not it shall enter an
attornment and nondisturbance agreement with Tenant and as to the form of any
such agreement. In the event that Tenant should fail to execute any
subordination agreement or other agreement required by this paragraph, promptly
as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-
fact to execute such instrument in Tenant's name, place and stead, it being
agreed that such power is one coupled with an interest. Tenant agrees that it
will from time to time, within ten (10) days after request by Landlord, execute
and deliver to such persons as Landlord shall request a statement in recordable
form certifying that this Lease is unmodified and in full force and effect (or
if there have been modifications, that the same is in full force and effect as
so modified), stating the dates to which Rent and other charges payable under
the Lease have been paid, stating that Landlord is not in default hereunder (or
if Tenant alleges a default stating the nature of such alleged default) and
further stating such other matters as Landlord shall require.
32. ATTORNEY'S FEES.
---------------
In the event either party defaults in the performance of any of the terms
of this Lease and the other party employs an
20
<PAGE>
attorney in connection therewith, the defaulting party agrees to pay prevailing
party's reasonable attorney's fees, all court costs and other reasonable
expenses.
33. NO IMPLIED WAIVER.
-----------------
The failure to insist at any time upon the strict performance of any
covenant or agreement herein, or to exercise any option, right, power or remedy
contained in this Lease shall not be construed as a waiver or a relinquishment
thereof for the future. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly installment of Base Rent or other Rent due under this
Lease shall be deemed to be other than on account of the earliest such Rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or pursue any other remedy provided or
referenced in this Lease.
34. PERSONAL LIABILITY.
------------------
In no event shall Landlord be liable to Tenant, its employees, agents,
invitees or licensees, either for (a) any loss or damage that may be occasioned
by or through the acts or omissions of other tenants of the Building or of any
other persons whomsoever or (b) any consequential damages regardless of
causation. With respect to tort claims against Landlord, Landlord shall not be
liable to Tenant, its employees, agents, invitees or licensees for any act or
omission of Landlord or of its agents or employees, except for actual damages or
costs incurred as a direct result or caused directly by the gross negligence or
willful misconduct of Landlord (or its agents or employees) in circumstances in
which Landlord is deemed to be liable at law, as evidenced by a final non-
appealable judgment in a court of law for such acts or omissions and only if
such liability cannot be waived by Tenant. Nothing contained in the immediately
preceding sentence shall ever be construed as creating liability in excess of
that existing at law or, in any event, increasing the liability of Landlord,
under theory or cause of action, however denominated, from that existing at law.
Further, the liability of the Landlord to Tenant for (a) any default by Landlord
under the terms of this Lease or (b) any circumstance in which Landlord is
judicially determined to have some liability to Tenant, for whatever reason,
shall be limited to the interest of Landlord in the Building and Tenant agrees
to look solely to Landlord's interest in the Building for recovery of any
judgment from the Landlord, it being intended that Landlord shall not be
personally liable for any judgment or deficiency.
35. SPRINKLERS.
----------
If there now is or shall be installed in the Building a "sprinkler system",
and such a system or any of its appliances shall be damaged or injured or not in
proper working order by reason of an act or omission of the Tenant, Tenant's
agents,
21
<PAGE>
servants, employees, licensees or visitors, the Tenant shall immediately
notify Landlord in writing, and, within a reasonable period after Landlord's
receipt of such notice, Landlord shall have the sprinkler system restored at
Tenant's expense, which Tenant shall forthwith pay upon receipt of invoices; and
if the Board of Fire Underwriters of Fire Insurance Exchange or any bureau,
department or official of the state or city government, require or recommend
that any changes, modifications, alterations, or additional sprinkler heads or
other equipment be made or supplied by reason of the Tenant's business, or the
location of partitions, trade fixtures, or other contents, of the Premises, or
for any other reason, or if any such changes, modifications, alterations,
additional sprinkler heads or other equipment, become necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate as fixed by said Exchange, or by any fire
insurance company, Landlord shall, at Tenant's expense, promptly make and supply
such changes, modifications, alterations, additional sprinkler head or other
equipment.
36. WAIVER OF BENEFITS.
------------------
Tenant waives the benefits of all existing and future rent control
legislation and statutes and any similar governmental rules and regulations,
whether in time of war or not, to the extent permitted by law.
37. MISCELLANEOUS TAXES.
-------------------
Tenant shall pay prior to delinquency all taxes assessed against or levied
upon its occupancy of the Premises, or upon the fixtures, furnishings, equipment
and all other personal property of Tenant located in the Premises, if nonpayment
thereof shall give rise to a lien on any part of One Warren Place, and when
possible Tenant shall cause said fixtures, furnishings, equipment and other
personal property to be assessed and billed separately from the property of
Landlord. In the event any or all of Tenant's occupancy of the Premises, shall
be assessed and taxed with the property of Landlord, Tenant shall pay to
Landlord its share of such taxes, as determined by Landlord, within ten (10)
days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant's fixtures, furnishings,
equipment or personal property.
38. NOTICE.
------
Any notice provided for or required in this Lease must, unless otherwise
expressly provided in this Lease, be in writing, and may, unless otherwise
expressly provided in this Lease, be given or served by depositing the same in
the United States mail, postpaid, certified and addressed to the party to be
notified, with return receipt requested, or by delivering the same in person to
an officer of such party, or by prepaid telegram, when appropriate, addressed to
the party to be notified at the address set forth below or such other address,
notice of which has been given to the other party. Notice deposited in the mail
in the manner hereinabove described shall be effective from and after the
expiration of three (3) days after it is so deposited.
22
<PAGE>
Landlord: Metropolitan Life Insurance Company
Two Lincoln Centre, Suite 1310
5420 LBJ Freeway
Dallas, Texas 75240
Attn: Regional Manager
Real Estate Investments
With copies to:
Metropolitan Life Insurance Company
115 Perimeter Center
Suite 1050
Atlanta, Georgia 30346
Attn: Vice-President
Real Estate Investments
and
Koll Management Services, Inc.
One Warren Place, Suite 820
6120 South Yale Avenue
Tulsa, Oklahoma 74136
Attn: Building Manager of
One Warren Place
Tenant:
C.I.S., Inc.
One Warren Place, Suite 1900
6120 South Yale
Tulsa, Oklahoma 74136
39. SEVERABILITY.
------------
If any term or 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 term or provision to the
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law
notwithstanding the invalidity of any other term or provision hereof.
40. RECORDATION.
-----------
Tenant agrees not to record this Lease or any Memorandum hereof.
41. GOVERNING LAW.
-------------
This Lease and the rights and obligations of the parties hereto shall be
interpreted, construed, and enforced in accordance with the laws of the State of
Oklahoma.
42. FORCE MAJEURE.
-------------
Whenever a period of time is herein prescribed for the
23
<PAGE>
taking of any action by Landlord, Landlord shall not be liable or responsible
for, and there shall be excluded from the computation of such period of time,
any delays due to strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions, or any other cause
whatsoever beyond the control of Landlord.
43. TIME OF PERFORMANCE.
-------------------
Except as expressly otherwise herein provided, with respect to all required
acts of Tenant, time is of the essence of this Lease.
44. TRANSFERS BY LANDLORD.
---------------------
Landlord shall have the right to transfer and assign, in whole or in part,
all its rights and obligations hereunder and in One Warren Place and any other
property referred to herein, and in such event and upon such transfer Landlord
shall be released from any further obligations hereunder, and Tenant agrees to
look solely to such successor in interest of Landlord for the performance of
such obligations.
45. BROKERAGE COMMISSIONS.
---------------------
Tenant represents and warrants that it has dealt with no broker, agent or
other person in connection with this transaction other than the Brokers and that
no broker, agent or other person brought about this transaction, other than the
Brokers, Tenant agrees to indemnify and hold Landlord harmless from and against
any claims by any other broker, agent or other person claiming a commission or
other form of compensation by virtue of having dealt with Tenant with regard to
this leasing transaction. The provisions of this paragraph shall survive the
termination of this Lease.
46. EFFECT OF DELIVERY OF THIS LEASE.
--------------------------------
Landlord has delivered a copy of this Lease to Tenant for Tenant's review
only, and the delivery hereof does not constitute an offer to Tenant or an
option. This Lease shall not be effective until a copy executed by both
Landlord and Tenant is delivered to and accepted by Landlord.
47. BINDING EFFECT.
--------------
This Lease shall be binding upon and shall inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
48. EXHIBITS.
--------
The following exhibits are attached hereto and incorporated herein and made
a part of this Lease for all purposes:
Exhibit "A" - Description of Warren Place
Exhibit "B" - Description of One Warren Place
Exhibit "C" - Floor Plans of Premises
24
<PAGE>
Exhibit "D" - Work Letter
Exhibit "E" - Rules and Regulations
Exhibit "F" - Subordination, Non-Disturbance and
Attornment Agreement
Exhibit "G" - Diagram of Floor in One Warren Place
Parking Garage showing 15 spaces marked
"Reserved Parking Only"
49. INTEGRATED AGREEMENT.
--------------------
This Lease contains and constitutes the entire agreement between Landlord
and Tenant and supersedes all prior agreements and understandings between the
parties to this Lease relating to the subject matter of this Lease. There are
no agreements, understandings, restrictions, warranties, representations or
inducements between the parties to this Lease relating to the subject matter
hereof, other than those set forth in this Lease. This Lease may be amended,
modified, supplemented or terminated by a written document signed by the party
or parties to be bound, and not by any oral communication or other means.
50. TERMINATION OF PRIOR LEASES.
---------------------------
Effective as of the Commencement Date, the Prior Leases shall automatically
terminate, and Tenant shall not have any further right, title or interest in and
to any part of the premises covered by any of the Prior Leases under the terms
and provisions of those documents; provided, however, this termination of the
Prior Leases does not release or discharge any of the responsibilities,
obligations and liabilities of Tenant which accrue, or which are incurred by
Tenant, under the Prior Leases before termination thereof.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
multiple original counterparts as of the date and year first above written.
"Landlord": METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation
By _________________________________
David G. Rogers, Attorney-in-fact
"Tenant": C.I.S., INC., an Oklahoma corporation
ATTEST:
_________________ By _________________________________
Printed Name:____ Printed Name:____________________
____ Secretary ____ President
25
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
This instrument was acknowledged before me on _____, 199__, by David G.
Rogers, as Attorney-in-fact of Metropolitan Life Insurance Company, a New York
corporation.
____________________________
Notary Public
My Commission Expires:
___________
(SEAL)
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
This instrument was acknowledged before me on _____, 199__, by
__________________________, as ______ President of C.I.S., Inc., an Oklahoma
corporation.
___________________________
Notary Public
My Commission Expires:
___________
(SEAL)
26
<PAGE>
EXHIBIT 10(c)
================================================================================
U.S. $7,000,000
CREDIT AGREEMENT
Dated as of October 15, 1994
between
C.I.S., INC.
and
HOSPITAL BILLING ANALYSIS, INC.,
as Borrowers,
C.I.S. TECHNOLOGIES, INC.,
as Parent,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
================================================================================
<PAGE>
THIS CREDIT AGREEMENT ("Agreement") is entered into as of October 15, 1994
by and among C.I.S., INC., an Oklahoma corporation ("CIS, Inc."), and HOSPITAL
BILLING ANALYSIS, INC., a California corporation ("HBA", and, together with CIS,
Inc., collectively, the "Borrowers"), C.I.S. TECHNOLOGIES, INC., a Delaware
corporation ("Parent"), and GENERAL ELECTRIC CAPITAL CORPORATION, a corporation
organized under the banking laws of the State of New York, (together with its
successors and assigns in such capacity, "Lender").
RECITALS
A. Borrowers desire to borrow up to $7,000,000 from Lender, and Lender is
willing to make certain loans and other financial accommodations to Borrowers of
up to such amount upon the terms and conditions set forth herein.
B. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for purposes of
this Agreement and the other Loan Documents, the rules of construction set forth
in Annex A shall govern. Unless otherwise indicated, all references in this
Agreement to sections, subsections, schedules, exhibits, and attachments shall
refer to the corresponding sections, subsections, schedules, exhibits, and
attachments of or to this Agreement. All schedules, annexes, exhibits and
attachments hereto, or expressly identified to this Agreement, are incorporated
herein by reference, and taken together, shall constitute but a single
agreement. Unless otherwise expressly set forth herein, or in a written
amendment referring to such schedules and annexes, all schedules and annexes
referred to herein shall mean the schedules and annexes as in effect as of the
Closing Date. These Recitals shall be construed as part of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Advances.
(a) Upon and subject to the terms and conditions hereof, Lender agrees to
make available, from time to time until the Commitment Termination Date, for
Borrowers' use and upon the request of Borrowers therefor to Lender, advances
(each, a "Revolving Credit Advance") in an aggregate principal amount at any
time outstanding up to but not exceeding the Revolving Credit Commitment of
Lender, provided that in no event shall the aggregate principal amount of the
Revolving Credit Loan exceed the Borrowing Availability. Borrowers may from
time to time borrow, repay and reborrow Revolving Credit Advances under this
Section 1.1, provided that each borrowing of Revolving Credit Advances hereunder
shall be made only at the Revolving Credit Rate.
1
<PAGE>
(b) Borrowers shall give Lender notice of each borrowing of a Revolving
Credit Advance hereunder as provided in Section 1.1(c) and on the date specified
for such borrowing Lender shall make available the amount of the Revolving
Credit Advances to be made by it on such date to the Borrowers giving such
notice in immediately available funds.
(c) Each notice of a borrowing of a Revolving Credit Advance shall be given
in writing (by telecopy, hand delivery, or U.S. mail) by Borrowers to Lender at
its address at 501 Merritt Seven, Norwalk, Connecticut 06851, Attention:
Collateral Analyst Department, Telephone No. (203) 840-4518, Telecopy No. (203)
840-4540/4710, given no later than 12:00 noon (New York time) on the Business
Day of the proposed Revolving Credit Advance. Each such notice of borrowing (a
"Notice of Revolving Credit Advance") shall be substantially in the form of
Exhibit A, specifying therein the requested date, the amount of such Revolving
Credit Advance and such other information as may be required by Lender. Lender
shall be entitled to rely upon any Notice of Revolving Credit Advance delivered
to Lender by Borrowers. Subject to the terms and conditions of this Agreement,
if Lender shall have received a Notice of Revolving Credit Advance prior to
12:00 noon (New York time) on a Business Day, Lender shall, not later than 3:00
p.m. (New York time) on such Business Day cause the amount requested in such
Notice of Revolving Credit Advance to be wired to the Disbursement Account.
(d) The Revolving Credit Advances made by Lender shall be evidenced by a
single promissory note of Borrowers substantially in the form of Exhibit C,
dated the date hereof, payable to Lender in a principal amount equal to the
amount of the Revolving Credit Commitment as originally in effect and otherwise
duly completed. The date and amount of each Revolving Credit Advance made by
Lender and each payment of principal with respect thereto shall be recorded on
the books and records of Lender, which books and records shall constitute prima
facie evidence of the accuracy of the information therein recorded. The entire
unpaid balance of the Revolving Credit Loan shall be immediately due and payable
on the Commitment Termination Date.
(e) The Borrowers shall furnish to Lender a Borrowing Base Certificate
substantially in the form of Exhibit B, completed and signed by the Chief
Executive Officer or Chief Financial Officer of the Borrowers, which sets forth
a calculation of the Borrowing Base at the times and for the periods set forth
in Annex E. The Borrowers agree that in making any Revolving Credit Advance
hereunder Lender shall be entitled to rely upon the most recent Borrowing Base
Certificate delivered to Lender. The Borrowers further agree that, if Borrowers
shall have failed to deliver a Borrowing Base Certificate to Lender within the
specified period, Lender shall be under no obligation to make any further
Revolving Credit Advances until such time as such Borrowing Base Certificate is
delivered to Lender.
1.2 Term Loan.
(a) Upon and subject to the terms and conditions hereof, the Lender agrees
to make available to Borrowers in a single funding, on the Closing Date, the
Term Loan in a maximum principal amount equal to the Lender's Term Loan
Commitment as follows: (i) on the Closing Date, in a single funding, a portion
of the Term Loan in a principal amount equal to $1,000,000 (the "Tranche A Term
Loan"); and (ii) at any time prior to
2
<PAGE>
November 30, 1994 upon three Business Days' prior written notice from Borrowers
to Lender, on the date of consummation of the AMSC Acquisition, in a single
funding, a portion of the Term Loan in a principal amount equal to $1,000,000
(the "Tranche B Term Loan"). In the event that the Tranche B Term Loan is not
funded on or prior to November 30, 1994, a portion of the Term Loan Commitment
in an amount equal to $1,000,000 shall terminate. The Term Loan shall be
evidenced by a single promissory note of Borrowers substantially in the form of
Exhibit D, dated the date hereof, payable to the Lender in a principal amount
equal to the amount of the Term Loan Commitment as originally in effect and
otherwise duly completed.
(b) Subject to the terms and conditions of this Agreement, on any date of
funding of the Tranche A Term Loan or the Tranche B Term Loan, Lender shall
cause to be wired to the Disbursement Account, the proceeds of such Term Loan.
(c) The aggregate principal amount of the Tranche A Term Loan and the
Tranche B Term Loan shall be payable in quarterly installments until paid in
full as follows:
<TABLE>
<CAPTION>
Tranche A Tranche B
Payment Date Term Loan Term Loan
- - --------------- -------------- --------------
<S> <C> <C>
January 1, 1995 $ 83,333.33 $ 83,333.33
April 1, 1995 83,333.33 83,333.33
July 1, 1995 83,333.33 83,333.33
October 1, 1995 83,333.33 83,333.33
January 1, 1996 83,333.33 83,333.33
April 1, 1996 83,333.33 83,333.33
July 1, 1996 83,333.33 83,333.33
October 1, 1996 83,333.33 83,333.33
January 1, 1997 83,333.33 83,333.33
April 1, 1997 83,333.33 83,333.33
July 1, 1997 83,333.33 83,333.33
October 1, 1997 83,333.37 83,333.37
------------- -------------
Total $1,000,000.00 $1,000,000.00
</TABLE>
Notwithstanding anything to the contrary contained herein or in the Term Note,
the entire unpaid balance of the Term Loan shall be immediately due and payable
on the Commitment Termination Date.
(d) Amounts repaid or prepaid in respect of the Term Loan may not be
reborrowed. The Term Loan shall be subject to mandatory prepayment as set forth
in Section 1.3(c) and may be voluntarily prepaid as set forth in Section 1.3(d).
1.3 Repayment; Termination of Commitment.
(a) Borrowers hereby jointly and severally promise to pay to Lender the
entire outstanding principal amount of the Revolving Credit Loan and the Term
Loan, and the Revolving Credit Loan and the Term Loan shall mature, on the
Commitment Termination Date.
3
<PAGE>
(b) In the event that the outstanding balance of the Revolving Credit Loan
shall at any time exceed the Borrowing Availability, (i) Borrowers shall
immediately repay the Revolving Credit Loan in the amount of such excess; and
(ii) the excess balance shall nevertheless constitute Obligations that are
secured by the Collateral and entitled to all of the benefits thereof and of the
Loan Documents and shall be evidenced by the Revolving Credit Note.
(c) Borrowers shall have the right at any time, upon ten (10) days prior
written notice to Lender, to voluntarily terminate the Revolving Credit
Commitment (in whole but not in part). Upon such termination, Borrowers' right
to receive Revolving Credit Advances shall simultaneously terminate and
Borrowers' obligation to pay the Non-Use Fee shall terminate, and
notwithstanding anything to the contrary contained herein or in any Loan
Document, the entire outstanding balance of the Revolving Credit Loan and the
Term Loan shall be immediately due and payable. On the date of such
termination, Borrowers shall pay to Lender in immediately available funds all of
the Obligations, including the Termination Fee, and any accrued and unpaid
interest thereon. If the Tranche B Term Loan is made available by Lender to
Borrower and the AMSC Acquisition is not consummated within three (3) Business
Days of funding thereof, Borrower shall on the fourth Business Day after funding
thereof repay the entire principal amount of the Tranche B Term Loan, together
with any accrued and unpaid interest thereon.
(d) Borrowers shall have the right at any time, upon thirty (30) days prior
written notice to Lender, to voluntarily prepay all or a portion of the Term
Loan, without premium or penalty. Any such payments of less than all of the
outstanding balance of the Term Loan shall be applied to the remaining
installments of the Term Loan in the inverse order of their maturity.
1.4 Use of Proceeds.
(a) Borrowers shall use the proceeds of the Revolving Credit Loan for (i)
the refinancing of certain outstanding Indebtedness as provided in Section 2.1,
(ii) the payment of costs and expenses of the financing transactions
contemplated by this Agreement that are payable by Borrowers, and (iii) for
working capital, other corporate purposes and acquisitions (other than the AMSC
Acquisition) permitted by the terms of this Agreement and the other Loan
Documents.
(b) Borrowers shall use the proceeds of the Term Loan as follows: (i) the
Tranche B Term Loan shall be used only for the financing of the AMSC
Acquisition, and (ii) the Tranche A Term Loan shall be used only for working
capital and other corporate purposes permitted by the terms of this Agreement
and the other Loan Documents.
1.5 Interest.
(a) Borrowers shall pay interest on the Term Loan and the Revolving Credit
Loan to Lender, (i) in arrears for the preceding calendar month, on the first
day of each calendar month commencing on November 1, 1994, (ii) on the
Commitment Termination Date, and (iii) if any interest accrues or remains
payable after the Commitment Termination Date, upon demand. If any interest or
other payment under this Agreement
4
<PAGE>
becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Borrowers shall be obligated to pay interest to Lender: (i) on the
outstanding balance of the Revolving Credit Loan, at a floating rate equal to
the Revolving Credit Rate; and (ii) on the outstanding balance of the Term Loan,
at a floating rate equal to the Term Rate. All computations of interest shall
be made by Lender and on the basis of a three hundred and sixty (360) day year,
in each case for the actual number of days occurring in the period for which
such interest is payable. Each determination by Lender of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(c) Upon notice from Lender to Borrowers after the occurrence of any
Default, the interest rate applicable to the Obligations (including, without
limitation, the Revolving Credit Loan and the Term Loan) shall, from the date of
the occurrence of such Default and so long as such Default continues, be the
Default Rate, provided, that upon the occurrence of an Event of Default
specified in Sections 8.1(f), (g), or (h), the interest rate applicable to all
of the Obligations shall be increased automatically to the Default Rate without
the necessity of any action on the part of Lender.
(d) Notwithstanding anything to the contrary set forth in this Section 1.5,
if, at any time until payment in full of all of the Obligations, the rate of
interest payable hereunder exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such
event and so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable hereunder shall be equal to the Maximum Lawful Rate; provided,
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by
Lender from the making of the Revolving Credit Loan and the Term Loan hereunder
is equal to the total interest which Lender would have received had the interest
rate payable hereunder been (but for the operation of this paragraph) the
interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, the interest rate payable hereunder shall be the rate of
interest provided in Sections 1.5 (a) through (c), unless and until the rate of
interest again exceeds the Maximum Lawful Rate, in which event this Section
1.5(d) shall again apply. In no event shall the total interest received by
Lender pursuant to the terms hereof exceed the amount which Lender could
lawfully have received had the interest due hereunder been calculated for the
full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful
Rate is calculated pursuant to this paragraph, such interest shall be calculated
at a daily rate equal to the Maximum Lawful Rate divided by the number of days
in the year in which such calculation is made. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this Section 1.5(d),
shall make a final determination that Lender has received interest hereunder or
under any of the Loan Documents in excess of the Maximum Lawful Rate, Lender
shall, to the extent permitted by applicable law, promptly apply such excess
first to any lawful interest due and not yet paid hereunder, then to the
outstanding principal of the Obligations, then to Fees and any other unpaid
5
<PAGE>
Obligations, and thereafter shall refund any excess to Borrowers or as a court
of competent jurisdiction may otherwise order.
1.6 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrowers to Lender and on other information available
to Lender, Lender shall determine which Accounts shall be deemed to be Eligible
Accounts and Eligible Audit Service Accounts for purposes of determining the
amounts, if any, to be advanced to Borrowers under the Revolving Credit Loan.
1.7 Fees. As compensation for Lender's costs, skills, services and
efforts incurred and expended in making the Revolving Credit Loan and the Term
Loan available to Borrowers, Borrowers agree to pay to Lender the fees and
charges set forth in Annex D.
1.8 Cash Management System. On or prior to the Closing Date, Borrowers
will establish and maintain until the Termination Date, the cash management
system described in Annex B.
1.9 Receipt of Payments. Borrowers shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
Dollars in immediately available funds to the Collection Account. For purposes
of computing interest and Fees and determining the Borrowing Availability: (a)
all payments (including cash sweeps) consisting of cash, wire, or electronic
transfers in immediately available funds shall be deemed received by Lender upon
deposit in the Collection Account and notice to Lender of such deposit; and (b)
all payments consisting of checks, drafts, or similar non-cash items shall be
deemed received upon receipt of good funds following deposit in the Collection
Account (together with notice to Lender of such deposit).
1.10 Application and Allocation of Payments. Borrowers irrevocably waive
the right to direct the application of any and all payments at any time or times
hereafter received from or on behalf of Borrowers, and Borrowers irrevocably
agree that Lender shall have the continuing exclusive right to apply any and all
such payments against the then due and payable Obligations of Borrowers and in
repayment of the Revolving Credit Loan and the Term Loan as Lender may deem
advisable. In the absence of a specific determination by Lender with respect
thereto, the same shall be applied in the following order: (a) then due and
payable Fees and expenses; (b) then due and payable interest payments; (c) then
due and payable Obligations other than Fees, expenses and interest and principal
payments; (d) then due and payable principal payments on the Term Loan; and (e)
then due and payable principal payments on the Revolving Credit Loan. Lender is
authorized to, and at its option may, make or cause to be made Revolving Credit
Advances on behalf of Borrowers for payment of all Fees, expenses, charges,
costs, principal, interest, or other Obligations then due and payable by
Borrowers under this Agreement or any of the Loan Documents, even if the making
of such Revolving Credit Advance causes the outstanding balance of the Revolving
Credit Loan to exceed the Borrowing Availability, in which case the terms of
Section 1.3(b) shall apply.
1.11 Accounting. Lender will provide a monthly accounting of transactions
under the Revolving Credit Loan to Borrowers. Each and every such accounting
shall (absent manifest error) be deemed final, binding and conclusive upon
Borrowers in all respects as to all matters reflected therein, unless Borrowers,
within thirty (30) days
6
<PAGE>
after the date any such accounting is rendered, shall notify Lender in writing
of any objection which Borrowers may have to any such accounting, describing the
basis for such objection with specificity. In that event, only those items (the
"disputed items") expressly objected to in such notice shall be deemed to be
disputed by Borrowers. Lender's determination, based upon the facts available,
of any disputed item shall (absent manifest error) be final, binding and
conclusive on Borrowers.
1.12 Indemnity.
(a) Borrowers shall indemnify and hold Lender and its Affiliates, officers,
directors, employees, attorneys and agents (each, an "Indemnified Person"),
harmless from and against any and all suits, actions, costs, fines,
deficiencies, penalties, proceedings, claims, damages, losses, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other costs
of investigations or defense, including those incurred upon any appeal) (each, a
"Claim") which may be instituted or asserted against or incurred by such
Indemnified Person as the result of credit having been extended under this
Agreement or any other Loan Document or otherwise arising in connection with the
transactions contemplated hereunder and thereunder, including any and all
Environmental Liabilities and Costs and regardless of whether the Indemnified
Person is a party to such Claim; provided, that Borrowers shall not be liable
for any indemnification to such Indemnified Person with respect to any portion
of any such Claim which results solely from such Indemnified Person's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. NEITHER LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED THEREBY.
In any suit proceeding or action brought by Lender relating to any Account,
Chattel Paper, Contract, General Intangible, Inventory, Instrument, Equipment or
Document for any sum owing thereunder, or to enforce any provision of any
Account, Chattel Paper, Contract, General Intangible, Instrument or Document,
Borrowers shall save, indemnify and keep Lender harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder
arising out of a breach by any Borrower of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to, or
in favor of, such obligor or its successors from any Borrower, all such
obligations of Borrowers shall be and remain enforceable against, and only
against, Borrowers and shall not be enforceable against Lender.
(b) Borrowers hereby acknowledge and agree that Lender (as of the date
hereof) (i) is not now nor has ever been in control of any of the Subject
Property or the affairs of any Loan Party, and (ii) does not have the capacity
through the provisions of the Loan Documents to influence the conduct of any
Loan Party with respect to the ownership, operation or management of any of the
Subject Property.
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1.13 Access. Borrowers and Parent shall (and shall cause each of their
Subsidiaries to): (a) provide access during normal business hours to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate, upon reasonable advance notice (unless a Default shall have
occurred and be continuing, in which event no notice shall be required and
Lender shall have access at any and all times), to the properties and facilities
of the Loan Parties; (b) permit Lender and any of its officers, employees and
agents to inspect, audit and make extracts from all of the Loan Parties'
records, files and books of account; and (c) permit Lender to conduct audits to
inspect, review and evaluate the Collateral, and Borrowers and Parent agree to
render to Lender at Borrowers' cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. Borrowers shall,
and shall cause each of their Subsidiaries to, make available to Lender and its
respective counsel, as quickly as practicable under the circumstances, originals
or copies of all books, records, board minutes, contracts, insurance policies,
environmental audits, business plans, files, financial statements (actual and
pro forma), filings with federal, state and local regulatory agencies, and other
instruments and documents which Lender may request. Each Borrower and Parent
shall deliver any document or instrument reasonably necessary for Lender, as it
may from time to time request, to obtain records from any service bureau or
other Person which maintains records for such Loan Party, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by such Loan Party. Borrowers and Parent agree to make
available to Lender upon its reasonable request information and records prepared
by its independent certified public accountants and its banking and other
financial institutions.
1.14 Taxes.
(a) Any and all payments by or on behalf of Borrowers hereunder or under
the Revolving Credit Note, the Term Note, or any other Loan Document, shall be
made, in accordance with this Section 1.14, free and clear of and without
deduction for any and all present or future Taxes. If Borrowers shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Revolving Credit Note, the Term Note or any other Loan
Document to Lender, (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 1.14) Lender receives an amount equal
to the sum it would have received had no such deductions been made, (ii)
Borrowers shall make such deductions, and (iii) Borrowers shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law.
(b) In addition, Borrowers agree to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) Borrowers shall indemnify and pay, within ten (10) days of demand
therefor, Lender for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 1.14) paid by 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.
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(d) Within thirty (30) days after the date of any such payment of Taxes or
Other Taxes, Borrowers shall furnish to Lender, the original or a certified copy
of a receipt evidencing payment thereof.
1.15 Joint and Several Liability. All Obligations of any or all of the
Borrowers under this Agreement and the other Loan Documents shall be joint and
several and constitute one general obligation and liability of each Borrower to
the Lender. The Borrowers acknowledge that they will benefit directly and
indirectly from the Revolving Credit Loan and the Term Loan and agree that their
liability hereunder shall be absolute and unconditional regardless of any
defense available to or discharge of any other Borrower.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Term Loan and the Initial Revolving Credit Advance.
Notwithstanding any other provision of this Agreement and without affecting in
any manner the rights of Lender hereunder, none of Borrowers or Parent shall
have any rights under this Agreement (but shall have all applicable obligations
hereunder), and Lender shall not be obligated to make the Term Loan or any
Revolving Credit Advances, or to take, fulfill, or perform any other action
hereunder, until the following conditions have been fulfilled to the
satisfaction of Lender:
(a) This Agreement or counterparts thereof shall have been duly executed by
Borrowers and Parent and delivered to Lender.
(b) Lender shall have received such documents, instruments, certificates,
opinions and agreements as Lender shall request in connection with the
transactions contemplated by this Agreement, including all documents,
instruments, agreements and other materials listed in the Schedule of Documents
each in form and substance satisfactory to Lender.
(c) Lender shall have received evidence satisfactory to Lender that all of
the obligations of the Loan Parties under their financing agreements and
instruments with Liberty Bank and Trust Company of Tulsa, N.A., and the Small
Business Administration in each case, as in effect immediately prior to the
Closing Date, will be performed and paid in full from the proceeds of the
initial Revolving Credit Advance and that all Liens in favor of such lenders
upon any of the Collateral or any other property or assets of any Loan Party
shall have been terminated immediately upon such payment.
(d) Evidence satisfactory to Lender that the Loan Parties have obtained
consents and acknowledgments of all Persons whose consents and acknowledgments
may be required, including all requisite Governmental Authorities, to the terms
and to the execution and delivery of this Agreement and the other Loan Documents
and the consummation of the transactions contemplated hereby and thereby.
(e) Evidence satisfactory to Lender that the insurance policies provided
for in Section 3.19 and Annex F are in full force and effect, together with
appropriate evidence showing a loss payable and/or additional insured clauses or
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endorsements, as appropriate, in favor of Lender and in form and substance
satisfactory to Lender.
(f) All of the assets supporting the initial Revolving Credit Advance and
the amount, if any, of the reserves to be established on the Closing Date shall
be sufficient in value, on a pro forma basis after giving effect to the payment
of all anticipated closing expenditures, whether or not then paid, as determined
by Lender, and without any material deterioration of trade payables, to provide
Borrowers with Excess Borrowing Availability under the Revolving Credit Loan of
not less than $3,000,000.
(g) Payment by Borrowers to Lender of all Fees, costs, and expenses of
closing (including fees and expenses of consultants and counsel to Lender
presented as of the Closing Date).
(h) No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of, or which is related to or arises out of, this Agreement or any of
the other Loan Documents or the consummation of the transactions contemplated
hereby and thereby and which, in Lender's sole judgment, would make it
inadvisable to consummate the transactions contemplated by this Agreement or any
of the other Loan Documents.
(i) Lender shall have received the Financials.
(j) Lender shall be satisfied, in its reasonable judgment, with the
corporate, capital, tax, legal and management structure of each Loan Party, and
shall be satisfied, in its sole judgment exercised reasonably, with the nature
and status of all contractual obligations, securities, labor, tax, ERISA,
employee benefit, environmental, health and safety matters, in each case,
involving or affecting any Loan Party.
(k) All of the conditions precedent to closing under the Company Documents
and the Equity Documents shall have been met to the satisfaction of Lender and
all of such documents shall have been executed and delivered by the parties
thereto and the closings thereunder shall be consummated simultaneously with the
closing hereunder.
2.2 Further Conditions to Each Loan. It shall be a further condition to
the funding of the Tranche A Term Loan or the Tranche B Term Loan and the
initial and each subsequent Revolving Credit Advance that the following
statements shall be true on the date of each such funding, advance or
incurrence, as the case may be:
(a) Each Loan Party's representations and warranties contained herein or in
any of the Loan Documents shall be true and correct on and as of the Closing
Date and the date on which such Revolving Credit Advance or such Term Loan is
made, as though made on or incurred on and as of such date, except to the extent
that any such representation or warranty expressly relates solely to an earlier
date and except for changes therein permitted or contemplated by this Agreement.
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(b) No event shall have occurred and be continuing, or would result from
the making of such Term Loan or such Revolving Credit Advance, as the case may
be, which constitutes or would constitute a Default.
(c) After giving effect to such Revolving Credit Advance, the aggregate
principal amount of the Revolving Credit Loan shall not exceed the Borrowing
Availability.
(d) With respect to the Tranche B Term Loan, the AMSC Acquisition shall be
consummated on the date of funding thereof and Lender shall have received such
evidence of consummation of, and other information with respect to, the AMSC
Acquisition as it may require.
The request and acceptance by Borrowers of the proceeds of any Term Loan or any
Revolving Credit Advance, as the case may be, shall be deemed to constitute, as
of the date of such request or acceptance, (i) a representation and warranty by
Parent and Borrowers that the conditions in this Section 2.2 have been satisfied
and (ii) a confirmation by Parent and Borrowers of the granting and continuance
of Lender's Liens pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, Borrowers and Parent
represent and warrant to Lender that:
3.1 Corporate Existence; Compliance with Law. Each Loan Party: (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to do business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification and the
failure to so qualify would not have a Material Adverse Effect; (b) has the
requisite corporate and authority and the legal right to own, pledge, mortgage
or otherwise encumber and operate its properties, to lease the property it
operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (c) has all material licenses, permits, consents or
approvals from or by, and has made all filings with, and has given all notices
to, all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (d) is in compliance with its articles or
certificate of incorporation and by-laws; and (e) is in compliance in all
material respects with all applicable provisions of law.
3.2 Executive Offices; Collateral Locations; Corporate or Other Names.
The current locations of each Loan Party's executive office, principal place of
business, corporate offices, all warehouses and premises within which any
Collateral is stored or located, and the locations of all of the Loan Parties'
records concerning the Collateral are set forth in Schedule 3.2 and, except as
set forth in Schedule 3.2, such locations have not changed during the preceding
12 months. During the prior five (5) years, except as set forth in Schedule
3.2, no Loan Party has been known as or used any corporate, fictitious or trade
name.
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3.3 Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each Loan Party of the Loan Documents and
all other instru-ments and documents to be delivered by such Loan Party
hereunder and thereunder to the extent it is a party thereto and the creation of
all Liens provided for herein and therein: (a) are within such Loan Party's
corporate power; (b) have been duly authorized by all necessary corporate and
shareholder action; (c) are not in contravention of any provision of such Loan
Party's articles or certificate of incorporation or by-laws or other
organizational documents; (d) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (e) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which any Loan Party is a
party or by which any Loan Party or any of its property is bound; (f) will not
result in the creation or imposition of any Lien upon any of the property of any
Loan Party other than those in favor of Lender, all pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in Section 2.1(d), all
of which will have been duly obtained, made or complied with prior to the
Closing Date and which are in full force and effect. At or prior to the Closing
Date, each of the Loan Documents shall have been duly executed and delivered for
the benefit of or on behalf of each Loan Party which is a party thereto and each
shall then constitute a legal, valid and binding obligation of such Loan Party
to the extent it is a party thereto, enforceable against such Loan Party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights and
to equitable principles of general applicability.
3.4 Financial Statements. Borrowers and Parent have delivered the
Financials identified in Schedule 3.4, and each of such Financials complies with
the description thereof contained in Schedule 3.4.
3.5 Material Adverse Change. As of the date hereof, no Loan Party has any
obligations, contingent liabilities, or liabilities for Charges, long-term
leases or unusual forward or long-term commitments which are not reflected in
the audited December 31, 1993, consolidated balance sheet of Parent, which could
have a Material Adverse Effect. Except as otherwise permitted hereunder or as
set forth in Schedule 3.5, no Restricted Payment has been made since December
31, 1993, and no shares of Stock of Parent have been, or are now required to be,
redeemed, retired, purchased or otherwise acquired for value by Parent. Except
as otherwise disclosed in paragraph 1 of Schedule 3.12, since December 31, 1993,
no event has occurred or is continuing which would result in a Material Adverse
Effect.
3.6 Ownership of Property; Liens. Except as described in Schedule 3.6,
the real estate listed in Schedule 3.6 constitutes all of the real property
owned, leased, or used in its business by each Loan Party. Each Loan Party
holds good and marketable title to all of its property and assets and valid
leasehold interests in all of such Loan Party's Leases and none of the
properties or assets of any Loan Party are subject to any Liens, except (x)
Permitted Encumbrances and (y) from and after the Closing Date, the Lien in
favor of Lender pursuant to the Collateral Documents. Each Loan Party has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and duly
effected all recordings, filings
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and other actions necessary to establish, protect and perfect such Loan Party's
right, title and interest in and to all such real estate and other assets or
property. Except as described in Schedule 3.6, (a) no Loan Party or, to
Borrowers' or Parent's knowledge, any other party to any Lease, is in default of
its obligations thereunder or has delivered or received any notice of default
under any such Lease, and no event has occurred which, to Borrowers' or Parent's
knowledge, with the giving of notice, the passage of time, or both, would
constitute a default under any such Lease; (b) no Loan Party owns or holds, or
is obligated under or a party to, any option, right of first refusal or any
other contractual right to purchase, acquire, sell, assign or dispose of any
property owned or leased by such Loan Party except as set forth in Schedule 3.6;
and (c) no material portion of any real property owned or leased by any Loan
Party has suffered any material damage by fire or other casualty loss which has
not heretofore been completely repaired and restored to its original condition.
All permits required to have been issued or appropriate to enable the real
property owned or leased by any Loan Party to be lawfully occupied and used for
all of the purposes for which they are currently occupied and used, have been
lawfully issued and are, as of the date hereof, in full force and effect, except
to the extent that the failure to have any such permit would not have a Material
Adverse Effect.
3.7 Restrictions; No Default. No Contract, lease, agreement, instrument
or other document to which any Loan Party is a party or by which it or any of
its properties or assets is bound or affected and no provision of any charter,
corporate restriction, applicable law or governmental regulation has resulted in
or will result in a Material Adverse Effect. No Loan Party is in default and,
to Borrowers' or Parent's knowledge, no third party is in default, under or with
respect to any Contract, lease, agreement, instrument or other document to which
any Loan Party is a party, which default could result in a Material Adverse
Effect. No Default has occurred and is continuing.
3.8 Labor Matters. There are no strikes or other labor disputes against
any Loan Party that are pending or, to Borrowers' or Parent's knowledge,
threatened. Hours worked by and payment made to employees of each Loan Party
have not been in violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters which would have a Material Adverse
Effect. All material payments due from any Loan Party on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of such Loan Party. Except as set forth in Schedule 3.8, no Loan Party
has any obligation under any collective bargaining agreement, management
agreement, or any employment agreement, and a correct and complete copy of each
agreement listed on Schedule 3.8 has been provided to Lender. There is no
organizing activity involving any Loan Party pending or, to Borrowers' or
Parent's knowledge, threatened by any labor union or group of employees. Except
as set forth in Schedule 3.14, there are no representation proceedings pending
or, to Borrowers' or Parent's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any Loan
Party has made a pending demand for recognition, and, there are no complaints or
charges against any Loan Party pending or threatened to be filed with any
federal, state, local or foreign court, governmental agency or arbitrator based
on, arising out of, in connection with, or otherwise relating to the employment
or termination of employment by any Loan Party of any individual.
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Schedule 3.9, no Loan Party has any
Subsidiaries, or
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is engaged in any joint venture or partnership with, or an Affiliate of, any
other Person. The Stock of each Subsidiary owned by each of the stockholders
thereof named in Schedule 3.9 constitutes all of the issued and outstanding
Stock of such Loan Party. Except as set forth in Schedule 3.9, there are no
outstanding rights to purchase options, warrants or similar rights or agreements
pursuant to which any Loan Party may be required to issue, sell or purchase any
Stock or other equity security. Schedule 3.9 lists all outstanding Stock of each
Loan Party as of the Closing Date. Schedule 6.3 lists all Indebtedness of each
Loan Party as of the Closing Date.
3.10 Government Regulation. No Loan Party: (a) is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940 as amended; (b) is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or any other federal or state statute that restricts or limits such
Loan Party's ability to incur Indebtedness, pledge its assets, or to perform its
obligations hereunder, or under any other Loan Document, and the making of the
Term Loan and the Revolving Credit Advances, in each case by Lender, the
application of the proceeds and repayment thereof by each Loan Party, and the
consummation of the transactions contemplated by this Agreement and the other
Loan Documents, will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.11 Margin Regulations. No Loan Party is engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock and no
proceeds of the Term Loan nor of any Revolving Credit Advance will be used to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock. No Loan Party will take or permit
to be taken any action which might cause any Loan Document or any document or
instrument delivered pursuant hereto or thereto to violate any regulation of the
Board of Governors of the Federal Reserve Board.
3.12 Taxes. Except as set forth in Schedule 3.12, all federal, state,
local and foreign tax returns, reports and statements, including information
returns required to be filed by each Loan Party, have been filed with the
appropriate Governmental Authority and all Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid.
Except as set forth in Schedule 3.12, each Loan Party has paid when due and
payable all material Charges required to be paid by it. Proper and accurate
amounts have been withheld by each Loan Party from their respective employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 3.12 sets forth those taxable years for
which any of the tax returns of each Loan Party are currently being audited by
the IRS or any other applicable Governmental Authority; and any assessments or
threatened assessments in connection with such audit or otherwise currently
outstanding. Except as described in Schedule 3.12, no Loan Party has executed
or filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charges. None of the property owned by any Loan Party is
property which is required
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to treat as being owned by any other Person pursuant to the provisions of IRC
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in
effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of IRC Section 168(h). No Loan
Party has agreed or been requested to make any adjustment under IRC Section
481(a) by reason of a change in accounting method or otherwise. No Loan Party
has any obligation under any written tax sharing agreement except as described
in Schedule 3.12.
3.13 ERISA. Schedule 3.13 lists all Plans maintained or contributed to by
any Loan Party and all Qualified Plans, unfunded Pension Plans, or Welfare Plans
maintained or contributed to by any ERISA Affiliate. No Loan Party or any
current or former ERISA Affiliate sponsors (or has sponsored), contributes to
(or has contributed to), or is (or was) required to contribute to any Title IV
Plan, any Plan subject to IRC Section 412 or ERISA Section 302, or any Retiree
Welfare Plan. IRS determination letters regarding the qualified status under
IRC Section 401 of each Qualified Plan have been received as of the dates listed
in Schedule 3.13. Each of the Qualified Plans has been amended to comply with
the Tax Reform Act of 1986 and to make other changes required under the IRC or
ERISA, and if such required amendments are not subject to the determination
letters described in the previous sentence, each Qualified Plan so amended will
be submitted to the IRS for a determination letter as to the ongoing qualified
status of the Plan under the IRC within the applicable IRC Section 401(b)
remedial amendment period; and each such Plan shall be amended, including
retroactive amendments, as required during such determination letter process to
maintain the qualified status of such Plans. To the knowledge of Borrowers and
Parent, the Qualified Plans as amended continue to qualify under Section 401 of
the IRC, the trusts created thereunder continue to be exempt from tax under the
provisions of IRC Section 501(a), and nothing has occurred which would cause the
loss of such qualification or tax-exempt status. To the knowledge of Borrowers
and Parent, each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including the filing of all reports
required under the IRC or ERISA which are true and correct as of the date filed,
and all required contributions and benefits have been paid in accordance with
the provisions of each such Plan. No Loan Party has engaged in a prohibited
transaction, as defined in IRC Section 4975 or Section 406 of ERISA, in
connection with any Plan which would subject any such Person (after giving
effect to any exemption) to a material tax on prohibited transactions imposed by
IRC Section 4975 or any other material liability. Except as set forth in
Schedule 3.13: (i) there are no pending, or to the knowledge of Borrowers and
Parent, threatened claims, actions or lawsuits (other than claims for benefits
in the normal course), asserted or instituted against (x) any Plan or its
assets, (y) any fiduciary with respect to any Plan or (z) any Loan Party or any
ERISA Affiliate with respect to any Plan (ii) each Loan Party or other ERISA
Affiliate has complied with the notice and continuation coverage requirements of
IRC Section 4980B and the proposed or final regulations thereunder; and (iii) no
liability under any Plan has been funded, nor has such obligation been satisfied
with, the purchase of a contract from an insurance company that is not rated AAA
by Standard & Poor's Corporation and the equivalent by each other nationally
recognized rating agency.
3.14 No Litigation. Except as set forth in Schedule 3.14, no action,
claim or proceeding is now pending or, to the knowledge of Borrowers and Parent,
threatened against any Loan Party, at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of any federal, state, or
local government or of any agency or
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subdivision thereof, or before any arbitrator or panel of arbitrators (a) which
challenges any such Person's right, power, or competence to enter into or
perform any of its obligations under the Loan Documents, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) which
if determined adversely, could have or result in a Material Adverse Effect. To
the knowledge of Borrowers and Parent, there does not exist a state of facts
which is reasonably likely to give rise to such proceedings.
3.15 Brokers. No broker or finder acting on behalf of any Loan Party
brought about the obtaining, making or closing of the credit extended pursuant
to this Agreement or the transactions contemplated by the Loan Documents and no
Loan Party has any obligation to any Person in respect of any finder's or
brokerage fees in connection therewith .
3.16 Intellectual Property. Except as otherwise set forth in Schedule
3.16, each Loan Party owns all Intellectual Property which is necessary to
continue to conduct its business as heretofore conducted by it, except where the
failure to own any such Intellectual Property right would not have or result in
a Material Adverse Effect, now conducted by it and, to the Borrowers' and
Parent's knowledge, proposed to be conducted by it, each of which is listed,
together with United States Patent and Trademark Office application or
registration numbers, where applicable, in Schedule 3.16. Each Loan Party
conducts business without infringement or claim of infringement of any
Intellectual Property right of others, except where such infringement or claim
of infringement could not have or result in a Material Adverse Effect. Except
as set forth in Schedule 3.16, to Borrowers' and Parent's knowledge, there is no
infringement or claim of infringement by others of any material Intellectual
Property of any Loan Party, except where such infringement or claim of
infringement could not have or result in a Material Adverse Effect.
3.17 Full Disclosure. No information contained in this Agreement, the
other Loan Documents, the Financials or any written statement furnished by or on
behalf of any Loan Party or any Affiliate thereof pursuant to the terms of this
Agreement or any other Loan Document, which has previously been delivered to
Lender, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. With
respect to any business plan (including without limitation Parent's strategic
plan) furnished by or on behalf of the Loan Parties to Lender relating to the
financial condition, operations, business, properties or prospects of any Loan
Party or any Subsidiary thereof: (a) all facts upon which such business plan is
based are true and complete in all material respects and no material fact was
omitted therefrom, (b) all material assumptions underlying such business plan
are reasonable under the circumstances and are disclosed therein, and (c) the
forecasts in such business plan are made with care and diligence and are
reasonably based on those facts and assumptions. With respect to any such
business plans made available to Lender after the Closing Date, the foregoing
clauses (a) through (c) shall be true and correct in all respects as of the date
of such business plan.
3.18 Hazardous Materials. Except for routine operations in the ordinary
course of business in compliance with applicable permits issued by a
Governmental
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Authority, the Subject Property is free of any Hazardous Material and no Loan
Party has caused or suffered to occur any Release at, under, above or within any
Subject Property. There are no existing or potential Environmental Liabilities
and Costs of any Loan Party of which any Borrower or Parent, after due inquiry,
have knowledge, which could have or result in a Material Adverse Effect. No Loan
Party is involved in operations which could lead to the imposition of any
material Environmental Liabilities and Costs on it, or any owner of any premises
which it occupies, or any Lien securing the same under any Environmental Law.
3.19 Insurance Policies. Schedule 3.19 lists all insurance of any nature
maintained for current occurrences by each Loan Party, as well as a summary of
the terms of such insurance. Such insurance complies with and shall at all
times comply with the standards set forth in Annex F.
3.20 Deposit and Disbursement Accounts. Schedule 3.20 lists all banks and
other financial institutions at which each Loan Party maintains deposits and/or
other accounts and/or post office lock boxes, including the Disbursement
Account, the Concentration Account and the Lock Box Accounts, and such Schedule
correctly identifies the name, address and telephone number of each depository,
the name in which the account is held, a description of the purpose of the
account, and the complete account number.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. Borrowers and Parent covenant and agree that
from and after the Closing Date and until the Termination Date, they shall
deliver to Lender the Financials and notices at the times and in the manner set
forth in Annex E. Concurrently with the delivery of such annual audited
financial statements, Borrowers shall cause to be delivered to Lender a
certificate of Borrowers' independent certified public accountants certifying
that during the course of performing their audit of the Loan Parties they did
not become aware of any Default under the Loan Documents or specifying each
Default of which they became aware.
4.2 Communication with Accountants. Borrowers and Parent (each for itself
and each Subsidiary) authorize Lender to communicate directly with them and
their Subsidiaries' independent certified public accountants and tax advisors
and authorizes those accountants and advisors to disclose to Lender any and all
work papers and financial statements and other supporting financial documents
and schedules, including copies of any management letter with respect to the
business, financial condition and other affairs of Parent, each Borrower and
each Subsidiary thereof. So long as no Event of Default has occurred and is
continuing, Lender shall promptly notify Parent in writing of any such
communication; provided that Lender shall incur no liability for failure to give
such notice. At or before the Closing Date and on each anniversary of the
Closing Date, Borrowers and Parent shall, and shall cause each Subsidiary
thereof to, deliver a letter (the "Accountant's Letter") addressed to and
acknowledged by such accountants and tax advisors instructing them to make
available to Lender such information and records as Lender may reasonably
request and to otherwise comply with the provisions of this Section 4.
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5. AFFIRMATIVE COVENANTS
Borrowers and Parent covenant and agree (each for itself and its
Subsidiaries) that, unless Lender shall otherwise consent in writing, from and
after the date hereof and until the Termination Date, Borrowers and Parent
shall, and shall cause each Subsidiary thereof to, comply with the following
affirmative covenants:
5.1 Maintenance of Existence and Conduct of Business. Each Loan Party
shall: (a) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises; (b)
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; (c) at all times maintain, preserve and protect all of its
Intellectual Property, and preserve all the remainder of its property, in use or
useful in the conduct of its business and keep the same in good repair, working
order and condition (taking into consideration ordinary wear and tear) and from
time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; (d) keep and maintain its Equipment and
Fixtures in good operating condition (reasonable wear and tear excepted)
sufficient for the continuation of such Person's business conducted on a basis
consistent with past practices and shall provide or arrange for all maintenance
and service and all repairs necessary for such purpose; and (e) transact
business only under the names set forth in Schedule 3.2.
5.2 Payment of Charges and Claims. Each Loan Party shall pay and
discharge, or cause to be paid and discharged in accordance with the terms
thereof, (A) all Charges imposed upon it or any other Loan Party or its or their
income and profits, or any of its property (real, personal or mixed), and (B)
all lawful claims for labor, materials, supplies and services or otherwise,
which if unpaid might by law become a Lien on its property; provided, that such
Loan Party shall not be required to pay any such Charge or claim which is being
contested in good faith by proper legal actions or proceedings, so long as at
the time of commencement of any such action or proceeding and during the
pendency thereof (i) adequate reserves with respect thereto are established and
are maintained in accordance with GAAP, (ii) such contest operates to suspend
collection of the contested Charges or claims and is maintained and prosecuted
continuously with diligence, (iii) none of the Collateral would be subject to
forfeiture or loss or any Lien by reason of the institution or prosecution of
such contest, (iv) no Lien shall exist, be imposed or be attempted to be imposed
for such Charges or claims during such action or proceeding unless the full
amount of such Charge or claim is covered by insurance satisfactory in all
respects to Lender, (v) such Loan Party shall promptly pay or discharge such
contested Charges and all additional charges, interest penalties and expenses,
if any, and shall deliver to Lender evidence acceptable to Lender of such
compliance, payment or discharge, if such contest is terminated or discontinued
adversely to such Loan Party, and (vi) Lender has not advised Borrower in
writing that Lender reasonably believes that nonpayment or nondischarge thereof
would result in a Material Adverse Effect.
5.3 Books and Records. Each Loan Party shall keep adequate records and
books of account with respect to its business activities, in which proper
entries, reflecting all of its consolidated and consolidating financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financials.
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5.4 Litigation. Each Loan Party shall notify Lender in writing, promptly
upon learning thereof, of any litigation, Claim or other action commenced or
threatened against any Loan Party, and of the institution against any Loan Party
of any suit or administrative proceeding which (a) may involve an amount in
excess of $250,000 individually or in the aggregate or (b) could have or result
in a Material Adverse Effect if adversely determined.
5.5 Insurance.
(a) The Loan Parties shall, at their sole cost and expense, maintain or
cause to be maintained, the policies of insurance in such amounts and as
otherwise described in Annex F and with insurers recognized as adequate by
Lender. The Loan Parties shall notify Lender promptly of any occurrence causing
a material loss or decline in value of any real or personal property and the
estimated (or actual, if available) amount of such loss or decline, except as
specified otherwise in Annex F. Subject to Section 5.13, Borrowers and Parent
hereby direct all present and future insurers under its "All Risk" policies of
insurance to pay all proceeds payable thereunder directly to Lender, other than
proceeds relating to the loss or damage to property which secures Indebtedness
permitted under clauses (c) of Section 6.3 which is required by the terms of
such Indebtedness to be paid to the holder thereof ("excluded proceeds").
Borrowers and Parent irrevocably make, constitute and appoint Lender (and all
officers, employees or agents designated by Lender) as their true and lawful
agent and attorney in-fact for the purpose of, upon the occurrence and during
the continuance of a Default, making, settling and adjusting claims under the
"All Risk" policies of insurance, endorsing the name of such Person on any
check, draft, instrument or other item of payment for the proceeds of such "All
Risk" policies of insurance (other than excluded proceeds), and for making all
determinations and decisions with respect to such "All Risk" policies of
insurance. In the event any Loan Party at any time or times hereafter shall
fail to obtain or maintain (or fail to cause to be obtained or maintained) any
of the policies of insurance required above or to pay any premium in whole or in
part relating thereto, Lender, without waiving or releasing any Obligations or
Default hereunder, may at any time or times thereafter (but shall not be
obligated to) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which Lender deems
advisable. All sums so disbursed, including reasonable attorneys' fees, court
costs and other charges related thereto, shall be payable, on demand, by
Borrowers to Lender and shall be additional Obligations hereunder secured by the
Collateral, provided, that if and to the extent Borrowers fail to promptly pay
any of such sums upon Lender's demand therefor, Lender is authorized to, and at
its option may, make or cause to be made Revolving Credit Advances on behalf of
Borrowers for payment thereof.
(b) Lender reserves the right at any time, upon review of Borrowers' risk
profile, to reasonably require additional forms and limits of insurance to
adequately protect Lender's interests. Each Loan Party shall, if so requested
by Lender, deliver to Lender, as often as Lender may reasonably request, a
report of a reputable insurance broker satisfactory to Lender with respect to
its insurance policies.
(c) Each Loan Party shall deliver to Lender endorsements to all of its (i)
"All Risk" and business interruption insurance naming Lender as loss payee to
the
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extent provided in Section 5.5(a), and (ii) general liability and other
liability policies naming Lender as an additional insured.
5.6 Compliance with Laws. Each Loan Party shall comply with all federal,
state and local laws, permits and regulations applicable to it, including those
relating to licensing, environmental, ERISA and labor matters, except to the
extent any failure to so comply would not have a Material Adverse Effect.
5.7 Agreements. Each Loan Party shall perform, within all required time
periods (after giving effect to any applicable grace periods), all of its
obligations and enforce all of its rights under each agreement, contract,
instrument or other document to which it is a party, where the failure to so
perform and enforce could have or result in a Material Adverse Effect. Each
Loan Party shall perform and comply with all obligations in respect of Accounts,
Chattel Paper, Instruments, Contracts, Licenses, and Documents and all other
agreements constituting or giving rise to Collateral. No Borrower shall,
without Lender's prior written consent, with respect to any of the Accounts (a)
grant any extension of the time of payment of any thereof; (b) compromise or
settle the same for less than the full amount thereof; (c) release, in whole or
in part, any Person liable for the payment thereof; or (d) allow any credit or
discount whatsoever thereon other than trade discounts granted in the ordinary
course of business of such Borrower, provided, that Borrowers may, without
Lender's prior written consent, release, in whole or in part, compromise,
settle, or allow credits or discounts with respect to the payment of any of the
Accounts, each in an amount not to exceed (i) $50,000 in the aggregate in any
calendar month, and (ii) $150,000 in the aggregate in any twelve month period,
so long as such compromise, settlement, credit or discount is reported on the
next Borrowing Base Certificate submitted by Borrowers.
5.8 Supplemental Disclosure. On the request of Lender (in the event that
such information is not otherwise delivered by Borrowers or Parent to Lender
pursuant to this Agreement), Borrowers and Parent will supplement (or cause to
be supplemented) each Schedule hereto, or representation herein or in any other
Loan Document with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedule or as an exception to such representation or
which is necessary to correct any information in such Schedule or representation
which has been rendered inaccurate thereby; provided, that such supplement to
such Schedule or representation shall not be deemed an amendment thereof unless
expressly consented to in writing by Lender, and no such amendments, except as
the same may be consented to in a writing which expressly includes a waiver,
shall be or be deemed a waiver by Lender of any Default disclosed therein. Each
Loan Party shall, if so requested by Lender, furnish to Lender as often as it
reasonably requests, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as
Lender may reasonably request, all in reasonable detail, and, each, Loan Party
shall advise Lender promptly, in reasonable detail, of (a) any Lien, other than
as permitted pursuant to Section 6.7, attaching to or asserted against any of
the Collateral, (b) any material change in the composition of the Collateral,
and (c) the occurrence of any other event which would have a Material Adverse
Effect upon the Collateral and/or Lender's Lien thereon.
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5.9 Environmental Matters. Each Loan Party shall (a) comply with all
Environmental Laws and permits applicable to it where the failure to so comply
could have or result in a Material Adverse Effect, (b) notify Lender promptly
after such Loan Party becomes aware of any Release upon any Subject Property
which could have or result in a Material Adverse Effect, and (c) promptly
forward to Lender a copy of any order, notice, permit, application, or any
communication or report received by any Loan Party in connection with any such
Release or any other material matter relating to the Environmental Laws that may
affect any Subject Property or any Loan Party. The provisions of this Section
5.9 shall apply whether or not the Environmental Protection Agency, any other
federal agency or any state or local environmental agency has taken or
threatened any action in connection with any Release or the presence of any
Hazardous Materials.
5.10 Subsidiaries. Each Loan Party shall take such action from time to
time as shall be necessary to ensure that each of its Subsidiaries is a Wholly-
owned Subsidiary, except as otherwise permitted under clause (ii) of the first
sentence of Section 6.1 and any limited liability company Subsidiary organized
pursuant to the Company Documents. No Loan Party will permit any of its
Subsidiaries to enter into, after the date of this Agreement, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of dividends or
other Restricted Payments, the making of loans, advances or Investments or the
sale, assignment, transfer or other disposition of any property or assets. Upon
Lender's request (exercised in its sole discretion), Parent shall cause its
Subsidiaries or any of them to (i) guarantee the Obligations by executing and
delivering a Subsidiary Guaranty and/or (ii) pledge all of its assets to secure
the Obligations by executing and delivering a Subsidiary Security Agreement.
5.11 Application of Proceeds. Borrowers shall use the proceeds of the
Revolving Credit Loan and the Term Loan as provided in Section 1.4.
5.12 Fiscal Year. Each Loan Party shall maintain as its Fiscal Year the
twelve month period ending on December 31 of each year.
5.13 AMSC Acquisition. Parent shall provide to Lender copies of all
documentation relating to the AMSC Acquisition which documentation shall be
satisfactory in all respects to Lender. The notes (the "Acquisition Notes")
proposed to be made by Parent in favor of the sellers as partial consideration
for the purchase price of the AMSC Acquisition shall (i) be satisfactory in all
respects to Lender, (ii) be subject to acceleration, redemption, mandatory
prepayment or purchase only upon the bankruptcy of the Parent or upon a payment
default, (iii) be in an original aggregate principal amount of not more than
$2,000,000, and (iv) provide that no scheduled payments of principal or interest
are payable thereunder prior to a date which is no less than 36 months from the
date of issuance. The Acquisition Notes shall be secured only by the stock of
AMSC owned by Parent.
6. NEGATIVE COVENANTS
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Borrowers and Parent covenant and agree (for itself and each Subsidiary)
that, without Lender's prior written consent, from and after the date hereof and
until the Termination Date, Borrowers and Parent shall, and shall cause each
Subsidiary thereof to, comply with the following negative covenants:
6.1 Mergers, Subsidiaries, Etc. No Loan Party shall directly or
indirectly, by operation of law or otherwise, merge with, consolidate with,
acquire all or substantially all of the assets or capital stock of, or otherwise
combine with, any Person, except (i) the merger or consolidation of a Wholly-
owned Subsidiary (other than a Borrower) with another Subsidiary of Parent
(other than a Borrower), so long as the Subsidiary surviving such merger or
consolidation is a Wholly-owned Subsidiary; and (ii) the acquisition of the
assets or stock of any Person; provided that for any acquisition of the stock of
another Person (such Person and any Subsidiaries thereof being "Acquired
Subsidiaries"), such Acquired Subsidiaries are, after giving effect to such
acquisition, Wholly-owned Subsidiaries; provided, further, that an Acquired
Subsidiary shall be permitted to be a non-Wholly-owned Subsidiary if (1) such
Acquired Subsidiary is a Subsidiary of another such Acquired Subsidiary at the
time of acquisition, (2) the fair market value of such Acquired Subsidiary's
assets is less than ten percent of the aggregate purchase price for all Acquired
Subsidiaries then being acquired, and (3) no less than 80% of the voting Stock
of such Acquired Subsidiary is held directly or indirectly by Parent. Prior to
forming, acquiring or otherwise holding any Subsidiary after the date hereof,
each Loan Party shall (a) provide not less than thirty (30) days prior written
notice to Lender, (b) take all actions requested by Lender to protect and
preserve the Collateral, and (c) except for any Subsidiary formed or acquired in
connection with, or as a result of, a Permitted Acquisition, obtain Lender's
prior written consent.
6.2 Investments. No Loan Party shall, directly or indirectly, make or
maintain any Investment except: (a) as otherwise permitted by Section 6.3 or
6.4; (b) Investments outstanding on the date hereof and listed in Schedule 6.2;
(c) trade credit for the purchase of inventory or goods sold to any Person
(other than a Subsidiary or Affiliate of such Loan Party) in the ordinary course
of business on terms not exceeding 120 days; (d) Investments in Cash Equivalents
at any time during which no Revolving Credit Advances are outstanding which are
subject to a first priority perfected Lien of Lender; and (e) Permitted
Acquisitions.
6.3 Indebtedness. No Loan Party shall create, incur, assume or permit to
exist any Indebtedness, except: (a) the Obligations; (b) Deferred Taxes; (c)
Capital Lease Obligations and Indebtedness secured by purchase money Liens on
Equipment permitted under clause (c) of Section 6.7 in a maximum aggregate
amount outstanding not to exceed $500,000 outstanding at any time; (d)
Indebtedness existing on the Closing Date and set forth in Schedule 6.3 and (e)
Indebtedness assumed in connection with Permitted Acquisitions, including
Indebtedness of any Acquired Subsidiary, in a maximum aggregate principal amount
outstanding not to exceed $500,000 outstanding at any time.
6.4 Affiliate Transactions. Except as otherwise expressly permitted
hereunder, no Loan Party shall enter into any lending, borrowing or other
commercial transaction with any of its Subsidiaries or Affiliates, including
payment of any management, consulting, advisory or similar fee provided that
such Loan Parties may make:
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(i) intercompany advances by any Loan Party to another Loan Party not in excess
of $100,000 in the aggregate for all Loan Parties in any Fiscal Year; (ii) an
advance by Borrowers to Parent in an amount equal to $1,000,000 from proceeds of
the Tranche B Loan to be used by Parent in payment of the cash portion of the
purchase price for the AMSC Acquisition; and (iii) redemption of the Parent's
common stock from Philip Kurtz in repayment of the loan referred to on Schedule
6.4. Set forth in Schedule 6.4 is a list of all such lending, borrowing or other
commercial transactions existing or outstanding as of the Closing Date.
6.5 Capital Structure and Business. No Loan Party (including any Acquired
Subsidiary) shall: (a) make any changes in its business objectives, purposes,
or operations which could in any way adversely affect the repayment of the
Obligations or have or result in a Material Adverse Effect; (b) amend its
certificate of incorporation, charter, by-laws or other organizational
documents; or (c) engage in any business other than the business currently
engaged in by such Loan Party and related businesses.
6.6 Guaranteed Indebtedness. No Loan Party shall incur any Guaranteed
Indebtedness except: (a) by endorsement of instruments or items of payment for
deposit to the general account of such Loan Party; (b) for Guaranteed
Indebtedness incurred for the benefit of such Loan Party if the primary
obligation is permitted by this Agreement for such Loan Party to incur (and such
Guaranteed Indebtedness shall be treated as a primary obligation for all
purposes hereof); and (c) for performance bonds or indemnities entered into in
the ordinary course of business consistent with past practices.
6.7 Liens. No Loan Party shall create or permit to exist any Lien on any
of its properties or assets except for: (a) presently existing or hereafter
created Liens in favor of Lender to secure the Obligations; (b) Permitted
Encumbrances; and (c) purchase money Liens or purchase money security interests
upon or in Equipment acquired by such Loan Party in the ordinary course of
business to secure the purchase price of such Equipment or to secure Capital
Lease Obligations or Indebtedness permitted under clause (c) of Section 6.3
incurred solely for the purpose of financing the acquisition of such Equipment;
provided that no Loan Party shall create or permit any Lien to exist on any of
the Collateral (other than Liens described in clauses (a) and (b) above).
6.8 Sale of Assets. No Loan Party shall sell, transfer, convey, assign or
otherwise dispose of any of its assets or properties, including any Collateral;
provided, that the foregoing shall not prohibit (a) the sale of Inventory in the
ordinary course of business; and (b) the sale or disposition of any assets which
have become obsolete or surplus to the business of such Loan Party in any Fiscal
Year having a fair market value of not greater than $35,000 in the aggregate for
all of the Loan Parties.
6.9 ERISA. No Loan Party or any ERISA Affiliate shall acquire any new
ERISA Affiliate that maintains or has an obligation to contribute to a Pension
Plan that has either an "accumulated funding deficiency," as defined in Section
302 of ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(E)(iii) of ERISA in the case of any Pension Plan other than a
Multiemployer Plan and in Section 4211 of ERISA in the case of a Multiemployer
Plan. Additionally, no Borrower or any ERISA Affiliate shall: (a) permit or
suffer any condition set forth in Section 3.13 to cease to be met and satisfied
at any time, other than permitting an ERISA Affiliate acquired after the Closing
Date to
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sponsor a Title IV Plan, a Plan subject to IRC Section 412 or ERISA Section 302,
or a Retiree Welfare Plan.; (b) terminate any Title IV Plan where such
termination could reasonably be anticipated to result in liability to such
Borrower; (c) permit any accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, to be incurred with respect to any Pension Plan; (d) fail to
make any contributions or fail to pay any amounts due and owing as required by
the terms of any Plan before such contributions or amounts become delinquent;
(e) make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any Multiemployer Plan; (f) fail to provide Lender with copies of
any Plan documents or governmental reports or filings, if reasonably requested
by Lender; (g) fail to make any contribution or pay any amount due as required
by IRC Section 412 or Section 302 of ERISA; (h) allow any ERISA Event or event
described in Section 4062(e) of ERISA to occur with respect to any Title IV
Plan; (i) with respect to all Retiree Welfare Plans, allow the present value of
future anticipated expenses to exceed $50,000 or fail to provide copies of such
projections to Lender.
6.10 Financial Covenants. No Loan Party shall breach or fail to comply
with any of the financial covenants set forth in Annex G, each of which shall be
calculated in accordance with GAAP consistently applied (and based upon the
financial statements delivered hereunder).
6.11 Hazardous Materials. Except as set forth in Schedule 3.18, no Loan
Party shall, or permit any of its Subsidiaries or any other Person within its
control: (a) to cause or permit a Release of Hazardous Material on, under, in
or about any Subject Property which could have or result in a Material Adverse
Effect; (b) to use, store, generate, treat or dispose of Hazardous Materials,
except in compliance in all material respects with the Environmental Laws; or
(c) to transport any Hazardous Materials to or from any Subject Property, except
in compliance in all material respects with the Environmental Laws.
6.12 Sale-Leasebacks. No Loan Party shall engage in any sale-leaseback or
similar transaction involving any of its property or assets.
6.13 Cancellation of Indebtedness. No Loan Party shall cancel any claim
or Indebtedness owing to it, except for adequate consideration and in the
ordinary course of its business.
6.14 Restricted Payments. No Loan Party shall make any Restricted Payment
to any Person other than to a Parent, except Restricted Payments permitted under
Section 6.4.
6.15 Bank Accounts. No Loan Party shall maintain any deposit, operating
or other bank accounts except for those accounts identified in Schedule 3.20
without the prior written consent of Lender which shall not be unreasonably
withheld so long as the maintenance of such account does not in Lender's
reasonable judgment negatively affect the cash management system described in
Annex B or the preservation of the Collateral and the requirements of Annex B
with respect to such account are satisfied.
6.16 No Speculative Investments. No Loan Party shall engage in any
speculative investment or any investment involving commodity options or futures
contracts.
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6.17 Margin Regulations. No Loan Party shall use the proceeds of any
Revolving Credit Advance to purchase or carry any Margin Stock or any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
6.18 Limitation on Negative Pledge Clauses. No Loan Party shall directly
or indirectly, enter into any agreement with any Person, other than the
agreements with Lender pursuant to a Loan Document which prohibits or limits the
ability of a Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
7. TERM
7.1 Duration. The financing arrangement contemplated hereby shall be in
effect until the Commitment Termination Date. On the Commitment Termination
Date, the Revolving Credit Commitment and the Term Loan Commitment shall
terminate and the Revolving Credit Loan, the Term Loan and all other Obligations
shall immediately become due and payable in full, in cash.
7.2 Survival of Obligations. Except as otherwise expressly provided for
in the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the Obligations, duties, indemnities, and liabilities of any
Loan Party, or the rights of Lender relating to any Obligations, due or not due,
liquidated, contingent or unliquidated or any transaction or event occurring
prior to such termination, or any transaction or event, the performance of which
is not required until after the Commitment Termination Date. Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon any Loan Party, and all rights of Lender, all as contained in the
Loan Documents shall not terminate or expire, but rather shall survive such
termination or cancellation and shall continue in full force and effect until
such time as all of the Obligations have been indefeasibly paid in full in
accordance with the terms of the agreements creating such Obligations.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:
(a) Any Loan Party shall fail to make any payment in respect of any
Obligations hereunder or under any of the other Loan Documents when due and
payable or declared due and payable, including any payment of principal of, or
interest on, the Revolving Credit Loan or the Term Loan.
(b) Any Loan Party shall fail or neglect to perform, keep or observe any of
the provisions of Section 1.8, Section 4.1, or Section 6, including any of the
provisions set forth in Annex B, Annex F, or Annex G.
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(c) Any Loan Party shall fail or neglect to perform, keep or observe any
term or provision of this Agreement (other than any such term or provision
referred to in paragraph (a) or (b) above) or of any of the other Loan
Documents, and the same shall remain unremedied for a period ending on the first
to occur of thirty (30) days after Borrowers shall receive written notice of any
such failure from Lender or thirty (30) days after any Loan Party shall become
aware thereof.
(d) A default shall occur under any other agreement, document or instrument
to which any Loan Party is a party or by which any Loan Party or its property is
bound, and such default (i) involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of
such Loan Party in an aggregate amount exceeding $100,000, except for payments
lawfully withheld by such Loan Party as a setoff in connection with a good faith
dispute between such Loan Party and the holder of such Indebtedness, or (ii)
causes (or permits any holder of such Indebtedness or a trustee to cause) such
Indebtedness, or a portion thereof in an aggregate amount exceeding $100,000, to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment.
(e) Any representation or warranty herein or in any Loan Document or in any
written statement pursuant thereto or hereto, any report, financial statement or
certificate made or delivered to Lender by any Loan Party shall be untrue or
incorrect in any material respect as of the date when made or deemed made
(including those made or deemed made pursuant to Section 2.2).
(f) Any of the assets of any Loan Party shall be attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors of
such Loan Party and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person other than a Loan Party shall apply for the
appointment of a receiver, trustee or custodian for any Loan Party's assets and
shall remain unstayed or undismissed for thirty (30) consecutive days; or any
Loan Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Loan Party
in a court having competent jurisdiction seeking a decree or order (i) under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of any Loan Party or of any substantial part
of its properties, or (iii) ordering the winding up or liquidation of the
affairs of any Loan Party and such case or proceeding shall remain undismissed
or unstayed for sixty (60) consecutive days or such court shall enter a decree
or order granting the relief sought in such case or proceeding.
(h) Any Loan Party (i) shall file a petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any other
26
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applicable federal, state or foreign bankruptcy or other similar law, (ii) shall
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
any Loan Party or of any substantial part of any Loan Party's properties, (iii)
shall fail generally to pay its debts as such debts become due, or (iv) shall
take any corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $50,000 in the aggregate
shall be rendered against any Loan Party, unless the same shall be (i) fully
covered by insurance in accordance with Section 5.5, or (ii) vacated, stayed,
bonded, paid or discharged within a period of fifteen (15) days from the date of
such judgment.
(j) There shall occur any Material Adverse Effect which shall not have been
cured (or waived by Lender) within thirty (30) days of notice thereof from
Lender to Borrowers.
(k) Any provision of any Loan Document shall for any reason cease to be
valid, binding and enforceable in accordance with its terms or any Loan Party or
other party thereto shall so state in writing; or any Lien created under any
Collateral Document shall cease to be a valid and perfected Lien having the
first priority in any of the Collateral purported to be covered thereby.
(l) There shall occur a Change of Control.
(m) An event or condition specified in Section 6.9 hereof shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, a
Borrower, any Subsidiary thereof or any ERISA Affiliate shall incur or in the
opinion of Lender shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) in excess of
$50,000 in the aggregate.
8.2 Remedies. If any Event of Default shall have occurred and be
continuing, the rate of interest applicable to the Revolving Credit Loan and the
Term Loan may, at Lender's sole discretion, be increased, effective as of the
date of the occurrence of the Default giving rise to such Event of Default, to
the Default Rate as provided in Section 1.5(c). If any Event of Default shall
have occurred and be continuing, Lender may, without notice, take any one or
more of the following actions: (a) terminate the Revolving Credit Commitment,
whereupon Lender's obligation to make further Revolving Credit Advances shall
terminate; (b) declare all or any portion of the Obligations to be forthwith due
and payable, whereupon such Obligations shall become and be due and payable; or
(c) exercise any rights and remedies provided to Lender under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
provided, that upon the occurrence of an Event of Default specified in Section
8.1 (f), (g) or (h) the rate of interest applicable to all Obligations shall be
increased automatically to the Default Rate as provided in Section 1.5(c), and
the Revolving Credit Commitment shall immediately terminate and the Obligations
shall become immediately due and payable, in each case, without declaration,
notice or demand by Lender to any Person.
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<PAGE>
8.3 Waivers. Except as otherwise provided for in this Agreement and
applicable law, to the full extent permitted by applicable law, Borrowers waive
(a) presentment, demand and protest and notice of presentment, dishonor, notice
of intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
Loan Documents, notes, commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Lender on which
Borrowers may in any way be liable, and Borrowers hereby ratify and confirm
whatever Lender may do in this regard, (b) all rights to notice and a hearing
prior to Lender's taking possession or control of, or to Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to Lender to exercise any of its remedies, and (c)
the benefit of any right of redemption and all valuation, appraisal and
exemption laws. Borrowers and Parent acknowledge that they have been advised by
counsel of their choice with respect to this Agreement, the other Loan Documents
and the transactions contemplated by this Agreement and the other Loan
Documents.
9. SUCCESSORS AND ASSIGNS
9.1 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of Borrowers, Parent, Lender,
and their respective successors and assigns, except as otherwise provided herein
or therein. None of Borrowers or Parent may assign, delegate, transfer,
hypothecate or otherwise convey their rights, benefits, obligations or duties
hereunder or under any of the Loan Documents without the prior express written
consent of Lender. Any such purported assignment, transfer, hypothecation or
other conveyance by any Borrower or Parent without such prior express written
consent shall be void. The terms and provisions of this Agreement and the other
Loan Documents are for the purpose of defining the relative rights and
obligations of Borrowers and Parent, on the one hand, and Lender, on the other
hand, with respect to the transactions contemplated hereby and there shall be no
third party beneficiaries of any of the terms and provisions of this Agreement
or any of the other Loan Documents.
9.2 Assignments and Participations. Lender may assign, negotiate, pledge
or otherwise hypothecate all or any portion of this Agreement, or grant
participations herein, in the Revolving Credit Loan, the Term Loan, or in any of
its rights or security hereunder and under the other Loan Documents or any part
thereof, including, without limitation, any instruments securing the Borrowers'
obligations hereunder. Borrowers shall assist Lender in selling assignments or
participations under this Section 9.2 in whatever manner reasonably necessary in
order to enable or effect any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other documents and
instruments as shall be requested and the preparation and delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings with, potential assignees or
participants.
10. MISCELLANEOUS
10.1 Complete Agreement; Modification of Agreement. This Agreement and
the other Loan Documents constitute the complete agreement between the parties
with respect
28
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ANNEX A
to
CREDIT AGREEMENT
Dated as of October 15, 1994
DEFINITIONS; RULES OF CONSTRUCTION
1. Definitions. In addition to the defined terms appearing in this
Agreement and other Loan Documents, capitalized terms used in this Agreement and
the other Loan Documents shall have (unless otherwise provided elsewhere in this
Agreement and the other Loan Documents) the following respective meanings:
"Account Debtor" shall mean any Person who may become obligated to a
Borrower under, with respect to, or on account of, an Account, Chattel Paper or
General Intangibles.
"Accounts" shall mean, with respect to any Person, all "accounts," as
such term is defined in the Code, now owned or hereafter acquired by such Person
and, in any event, including: (a) all accounts receivable, other receivables,
book debts and other forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter
received or acquired by or belonging or owing to such Person, whether arising
out of goods sold or services rendered by it or from any other transaction
(including any such obligations which may be characterized as an account or
contract right under the Code); (b) all of such Person's rights in, to and under
all purchase orders or receipts now owned or hereafter acquired by it for goods
or services; (c) all of such Person's rights to any goods represented by any of
the foregoing (including unpaid sellers' rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods); (d) all monies due or to become due to such Person under all
purchase orders and contracts for the sale or lease of goods or the performance
of services or both by such Person or in connection with any other transaction
(whether or not yet earned by performance on the part of such Person) now or
hereafter in existence, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts; and (e) all collateral security
and guarantees of any kind, now or hereafter in existence, given by any Person
with respect to any of the foregoing.
"Acquired Subsidiary" shall have the meaning assigned to it in
Section 6.1.
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by
<PAGE>
or is under common control with such Person or any Affiliate of such Person, or
(c) each of such Person's officers, directors, joint ventures and partners. For
the purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Credit Agreement to which this Annex A is
attached and of which it forms a part, including all Annexes, Schedules, and
Exhibits attached or otherwise identified thereto, all restatements,
modifications and supplements hereof or hereto, and any appendices, attachments,
exhibits or schedules to any of the foregoing, and shall refer to this Agreement
as the same may be in effect at the time such reference becomes operative;
provided, that any reference to the Schedules to this Agreement shall be deemed
a reference to the Schedules as in effect as of the Closing Date, unless
otherwise provided in a written amendment thereto.
"AMSC" shall mean Automated Medical Systems Consultants, Inc., a
Florida corporation.
"AMSC Acquisition" shall mean the acquisition by Parent of all of the
capital stock of AMSC from its shareholders as contemplated by the letter of
intent dated August 24, 1994, as amended by the letter dated September 27, 1994,
among Parent, Wendy R. Lewis and Randall Ray and which is intended to be
effected pursuant to an Agreement and Plan of Reorganization to be entered into
among AMSC, Wendy R. Lewis, Randall Ray, Parent and C.I.S. Merger Co., a
Delaware corporation, and other documentation satisfactory to Lender.
"Audit Services" shall mean the audit services provided by HBA to
Persons in or related to the medical care industry, including, but not limited
to, charge recovery and verification services, services in connection with HBA's
Defense Audit Program, Concurrent Audit Programs, and supplemental audit support
services.
"Borrowers" has the meaning assigned to it in the preamble to this
Agreement.
"Borrowing Availability" shall mean, at any time, the lesser at such
time of (a) the Revolving Credit Commitment and (b) the Borrowing Base.
"Borrowing Base" shall mean, at any time, an amount determined by
Lender to be equal to the sum at such time of:
(a) up to ________ (__%) [redacted] of Eligible Accounts (other
than Eligible Charge Recovery Accounts) of Borrowers; and
(b) up to the lesser of (i) _________ (__%) [redacted] of
Eligible Charge Recovery Accounts of HBA and (ii) $1,500,000;
minus, the amount of any reserves as Lender may deem necessary or appropriate
from time to time in its reasonable discretion.
2
<PAGE>
"Borrowing Base Certificate" shall mean a certificate duly
completed in the form attached hereto as Exhibit B.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in New York City.
"Capital Expenditures" shall mean, as of any date, all payments or
accruals (including Capital Lease Obligations) for any asset or improvements or
for replacements, substitutions or additions thereto, that are required to be
capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Cash Equivalents" shall mean: (a) securities with maturities of one
year or less from the date of acquisition, issued or fully guaranteed or insured
by the government of the United States of America or any agency thereof and
backed by the full faith and credit of the United States of America; (b)
certificates of deposit, Eurodollar time deposits, overnight bank deposits and
bankers' acceptances of any domestic commercial bank having capital and surplus
in excess of $500,000,000, having maturities of one year or less from the date
of acquisition; and (c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Corp. or at least P-1 by Moody's Investors Services, Inc., or
carrying an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing ratings of investments, in
each case with maturities of not less than sixty (60) days from the date
acquired.
"Change of Control" shall mean (i) the replacement of a majority of
the Board of Directors of Parent, over a two-year period, from the directors who
constituted the Board of Directors at the beginning of such period, which
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors of Parent then still in office who were either members of the
Board of Directors at the beginning of such period or whose appointment as a
member of the Board of Directors was previously so approved; (ii) as a result of
a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, a Person or entity or group of Persons acting in concert
as a partnership, joint venture, alliance or other group shall have become the
"beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act as
in effect on the Closing Date) of securities of Parent representing 30% or more
of the combined voting power of the then outstanding securities of ordinarily
(and apart from rights arising under special circumstances) having the right to
vote in the election of directors thereof; or (iii) all of the shares of capital
stock of each Borrower are not owned directly by Parent.
3
<PAGE>
"Charge Recovery Account" shall mean any Account that arises from the
provision by HBA of Charge Recovery Audit Services and as to which Account the
Account Debtor has not yet received a remittance notice from the third party
payor or insurer.
"Charges" shall mean, for any Loan Party, all Federal, state, county,
city, municipal, local, foreign or other governmental taxes (including taxes
owed to PBGC at the time due and payable), levies, assessments, charges or Liens
upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees,
payroll, income or gross receipts of such Loan Party, (d) the ownership or use
by such Loan Party of any of its assets, or (e) any other aspect of such Loan
Party's business.
"Chattel Paper" shall mean all "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired and wherever located.
"CIS, Inc." has the meaning assigned to it in the first paragraph
of this Agreement.
"Claim" shall have the meaning assigned to it in Section 1.12.
"Closing Date" shall mean the Business Day on which the conditions
precedent set forth in Section 2 have been satisfied, in Lender's sole
discretion, or waived in writing by Lender, and the initial Revolving Credit
Advance and the Term Loan have been made.
"Closing Fee" shall have the meaning assigned to it in Annex D.
"Code" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, that in the event
that by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or the remedies with respect to, Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term "Code" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection,
priority or remedies and for purposes of definitions related to such provisions.
"Collateral" shall mean the property covered by the Collateral
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
Lien in favor of Lender to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, any
Subsidiary Security Agreement, the Concentration Account Agreement, the Lock Box
Account Agreements and the Disbursement Account Agreement and all other
instruments and agreements now or hereafter securing the whole or any part of
the Obligations.
"Collection Account" shall mean that certain account of Lender,
account number 502-328-54 in the name of GECC/CAF Depository at Bankers Trust
Company, 1 Bankers
4
<PAGE>
Trust Plaza, New York, New York 10006, ABA number 021-001-033, or such other
account as may be designated by Lender.
"Commitment Termination Date" shall mean the earliest of (a) October
31, 1997, (b) the date of termination of the Revolving Credit Commitment
pursuant to Section 8.2, and (c) the date of termination of the Revolving Credit
Commitment in accordance with the provisions of Section 1.3(c).
"Company Documents" shall mean the Limited Liability Company
Agreement, the Services Agreement and the Technology Agreement, each dated as of
October 31, 1994 among Parent, Borrowers, GE Capital Commercial Finance, Inc.
and SA Services, L.L.C., and all other agreements, documents, and instruments
executed and delivered in connection therewith.
"Concentration Account" shall have the meaning assigned to it in
Annex B.
"Concentration Account Agreement" shall have the meaning assigned
to it in Annex B.
"Contracts" shall mean, with respect to any Person, all the contracts,
undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which such Person may now or hereafter
have any right, title or interest, including any agreement relating to the terms
of payment or the terms of performance of any Account.
"Copyrights" shall, with respect to any Person, mean any United States
copyright to which such Person now or hereafter has title, as well as any
application for a United States of America copyright hereafter made by such
Person.
"Current Assets" shall mean, with respect to any Person at any date,
all assets of such Person which are or should be classified as current on a
consolidated balance sheet of such Person as of such date prepared in accordance
with GAAP.
"Current Liabilities" shall mean, with respect to any Person at any
date, all liabilities of such Person which are or should be classified as
current on a consolidated balance sheet of such Person as of such date prepared
in accordance with GAAP.
"Default" shall mean any Event of Default or any event which, with the
passage of time or notice or both, would, unless cured or waived, become an
Event of Default.
"Default Rate" shall mean the rate equal to the sum of two and one-
half percent (2.5%), plus (i) in the case of the Revolving Credit Loan, the
Revolving Credit Rate; or (ii) in the case of the Term Loan, the Term Rate.
5
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"Deferred Taxes" shall mean, with respect to any Person at any date,
the amount of deferred taxes of such Person as shown on the balance sheet of
such Person prepared in accordance with GAAP of such date.
"Disbursement Account" shall have the meaning assigned to it in
Annex B.
"Disbursement Account Agreement" shall have the meaning assigned to
it in Annex B.
"Documents" shall mean, with respect to any Person, all "documents,"
as such term is defined in the Code, now owned or hereafter acquired by such
Person, wherever located, and in any event any bills of lading, dock warrants,
dock receipts, warehouse receipts, or other documents of title.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"DOL" shall mean the United States Department of Labor or any
successor thereto.
"EBIT" shall mean, for any period, the Net Income (Loss) of Parent and
its Subsidiaries for such period, plus interest expense, tax expense, and
extraordinary losses and minus extraordinary gains, in each case, of Parent and
its Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP to the extent included in the determination of such Net
Income (Loss).
"Eligible Accounts" shall mean, with respect to any Borrower, such
Accounts of such Borrower that are not ineligible as the basis for Revolving
Credit Advances based on the criteria set forth below. Unless otherwise agreed
to in writing by Lender, in determining whether an Account constitutes an
Eligible Account, Lender shall not include any Account:
(a) that does not arise from the sale of goods or services by such
Borrower in the ordinary course of Borrower's business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatever, or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process;
(c) (i) against which, or against any contract or agreement pursuant
to which such account arises, is asserted or may be asserted any defense,
counterclaim or set-off, or (ii) which is a "contra" Account, whether well-
founded or otherwise, in each case to the extent of such defense, counterclaim,
set-off or "contra" amount;
(d) that is not a true and correct statement of a bona fide
indebtedness incurred in the amount of the Account for merchandise sold and
accepted by or services rendered to the Account Debtor obligated upon such
Account;
6
<PAGE>
(e) with respect to which an invoice, acceptable to Lender in form and
substance to ensure compliance with the terms of the Loan Documents, has not
been sent to Account Debtor;
(f) that is not owned by such Borrower or is subject to any right,
claim, or interest of another other than the Lien in favor of Lender;
(g) that arises from a sale to or performance of services for an
employee, Affiliate, parent or Subsidiary of such Borrower, or an entity which
has common officers or directors with such Borrower;
(h) that is the obligation of an Account Debtor that is the Federal
government or a political subdivision thereof, unless such Borrower has complied
with the Federal Assignment of Claims Acts of 1940, and any amendments thereto,
with respect to such obligation;
(i) that is evidenced by chattel paper, a promissory note,
negotiable instrument or any other instrument of any kind;
(j) that is the obligation of an Account Debtor located in a foreign
country, unless the sale of goods giving rise to the Account is on a letter of
credit or other credit support basis satisfactory to Lender's security interest
in or assignment of such Account and letter of credit or other credit support is
duly and properly created and/or perfected to Lender's satisfaction; or the sale
represented by such Account is denominated in other than Dollars or is payable
outside the United States of America;
(k) that is the obligation of an Account Debtor to whom such Borrower
is or may become liable for goods sold or services rendered by the Account
Debtor to such Borrower;
(l) that arises with respect to goods or services which are delivered
or rendered on a cash-on-delivery basis or placed on consignment, guaranteed
sale or other terms by reason of which the payment by the Account Debtor may be
conditional;
(m) that is in default; provided, that an Account shall be deemed
in default upon the occurrence of any of the following:
(i) with respect to any Account of CIS, Inc., such Account is
not paid within the earlier of (x) sixty (60) days from the due date,
and (y) ninety (90) days from its invoice date;
(ii) with respect to any Account of HBA (other than a Charge
Recovery Account), such Account is not paid within the earlier of (x)
thirty (30) days from the due date, and (y) sixty (60) days from its
invoice date;
(iii) with respect to any Charge Recovery Account, such
Account is not paid within 180 days of HBA's submission of a claim in
respect thereof to the insurer or other third party payor;
7
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(iv) the sale represented by such Account is subject to any
material claim or dispute by the Person to whom or to which it was made;
(v) if any Account Debtor obligated upon such Account suspends
business, becomes insolvent, makes a general assignment for the benefit
of creditors, or fails to pay its debts generally as they come due; or
(vi) if any petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other
national, state or provincial receivership, insolvency relief or other
law or laws for the relief of debtors;
(n) that is the obligation of an Account Debtor as to which fifty
percent (50%) or more of the Dollar value of the Accounts of such Account Debtor
have become, or have been determined by Lender to be, ineligible;
(o) the sale represented by such Account is on terms longer than
such Borrower's standard terms;
(p) that arises from any bill-and-hold or other sale of goods which
remain in a Borrower's possession or under such Borrower's control;
(q) as to which the interest of Lender therein is not a first
priority perfected security interest;
(r) to the extent such Account exceeds any credit limit established by
Lender with respect to any Account Debtor from time to time;
(s) that fails to meet or violates any of such Borrower's
representations, warranties or covenants contained in this Agreement or any
other Loan Document; or
(t) that is not otherwise acceptable in the reasonable judgment of
Lender based upon such credit and collateral considerations as Lender may deem
appropriate from time to time.
"Eligible Charge Recovery Accounts" shall mean such Eligible
Accounts which are also Charge Recovery Accounts.
"Environmental Laws" shall mean all Federal, state and local laws,
statutes, ordinances, orders and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any applicable
judicial or administrative interpretation thereof relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental
Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S)(S) 9601 et
seq.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49
U.S.C. (S)(S) 1801 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act, as
8
<PAGE>
amended (7 U.S.C. (S)(S) 136 et seq.); the Resource Conservation and Recovery
Act, as amended (42 U.S.C. (S)(S) 6901 et seq.) ("RCRA"); the Toxic Substance
Control Act, as amended (15 U.S.C. (S)(S) 2601 et seq.); the Clean Air Act, as
amended (42 U.S.C. (S)(S) 740 et seq.); the Federal Water Pollution Control Act,
as amended (33 U.S.C. (S)(S) 1251 et seq.); the Occupational Safety and Health
Act, as amended (29 U.S.C. (S)(S) 651 et seq.) ("OSHA"); and the Safe Drinking
Water Act, as amended (42 U.S.C. (S)(S) 300(f) et seq.), and any and all
regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, removal costs, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including any thereof arising under any Environmental Law, permit,
order or agreement with any Governmental Authority) and which relate to any
health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened Release,
or the presence of a Hazardous Material.
"Equipment" shall mean all "equipment" as such term is defined in the
Code, and, in any event, shall include all machinery, equipment, furnishings,
fixtures and vehicles and any and all additions, accessions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"Equity Documents" shall mean the Stock Purchase Agreement and the
Registration Rights Agreement, each dated as of even date herewith, between
Parent and Lender, and all other agreements, documents and instruments executed
and delivered in connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Loan Party, any
trade or business (whether or not incorporated) under common control with such
Loan Party and which, together with such Loan Party is treated as a single
employer within the meaning of Section 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Loan Party or any ERISA
Affiliate, (a) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (b) the withdrawal of any Loan Party or any ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(c) the complete or partial withdrawal of such Loan Party or any ERISA Affiliate
from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination
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under Section 4041 of ERISA; (e) the institution of proceeding to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (vi) the failure to make
required contributions to a Qualified Plan; or (f) any other event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in Section
8.1.
"Excess Borrowing Availability" shall mean at any time of measurement,
the amount by which Borrowing Availability exceeds the aggregate outstanding
principal amount of the Revolving Credit Advances.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fees" shall mean the fees due to Lender as set forth in Section 1.7,
and any other fees due to Lender pursuant to the Loan Documents.
"Financials" shall mean the financial statements referred to in
paragraph 1 of Schedule 3.4.
"Fiscal Month" shall mean each of the monthly accounting periods of
the Loan Parties.
"Fiscal Quarter" shall mean each of the three-month periods ending
on March 31, June 30, September 30 or December 31.
"Fiscal Year" shall, for the Loan Parties, mean the 12-month period of
the Loan Parties ending on December 31 of each year. Subsequent changes of the
fiscal year of such Loan Parties shall not change the term "Fiscal Year," unless
Lender shall consent in writing to such change.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of
the following for Parent and its Subsidiaries determined on a consolidated basis
in accordance with GAAP: (a) EBIT for such period to (b) the sum of (i) interest
expense paid or deemed paid in respect of Funded Debt during such period, plus
(ii) regularly scheduled payments of principal paid or deemed paid on Funded
Debt during such period, plus (iii) taxes paid during such period.
"Fixtures" shall, with respect to any Person, mean all "fixtures," as
such term is defined in the Code, now or hereafter owned or acquired such
Person, wherever located, and, in any event, including all of the fixtures,
systems, machinery, apparatus, equipment and fittings of every kind and nature
whatsoever and all appurtenances and additions thereto and substitutions
therefor or replacements thereof, now or hereafter attached or affixed to or
constituting a part of, or located in or upon, real property wherever located
(including all heating, electrical, mechanical, lighting, lifting, plumbing,
ventilating, air-conditioning and air cooling, refrigerating, incinerating and
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power, loading and unloading, signs, escalators, elevators, boilers,
communication, switchboards, sprinkler and other fire prevention and
extinguishing fixtures, systems, machinery, apparatus and equipment, and all
engines, motors, dynamos, machinery, pipes, pumps, tanks, conduits and ducts
constituting a part of any of the foregoing, together with all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to any of the foregoing property).
"Funded Debt" shall mean, for any Person, all of such Person's
Indebtedness which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from, or is directly or
indirectly renewable or extendible at the option of such Person under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from, the date of creation thereof,
including current maturities of long-term debt, revolving credit, and short-term
debt extendible beyond one year at the option of such Person.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, consistently applied,
except that, for purposes of Section 6.10 and Annex G, GAAP shall be determined
on the basis of such principles in effect on December 31, 1993 and consistent
with those used in the preparation of the audited financial statements referred
to in Section 3.4.
"General Intangibles" shall mean, with respect to any Person, all
"general intangibles," as such term is defined in the Code, now owned or
hereafter acquired by such Person and, in any event, including all right, title
and interest which such Person may now or hereafter have in or under any
Contract, all customer lists, Intellectual Property, interests in partnerships,
joint ventures and other business associations, permits, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including the goodwill associated with any
Intellectual Property), all rights and claims in or under insurance policies,
(including insurance for fire, damage, loss, and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man, and business interruption insurance, and all unearned
premiums), uncertificated securities, chooses in action, and other bank accounts
(including with respect to the Loan Parties the Lock Box Accounts, the
Concentration Account and the Disbursement Account), rights to receive tax
refunds and other payments and rights of indemnification.
"Goods" has the meaning assigned to it in the Code.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner including any obligation or arrangement of such Person (a) to
purchase or repurchase any
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such primary obligation, (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Hazardous Material" shall mean (i) any element, material, compound,
mixture, solution, chemical, substance, or pollutant within the definition of
"hazardous substance" under Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601(14); petroleum or
any fraction, byproduct or distillation product thereof; asbestos,
polychlorinated biphenyls, or any radioactive substances; and any material
regulated as a hazardous substance by any jurisdiction in which any Loan Party
owns or operates or has owned or operated a facility; or (ii) any element,
pollutant, contaminate or discarded material (including any radioactive
material) within the definition of Section 103(6) of the Resource Conservation
and Recovery Act, 42 U.S.C. (S) 6903(6); and any material regulated as a
hazardous waste by any jurisdiction in which any Loan Party owns or operates or
has owned or operated a facility, or to which any Loan Party sends material for
treatment, storage or disposal as waste.
"HBA" has the meaning assigned to it in the first paragraph of this
Agreement.
"Indebtedness" of any Person shall mean (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all indebtedness created or arising under
any conditional sale or other title retention agreements with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (d) all Capital Lease Obligations, (e)
all Guaranteed Indebtedness, (f) all Indebtedness referred to in clause (a),
(b), (c), (d) or (e) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (g) the Obligations, and (h) all liabilities under
Title IV of ERISA.
"Indemnified Person" shall have the meaning assigned to it in
Section 1.12.
"Index Rate" shall mean, for any day, the latest rate for thirty-day
dealer placed commercial paper (which for purposes hereof shall mean high grade
unsecured notes sold through dealers by major corporations in multiples of
$1,000) which normally is published in the "Money Rates" section of The Wall
Street Journal for such day or, in the event such rate is not so published, in
such other nationally recognized publication
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as Lender may specify. Each change in any interest rate provided for herein
based upon the Index Rate shall take effect at the time of such change in the
Index Rate.
"Instruments" shall mean, for any Person, all "instruments," as such
term is defined in the Code, now owned or hereafter acquired by such Person,
wherever located and in any event all certificated securities, certificates of
deposit and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" shall mean, for any Person, collectively, all
Trademarks, all Patents, all Copyrights and all Licenses now held or hereafter
acquired by such Person, together with all franchises, tax refund claims, rights
of indemnification, payments under insurance, indemnities, warranties and
guarantees payable with respect to the foregoing.
"Inventory" shall mean, for any Person, all "inventory," as such term
is defined in the Code, now or hereafter owned or acquired by, such Person,
wherever located, and, in any event, including inventory, merchandise, goods and
other personal property which are held by or on behalf of such Person for sale
or lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in such Person's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies, and all accessions and additions thereto and all documents of
title covering any of the foregoing.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Investment" shall mean, for any Person (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition;
(b) the making of any deposit with, capital contribution or other investment in,
or advance, loan or other extension of credit to, any other Person (including
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person); and
(c) the entering into of any Guaranteed Indebtedness of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person.
"Leases" shall mean all of those leasehold estates in real property
now owned or hereafter acquired by a Loan Party, as lessee or sublessee.
"Lender" shall have the meaning assigned to it in the first
paragraph of this Agreement.
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"License" shall mean, with respect to any Person, any Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by such Person.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the Revolving Credit Note,
the Term Note, the Parent Guaranty, any Subsidiary Guaranty, the Collateral
Documents and all agreements, instruments, documents and certificates in favor
of Lender in connection with this Agreement or the financing transactions
contemplated hereby, including all pledges, powers of attorney, consents,
assignments, contracts, notices and other written matter whether now existing or
hereafter arising.
"Loan Party" shall mean Borrowers, Parent and each Subsidiary of
Parent or either Borrower.
"Lock Box Accounts" shall have the meaning assigned to it in Annex
B.
"Lock Box Account Agreements" shall have the meaning assigned to it
in Annex B.
"Margin Stock" shall have the meaning specified in Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects, or financial or other condition of
the Parent and its Subsidiaries taken as a whole or of any Borrower or the
industry within which Parent or any Borrower operates, (b) any Loan Party's
ability to pay or perform the Obligations in accordance with the terms of the
Loan Documents, (c) the Collateral or Lender's Liens on the Collateral or the
priority of any such Liens, or (d) the rights and remedies of Lender under this
Agreement and the other Loan Documents.
"Maximum Lawful Rate" shall have the meaning assigned to it in
Section 1.5(d).
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a) (3) of ERISA, and to which Borrower or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"Net Income (Loss)" shall mean for any period, the aggregate net
income (or loss) after income and franchise taxes of the Parent and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; less any net income
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<PAGE>
of any Person that is not a direct or indirect wholly-owned Subsidiary of
Parent, unless received by Parent in cash.
"Net Worth" shall mean, with respect to any Person, at any date, the
total assets (excluding investments in subsidiaries and any assets attributable
to any issuances by such Person of any Stock on or after the date hereof) minus
the total liabilities, in each case, of such Person at such date determined in
accordance with GAAP.
"Non-Use Fee" shall have the meaning assigned to it in Annex D.
"Notice of Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(c).
"Obligations" shall mean all loans, advances, debts, liabilities and
obligations for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or amounts are liquidated or determinable) owing by any Loan Party
to Lender, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under any of the Loan Documents. This term includes
all principal, interest (including interest which accrues after the commencement
of any case or proceeding referred to in Section 8.1(g) or (h)), all Fees,
Charges, expenses, attorneys' fees and any other sum chargeable to any Loan
Party under any of the Loan Documents.
"Other Taxes" shall have the meaning assigned to it in Section
1.14(b).
"Parent" has the meaning assigned to it in the first paragraph of
this Agreement.
"Parent Guaranty" shall mean the Parent Guaranty, substantially in the
form of Exhibit E attached hereto executed by Parent in favor of Lender.
"Patent License" shall mean, with respect to any Person, rights under
any written agreement now owned or hereafter acquired by granting any right with
respect to any invention on which a Patent is in existence.
"Patents" shall mean, with respect to any Person, all of the following
in which such Person now holds or hereafter acquires any interest: (a) all
letters patent of the United States of America or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States of America or any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States of America, any State or
Territory thereof, or any other country, and (b) all reissues, divisions,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
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"Pension Plan" shall mean an employee pension benefit plan, as defined
in Section 3(2) of ERISA, which is not an individual account plan, as defined in
Section 3(34) of ERISA, and which Borrower or any Subsidiary of Borrower or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Permitted Acquisition" shall mean any acquisition permitted under
clause (ii) of the first sentence of Section 6.1.
"Permitted Encumbrances" shall mean, for any Loan Party, the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
or levies, either not yet due and payable or which are not payable under Section
5.2; (b) pledges or deposits securing obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation; (c) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which such Loan Party is a
party as lessee made in the ordinary course of business; (d) deposits securing
public or statutory obligations of such Loan Party; (e) inchoate and unperfected
workers', mechanics', suppliers' or similar liens arising in the ordinary course
of business; (f) carriers', warehousemen's or other similar possessory liens
arising in the ordinary course of business and securing indebtedness not yet due
and payable in an outstanding aggregate amount not in excess of $100,000 at any
time in the aggregate for all of the Loan Parties; (g) deposits securing, or in
lieu of, surety, appeal or customs bonds in proceedings to which such Loan Party
is a party; (h) any attachment or judgment lien, unless the judgment it secures
shall not, within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 30 days after the expiration of any such stay; (i) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
property, leases or leasehold estates; and (j) Liens on Schedule 6.7 existing on
the Closing Date.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean, with respect to any Loan Party or any ERISA
Affiliate, at any time, an employee benefit plan, as defined in Section 3(3) of
ERISA, which such Loan Party maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.
"Proceeds" shall mean all "proceeds," as such term is defined in the
Code and, in any event, shall include, with respect to any Person: (a) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to such
Person from time to time with respect to any of its property or assets; (b) any
and all payments (in any form whatsoever) made or due and payable to such Person
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of
16
<PAGE>
such Person's property or assets by any governmental body, authority, bureau or
agency (or any person acting under color of governmental authority), (c) any
claim of such Person against third parties (i) for past, present or future
infringement of any Patent or Patent License or (ii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License; (d) any recoveries by such Person against
third parties with respect to any litigation or dispute concerning any of such
Person's property or assets; and (e) any and all other amounts from time to time
paid or payable under or in connection with any of such Person's property or
assets, upon disposition or otherwise.
"Property" shall have the meaning assigned to it in Section 5.14.
"Qualified Plan" shall mean, for any Loan Party, an employee pension
benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-
qualified under IRC Section 401(a), and which such Loan Party or any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Regulatory Change" shall mean, with respect to Lender, any change
after the date of this Agreement in Federal, state or foreign law or regulations
(including Regulation D) or the adoption or making after such date of any
interpretation, directive or request applying to a class of lenders including
Lender of or under any Federal, state or foreign law or regulations (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Release" shall mean, as to any Person, any release or any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing or migration of a Hazardous Material into the
indoor or outdoor environment by such Person (or by a person under such Person's
direction or control), including the movement of a Hazardous Material through or
in the air, soil, surface water, ground water or property; but shall exclude any
release, discharge, emission or disposal in material compliance with a then
effective permit or order of a Governmental Authority.
"Reportable Event" shall mean any of the events described in Section
4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Restricted Payment" shall mean, with respect to any Person: (a) the
declaration or payment of any dividend or the occurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock; (b) any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly;
or (c) any payment, loan, contribution, or other transfer of funds or other
property to any stockholder of such Person.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage
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provided pursuant to Section 4980B of the IRC and at the sole expense of the
participant or the beneficiary of the participant.
"Revolving Credit Advances" shall have the meaning assigned to it
in Section 1.1(a).
"Revolving Credit Commitment" shall mean the commitment of Lender to
make Revolving Credit Advances to Borrowers pursuant to Section 1.1 in the
aggregate principal amount outstanding not to exceed at any time $5,000,000, as
such amount may be reduced or modified pursuant to this Agreement.
"Revolving Credit Loan" shall mean the aggregate amount of Revolving
Credit Advances of Lender outstanding at any time.
"Revolving Credit Note" shall mean the promissory note provided for by
Section 1.1(d) and all promissory notes delivered in substitution or exchange
therefor.
"Revolving Credit Rate" shall mean the sum of the Index Rate plus
_______________ percent (_____%) [redacted] per annum.
"Schedule of Documents" shall mean the schedule attached hereto as
Annex C, including all appendices, exhibits or schedules thereto, listing
certain documents and information to be delivered in connection with the Loan
Documents and the transactions contemplated thereunder.
"Security Agreement" shall mean the Security Agreement, substantially
in the form of Exhibit F attached hereto, between Lender, Borrowers and Parent.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participation or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Subject Property" shall mean all real property owned, leased or
operated by any Loan Party.
"Subsidiary" shall mean, with respect to any Person: (a) any
corporation of which an aggregate of 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise; and (b) any partnership in which such Person
and/or one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or
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participation in profits or capital contribution) of 50% or more or of which any
such Person is a general partner or may exercise the powers of a general
partner.
"Subsidiary Guaranty" shall mean any guaranty executed by a Subsidiary
of Parent in substantially the form of Exhibit G hereto.
"Subsidiary Security Agreement" shall mean any security agreement
entered into between a Subsidiary of Parent and Lender in substantially the form
of Exhibit H hereto.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Lender by the United States of America, the
jurisdiction under the laws of which Lender is organized or the jurisdiction in
which Lender's applicable lending office is located or, in each case, any
political subdivision thereof.
"Term Loan" shall mean the Tranche A Term Loan and the Tranche B Term
Loan made by Lender to Borrowers in accordance with the terms of Section 1.2.
"Term Loan Commitment" shall mean, the commitment of Lender to make
the Term Loan to Borrowers pursuant to Section 1.2 in the aggregate principal
amount of $2,000,000.
"Term Note" shall mean the promissory note provided for in Section
1.2(a) and all promissory notes delivered in substitution or exchange therefor.
"Term Rate" shall mean the sum of the Index Rate, plus ______
percent (__%) [redacted] per annum.
"Termination Date" shall mean the date on which (a) the Revolving
Credit Commitment has been terminated in full, and Lender shall have no further
obligation to make any credit extensions or financial accommodations hereunder,
and (b) all Obligations have been irrevocably paid in full.
"Termination Fee" shall have the meaning assigned to it in Annex D.
"Title IV Plan" shall mean a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"Total Days Sales in Accounts" shall mean, for a Borrower and for any
of such Borrower's Accounts, at the end of each Fiscal Quarter of such Borrower,
the product obtained by multiplying the total number of days in such Fiscal
Quarter by a fraction, the numerator of which is the average of the three Fiscal
Month-end book values of such Accounts (net of allowance for doubtful accounts)
of such Borrower for such Fiscal Quarter as reflected in its books and records
and determined in accordance with established practices consistently applied,
and the denominator of which is the gross sales of such Borrower for such Fiscal
Quarter that gave rise to such Accounts as reflected in its books and records
and determined in accordance with established practices consistently applied.
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"Trademark License" shall mean, with respect to any Person, rights
under any written agreement now owned or hereafter acquired by such Person
granting any right to use any Trademark or Trademark registration.
"Trademarks" shall mean, with respect to any Person, all of the
following in which such Person now holds or hereafter acquires any interest: (a)
all common law and statutory trademarks, trade names, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency
of the United States of America, any State or Territory thereof, or any other
country or any political subdivision thereof; (b) all reissues, extensions or
renewals thereof; and (c) all licenses thereunder and together with the goodwill
associated with and symbolized by such trademark.
"Tranche A Term Loan" shall have the meaning assigned to it in
Section 1.2(a)(i).
"Tranche B Term Loan" shall have the meaning assigned to it in
Section 1.2(a)(ii).
"Welfare Plans" shall mean any welfare plan, as defined in Section
3(1) of ERISA, which is maintained or contributed to by any Loan Party or any
ERISA Affiliate.
"Wholly-owned Subsidiary" shall mean any Subsidiary of which all of
the Stock is owned, directly or indirectly, by Parent.
2. Certain Matters of Construction. Any accounting term used in the
Agreement or the other Loan Documents shall have, unless otherwise specifically
provided therein, the meaning customarily given such term in accordance with
GAAP, and all financial computations thereunder shall be computed, unless
otherwise specifically provided therein, in accordance with GAAP consistently
applied. That certain items or computations are explicitly modified by the
phrase "in accordance with GAAP" shall in no way be construed to limit the
foregoing.
All other undefined terms contained in the Agreement or the other Loan
Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of New York to the extent the
same are used or defined therein. The words "herein," "hereof" and "hereunder"
or other words of similar import refer to the Agreement as a whole, including
the exhibits and schedules thereto, as the same may from time to time be
amended, modified or supplemented, and not to any particular section, subsection
or clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply: (a) wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter
20
<PAGE>
gender shall include the masculine, the feminine and the neuter; (b) the term
"including" shall not be limiting or exclusive, unless specifically indicated to
the contrary; (c) all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations; and
(d) all references to any instruments or agreements, including references to any
of the Loan Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof, in each case, made in
accordance with the terms of the Loan Documents.
21
<PAGE>
EXHIBIT 10(d)
STOCK PURCHASE AGREEMENT
between
GENERAL ELECTRIC CAPITAL CORPORATION
and
C.I.S. TECHNOLOGIES, INC.
Dated as of October 15, 1994
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of October 15, 1994, between General
Electric Capital Corporation, a New York corporation (the "Purchaser"), and
C.I.S. Technologies, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Purchaser wishes to purchase from the Company, and the Company
wishes to sell to the Purchaser shares of the Company's Common Stock, $.01 par
value per share (the "Stock") (unless otherwise defined, all capitalized terms
used herein shall have the respective meanings ascribed to them in Section 5);
and
WHEREAS, the Purchaser and the Company are entering into this Agreement to
provide for such purchase and sale and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, and such other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto intending
to be legally bound, agree as follows:
1. Purchase and Sale of Shares.
1.1. Closing. Upon the terms set forth herein and contemporaneously with
the execution of this Agreement, the Company is selling to the Purchaser, and
the Purchaser is purchasing from the Company, an aggregate of 840,336 shares of
Stock (the "Shares").
At the closing of the purchase and sale of the Shares (the "Closing"):
(i) Pray, Walker, Jackman, Williamson & Marlar, counsel to the
Company, shall deliver to the Purchaser a legal opinion
substantially in the form of Exhibit A hereto;
(ii) the Company and the Purchaser shall enter into a
registration rights agreement in
<PAGE>
the form of Exhibit B hereto (the "Registration Rights
Agreement");
(iii) the Company shall deliver to the Purchaser a stock
certificate in definitive form registered in the name of the
Purchaser, representing the Shares being purchased by the
Purchaser pursuant hereto;
(iv) the Purchaser shall pay to the Company Two Million
($2,000,000) U.S. Dollars by wire transfer of immediately
available funds to an account previously identified by the
Company; and
(v) no material adverse change in the business, condition,
operations (financial or otherwise) or prospects of the Company
and its subsidiaries taken as a whole from that set forth in the
balance sheet as of December 31, 1993, included in the SEC
Reports (as defined below), other than changes disclosed or
referred to in the SEC Reports or otherwise disclosed to the
Purchaser in writing prior to the execution by the Purchaser of
this Agreement, shall have occurred.
The Closing of the purchase and sale of the Shares shall be deemed to have
taken place in the State of New York.
1.2. Condition to Closing. The obligation of the Purchaser to purchase
the Shares is subject to the closing of the transactions contemplated by, and
the satisfaction of the conditions precedent thereto set forth in, the Credit
Agreement, among the Company, C.I.S., Inc. and Hospital Billing Analysis, Inc.,
the Company's wholly-owned subsidiaries, and the Purchaser, dated as of the date
hereof (the "Credit Agreement") and the Strategic Alliance Agreement, between GE
Capital Commercial Finance, Inc. and the Purchaser, dated as of the date hereof.
2. Representations and Warranties of the Company. The Company represents
and warrants as of the date hereof as follows and such representations and
warranties shall not be deemed to be remade on any subsequent date:
2
<PAGE>
2.1. Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the power and authority to own its respective property and to carry on its
respective business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of its respective
business conducted or property owned by it makes such qualification necessary
and where the failure so to qualify would have a material adverse effect on the
business or condition (financial or otherwise) of the Company taken as a whole.
2.2. Due Authorization. The Company has all right, power and authority to
enter into and perform this Agreement and the Registration Rights Agreement and
to issue and sell the Shares. The execution and delivery of this Agreement and
the Registration Rights Agreement, the issuance and sale of the Shares by the
Company and the compliance by the Company with all the provisions of this
Agreement and the Registration Rights Agreement (i) are within the power and
authority of the Company, (ii) do not require the approval or consent of any
stockholders of the Company, any governmental authority or any third party and
(iii) have been authorized by all requisite action on the part of the Company.
This Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The Company has furnished to the Purchaser true and correct
copies of the Company's Certificate of Incorporation and By-laws as in effect on
the date of this Agreement.
2.3. Status of Shares. Upon issuance of the Shares at Closing, the Shares
will be validly issued, fully paid and nonassessable and the issuance of the
Shares is not and will not be subject to preemptive rights of any other
stockholder of the Company.
3
<PAGE>
2.4. SEC Reports. The Stock is registered under Section 12(b) or (g) of
the Exchange Act, and the Company has filed all proxy statements, reports and
other documents required to be filed by it under the Exchange Act. The Company
has furnished the Purchaser true and correct copies of its Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and all proxy statements and
reports under the Exchange Act filed by the Company after such date, each as
filed with the Commission (collectively, the "SEC Reports"). Each SEC Report,
at the time it was filed with or delivered to the Commission, was in substantial
compliance with the requirements of its respective report form.
2.5. Consents. The Company is not required to obtain any consent,
approval or authorization of, or to make any declaration or filing with, any
governmental authority as a condition to or in connection with the valid
execution, delivery and performance of this Agreement or the Registration Rights
Agreement and the valid offer, issue, sale or delivery of the Shares, or the
performance by the Company of its obligations in respect thereof, except for any
filings required to effect any registration pursuant to and as contemplated
specifically by the Registration Rights Agreement and any filings required
pursuant to state and federal securities laws which will be timely made after
the Closing hereunder.
2.6. No Conflict. None of the execution and delivery of this Agreement or
the Registration Rights Agreement, the issuance of the Shares or the fulfillment
of, or compliance with, the terms and provisions hereof or thereof will conflict
with or result in a breach of the terms, conditions or provisions of, give rise
to a right of termination under, constitute a default under or result in any
violation of (i) the Certificate of Incorporation or By-laws of the Company,
(ii) any indenture, loan agreement, lease, mortgage or other agreement binding
on the Company, (iii) any judgment or decree of a court or administrative agency
binding on the Company or (iv) any applicable statute, law, rule or regulation
to which the Company or any of its subsidiaries or any of their respective
property is subject. Performance by the Company of its obligations under this
Agreement and the Registration Rights Agreement will not result in the
imposition or creation of any lien or charge against any assets of the Company.
Neither the Company nor its subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate
4
<PAGE>
restriction which materially and adversely affects its business, property,
assets, financial condition or prospects. Neither the Company nor any of its
subsidiaries is in default under any outstanding indenture or other debt
instrument or with respect to the payment of the principal of or interest on any
outstanding obligations for borrowed money or is in default under any of their
respective contracts or agreements or under any instrument by which the Company
or any of its subsidiaries is bound, in each case which default materially and
adversely affects the business, operations, assets, financial condition or
prospects of the Company and its subsidiaries taken as a whole.
2.7. Capitalization. The authorized capital stock of the Company consists
of (i) 50,000,000 shares of Stock, of which, as of the date hereof, 28,416,539
shares are outstanding and 1,017,745 shares are held in its treasury and (ii)
20,000,000 shares of preferred stock, $.01 par value, no shares of which are
issued and outstanding. All of such outstanding shares have been validly issued
and are fully paid and nonassessable. No class of capital stock of the Company
is entitled to preemptive rights. Except for the options and warrants listed on
Schedule 2.7 hereto or disclosed in the SEC Reports, there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock of the Company or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any shares of its capital stock. Since December 31, 1993,
the Company has not changed the amount of its authorized capital stock or
subdivided or otherwise changed any shares of any class of its capital stock,
whether by way of reclassification, recapitalization, stock split or otherwise
or issued or reissued, or agreed to issue, reissue, redeem or repurchase, any of
its capital stock, except as disclosed on Schedule 2.7 and has not since such
date declared or paid any dividend in cash or stock or made any other
distribution of assets to its stockholders. The Company has no obligation to
register any of its securities other than pursuant to the Registration Rights
Agreement.
2.8. Other Matters. The Company is not now and will not be, after giving
effect to the receipt of the proceeds from the sale of the Shares, an
"investment company" within the meaning of the Investment Company Act of
5
<PAGE>
1940, nor will it be controlled by or acting on behalf of any person which is
such an investment company. The Company does not own any "margin stock" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System and is not selling the Shares "for the purpose of purchasing or carrying
any margin stock" within the meaning of the said Regulation G.
2.9. Disclosure. None of this Agreement, any SEC Report, or any
certificate or written disclosure furnished to the Purchaser by or on behalf of
the Company in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
There is no fact peculiar to the Company which the Company has not disclosed to
the Purchaser in writing which materially affects adversely or, so far as the
Company can now reasonably foresee, could materially affect adversely the
properties, business, condition (financial or otherwise) or prospects of the
Company and its subsidiaries taken as a whole or the ability of the Company to
perform this Agreement, the Registration Rights Agreement or its obligations in
respect of the Shares.
2.10. Offering of Shares. Neither the Company nor any Person acting on
its behalf has offered the Shares or any similar securities of the Company for
sale to, solicited any offers to buy the Shares or any similar securities of the
Company from or otherwise approached or negotiated with respect to the Company
with any Person other than the Purchaser, except for an offer for the Shares
made to one institutional investor, which offer is not currently outstanding.
Neither the Company nor any Person acting on its behalf has taken or will take
any action (including, without limitation, any offering of any securities of the
Company under circumstances which would require the integration of such offering
with the offering of the Shares under the Securities Act and the rules and
regulations of the Commission thereunder) which might subject the issuance or
sale of the Shares to the registration requirements of Section 5 of the
Securities Act.
2.11. Brokers or Finders. No agent, broker, investment banker or other
firm or Person is or will be entitled to any broker's fee or any other
commission or similar fee for which the Purchaser shall be responsible.
6
<PAGE>
2.12. Credit Agreement Representations and Warranties. All the
representations and warranties made by the Company in the Credit Agreement are
true and correct as of the date hereof and are hereby incorporated into and made
a part of this Agreement as if set forth in full herein.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants as of the date hereof as follows:
3.1. Due Authorization. The Purchaser has all corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on behalf of
the Purchaser. This Agreement has been duly executed and delivered by the
Purchaser and constitutes a valid and binding agreement of the Purchaser
enforceable against the Purchaser in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
3.2. Acquisition for Investment. The Purchaser is acquiring the Shares
for its own account for the purpose of investment and not with a view to or for
sale in connection with any "distribution" (within the meaning of the Securities
Act) thereof, and the Purchaser has no present intention or plan to effect any
distribution of the Shares. The Purchaser understands that certificates
representing the Shares shall bear the legend set forth in Section 6.12 hereof.
3.3. Brokers or Finders. No agent, broker, investment banker or other
firm or Person is or will be entitled to any broker's fee or any other
commission or similar fee for which the Company shall be responsible.
3.4. Accredited Investor. The Purchaser is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act.
7
<PAGE>
4. Covenants of the Company. The Company hereby covenants that, during
such time as the Purchaser (or one of its Affiliates) owns a minimum of 500,000
Shares:
4.1. Reports and Financial Statements.
(a) The Company will cause its Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply with its reporting and
filing obligations under the Exchange Act and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act. The Company will
take all action necessary to continue the listing or trading of its common stock
on any national securities exchange or the Automated Quotation System of the
National Association of Securities Dealers on which such common stock is listed
or traded and will comply with its reporting, filing and other obligations under
the Exchange Act, the Securities Act and the bylaws or rules of said exchange or
Association.
(b) The Company will furnish to the Purchaser, concurrently with the
distribution or filing thereof, each annual and quarterly report to its
shareholders, its reports on Form 10-K and 10-Q and each other report,
registration statement, definitive proxy statement or other document filed with
the Commission and any reports, listing applications or other documents filed
with any national securities exchange or the National Association of Securities
Dealers, and each press release or other public announcement issued by the
Company.
4.2. Rights of Inspection. The Company will permit representatives of the
Purchaser to visit and inspect any of the properties of the Company, including
its books of account, and to discuss its affairs, finances and accounts with the
Company's officers and its independent public accountants, all at such
reasonable times and as often as the Purchaser may reasonably request.
4.3. Maintenance and Compliance. The Company will and will cause its
subsidiaries to (i) maintain its corporate existence, rights, powers and
privileges in good standing, (ii) pay promptly when due all taxes, assessments
and governmental charges properly imposed on it, (iii) maintain its properties
in workable condition and repair,
8
<PAGE>
(iv) comply in all material respects with all laws and governmental regulations
and restrictions applicable to its business or properties, (v) maintain with
financially sound insurers such insurance coverage against liability, fire and
other risks as is reasonably prudent and customary for companies similarly
situated, (vi) keep records and books of account and maintain a system of
internal accounting controls in accordance with generally accepted accounting
principles and in compliance with Section 13(b)(2) of the Exchange Act, (vii)
retain independent public accountants of recognized national standing as
auditors of the Company's annual financial statements, (viii) comply in all
material respects with ERISA and (ix) comply in all material respects with all
applicable Environmental Regulations.
4.4. Press Release; Public Offering Materials. The Company will not and
will not permit any of its subsidiaries to disclose the name of the Purchaser in
any press release or in any prospectus, proxy statement or other materials filed
with any governmental entity relating to a public offering of the capital stock
of the Company without the Purchaser's prior written consent which consent shall
not be unreasonably withheld.
5. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act
(as in effect on the date of this Agreement), it being understood that any
limited partner of a partnership shall not be an Affiliate of such partnership
solely by virtue of its status as such a limited partner.
"Commission" means the Securities and Exchange Commission.
"Environmental Regulations" means all federal, state, local and foreign
environmental laws, statutes, rules, regulations, order and ordinances, as
amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
9
<PAGE>
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include reference to the comparable
section, if any, of any such similar Federal statute.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or department or agency of a
government.
"SEC Reports" has the meaning provided in Section 2.4 hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of any such similar Federal statute.
6. Miscellaneous.
6.1. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable.
6.2. Specific Enforcement. The Purchaser, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.
10
<PAGE>
6.3. Entire Agreement. This Agreement (including the exhibits hereto)
contains the entire understanding of the parties with respect to the
transactions contemplated hereby.
6.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
6.5. Notices. All notices, consents, requests, instructions, approvals
and other communications provided for herein shall be validly given, if in
writing and delivered personally, by confirmed telecopy or by registered mail or
nationally recognized air courier, postage prepaid, to:
the Company:
C.I.S. Technologies, Inc.
One Warren Place
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136-1930
Attention: Philip D. Kurtz
Chairman and Chief Executive Officer
Telecopy: (918) 481-4276
With a copy to:
Pray, Walker, Jackman, Williamson & Marlar
900 Oneok Plaza
100 West 5th Street
Tulsa, OK 74103-4218
Attention: Thomas G. Noulles, Esq.
Telecopy: (918) 581-5599
11
<PAGE>
the Purchaser:
General Electric Capital Corporation
501 Merritt Seven
Norwalk, CT 06851
Attention: Daniel R. Pengue
Vice President
Telecopy: (203) 840-4580
and
Attention: Legal Department
Telecopy: (203) 840-4520
With a copy to:
Paul, Hastings, Janofsky & Walker
1055 Washington Boulevard, 9th Floor
Stamford, CT 06901
Attention: Mario J. Ippolito, Esq.
Telecopy: (203) 359-3031
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
6.6. Amendments. Neither this Agreement nor any terms hereof may be
changed, waived, amended or modified unless such change, waiver, amendment or
modification is in writing and signed by the Company and the Purchaser or its
successors and assigns. This Agreement may not be waived, changed, modified or
discharged orally, but only by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change, modification or
discharge is sought or by parties with the right to consent to such waiver,
change, modification or discharge on behalf of such party.
6.7. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement (including any holder of
Shares), upon any breach or default of another party under this Agreement, shall
impair any such right, power or remedy of such party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach a default thereafter occurring, nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. All remedies, either under this
12
<PAGE>
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
6.8. Cooperation. The Purchaser and the Company agree to take, or cause
to be taken, all such further or other actions as shall reasonably be necessary
to make effective and consummate the transactions contemplated by this
Agreement.
6.9. Successors and Assigns. (a) Except for Section 2.12, Article 4 and
Section 6.10(b) hereof, this Agreement and all covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns (including, without limitation, any
transferee of the Shares). The provisions contained in Section 6.10(a) shall
not be deemed to refer to any subsequent holder of the Shares other than such
Persons who agree to be bound by the terms of this Agreement.
(b) The rights of the Purchaser hereunder may be assigned by the Purchaser
in connection with the transfer or assignment of any Shares, and such rights may
be further reassigned by such transferee to another transferee. Any transferee
asserting rights under this Agreement shall be bound by its provisions.
6.10. Expenses and Remedies.
(a) The Company shall pay all stamp and other taxes payable with respect to
the issuance of the Shares, filing fees, fees and expenses of counsel (i)
incurred with respect to any amendment or waivers requested by the Company
(whether or not the same become effective) under this Agreement or the
Registration Rights Agreement or in connection with the rights of Purchaser (or
Purchaser's successors or assigns) with respect to the Shares and (ii) all such
expenses incurred with respect to the enforcement by the Purchaser (or
Purchaser's successors and assigns) of any provision of this Agreement or the
Registration Rights Agreement or in connection with the rights of Purchaser (or
Purchaser's successors or assigns) with respect to the Shares, including without
limitation, costs and expenses in any bankruptcy proceeding, provided, that such
Purchaser (or Purchaser's successors or assigns) prevailed in any such
enforcement action.
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<PAGE>
(b) The Company shall indemnify and save harmless the Purchaser and its
officers, directors, partners, employees, agents, representatives and each
person who controls the Purchaser within the meaning of the Exchange Act from
and against any and all costs, expenses, damages or other liabilities resulting
from any breach of this Agreement or the Registration Rights Agreement by the
Company or any legal, administrative or other proceedings arising out of the
transactions contemplated hereby or thereby, other than such costs, expenses,
damages or other liabilities resulting from the violation by the Purchaser of
any legal investment laws or other laws restricting or governing the Purchaser's
investments generally, from the violation by the Purchaser of any of its
agreements contained herein or therein or from the gross negligence or willful
misconduct of the Purchaser or any of its officers, directors, partners,
employees, agents or representatives or any person who controls the Purchaser
within the meaning of the Exchange Act as determined by a final judgment of a
court of competent jurisdiction; provided, however, that, if and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of such
indemnified liability which shall be permissible under applicable laws.
6.11. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
issuance and delivery of the Shares, for a period of three years from the latest
date set forth under the signatures hereto, regardless of any investigation made
by or on behalf of any party.
6.12. Transfer of Shares. The Purchaser understands and agrees that the
Shares have not been registered under the Securities Act or the securities laws
of any state and that they may be sold or otherwise disposed of only in one or
more transactions registered under the Securities Act and, where applicable,
such laws, or as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws are available. The Purchaser
understands and agrees that each certificate representing the Shares shall bear,
until so registered, the following legend:
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<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933 AND/OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATIONS(S) IS (ARE) NOT
REQUIRED THEREUNDER."
6.13. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR THE REGISTRATION RIGHTS
AGREEMENT; PROVIDED, THAT THE COMPANY AND THE PURCHASER ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT OR THE
REGISTRATION RIGHTS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT AND THE COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 6.5 OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.
6.14. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY
15
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AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT OR THE REGISTRATION RIGHTS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
6.15. Dating. Although this Agreement is dated as of the date first
written above for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this Agreement shall be effective on the latest of such dates.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be duly executed, all as of the day and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By: _______________________________
Name:
Title:
Date:
C.I.S. TECHNOLOGIES, INC.
By: ___________________________________
Name:
Title:
Date:
16
<PAGE>
SCHEDULE 2.7
Outstanding Options and Warrants
None
17
<PAGE>
EXHIBIT 10(e)
REGISTRATION RIGHTS AGREEMENT
between
GENERAL ELECTRIC CAPITAL CORPORATION
and
C.I.S. TECHNOLOGIES, INC.
Dated as of October 15, 1994
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of October 15, 1994, between C.I.S.
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and GENERAL ELECTRIC
CAPITAL CORPORATION (the "Purchaser").
1. Background. Pursuant to a Stock Purchase Agreement, dated as of
October 15, 1994 (the "Purchase Agreement"), between the Company and the
Purchaser, the Purchaser has purchased from the Company 840,336 shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Stock").
Unless otherwise defined in context or the context otherwise requires,
capitalized terms used herein are defined in Section 3.
2. Registration Rights.
2.1 Registration On Request.
(a) Request. Subject to Section 2.8 hereof, at any time, beginning on the
first day of the ninth month of the date hereof, and from time to time, upon the
written request of holders (the "Initiating Holders") of Registrable Securities
representing not less than 50% of the Registrable Securities that the Company
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities, the Company shall promptly give
written notice of such requested registration to all registered holders of
Registrable Securities, and thereupon the Company shall use its best effort to
effect the registration under the Securities Act, including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested in
such request and if the Company is then eligible to use such a registration, of
(i) the Registrable Securities which the Company has been so requested to
register by such Initiating Holders, and
(ii) all other Registrable Securities which the Company has been requested
to register by the holders thereof (such holders together with the Initiating
Holders, the "Selling Holders") by written request given to the Company within
30 days after the giving of such written notice by the Company, all to the
extent requisite to permit the disposition of the Registrable Securities so to
be registered.
<PAGE>
(b) Registration of Other Securities. Whenever the Company shall effect
registration pursuant to this Section 2.1 in connection with an underwritten
offering by one or more Selling Holders of Registrable Securities, no securities
other than Registrable Securities shall be included among the securities covered
by such registration unless (i) the managing underwriter of such offering shall
have advised each Selling Holder of Registrable Securities to be covered by such
registration in writing that the inclusion of such other securities would not
adversely affect such offering or (ii) the Selling Holders of not less than 66-
2/3% of all Registrable Securities to be covered by such registration shall have
consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission as shall be
selected by the Company and as shall be reasonably acceptable to the Selling
Holders of more than 50% of the Registrable Securities so to be registered. The
Company shall include in any such registration statement all information which,
in the opinion of counsel to the Selling Holders of Registrable Securities so to
be registered and counsel to the Company, is required to be included.
(d) Expenses. The Company will pay the Registration Expenses in connection
with any registration requested pursuant this Section 2.1.
(e) Effective Registration Statement. A registration requested pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective, (ii) if after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling Holders and has
not thereafter become effective or (iii) if the conditions to closing specified
in the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Selling Holders.
(f) Selection of Underwriters. If the registration under this Section 2.1
is in connection with an underwritten offering, the underwriter or underwriters
of
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<PAGE>
each underwritten offering of the Registrable Securities so to be registered
shall be selected by the mutual agreement of the Company and the Selling Holders
of more than 50% of the Registrable Securities so to be registered.
(g) Priority in Requested Registration. If the managing underwriter of any
underwritten offering shall advise the Company in writing (with a copy to each
Selling Holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Selling Holders of 66-2/3% of the Registrable Securities
requested to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration, pro rata among the Selling Holders requesting such registration on
the basis of the percentage of the Registrable Securities of such Selling
Holders requested so to be registered. In connection with any such registration
to which this Section 2.1(g) is applicable, no securities other than Registrable
Securities shall be covered by such registration.
(h) Limitations on Registration on Request. Notwithstanding anything in
this Section 2.1 to the contrary, in no event will the Company be required to
effect (i) in the aggregate, without regard to the holder of Registrable
Securities making such request, more than two registrations pursuant to this
Section 2.1 and (ii) without regard to the holder of Registrable Securities
making such request, more than one registration in any twelve month period;
provided, that the Company shall only be obligated to effect the second
registration pursuant to this Section 2.1(h) on Form S-3 (or any similar or
successor form).
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company proposes to
register any of its securities under the Securities Act by registration on Forms
S-l, S-2 or S-3 or any successor or similar form(s) (except registrations on
such Forms or similar form(s) solely for registration of securities in
connection with an employee benefit plan or dividend reinvestment plan or merger
or consolidation), whether or not for sale for its own account, it will, subject
to Section 2.8 hereof, each such time give
3
<PAGE>
prompt written notice to all registered holders of Registrable Securities of its
intention to do so and of such holders' rights under this Section 2.2. Upon the
written request of any such holder (a "Requesting Holder") made as promptly as
practicable and in any event within 30 days after the receipt of any such notice
(ten days if the Company states in such written notice or gives telephonic
notice to all registered holders of Registrable Securities, with written
confirmation to follow promptly thereafter, that (i) such registration will be
on Form S-3 and (ii) such shorter period of time is required because of a
planned filing date), which request shall specify the Registrable Securities
intended to be disposed of by such Requesting Holder, the Company shall, subject
to Section 2.8 hereof, use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Requesting Holders thereof; provided, however, that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each Requesting
Holder of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a
registration under Section 2.1 and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1. The
Company shall pay all Registration Expenses in connection with registration of
Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. Notwithstanding anything in
paragraph (a) above to the contrary, if the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief that the
number or type of Registrable Securities requested
4
<PAGE>
to be included in such registration would materially and adversely affect such
offering, then the Company shall include in such registration, to the extent of
the number and type which the Company is so advised can be sold in (or during
the time of) such offering, first, all securities proposed by the Company to be
sold for its own account, second, Registrable Securities requested to be
included in such registration, pro rata among such Requesting Holders on the
basis of the percentage of the Registrable Securities of such Requesting Holders
requested so to be registered, third, all other securities of the Company
requested to be included in such registration pro rata among such holders on the
basis of the estimated gross proceeds of the securities of such holder requested
to be so included, and fourth, any other securities of the Company requested to
be included in such registration.
2.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2.1 or 2.2, the
Company shall as expeditiously as possible:
(i) prepare and (as soon as practicable, and in any event within 60 days in
the case of Forms S-1 or S-2 and 30 days in the case of a registration requested
on Form S-3 after the end of the period within which requests for registration
may be given to the Company) file with the Commission the requisite registration
statement to effect such registration and thereafter use its best efforts to
cause such registration statement to become effective; provided, however, that
the Company may discontinue any registration of its securities which are not
Registrable Securities (and, under the circumstances specified in Section
2.2(a), its securities which are Registrable Securities) at any time prior to
the effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement for such period as
shall be required for the disposition of all of such Registrable Securities,
provided, that except with respect to any such registration statement
5
<PAGE>
filed pursuant to Rule 415 under the Securities Act, such period need not exceed
180 days;
(iii) furnish to each seller of Registrable Securities covered by such
registration statement, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as such seller may reasonably request;
(iv) use its bet efforts (x) to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or Blue Sky laws of such States of the United States of
America where an exemption is not available and as the sellers of Registrable
Securities covered by such registration statement shall reasonably request, (y)
to keep such registration or qualification in effect for so long as such
registration statement remains in effect and (z) to take any other action which
may be reasonably necessary or advisable to enable such sellers to consummate
the disposition in such jurisdictions of the securities to be sold by such
sellers, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not, but for the requirement of this paragraph (iv), be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary in the
opinion of counsel to the Company and counsel to the seller or sellers thereof
to consummate the disposition of such Registrable Securities in accordance with
their intended method of disposition;
6
<PAGE>
(vi) furnish to each seller of Registrable Securities a signed counterpart
of
(x) an opinion of counsel for the Company, and
(y) a "comfort" letter signed by the independent pubic accountants who
have certified the Company's financial statements included or incorporated by
reference in such registration statement,
each covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuers'
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated) and, in the case of the accountants'
comfort letter, such other financial matters, and in the case of the legal
opinion, such other legal matters, as the sellers of more than 50% of the
Registrable Securities covered by such registration statement, or the
underwriters, may reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstance under which they were made, and at the request of any such seller
promptly prepare and furnish to it a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable rules
and regulations of the
7
<PAGE>
Commission and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder, and promptly furnish to each
such seller of Registrable Securities a copy of such statement;
(ix) provide and cause to be maintained a transfer agent and registrar
(which, in each case, may be the Company) for all Registrable Securities covered
by such registration statement from and after a date not later than the
effective date of such registration; and
(x) use its best efforts to list all Registrable Securities covered by
such registration statement on any national securities exchange or quotation
system on which Registrable Securities of the same class and, if applicable,
series, covered by such registration statement are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.3(vii), such holder
will forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by 2.3(vii) and, if so directed by the Company, will
deliver to the Company at the Company's expense all copies, other than permanent
file copies, then in such holder's possession, of the prospectus relating to
such Registrable Securities current at the time of receipt of such notice.
8
<PAGE>
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the underwriters for
any underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, each such
holder (or the representative of such holder) and the underwriters, and to
contain such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in Section 2.7.
The holders of the Registrable Securities proposed to be distributed by such
underwriter will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable suggestions
of the Company regarding the form thereof. Such holders of Registrable
Securities shall, upon the request of the Company, appoint a representative of
such holders. Such holders of Registrable Securities to be distributed by such
underwriter shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the condition precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities, such holder's intended method of
distribution and any other representations required by law.
(b) Incidental Underwritten Offerings. If the Company proposes to
register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or though one or more
underwriters, the Company will, subject to Section 2.2 and Section 2.8 hereof,
if requested by any Requesting Holder of Registrable Securities, arrange for
such underwriters to include all the Registrable Securities to be offered and
9
<PAGE>
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters. Such holders of Registrable Securities shall,
upon the request of the Company, appoint a representative of such holders. The
holders of Registrable Securities to be distributed by such underwriters or
their representative shall be parties to the underwriting agreement between the
Company and such underwriters and may, at their option, require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriter under
such underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such Requesting Holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Requesting Holder, such Requesting
Holder's Registrable Securities and such Requesting Holder's intended method of
distribution of any other representations required by law.
(c) Holdback Agreements. (i) If any registration of Registrable
Securities shall be in connection with an underwritten public offering, each
holder of Registrable Securities agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Registrable Securities, and not to affect any such public sale or
distribution of any other equity security of the Company or of any security
convertible into or exchangeable or excisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering)
during the 15 days prior to, and during the 90-day period (or such period as the
underwriters retained by the Company may reasonably request, which period is no
greater than 120 days) beginning on, the effective date of such registration
statement (except as part of such registration) provided that each holder of
Registrable Securities has received written notice of such registration at least
15 days prior to such effective date.
(ii) If any registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees (x) not to effect any
public sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or
10
<PAGE>
exercisable for any equity security of the Company (other than any such sale or
distribution of such securities in connection with any merger or consolidation
by the Company or any subsidiary of the Company or the acquisition of the
outstanding capital stock or of substantially all the assets of any other person
or in connection with any employee stock option or other benefit plan) during
the 15 days prior to, and during the 90-day period (or such period as the
underwriters retained by the Company may reasonably request, which period is no
greater than 120 days) beginning on, the effective date of such registration
statement (except as part of such registration) and (y) that any agreement
entered into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any privately placed equity securities shall contain a
provision under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the period referred to in the
foregoing clause (x), including any sale pursuant to Rule 144 under the
Securities Act (except as part of such registration, if permitted).
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission and each amendment thereof or supplement
thereto, and give each of them such access to its books and records, such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations under
Registration Covenants. The obligations of the Company to use its best efforts
to cause the Registrable Securities to be registered under the Securities Act is
subject to the following limitations, conditions and qualifications:
The Company shall be entitled to postpone for a reasonable period of time
(but not exceeding 60 days and no
11
<PAGE>
more than once in any twelve month period) the filing of any registration
statement otherwise required to be prepared and filed by it pursuant to Section
2.1 if the Company determines, in its reasonable judgment, that such
registration and offering would interfere with any financing, acquisition,
corporate reorganization or other material transaction involving the Company or
any of its Affiliates or would require premature disclosures thereof and
promptly gives the holders of Registrable Securities requesting registration
thereof pursuant to Section 2.1 written notice of such determination, containing
a general statement of the reasons for such postponement and an approximation of
the anticipated delay. If the Company shall so postpone the filing of a
registration statement, such holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1 shall have the right to withdraw
the request for registration by giving written notice to the Company within 30
days after receipt of the notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which holders of Registrable Securities are entitled pursuant to
Section 2.1 hereof.
2.7 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1 or 2.2, each seller of any Registrable
Securities covered by such registration statement, its directors, officers,
partners, agents and affiliates and each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act, insofar as losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the
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circumstances in which they were made not misleading, and the Company will
reimburse such seller and each such director, officer, partner, agent or
affiliate, underwriter and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument executed by or on behalf of such
seller or underwriter, as the case may be, specifically stating that it is for
use in the preparation thereof; and provided, further, that the Company shall
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus so long as such final prospectus, and any
amendments or supplements thereto, have been furnished to such underwriter.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, office,
partner, agent or affiliate or controlling Person and shall survive the transfer
of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to including any
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from the prospective seller of such
Registrable Securities to indemnify and hold harmless (in the same manner and to
the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, and each director of the Company, each officer of the
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Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the liability of such indemnifying party under this Section 2.7(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling Person and shall survive
the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 2.7, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties is reasonably likely to exist in respect of
such claim, the indemnifying party shall be entitled to participate in and, to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other
14
<PAGE>
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the
defense thereof. No indemnifying party shall be liable for any settlement of
any action or proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in this Section 2.7
shall for any reason be held by a court to be unavailable to an indemnified
party under paragraph (a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid or
payable under paragraph (a) or (b) hereof, the indemnified party and the
indemnifying party under paragraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this paragraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no
15
<PAGE>
Person shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 2.7 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
required by this Section 2.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
2.8 Limitations on Registrations of Registrable Securities. The Company
shall not be required to effect any registration of Registrable Securities
pursuant to Section 2.1 or 2.2 hereof if it shall deliver to the holder or
holders requesting such registration a written opinion of counsel (which opinion
and counsel shall be reasonably satisfactory to such holder or holders) to the
effect that all Registrable Securities held by such holder may be sold in the
public market without restriction (including, but not limited to, the volume
limitations of Rule 144) or registration under the Securities Act and any
applicable state securities laws.
2.9 Transfer of Rights. The rights to cause the Company to register all
or any portion of the Registrable Securities pursuant to this Section 2 may be
assigned by Purchaser (or Purchaser's successors or assigns) to a transferee or
assignee of the Registrable Securities. Within a reasonable time after such
transfer or assignment, the Purchaser shall (or Purchaser's successors or
assigns) notify the Company of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned. Such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act. Any transferee
asserting registration
16
<PAGE>
rights hereunder shall be bound by the provisions of this Section 2.
3. Definitions. A used herein, unless the context otherwise requires, the
following terms have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act
(as in effect on the date of this Agreement), it being understood that any
limited partner of a partnership shall not be an affiliate of such partnership
solely by virtue of its status as such a limited partner.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Initiating Holders" is defined in Section 2.1(a).
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Purchase Agreement" is defined in Section 1.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), all word processing, duplicating and printing expenses, messenger
and delivery expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of "cold comfort"
letters required by or
17
<PAGE>
incident to such performance and compliance, any fees and disbursements of
underwriters (including, without limitation, fees and expenses of counsel to the
underwriters) customarily paid by issuers or sellers of securities and the fees
and expenses of one counsel to the Selling Holders (selected by Selling Holders
representing more than 50% of the Registrable Securities covered by such
registration); provided, however, that Registration Expenses shall exclude, and
the sellers of the Registrable Securities being registered shall pay,
underwriters' fees and underwriting discounts and commissions and transfer taxes
in respect of the Registrable Securities being registered.
"Registrable Securities" means the Shares. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or successor provision) promulgated under the Securities Act,
(c) they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer under the Securities Act shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act or (d) they
shall have ceased to be outstanding.
"Requesting Holders" is defined in Section 2.2(a).
"Rule 144" means Rule 144 promulgated under the Securities Act or any
similar federal rule under the Securities Act as shall be in effect at the time.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Selling Holder" is defined in Section 2.1(a).
4. Rule 144. With a view to making available the benefits of certain
rules and regulations of the Commission
18
<PAGE>
which may at any time permit the sale of the Registrable Securities to the
public without registration, during such time as a public market exists for the
Stock, the Company agrees to:
(a) use its best efforts to facilitate the sale of the Registrable
Securities to the public, without registration under the Securities Act,
pursuant to Rule 144;
(b) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) upon the request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to whether it has complied
with such requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended with the consent
of the Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act
of the beneficial owner or owners of at least 66-2/3% of the Registrable
Securities. Each beneficial owner of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
5, whether or not such Registrable Securities shall have been marked to indicate
such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
19
<PAGE>
7. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be validly given, if in writing
and delivered personally, by confirmed telecopy or by registered mail or
nationally recognized air courier, postage prepaid, as follows:
(a) if to the Purchaser, addressed to it in the manner set forth in the
Purchase Agreement or at such other address as it shall have furnished to the
Company in writing;
(b) if to any other holder of Registrable Securities, at the address that
such holder shall have furnished to the Company in writing, or, until any such
other holder so furnishes to the Company an address, then to and at the address
of the last holder of such Registrable Securities who has furnished an address
to the Company; or
(c) if to the Company, addressed to it in the manner set forth in the
Purchase Agreement or at such other address as the Company shall have furnished
to each holder of Registrable Securities at the time outstanding.
8. Assignment; Calculation of Percentage Interests in Registrable
Securities.
(a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and, with respect to the Company, its
respective successors and assigns and, with respect to the Purchaser, any
beneficial owner of any Registrable Securities, subject to the provisions
respecting the minimum numbers of percentages of shares of Registrable
Securities required in order to be entitled to certain rights, or take certain
actions, contained herein. The Purchaser named in the first paragraph of this
Agreement (and not any other holder of Registrable Securities or any other
Person) shall be permitted, in connection with a transfer or disposition of
Registrable Securities permitted by the Purchase Agreement, to impose conditions
or constraints on the ability of the transferee, as a holder of Registrable
Securities, to request a registration pursuant to Section 2.1 and shall provide
the Company with copies of such conditions or constraints and the identity of
such transferees.
(b) For purposes of this Agreement, all references to a percentage of the
Registrable Securities
20
<PAGE>
shall be calculated based upon the number of Registrable Securities outstanding
at the time such calculation is made.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
11. No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement. The
Company has not previously entered into any agreement with respect to any of its
equity securities granting any registration rights to any person.
12. Recapitalizations, etc. In the event that any capital stock or other
securities are issued in respect of, in exchange for or in substitution of any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
13. Attorneys' Fees. In any action or proceeding brought by the Purchaser
or any other holder of Registrable Securities to enforce any provision of this
Agreement, the Company shall reimburse, on demand, such party's reasonable
attorneys' fees and expenses incurred in connection therewith; provided that the
Purchaser or any such holder of Registrable Securities is the prevailing party
in any such enforcement action.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
21
<PAGE>
15. Dating. Although this Agreement is dated as of the date first written
above for convenience, the actual dates of execution hereof by the parties
hereto are respectively the dates set forth under the signatures hereto, and
this Agreement shall be effective on the latest of such dates.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officer thereunto duly authorized as of the
date first above written.
C.I.S. TECHNOLOGIES, INC.
By_________________________________
Name:
Title:
Date:
GENERAL ELECTRIC CAPITAL CORPORATION
By_________________________________
Name:
Title:
Date:
22
<PAGE>
EXHIBIT 10(f)
STOCK AND WARRANT PURCHASE AGREEMENT
between
BT HOLDINGS (NEW YORK), INC.
and
C.I.S. TECHNOLOGIES, INC.
Dated as of November 21, 1994
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT, dated as of November 21, 1994,
between BT Holdings (New York), Inc. a New York corporation (the "Purchaser"),
and C.I.S. Technologies, Inc., a Delaware corporation (the "Company").
WITNESSETH;
WHEREAS, the Purchaser wishes to purchase from the Company, and the Company
wishes to issue and sell to the Purchaser, (i) 1,615,818 shares of the Company's
Common Stock, $.01 par value per share (the "Common Stock"), (ii) 2,384,182
shares of the Company's Series A Preferred Stock, $.01 par value per share (the
"Series A Preferred Stock" and, together with the Common Stock, the "Stock"),
and (ii) warrants to purchase an additional 500,000 shares of Series A Preferred
Stock (the "Warrants") (unless otherwise defined, all capitalized terms used
herein shall have the respective meanings ascribed to them in Section 6); and
WHEREAS, the Purchaser and the Company are entering into this Agreement to
provide for such purchase and sale and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, and such other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto intending
to be legally bound, agree as follows:
1. Purchase and Sale of Shares.
---------------------------
1.1. Issuance and Sale. Upon the terms set forth herein and provided
-----------------
the conditions in Section 1.3 have been fulfilled, at the Closing referred
to in Section 1.2, the Company will issue and sell to the Purchaser, and
the Purchaser will purchase from the Company, (i) 1,615,818 shares of
Common Stock (the "Common Shares"), (ii) 2,384,182 shares of Series A
Preferred Stock (the "Series A Preferred Shares" and, together with the
Common Shares, the "Shares"), and (iii) the Warrants to purchase an
additional 500,000 shares of Series A Preferred Stock (the "Underlying
Series A Preferred Shares"), for an aggregate purchase price of $10,000,000
(the "Purchase Price").
1.2 Closing. The closing (the "Closing") of the issuance, sale and
-------
purchase of the Shares and the Warrants shall take place, subject to prior
satisfaction of the conditions in Section 1.3, on such date on or before
December 31, 1994 as the parties may agree (the date on which the closing
occurs being the "Closing Date"). At the Closing:
(i) the Company will deliver to the Purchaser or its nominee
stock certificates in definitive form and a warrant certificate in the
form of Exhibit A hereto, both registered in the name of the Purchaser
or its nominee,
2
<PAGE>
representing the Shares and the Warrants, respectively, being
purchased by the Purchaser pursuant hereto, and
(ii) the Purchaser shall pay to the Company Ten Million
($10,000,000) U.S. Dollars by wire transfer of immediately available
funds to an account previously identified by the Company.
1.3 Conditions to Closing. The obligation of the Purchaser to
---------------------
purchase the Shares and the Warrants is subject to the fulfillment of each
of the following conditions precedent:
(i) the Purchaser shall have received from Pray, Walker,
Jackman, Williamson & Marlar, counsel to the Company, a written
opinion dated the Closing Date substantially in the form attached as
Exhibit B hereto;
(ii) the Company shall have executed and delivered to the
Purchaser for counter-signature by the Purchaser a registration rights
agreement in the form of Exhibit C hereto (the "Registration Rights
Agreement");
(iii) the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of such
date, the Company shall have performed in all material respects all of
its obligations and agreements hereunder theretofore to be performed
by it, and the Purchaser shall have received on the Closing Date a
certificate to that effect dated the Closing Date and executed on
behalf of the Company by its Chief Executive Officer or President;
(iv) the Company shall have amended its certificate of
incorporation by filing with the Secretary of State of the State of
Delaware the Certificate of Designation establishing the terms of the
Series A Preferred Stock in the form of Exhibit D hereto (the
"Certificate of Designation");
(v) no action or proceeding shall have been instituted, or shall
be deemed by the Purchaser likely to be instituted, before any court
or governmental agency or body to restrain or prohibit consummation of
the transactions contemplated hereby;
(vi) no material adverse change shall have occurred in the
business, conditions, operations (financial or otherwise) or prospects
of the Company and its Subsidiaries taken as a whole from that set
forth in the consolidated balance sheet of the Company as of December
31, 1993 included in the SEC Reports, other than changes disclosed or
referred to in the SEC Reports or in the Disclosure Letter;
3
<PAGE>
(vii) as of the Closing Date, Philip D. Kurtz shall be the
Chief Executive Officer and James L. Hersma shall be the President and
Chief Operating Officer of the Company and no steps shall have been
taken by the Company or other such individuals to remove such
individuals (whether by termination of employment, reorganization or
otherwise) from such positions;
(viii) The Purchaser shall have received from Coopers & Lybrand
a procedures letter reasonably satisfactory in form and substance to
the Purchaser;
(ix) an individual identified by the Purchaser to the Company in
writing as the Purchaser's "nominee for director" shall have been
elected a director of the Company.
2. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants as of the date hereof as follows:
2.1. Organization and Qualification. The Company and each of its
------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and
has the power and authority to own its respective property and to carry on
its respective business as now being conducted. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of its
respective business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify would have a
material adverse effect on the business or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole. Paragraph
2.1 of the Disclosure Letter lists all of the Company's Subsidiaries as of
the date of this Agreement and the amount and percent of its stock
ownership thereof.
2.2. Due Authorization. The Company has all right, power and
-----------------
authority to enter into and perform this Agreement, the Warrants and the
Registration Rights Agreement and to issue and sell the Shares, the
Warrants and the Underlying Series A Preferred Shares. The execution and
delivery of this Agreement and the Registration Rights Agreement, the
issuance and sale of the Shares, the Warrants, and, upon exercise of the
Warrants, the Underlying Series A Preferred shares by the Company and the
compliance by the Company with all the provisions of this Agreement, the
Warrants and the Registration Rights Agreement (i) are within the power and
authority of the Company, (ii) do not require the approval or consent of
any stockholders of the Company, any governmental authority or any third
party, and (iii) have been authorized by all requisite action on the part
of the Company. This Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable against the Company in
4
<PAGE>
accordance with their respective terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors rights
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. The Company has furnished to the Purchaser true and correct
copies of the Company's Certificate of Incorporation and By-laws as in
effect on the date of this Agreement.
2.3. Status of Shares. Upon issuance of the Shares and the Warrants
----------------
at the Closing, and, upon issuance of the Underlying Series A Preferred
Shares upon exercise of the Warrants, the Shares and the Underlying Series
A Preferred Shares will be validly issued, fully paid and nonassessable and
the issuance of the Shares and the Underlying Series A Preferred Shares is
not and will not be subject to preemptive rights of any other stockholder
of the Company.
2.4. SEC Reports. The Stock is registered under Section 12(g) of the
-----------
Exchange Act, and the Company has filed all proxy statements, reports and
other documents required to be filed by it under the Exchange Act. The
Company has furnished the Purchaser true and correct copies of its Annual
report on Form 10-K for the fiscal year ended December 31, 1993, and all
proxy statements and reports under the Exchange Act filed by the Company
after such date, each as filed with the Commission (collectively, the "SEC
Reports"). Each SEC report, at the time it was filed with or delivered to
the Commission, was in substantial compliance with the requirements of its
respective report form.
2.5. Consents. The Company is not required to obtain any consent,
--------
approval or authorization of, or to make any declaration or filing with,
any governmental authority as a condition to or in connection with the
valid execution, delivery and performance of this Agreement, the Warrants
or the Registration Rights Agreement and the valid offer, issue, sale or
delivery of the Shares, the Warrants or, upon exercise of the Warrants, the
Underlying Series A Preferred Shares, or the performance by the Company of
its obligations in respect thereof, except for any filings required to
effect any registration pursuant to and as contemplated specifically by the
Registration Rights Agreement and any filings required pursuant to federal
securities laws which will be timely made after the Closing hereunder.
2.6. No Conflict. None of the execution and delivery of this
-----------
Agreement or the Registration Rights Agreement, the issuance of the Shares,
the Warrants, or, upon exercise of the Warrants, the Underlying Series A
Preferred Shares, or the fulfillment of, or compliance with, the terms and
provisions hereof or thereof will conflict with or result in a breach of
5
<PAGE>
the terms, conditions or provisions of, give rise to a right of termination
under, constitute a default under or result in any violation of (i) the
Certificate of Incorporation or By-laws of the Company, (ii) any indenture,
loan agreement, lease, mortgage or other agreement binding on the Company
or any Subsidiary, (iii) any judgment or decree of a court or
administrative agency binding on the Company or any Subsidiary or (iv) any
applicable statute, law, rule or regulation to which the Company or any
Subsidiary or any of their property is subject. Performance by the Company
of its obligations under this Agreement and the Registration Rights
Agreement will not result in the imposition or creation of any lien or
charge against any assets of the Company. Neither the Company nor any
subsidiary is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely
affects its business, property, assets, financial condition or prospects.
Neither the Company nor any Subsidiary is in default under any outstanding
indenture or other debt instrument or with respect to the payment of the
principal of or interest on any outstanding obligations for borrowed money
nor is it in default under any of their respective contracts or agreements
or under any instrument by which the Company or any Subsidiary is bound, in
each case which default materially and adversely affects the business,
operations, assets, financial condition or prospects of the Company and its
subsidiaries taken as a whole.
2.7. Capitalization. The authorized capital stock of the Company
--------------
consists of (i) 50,000,000 shares of Common Stock, of which, as of the date
hereof, 28,477,888 shares are outstanding and 1,517,745 shares are held in
treasury and (ii) 20,000,000 shares of preferred stock, $.01 par value, no
shares of which are issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. No class of
capital stock of the Company is entitled to preemptive rights. Except for
the options and warrants listed in paragraph 2.7 of the Disclosure Letter
or disclosed in the SEC Reports, there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any capital stock of the Company or contracts, commitments,
understandings or arrangements by which the Company is or may become bound
to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any shares of its capital stock. Since
December 31, 1993, the Company has not changed the amount of its authorized
capital stock or subdivided or otherwise changed any shares of any class of
its capital stock, whether by way or reclassification, recapitalization,
stock split or otherwise or issued or reissued, or agreed to issue,
reissue, redeem or repurchase, any of its capital stock, except as
disclosed in paragraph 2.7 of the Disclosure Letter and has not since such
date declared or paid any dividend in cash or stock or made any other
distribution of assets to its stockholders.
6
<PAGE>
2.8 Taxes.
-----
(i) The term "Tax" includes any material tax or similar
governmental charge, impost or levy (including, without limitation,
income taxes, franchise taxes, transfer taxes or fees, stamp taxes,
sales taxes, use taxes, excise taxes, ad valorem taxes, withholding
taxes, employee withholding taxes, worker's compensation, payroll
taxes, unemployment insurance, social security, minimum taxes or
windfall profits taxes), together with any related liabilities,
penalties, fines, additions to tax or interest, imposed by the United
States or any state, county, provincial, local or foreign government
or subdivision or agency thereof, except that, for purposes of
------ ----
paragraph (ii) of this Section 2.8, the term "Tax" does not include
taxes, penalties and interest referred to in paragraph 2.8 of the
Disclosure Letter.
(ii) All federal, state and local Tax returns, including all
information returns, required to be filed by or on behalf of the
Company or any of its Subsidiaries have been timely filed or requests
for extensions have been timely filed and any such extension has been
granted and has not expired, and all such filed returns are complete
and accurate in all material respects. Except as disclosed in the
Company's SEC Reports, all taxes attributable to it or any of its
Subsidiaries that are or were due or payable (without regard to
whether such Taxes have been assessed) have been paid in full or have
been adequately provided for on its consolidated balance sheet and
consolidated statement of earnings or income (in accordance with
generally accepted accounting principles). Adequate provision in
accordance with generally accepted accounting principles appropriately
and consistently applied has been made in the Company's financial
statements included in the SEC Reports relating to all Taxes for the
periods covered thereby that were not yet due and payable as of the
dates thereof, regardless of whether the liability for such Taxes is
disputed. Except as disclosed in its SEC Reports, there is no
outstanding audit examination, deficiency, refund litigation or
outstanding waivers or agreements extending the applicable statute of
limitations for the assessment or collection of any Taxes for any
period with respect to any Taxes of the Company or its Subsidiaries.
All Taxes, interest, additions and penalties due with respect to
completed and settled examinations or concluded litigation relating to
the Company or any of its Subsidiaries have been paid in full or have
been recorded on its or such Subsidiary's balance sheet and
consolidated statement of earnings or income (in accordance with
generally accepted accounting principles). Neither the Company nor
any of its Subsidiaries is a party to a tax sharing or similar
agreement or any agreement pursuant to which it or any of its
Subsidiaries has indemnified any party
7
<PAGE>
(other than it or one of its subsidiaries) with respect to Taxes. The
proper and accurate amounts have been withheld from all employees (and
timely paid to the appropriate Governmental Entity or set aside in an
account for such purposes) for all periods through the Closing Date in
compliance with all Tax withholding provisions of applicable, federal,
state, local and foreign laws (including, without limitation, income,
social security and employment tax withholding for all types of
compensation).
2.9 Labor Matters. Neither the Company nor any of its Subsidiaries
-------------
is a party to, or is bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its Subsidiaries the subject of
any material proceeding asserting that it or any such Subsidiary has
committed an unfair labor practice or seeking to compel it or such
Subsidiary to bargain with any labor organization as to wages or conditions
of employment, nor is there any strike involving the Company or any of its
Subsidiaries pending or, to the knowledge of its executive officers,
threatened, nor are its executive officers aware of any activity involving
its or any of its subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
2.10 Compliance with ERISA. Each member of the ERISA Group has
---------------------
fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code
with respect to each Plan. No member of the ERISA Group has (i) sought a
waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, (ii) failed to make any contribution or payment to any
Plan, or made any amendment to any Plan, which has resulted or could result
in the imposition of a lien or the posting of a bond or other security
under ERISA or the Code, (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA or (iv) engaged in a transaction with respect to a Plan, which has
resulted or could result in such member being subject to a tax or penalty
imposed by either Section 4975 of the Code or Section 502 of ERISA. The
Company has not received any notification that any Multiemployer Plan is in
reorganization or has been terminated within the meaning of Title IV of
ERISA, and has no Multiemployer Plan that is reasonably expected to be in
reorganization or to be terminated where such reorganization or termination
has had or could reasonably be expected to have, through increases in the
contributions required to be made or otherwise, a material adverse effect
on the business, condition, operations (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole.
8
<PAGE>
2.11 Litigation. There are no proceedings or investigations pending
----------
or threatened before any court or arbitrator or before or by any
Governmental Entity which, in any one case or in the aggregate could
reasonably be expected to have a material adverse effect on the business,
conditions, operations (financial or otherwise) or prospects of the Company
and its Subsidiaries taken as a whole or call into question the validity or
enforceability of this Agreement, the Warrants, the Registration Rights
Agreement or the transactions contemplated hereby or thereby.
2.12 Credit Agreement Representations and Warranties. The Company's
-----------------------------------------------
representations and warranties in the following sections of the Credit
Agreement, dated as of October 15, 1994, among the Company, certain of its
affiliates, and General Electric Capital Corporation are hereby
incorporated into and made a part of this Agreement for the benefit of the
Purchaser, mutatis mutandis, as if set forth in full herein, and are true
------- --------
and correct as of the date hereof: Section 3.5, Section 3.6, Section 3.7,
Section 3.8, Section 3.9, Section 3.10, Section 3.11, Section 3.12, Section
3.13, Section 3.14, Section 3.18 and Section 3.19.
2.13. Other Matters. The Company is not now and will not be, after
-------------
giving effect to the receipt of the proceeds from the sale of the Shares,
the Warrants or the Underlying Series A Preferred Shares, an "investment
company" within the meaning of the Investment Company Act of 1940, nor will
it be controlled by or acting on behalf of any person which is such an
investment company. The Company does not own any "margin stock" within the
meaning of Regulation G of the Board of Governors of the Federal Reserve
System and is not selling the Shares, the Warrants or the Underlying Shares
"for the purpose of purchasing or carrying any margin stock" within the
meaning of the said Regulation G.
2.14. Disclosure. None of this Agreement, any SEC Report, or any
----------
certificate or written disclosure furnished to the Purchaser by or on
behalf of the Company in connection with the transactions contemplated
hereby contains any untrue statements of a material fact or omits to state
a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to the Company or
any of its Subsidiaries which the Company has not disclosed to the
Purchaser in writing which materially affects adversely or, so far as the
Company can now reasonably foresee, could materially affect adversely the
properties, business, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole or the ability of the
Company to perform this Agreement, the Warrants, the Registration Rights
Agreement or its obligations in respect of the Shares.
2.15. Brokers or Finders. No agent, broker, investment banker or
------------------
other firm or Person is or will be entitled to any
9
<PAGE>
broker's fee or any other commission or similar fee for which the Purchaser
will be liable.
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
represents and warrants as of the date hereof as follows:
3.1. Due Authorization. The Purchaser has all corporate power and
-----------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on behalf of the Purchaser. This Agreement has been duly executed
and delivered by the Purchaser and constitutes a valid and binding
agreement of the Purchaser enforceable against the Purchaser in accordance
with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors rights and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3.2. Acquisition for Investment. The Purchaser is acquiring the
--------------------------
Shares and the Warrants and, upon exercise of the Warrants, will be
acquiring the Underlying Series A Preferred Shares for its own account for
the purpose of investment and not with a view to or for sale in connection
with any "distribution" (within the meaning of the Securities Act) thereof,
and the Purchaser has no present intention or plan to effect any
distribution of the Shares, the Warrants or the Underlying Series A
Preferred Shares. The Purchaser understands that each certificate
representing the Shares, the Warrants and the Underlying Shares will
contain the restrictive legend set forth in Section 7.12
3.3. Brokers or Finders. No agent, broker, investment banker or
------------------
other firm or Person who is not an affiliate of the Purchaser is or will be
entitled to any broker's fee or any other commission or similar fee from
the Purchaser.
3.4. Accredited Investor. The Purchaser is an "accredited investor"
-------------------
within the meaning of Rule 501 promulgated under the Securities Act.
4. Covenants of the Company. The Company hereby covenants that, (i) at
------------------------
all times prior to the earlier of the Closing Date and December 31, 1994, and
(ii) thereafter during such time as the Purchaser (or one of its Affiliates)
owns a minimum of 500,000 Shares of Common Stock (including, for these purposes,
shares of Common Stock purchased upon conversion of the Series A Preferred
Stock):
10
<PAGE>
4.1. Reports and Financial Statements.
--------------------------------
(a) The Company will cause its Common Stock to continue to be
registered under Sections 12(g) of the Exchange Act, will comply with
its reporting and filing obligations under the Exchange Act and will
not take any action or file any document (whether or not permitted by
the Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act. The Company will take all action
necessary to continue the listing or trading of its Common Stock on
any national securities exchange or the Automated Quotation System of
the National Association of Securities Dealers on which such Common
Stock is listed or traded and will comply with its reporting, filing
and other obligations under the Exchange Act, the Securities Act and
the bylaws or rules of said exchange or Association.
(b) The Company will furnish to the Purchaser, concurrently with
the distribution or filing thereof, each annual and quarterly report
to its shareholders, its reports on Form 10-K and 10-Q and each other
report, registration statement, definitive proxy statement or other
document filed with the Commission and any reports, listing
applications or other documents filed with any national securities
exchange or the National Association of Securities Dealers, and each
press release or other public announcement issued by the Company.
4.2. Rights of Inspection. The Company and each of its Subsidiaries
--------------------
will permit representatives of the Purchaser to visit and inspect any of
the properties of the Company and its Subsidiaries, including each of their
books of account, and to discuss the Company's and its Subsidiaries'
affairs, finances and accounts with the Company's and any Subsidiary's
officers and its independent public accountants, all at such reasonable
times and as often as the Purchaser may reasonably request.
4.3. Maintenance and Compliance. The Company and each of its
--------------------------
Subsidiaries will (i) maintain its corporate existence, rights, powers and
privileges in good standing, (ii) pay promptly when due all taxes,
assessments and governmental charges properly imposed on it, (iii) maintain
its properties in workable condition and repair, (iv) comply in all
material respects with all laws and governmental regulations and
restrictions applicable to its business or properties, (v) maintain with
financially sound insurers such insurance coverage against liability, fire
and other risks as is reasonably prudent and customary for companies
similarly situated, (vi) keep records and books of account and maintain a
system of internal accounting controls in accordance with generally
accepted accounting principles and in compliance with Section 13(b)(2) of
the Exchange Act, (vii) retain independent public accountants of recognized
national standing
11
<PAGE>
as auditors of the Company's annual financial statements, (viii) comply in
all material respects with ERISA and (ix) comply in all material respects
with all applicable Environmental Regulations.
4.4 Press Release; Public Offering Materials. The Company will not
----------------------------------------
and will not permit any of its Subsidiaries to disclose the name of the
Purchaser in any press release or in any prospectus, proxy statement or
other materials filed with any Governmental Entity relating to a public
offering of the capital stock of the Company without the Purchaser's prior
written consent which consent shall not be unreasonably withheld.
4.5. Purchaser Representation on Company Board. The Company will
-----------------------------------------
take all permissible and appropriate action to ensure that one person
selected by Purchaser is nominated and elected to serve on the Company's
board of directors (it being understood that, notwithstanding the
introduction to Section 4, the Company's obligations under this Section 4.4
commence on the Closing Date).
4.6 Share Repurchases. (a) The Company will not repurchase or
-----------------
redeem any shares of any Common Stock or its other equity securities if,
after giving effect to such repurchase or redemption, either (i) the Shares
of Common Stock owned by the Purchaser and its Affiliates would equal or
exceed 5.0% of the Company's Outstanding Common Stock or (ii) the Purchaser
Shares (as defined in Section 7.12) owned by the Purchaser and its
Affiliates would equal or exceed 15% of the Company's Outstanding Common
Stock (the circumstances described in clause (i) and (ii) above each a
"Threshold") without first complying with the other provisions of this
Section 4.6. For purposes of the foregoing, the term "Outstanding" means
shares issued and outstanding, includes shares of Common Stock which the
Purchaser may acquire directly or indirectly upon exercise of the Warrant
or conversion of shares of Series A Preferred Stock, but does not include
shares issuable upon exercise or conversion of options, warrants,
convertible securities or other similar instruments owned by any Person
other than the Company or an affiliate of the Company.
(b) In the event a proposed repurchase or redemption would cause the
Company to cross a Threshold, at least 30 days before such repurchase or
redemption the Company shall (i) notify the Purchaser of such proposed
repurchase or redemption and (ii) offer to repurchase or redeem such number
of Purchaser Shares owned by the Purchaser or its Affiliates as necessary
to prevent the proposed purchase or redemption from causing the Company to
cross a Threshold on substantially the same terms (as to both consideration
and timing) as are applicable to the proposed repurchase or redemption of
such other shares.
12
<PAGE>
4.7 Additional Ventures. Subject to the last two sentences of this
-------------------
Section 4.7, in the event the Company proposes to join with any third-party
who is not an Affiliate (an "unaffiliated Third-Party"), whether through a
joint venture, partnership, co-ownership of another entity or otherwise
(each a "Venture"), to provide cash management or data processing services
or related technology and related services to customers or potential
customers, the Company agrees that it will first explore in good faith with
the Purchaser whether the Purchaser or one of its Affiliates desires to
join with the Company in developing the Venture. If the Purchaser or one
of its Affiliates does wish to join with the Company in developing such
Venture, the Company and the Purchaser or such Affiliate of the Purchaser
will negotiate in good faith for a reasonable period of time to establish
mutually acceptable terms and conditions upon which the Company and the
Purchaser or its Affiliates may establish such Venture. This Section 4.7
will not apply if an unaffiliated Third Party proposes to contribute as an
integral part of the Venture products or services (other than healthcare
decision support information products or services) or good will which is
not reasonably believed by the Company to be available from Purchaser or
its Affiliates. For purposes hereof, "healthcare decision support
information products or services" means products or services which
facilitate the accumulation, manipulation and repackaging of healthcare
data for marketing to the healthcare industry.
4.8 Conduct of Business. Prior to the earlier of (i) the Closing
-------------------
Date and (ii) December 31, 1994, the Company and its Subsidiaries will
conduct their businesses only in the ordinary and usual course of such
businesses and will not issue any additional equity securities except
pursuant to a Plan.
5. Additional Shares.
-----------------
In the event that, during any calendar quarter (treating the period
from the date of this Agreement through December 31, 1994 as a calendar
quarter for purposes of this Section 5) on the first day of which the
Purchaser (together with its Affiliates) owns a minimum of 500,000
Purchaser Shares (as defined in Section 7.12), the Company shall issue
additional shares of Common Stock ("Additional Third-Party Shares")
otherwise than (i) to employees of the Company or its Subsidiaries, other
than pursuant to options, warrants or other rights to acquire such shares
granted to such employees, in an aggregate amount of not more than 100,000
shares per calendar year, (ii) pursuant to options, warrants or other
rights granted to employees of the Company or a Subsidiary (and not
transferable to any Person who is not an employee of the Company or a
Subsidiary) to acquire such shares at prices not less than the market price
thereof (as defined in Section 6(h) of the Certificate of Designation) on
the date of the grant of each such option, warrant or other right, or (iii)
pursuant to
13
<PAGE>
a Plan, on or before the fifth day after the end of such calendar quarter
the Company shall offer to issue to the Purchaser additional shares of
Common Stock ("Additional Common Shares") or additional shares of Series A
Preferred Stock ("Additional Series A Preferred Shares") in accordance with
this Section 5.1. In each such case:
(i) the number of Additional Shares so offered shall equal 17.6%
of the number of Additional Third-Party Shares issued during such
calendar quarter (rounded to the nearest whole share), and 33-1/3% of
the Additional Shares so offered to the Purchaser shall be Additional
Common Shares and 66-2/3% of the Additional Shares so offered shall be
Additional Series A Preferred Shares;
(ii) except as otherwise provided in clause (iii), below, the
offer price of each Additional Share so offered shall be determined by
dividing the aggregate of the consideration received by the Company
with respect to the Additional Third-Party Shares issued during such
calendar quarter by the total number of such Additional Third-Party
Shares so issued (provided, however, that if any of the events
-------- -------
described in Section 6 of the Certificate of Designation giving rise
to an adjustment in the Conversion Rate (as defined therein) shall
theretofore have occurred, for purposes of this Section 5 an
Additional Series A Preferred Share shall be deemed to be such
fraction or multiple of a Series A Preferred Share which would, after
giving effect to such event, produce a Conversion Rate of 1.00), and
(iii) if the Additional Third-Party Shares were issued pursuant
to options, warrants or other similar rights to acquire such shares
and such options, warrants or other similar rights were themselves
issued in a Permitted Transaction, the offer price of each Additional
Share so offered shall be the market price thereof (as defined in
Section 6(h) of the Certificate of Designation) determined as of the
last business day of the applicable calendar quarter. ("Permitted
Transaction", as used in this clause (iii), means a transaction in
which the Company acquires assets or a business operation from a
Person or Persons who are not affiliates of the Company and, in
connection with such acquisition, issues to such Person or Persons or
their employees options, warrants or other similar rights to acquire a
number of shares of the Company's Common Stock up to (but not
exceeding 500,000.
The Company's offer to the Purchase shall be in writing and shall set forth
a calculation of the applicable offer price. The Purchaser may accept such
offer on or before the 15th day after such offer is received by it by
paying to the Company, at its office set forth in Section 7.5 (and in
immediately available funds), an amount determined as described above, and
14
<PAGE>
the Company shall thereupon issue the appropriate number of Additional
Common Shares and Additional Series A Preferred Shares to the Purchaser.
The Company shall not at any time issue additional shares of Common Stock
(otherwise than pursuant to a Plan) unless at the same time it takes all
corporate action necessary and reserves for issuance a sufficient number of
shares of Common Stock and Series A Preferred Stock to carry out its
obligations under this Section 5.1.
6. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act (as in effect on the date of this Agreement), it being understood that
any limited partner of a partnership shall not be an Affiliate of such
partnership solely by virtue of its status as such a limited partner.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Disclosure Letter" means the letter from the Company to the Purchaser
of even date with this Agreement setting forth certain exceptions and
qualifications to the Company's representations and warranties herein.
"Environmental Regulations" means all federal, state, local and
foreign environmental laws, statutes, rules, regulations, order and
ordinances, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means the Company and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control with the Company which are treated as a single
employer under Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such similar Federal
statute.
"Governmental Entity" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
15
<PAGE>
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which any member of the ERISA Group is then making
or accruing an obligation to make contributions or has within the preceding
five-plan years made contribution.
"PBGC" means the Pension Benefit Guarantee Corporation or any
successor thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department
or agency of a government.
"Plan" means an employee pension benefit plan as defined in Section
3(3) of ERISA (other than a Multiemployer Plan) which is covered by Title
IV of ERISA or is subject to the minimum funding standards of Section 412
of the Code and which is maintained or contributed to by the Company or any
member of the ERISA Group.
"SEC Reports" has the meaning provided in Section 2.4 hereof.
"Subsidiary" means, with respect to any Person, any corporation the
majority of the voting shares of which at the time are owned directly or
indirectly by such Person and/or by one or more Subsidiaries of such
Person.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
7. Miscellaneous.
-------------
7.1. Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without limitation any of such which may be hereafter declared
invalid, void or unenforceable.
7.2. Specific Enforcement. The Purchaser, on the one hand, and the
--------------------
Company, on the other, acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
an injunction to prevent breaches of the provisions of this Agreement and
to enforce specifically the terms
16
<PAGE>
and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to
which they may be entitled at law or equity.
7.3. Entire Agreement. This Agreement (including the exhibits
----------------
hereto) contains the entire understanding of the parties with respect to
the transactions contemplated hereby.
7.4. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
7.5. Notices. All notices, consents, requests, instructions,
-------
approvals and other communications provided for herein shall be validly
given, if in writing and delivered personally, by confirmed telecopy or by
registered mail or nationally recognized air courier, postage prepaid to:
the Company:
C.I.S. Technologies, Inc.
One Warren Place
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136-1930
Attention: Philip D. Kurtz
Chairman and Chief Executive Officer
Telecopy: 918/481-4205
with a copy to:
Pray, Walker, Jackman, Williamson & Marlar
900 Oneok Plaza
100 West 5th Street
Tulsa, Oklahoma 74103-4218
Attn: Thomas G. Noulles, Esq.
Telecopy: 918/581-5599
the Purchaser:
BT Holdings (New York), Inc.
130 Liberty Street
New York, New York 10006
Attention: Nathan H. Peck, Jr.
Telecopy: 212/250-1835
17
<PAGE>
with a copy to:
Richard A. Coll, Esq.
BT Holdings (New York), Inc.
130 Liberty Street
New York, New York 10006
Telecopy: 212/250-5063
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
7.6. Amendments. Neither this Agreement nor any terms hereof may be
----------
changed, waived, amended or modified unless such change, waiver, amendment
or modification is in writing and signed by the Company and the Purchaser
or its successors and assigns. This Agreement may not be waived, changed,
modified or discharged orally, but only by an agreement in writing signed
by the party or parties against whom enforcement of any waiver, change,
modification or discharge is sought or by parties with the right to consent
to such waiver, change, modification or discharge on behalf of such party.
7.7. Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to either party to this Agreement
(including any holder of Shares), upon any breach or default of another
party under this Agreement, shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach a
default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not
alternative.
7.8. Cooperation. The Purchaser and the Company agree to take, or
-----------
cause to be taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions contemplated by
this Agreement.
7.9. Successors and Assigns. This Agreement may not be assigned by
----------------------
the Company and may only be assigned by the Purchaser to one or more
Affiliates of Purchaser. This Agreement and all covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. The rights of the
Purchaser hereunder may not be assigned by the Purchaser in connection with
the transfer or assignment of any Shares or Additional Shares or of the
Warrants.
7.10. Expenses. The Company shall pay all stamp and other taxes
--------
payable with respect to the issuance of the Shares, Additional Shares and
the Underlying Series A Preferred Shares.
18
<PAGE>
7.11. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
issuance and delivery of the Shares, for a period of three years from the
latest date set forth under the signatures hereto, regardless of any
investigation made by or on behalf of any party.
7.12. Transfer of Shares.
------------------
(a) The term "Purchaser Shares", as used in this Section 7.12,
means at any point in time (x) the Common Shares then owned by the
Purchaser or its Affiliates, (y) the shares of Common Stock issuable
upon conversion of the Series A Preferred Shares then owned by the
Purchaser or its Affiliates, and (z) the Warrants and Series A
Preferred Shares then owned by the Purchaser or its Affiliates or
issuable upon exercise of the Warrants (excluding, however, any shares
of Common Stock acquired by the Purchaser or its Affiliates from
Persons other than the Company). The term "Free Purchaser Shares"
means (i) from the Closing Date through the date nine months
thereafter, 0% of the Purchaser Shares, (ii) thereafter through the
date two years after the Closing Date, 66-2/3% of the Purchaser Shares
as they exist as of the first day of such period, and (iii) thereafter
100% of the Purchaser Shares (with such percentages calculated based
upon the sum of the number of shares of Common Stock (x) owned by the
Purchaser and its Affiliates, (y) with respect to Series A Preferred
Shares, issuable upon exercise of Series A Preferred Shares owned by
the Purchaser or its Affiliates, and (z) with respect to the Warrants,
issuable upon conversion of underlying Series A Preferred Shares
issuable upon exercise of the Warrants).
(b) the Purchaser understands and agrees that the Shares and the
Warrants have not been, and the Underlying Series A Preferred Shares
at the time of their delivery upon exercise of the Warrants and any
Additional Shares upon their issuance and delivery will not have been,
registered under the Securities Act or the securities laws of any
state and that they may be sold or otherwise disposed of only in one
or more transactions registered under the Securities Act and, where
applicable, such laws, or as to which an exemption from the
registration requirements of the Securities Act and, where applicable,
such laws are available. The Purchaser understands and agrees that
each certificate representing the Shares, Warrants, Underlying Series
A Preferred Shares and Additional Shares shall bear, until so
registered or until a holder of such Shares causes to be delivered to
the Company an opinion of counsel reasonably acceptable to the Company
to the affect that such legend is not
19
<PAGE>
necessary in order to assure compliance with the Securities Act's
registration provisions, the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM
UNDER THE SECURITIES ACT OF 1933 AND/OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION(S) IS (ARE) NOT REQUIRED THEREUNDER.
(c) The Purchaser may, at any time and from time to time, sell
or otherwise transfer (x) any Purchaser Shares to any Affiliate of the
Purchaser which agrees to be bound by the terms of this Agreement
without any further limitation whatsoever and (y), subject to Section
7.12(b), any Free Purchaser Shares to any Person; except that
notwithstanding the foregoing, the Purchaser may only sell or
otherwise transfer pursuant to clause (y) above Free Purchaser Shares
(A) in a widely dispersed public distribution, (B) in a private
placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of the Company, (C) in an assignment
to a single party (e.g. a broker or investment banker) for the purpose
- -
of conducting a widely dispersed public distribution on the
transferor's behalf or (D) in any other manner permitted by the
Federal Reserve Board. For purposes of this paragraph (c),
percentages of the Company's outstanding voting securities shall
include shares issuable upon exercise or conversion of Series A
Preferred stock, the Warrants or other similar securities owned by the
Purchaser or its Affiliates but shall not include shares issuable upon
exercise or conversion of convertible securities, options, warrants or
other similar instruments owned by Persons who are not Affiliates of
the Purchaser.
7.13. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR
THE REGISTRATION RIGHTS AGREEMENT; PROVIDED, THAT THE COMPANY AND THE
PURCHASER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS AGREEMENT OR THE REGISTRATION RIGHTS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE
COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT AND THE COMPANY HEREBY
WAIVES
20
<PAGE>
ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION
6.5 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be duly executed, all as of the day and year first above written.
BT HOLDINGS (NEW YORK), INC.
By: ___________________________________
Name:______________________________
Title:_____________________________
C.I.S. TECHNOLOGIES, INC.
By: ___________________________________
Name:______________________________
Title:_____________________________
21
<PAGE>
THIS WARRANT AND THE SHARES OF SERIES A PARTICIPATING
CONVERTIBLE PREFERRED STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE
SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE
HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL AND/OR SUBMISSION TO THE
COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE
SHARES OF SERIES A PARTICIPATING
CONVERTIBLE PREFERRED STOCK
C.I.S. TECHNOLOGIES,INC.
(a Delaware Corporation)
C.I.S. TECHNOLOGIES,INC., a Delaware corporation (the "Company"), hereby
certifies that BT Holdings (New York), Inc., a New York Corporation, its
successors and assigns, registered on the books of the Company maintained for
such purposes as the registered holder hereof (the "Holder"), for value
received, is entitled to purchase from the Company Five Hundred Thousand
(500,000) fully paid and non-assessable shares of Series A Participating
Convertible Preferred Stock of the Company, $0.01 par value ("Preferred
Shares"), at the purchase price of Three and 25/100 dollars ($3.25) per
Preferred Share (the "Exercise Price") (the number of Preferred Shares and
Exercise Price being subject to adjustment as hereinafter provided) upon the
terms and conditions herein provided. Certain capitalized terms used herein
which are otherwise not defined are defined in the Stock and Warrant Purchase
Agreement of even date herewith (the "Agreement") to which Holder and the
Company are parties.
1. Exercise of Warrants.
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company at Tulsa, Oklahoma, or at
such other place as the Company may designate by notice to the Holder
hereof, together with a certified or bank cashier's check payable to the
order of the Company in the amount of the Exercise Price times the number
of Preferred Shares being purchased, the Company shall deliver to the
Holder hereof, as promptly as practicable, certificates representing the
Preferred Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the
number of Preferred Shares as to which this Warrant has not been exercised.
(b) This Warrant must be exercised on or prior to November 23, 1997
after which time it will be void and of no further force or effect.
2. Rights and Obligations of Warrant Holder.
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either
at law or in equity; provided if any certificate representing the Preferred
Shares is issued to the Holder hereof upon exercise of this Warrant, such
Holder shall, for all purposes, be deemed to have become the holder of
record of such Preferred Shares on the date on which this Warrant
Certificate, together with a duly executed Purchase Form, was surrendered
and payment of the Exercise Price was made, irrespective of the date of
delivery of such Preferred Share certificate. The rights of the Holder of
this Warrant are limited to those expressed herein and the Holder of this
Warrant, by its acceptance hereof, consents to and agrees to be bound by
and to comply with all the provisions of this Warrant Certificate. In
addition, the Holder of this Warrant Certificate, by accepting the same,
agrees that the Company may deem and treat the person in whose name this
Warrant Certificate is registered on the books of the Company maintained
for such purpose as the absolute, true and lawful owner for all purposes
whatsoever, notwithstanding any notation of ownership or other writing
thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Preferred Shares
for any purpose, nor shall anything contained in this Warrant Certificate
be construed to confer upon any Holder of this Warrant Certificate, as
such, any of the rights of a shareholder of the Company or any right to
vote, give or withhold consent to any action by the Company, whether upon
any recapitalization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise, receive notice of meetings
or other action affecting shareholders (except for notices provided for
herein), receive dividends, subscription rights or otherwise, until this
Warrant shall have become exercisable and been exercised and the Preferred
Shares purchasable upon the exercise thereof shall have become deliverable
as provided herein; provided that any such exercise on any date when the
stock transfer books
<PAGE>
of the Company shall be closed shall constitute the person or persons in
whose name or names the certificate or certificates for those Preferred
Shares are to be issued as the record holder or holders thereof for all
purposes at the opening of business on the next succeeding day on which
such stock transfer books are open, and the Warrant surrendered shall not
be deemed to have been exercised, in whole or in part as the case may be,
until the next succeeding day on which the stock transfer books are open
for the purpose of determining entitlement to dividends on the Company's
Participating Convertible Series A Preferred stock.
3. Shares Underlying Warrants. The Company covenants and agrees that all
Preferred Shares delivered upon exercise of this Warrant shall, upon delivery
and payment therefor, be duly and validly authorized and issued, fully-paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the purchase thereof. In addition, the Company agrees at all times to
reserve and keep available an authorized number of Preferred Shares sufficient
to permit the exercise in full of this Warrant.
4. Disposition of Warrants or Preferred Shares. The Holder of this
Warrant Certificate and any transferee hereof or of the Preferred Shares
issuable upon the exercise of this Warrant Certificate, by their acceptance
hereof, hereby understand and agree that the Warrant, and the Preferred Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 (the "Act") or applicable state securities laws (the
"State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise
transferred (whether or not for consideration) except upon the issuance to the
Company of a favorable opinion of counsel and/or submission to the Company of
such evidence as may be satisfactory to counsel for the Company, in each such
case, to the effect that any such transfer shall not be in violation of the Act
and the State Acts. It shall be a condition to the transfer of this Warrant
that any transferee thereof deliver to the Company its written agreement to
accept and be bound by all of the terms and conditions of this Warrant
Certificate.
5. Adjustments.
(a) Stock Dividends. If after the date hereof, the number of
---------------
outstanding shares of the Company's common stock, $.01 par value ("Common
Shares"), is increased by a stock dividend payable in Common Shares or
Preferred Shares or by a split-up of Common Shares, then, on the day
following the date fixed for the determination of holders of Common Shares
entitled to receive such stock dividend or split-up, the number of
Preferred Shares issuable on exercise of the Warrants shall be increased in
proportion to such increase in outstanding Common Shares or Preferred
Shares and the then applicable Exercise Price shall be correspondingly
decreased.
(b) Aggregation of Shares. If after the date hereof, the number of
---------------------
outstanding Common Shares is decreased by a combination or reclassification
of Common Shares, then, after the effective date of such combination or
reclassification, the number of Preferred Shares issuable on exercise of
the Warrants shall be decreased in proportion to such decrease in
outstanding Common Shares and the then applicable Exercise Price shall be
correspondingly increased.
(c) Special Stock Dividend. If after the date hereof, shares of any
----------------------
class of the Company (other than Common Shares) are issued by way of a
stock dividend on outstanding Common Shares then, commencing with the day
following the date fixed for the determination of holders of Common Shares
entitled to receive such stock dividend, in addition to any Preferred
Shares receivable upon exercise of the Warrants, the Holder shall, upon
such exercise of the Warrants, be entitled to receive, as nearly as
practicable, the same number of shares of dividend stock, plus any shares
issued upon any subsequent change, replacement, subdivision or combination
thereof to which the holders would have been entitled had their Warrants
been exercised immediately prior to such stock dividend.
(d) Issuance of Shares Below Market. If on a date after the date
-------------------------------
hereof ("New Issue") the Company issues and sells Common Shares, Preferred
Shares, or a combination thereof at a price per share less than the market
price per Common Share (determined as provided in the following paragraph)
on the New Issue Date, the Exercise Price in effect at the opening of
business on the day following such issuance and sale shall be adjusted by
multiplying such Exercise Price by a fraction of which (i) the numerator
shall be the aggregate number of Common Shares and Preferred Shares
outstanding at the close of business on the New Issue Date plus the number
of Common Shares which the aggregate of the offering price of the total
number of Common Shares, Preferred Shares, or combination thereof so issued
and sold would purchase at such current market price, and (ii) the
denominator shall be the aggregate number of Common Shares and Preferred
Shares outstanding at the close of business on the New Issue Date plus the
number of Common Shares, Preferred Shares, or combination thereof so
offered and sold, such adjustment to become effective immediately after the
opening of business on the day following the date, and contingent upon the
actual occurrence, of such issuance and sale.
For purposes of the preceding paragraph, the "market price per Common
Share" shall be the average of the daily closing prices for any period of
five to ten consecutive business days selected by the Company commencing
not more than 20 business days before the day in question. "Business day"
means any Monday, Tuesday, Wednesday, Thursday and Friday other than any
day on which securities are not traded on the principal exchange or
principal market through which Common Shares are traded. The closing price
for each such day shall be the last reported sales price, regular way, or,
in
2
<PAGE>
case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case on the
New York Stock Exchange, Inc. or, if the Common Shares are not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange,
on the NASDAQ Stock Market, Inc. National Market or, if the Common Shares
are not listed or admitted to trading on any national securities exchange
or quoted on such National Market, the fair market value as determined in
good faith by the board of directors of the Company, whose determination
shall, absent demonstrable error, be conclusive.
(e) Reorganization. If after the date hereof any capital
--------------
reorganization or reclassification of the Common Shares, or consolidation
or merger of the Company with another Corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and fair provisions shall be made
whereby the Holders shall thereafter have the right to purchase and receive
in lieu of the Preferred Shares immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding Common Shares equal to the
number of Preferred Shares immediately theretofore purchasable and
receivable upon the exercise of the rights represented by the Warrants had
such reorganization, reclassification, consolidation, merger or sale not
taken place and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders to the end that the
provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and the number of Preferred Shares
purchasable upon the exercise of the Warrants) shall thereafter be
applicable as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless
prior to the consummation thereof the successor corporation (if other than
the Company) resulting from such consolidation or merger, or the
corporation purchasing such assets, shall assume by written instrument
executed and delivered to the Holders the obligation to deliver to the
Holders such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holders may be entitled to purchase.
(f) Notice to Warrant Holders of Adjustment. Whenever the number of
---------------------------------------
Preferred Shares purchasable or the Exercise Price hereunder is adjusted as
herein provided, the Company shall cause to be mailed to the Holder in
accordance with the provisions of this Section a notice (i) stating that
the number of Preferred Shares purchasable upon exercise or the Exercise
Price of this Warrant has been adjusted, (ii) setting forth the adjusted
number of Preferred Shares purchasable upon the exercise of this Warrant or
the adjusted Exercise Price, and (iii) showing in reasonable detail the
computations and the facts, including the amount of consideration received
or deemed to have been received by the Company, upon which such adjustments
are based.
6. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement or bond satisfactory in form, substance and
amount to the Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
7. Survival. The various rights and obligations of the Holder hereof as
set forth herein shall survive the exercise of the Warrants represented hereby
and the surrender of this Warrant Certificate.
8. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed as follows:
C.I.S. Technologies, Inc.
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136
and if to the Holder, it will be addressed to the registered Holder at his
address as it appears on the books of the Company.
9. GOVERNING LAW; JURISDICTION. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS WARRANT CERTIFICATE;
PROVIDED, THAT THE COMPANY AND THE PURCHASER ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW
YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS WARRANT CERTIFICATE SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR
3
<PAGE>
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
IN SECTION 8 OF THIS WARRANT CERTIFICATE AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
DATED: November 23, 1994
C.I.S. TECHNOLOGIES, INC.
ATTEST:
By _____________________________
____________________________ Title:__________________________
___________ Secretary
4
<PAGE>
PURCHASE FORM
__________________________
Date
TO: C.I.S. TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise the attached Warrant
Certificate to the extent of ___________ shares of the Series A Participating
Convertible Preferred Stock, $0.01 par value, of C.I.S. Technologies, Inc. and
hereby makes payment of $____________ in accordance with the provisions of
Section 1 of the Warrant Certificate in payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:_____________________________________________________________
(Please typewrite or print in block letters)
Address:__________________________________________________________
__________________________________________________________
Soc. Sec. or Employer I.D. No. ___________________________________
_______________________________
By:____________________________
tgn\agms\war-fin.bt
<PAGE>
EXHIBIT 10(g)
FORM OF CERTIFICATE OF DESIGNATION
AND TERMS OF THE SERIES A PARTICIPATING
CONVERTIBLE PREFERRED STOCK OF C.I.S. TECHNOLOGIES, INC.
--------------------------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------
We, the undersigned, Philip D. Kurtz and Kellie J. Watts, the Chairman of
the Board and Chief Executive Officer, and Secretary, respectively, of C.I.S.
Technologies, Inc., a Delaware corporation (the "Corporation"), do hereby
certify that, pursuant to authority granted by Article [FOURTH] of the
Certificate of Incorporation of the Corporation, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation has adopted the following
resolution fixing the designation and certain terms, powers, preferences and
other rights of a new series of the Corporation's preferred stock, par value
$0.01 per share, and certain qualifications, limitations and restrictions
thereof:
RESOLVED, that there is hereby established a series of Preferred
Stock, par value $0.01 per share ("Preferred Stock"), of the Corporation,
and the designation and certain terms, powers, preferences and other rights
of the shares of such series, and certain qualifications, limitations and
restrictions thereof, are hereby fixed as follows:
Section 1. Designation and Number. (a) The distinctive serial
designation of this series shall be "Series A Participating Convertible
Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock").
<PAGE>
Each share of Series A Preferred Stock shall be identical in all respects with
the other shares of Series A Preferred Stock except as to the dates from and
after which dividends thereon shall be cumulative.
(b) The number of shares of Series A Preferred Stock shall initially
be _________, which number may from time to time be increased or decreased (but
not below the number then outstanding) by resolution of the Board of Directors.
Shares of Series A Preferred Stock purchased by the Corporation shall be
cancelled and shall revert to authorized but unissued shares of Preferred Stock
undesignated as to series. Shares of Series A Preferred Stock may be issued in
fractional shares, which fractional shares shall entitle the holder, in
proportion to such holder's fractional share, to all rights of a holder of a
whole share of Series A Preferred Stock.
Section 2. Liquidation Preference. The preferences of each share of
Series A Preferred Stock as to distribution of assets upon Liquidation (as
defined in Section 9) will be in every respect on a parity with the preferences
of every other share of capital stock of the Corporation which is not
specifically made senior or junior to the Series A Preferred Stock as to
distribution of assets upon Liquidation. The rights of the Common Stock (as
defined in Section 9) will be junior to the Series A Preferred Stock as to
distributions upon Liquidation to the extent herein provided.
Section 3. Dividends. (a) The holders of shares of Series A
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors, but only out of funds legally available therefor, dividends, on
each date that dividends or other distributions (other than dividends or
distributions payable solely in Common Stock of the Corporation) are payable on
or in respect of Common Stock comprising part of the Reference Package (as
defined in Section 9), in an amount per whole share of Series A Preferred Stock
equal to the aggregate amount (in cash or other property) of dividends or other
distributions (other than dividends or distributions payable solely in Common
Stock of the Corporation) that would be payable on such date to a holder of the
Reference Package. Each such dividend shall be paid to each holder of record of
shares of Series A Preferred Stock on the record date, not exceeding sixty days
preceding such payment date, fixed for the purpose by the Board of Directors in
advance of payment of each particular dividend or distribution (which record
date shall be the same date as the record date for the corresponding payment of
dividends on the Common Stock). To the extent that
-2-
<PAGE>
dividends or other distributions on or in respect of the Common Stock comprising
part of the Reference Package are either (i) cumulative or (ii) actually paid,
dividends on each share of Series A Preferred Stock shall be cumulative from the
date such share is originally issued; provided that any such share originally
--------
issued after a dividend record date and on or prior to the dividend payment date
to which such record date relates shall not be entitled to receive the dividend
payable on such dividend payment date or any amount in respect of the period
from such original issuance to such dividend payment date.
(b) Holders of shares of Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided.
(c) So long as any shares of Series A Preferred Stock shall be
outstanding, no dividend (other than a dividend payable solely in Common Stock
or in any other stock ranking junior to the Series A Preferred Stock as to
dividends and distribution of assets upon Liquidation) shall be declared or paid
or set aside for payment or other distribution declared or made upon the Common
Stock or upon any other stock ranking junior to the Series A Preferred Stock as
to dividends or distribution of assets upon Liquidation, nor shall any Common
Stock nor any other stock of the Corporation ranking junior to or on a parity
with the Series A Preferred Stock as to dividends or distribution of assets upon
Liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to, set aside or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to the
Series A Preferred Stock as to distribution of assets upon Liquidation), unless,
in each case, the full cumulative dividends (including the dividend to be due
upon payment of such dividend, distribution, redemption, purchase or other
acquisition) on all outstanding shares of Series A Preferred Stock shall have
been, or shall then be, paid.
Section 4. Liquidation. In the event of any Liquidation the holders
of shares of Series A Preferred Stock shall be entitled, before any distribution
or payment is made on any date to the holders of the Common Stock or any other
stock of the Corporation ranking junior to the Series A Preferred Stock as to
distribution of assets upon Liquidation, to be paid in full an amount per share
of Series A Preferred Stock equal to $0.01. Additionally, in the event of any
Liquidation the holders of shares of Series
-3-
<PAGE>
A Preferred Stock shall be entitled, contemporaneously with any distribution or
payment being made on any date to the holders of the Common Stock, to be paid in
full an amount per share of Series A Preferred Stock equal to the aggregate
amount distributed or to be distributed in connection with such Liquidation to a
holder of the Reference Package. If such payment shall have been made in full
to all holders of shares of Series A Preferred Stock, then the holders of shares
of Series A Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
(b) If the assets of the Corporation available for distribution to
the holders of shares of Series A Preferred Stock upon any Liquidation shall be
insufficient to pay in full all amounts to which such holders shall be entitled
pursuant to Section 4(a), no such distribution shall be made on account of any
shares of any other class or series of Preferred Stock ranking on a parity with
the Series A Preferred Stock as to distribution of assets upon Liquidation
unless proportionate distributive amounts shall be paid on account of all
outstanding shares of Series A Preferred Stock, ratably in proportion to the
full distributable amounts for which holders of all such parity shares are
respectively entitled upon such Liquidation.
(c) Upon any Liquidation the holders of outstanding shares of Series
A Preferred Stock shall be entitled to be paid out of assets of the Corporation
available for distribution to its stockholders all amounts to which such holders
are entitled pursuant to Section 4(a) before any payment shall be made to the
holders of Common Stock or any other stock of the Corporation ranking junior to
the Series A Preferred Stock as to distribution of assets upon Liquidation.
Section 5. Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 6. Conversion. After the Conversion Trigger Date (as defined
in Section 9) for a share of Series A Preferred Stock, such share shall be
convertible, at the option of the holder thereof, into shares of the
Corporation's Common Stock at any time after the issue thereof, subject to the
following terms and conditions:
(a) The Series A Preferred Stock shall be convertible on any
Business Day (as defined in Section 9) at the office of the
Corporation and at the office of any Transfer Agent for such shares
("Transfer Agent"), and at such other office or
-4-
<PAGE>
offices, if any, as the Board of Directors may designate, into fully
paid and nonassessable shares of Common Stock, at the Conversion Rate,
determined as hereinafter provided, in effect at the time of
conversion. The ratio at which shares of Common Stock shall be
delivered upon conversion (the "Conversion Rate") shall be initially
one (1.00). The Conversion Rate shall be adjusted in certain
instances as provided in Sections 6(c), (d), (e), (f) and (i) below.
(b) In order to convert Series A Preferred Stock into Common
Stock, the holder thereof shall surrender at any office hereinabove
mentioned the certificate or certificates therefor, duly endorsed or
assigned to the Corporation or in blank, and give written notice to
the Corporation at such office that he elects to convert such shares.
Such notice shall be substantially in the following form:
"NOTICE OF EXERCISE OF CONVERSION RIGHT
The undersigned, being a holder of shares of Series A
Participating Convertible Preferred Stock ("Series A Preferred Stock")
of C.I.S. Technologies, Inc., irrevocably exercises the right to
convert ____ outstanding shares of Series A Preferred Stock into
shares of Common Stock of C.I.S. Technologies, Inc. in accordance with
the terms of the Series A Preferred Stock, and directs that the shares
issuable and deliverable upon the conversion, together with any check
in payment for fractional shares, be issued and delivered in the
denominations indicated below to the registered holder hereof unless a
different name has been indicated below.
Dated: _________________
Fill in for registration of
shares of Common Stock
if to be issued otherwise
than to the registered
holder:
________________________
Name
-5-
<PAGE>
________________________
Address
________________________ ___________________
(Please print name (Signature)
and address,
including zip code
number)
Denominations: ___________________"
A payment or adjustment shall be made by the Corporation upon any
conversion on account of any dividends accrued on the shares of Series
A Preferred Stock surrendered for conversion but not on account of any
dividends or distributions on the Common Stock or other securities
issued upon conversion.
Series A Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of the surrender
of such shares for conversion in accordance with the foregoing
provisions, and the person or persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the conversion date, the
Corporation shall issue and shall deliver at such office a certificate
or certificates for the number of full shares of Common Stock issuable
upon such conversion, together with payment in lieu of any fraction of
a share, as hereinafter provided, to the person or persons entitled to
receive the same.
(c) In case at any time the Corporation shall pay or make a
dividend or other distribution on any class of stock of the
Corporation in Common Stock, the Conversion Rate in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution shall be adjusted by multiplying such Conversion
Rate by a fraction of which (i) the numerator shall be the sum of the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination and the total number of
shares constituting such
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<PAGE>
dividend or other distribution and (ii) the denominator shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination, such adjustment to become
effective immediately after the opening of business on the day
following the date fixed for such determination.
(d) In case at any time the Corporation shall issue rights or
warrants to substantially all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price
per share less than the then current market price per share
(determined as provided in Section 6(h)) of the Common Stock on the
date fixed for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Rate in effect at the opening
of business on the day following the date fixed for such determination
shall be adjusted by multiplying such Conversion Rate by a fraction of
which (i) the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase and (ii) the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such current market price, such adjustment to become
effective immediately after the opening of business on the day
following the date fixed for such determination.
(e) In case at any time outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the date upon which such subdivision becomes effective shall
be proportionately increased, and, conversely, if at any time
outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such
increase or
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<PAGE>
reduction, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(f) In case at any time the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidences of
its indebtedness or assets (including securities, but excluding any
rights or warrants referred to in Section 6(d) above, the portion of
any cash dividend or distribution paid out of the retained earnings of
the Corporation and any dividend or distribution referred to in
Section 6(c) above), the Conversion Rate shall be adjusted by
multiplying the Conversion Rate in effect immediately prior to the
close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of
which (i) the numerator shall be the current market price per share
(determined as provided in Section 6(h)) of the Common Stock on the
date fixed for such determination and the denominator shall be such
current market price per share of the Common Stock less the then fair
market value (as determined in good faith by the Board of Directors,
whose determination shall, absent manifest error, be conclusive) of
the portion of the evidences of indebtedness or assets so distributed
applicable to one share of Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such distribution.
(g) The reclassification of Common Stock into securities
including other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 6(o) applies) shall be
deemed to involve (i) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common
Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such
subdivision becomes effective" or "the day upon which such combination
becomes effective", as the case may be, and "the day upon which such
subdivision or combination becomes
-8-
<PAGE>
effective" within the meaning of Section 6(e)), and (ii) a
distribution of such securities other than Common Stock to all holders
of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of the
shareholders entitled to receive such distribution" and "the date
fixed for such determination" within the meaning of Section 6(f)).
(h) For the purpose of any computation under Sections 6(d), (f)
or (m), the current market price per share of Common Stock on any date
shall be the average of the daily closing prices for any period of
five to ten consecutive business days selected by the Corporation
commencing not more than 20 Business Days before the day in question.
The closing price for each day shall be the last reported sales price,
regular way, or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, regular
way, in either case on the New York Stock Exchange, Inc. or, if the
Common Stock is not listed or admitted to trading on such Exchange, on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the Nasdaq Stock
Market, Inc. National Market or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on
such National Market, the fair market value as determined in good
faith by the Board of Directors, whose determination shall, absent
demonstrable error, be conclusive.
(i) The Corporation may make such increases in the Conversion
Rate, in addition to those required by Sections 6(c), (d), (e) and
(f), as it considers advisable in order that any event treated for
federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(j) Whenever the Conversion Rate is adjusted:
(i) the Corporation shall compute the adjusted Conversion
Rate in accordance with this Section 6 and shall prepare a
certificate signed by the Chief Financial
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<PAGE>
Officer of the Corporation setting forth the adjusted Conversion
Rate and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be
filed with the Transfer Agent or Agents for the Series A
Preferred Stock; and
(ii) the Corporation shall mail to the holders of record of
shares of Series A Preferred Stock a notice stating that the
Conversion Rate has been adjusted and setting forth the adjusted
Conversion Rate.
(k) In case:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash
out of its retained earnings; or
(ii) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of Common Stock; or
(iii) of any reclassification of the Common Stock (other
than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders
of the Corporation is required, or of the sale or transfer of all
or substantially all of the assets of the Corporation; or
(iv) of any Liquidation;
then the Corporation shall cause to be filed with the Transfer Agent
or Agents for the Series A Preferred Stock, and shall cause to be
mailed to the holders of record of the outstanding shares of Series A
Preferred Stock, at least 20 days (or ten days in any case specified
in clause (i) or (ii) above) prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the record
date for the purpose of determining the holders of Common Stock
entitled to receive such dividend, distribution or grant, or (y) the
date on which such reclassification, consolidation, merger, sale or
transfer or Liquidation is
-10-
<PAGE>
expected to become effective, and the date as of which it is expected
that record holders of Common Stock shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale or
transfer or Liquidation.
(l) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but
unissued Common Stock, for the purpose of effecting the conversion of
Series A Preferred Stock, the full number of shares of Common Stock
then deliverable upon the conversion of all Series A Preferred Stock
then outstanding.
(m) No fractional shares of Common Stock shall be issued upon
conversion, but, instead of any fraction of a share which would
otherwise be issuable, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of
the current market price per share of Common Stock, as determined
pursuant to Section 6(h), on the day of conversion.
(n) The Corporation shall pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common Stock
on conversion of Series A Preferred Stock pursuant hereto.
(o) In case of any consolidation or share exchange of the
Corporation with, or merger of the Corporation into, any other person,
any merger of another person into the Corporation (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Corporation)
or any sale or transfer of all or substantially all the assets of the
Corporation, the person formed by such consolidation or resulting from
such merger or share exchange or which acquires such assets, as the
case may be, shall execute and deliver an agreement for the benefit of
the holders of the Series A Preferred Stock providing that the holder
of each outstanding share of Series A Preferred Stock shall have the
right thereafter to convert such share of Series A Preferred Stock
into the kind
-11-
<PAGE>
and amount of securities, cash and other property receivable upon such
consolidation, merger, share exchange, sale or transfer by a holder of
the number of shares of Common Stock into which such share of Series A
Preferred Stock might have been converted immediately prior to such
consolidation, merger, share exchange, sale or transfer, assuming such
holder of Common Stock (i) is not a person with which the Corporation
consolidated or engaged in the share exchange or into which the
Corporation merged or which merged into the Corporation or to which
such sale or transfer was made, as the case may be ("constituent
person"), or an affiliate of a constituent person and (ii) failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, share exchange, sale of transfer (provided that
if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not
the same for each share of Common Stock held immediately prior to such
consolidation, merger, share exchange, sale or transfer by any person
other than a constituent person or an affiliate thereof and in respect
of which such rights of election shall not have been exercised ("non-
electing share"), then for purposes of this Section 6(o) the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, share exchange, sale or transfer by each non-
electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). Such agreement
shall provide for adjustments which, for events subsequent to the
effective date of such agreement, shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 6. The
above provisions of this Section 6(o) shall similarly apply to
successive consolidations, mergers, share exchanges, sales or
transfers.
7. Voting Rights. (a) Except as hereinafter in this Section 7
expressly provided and as otherwise from time to time required by law, the
Series A Preferred Stock shall not have any voting rights.
(b) Whenever, at any time or times, dividends payable on shares of
Series A Preferred Stock or any other series of Preferred Stock shall be in
arrears in an amount
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<PAGE>
equivalent to two full quarterly dividends thereon, then, immediately upon the
happening of such event, the holders of outstanding shares of Series A Preferred
Stock shall have the right, voting together as a single class with holders of
shares of any other series of Preferred Stock then outstanding upon which like
voting rights have been conferred and are then exercisable, to vote for the
election of two additional members of the Board of Directors of the Corporation
until all dividends in arrears on the Series A Preferred Stock and all such
other series of Preferred Stock have been fully paid or set apart for payment.
The rights of the holders of Series A Preferred Stock to elect members of the
Board of Directors of the Corporation as aforesaid shall continue until such
time as all dividends in arrears on all series of Preferred Stock shall have
been fully paid or set apart for payment, at which time such right shall
terminate, except as herein or by law expressly provided, subject to
reinstatement in the event of each and every subsequent arrearage in the amount
above mentioned. Upon any termination of the right of such holders to elect
directors as herein provided, the term of office of all directors then in office
elected thereby shall terminate immediately. Any director who shall have been
so elected pursuant to this Section 7(b) may be removed at any time, either with
or without cause, and any vacancy thereby created may be filled, only by the
affirmative vote of the holders of Series A Preferred Stock voting together as a
single class with the holders of shares of any other series of Preferred Stock
upon which like voting rights have been conferred and are then exercisable. If
the office of any director so elected pursuant to this Section 7(b) becomes
vacant for any reason other than removal from office as aforesaid, the remaining
director may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred.
(c) So long as any shares of Series A Preferred Stock remain
outstanding, the consent of the holders of two-thirds of the outstanding shares
of Series A Preferred Stock and of any other series of Preferred Stock upon
which like voting rights have been conferred and are then exercisable, voting
together as a single class, given in person or by proxy either in writing or at
any special or annual meeting called for the purpose, shall be necessary to
permit, effect or validate any amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of the Certificate
of Incorporation or of this Resolution which would materially affect any right,
preference, privilege or power of the Series A Preferred Stock.
-13-
<PAGE>
(d) Holders of Series A Preferred Stock shall be entitled to one vote
for each share of such stock held on matters as to which such holders shall be
entitled to vote, and the holders of shares of any other series of preferred
stock shall be entitled, for purposes of this Section, to such number of votes
per share, if any, as shall have been conferred by the terms of such series.
9. Definitions. For purposes of this Resolution, the following
definitions shall apply:
(a) Any class or series of stock of the Corporation shall be deemed
to rank:
(i) "prior to" the Series A Preferred Stock as to dividends or
distribution of assets upon Liquidation, if the holders of such class or
series shall be entitled to the receipt of dividends or of amounts
distributable upon Liquidation, as the case may be, in preference or
priority to the holders of Series A Preferred Stock;
(ii) on a "parity" with the Series A Preferred Stock as to dividends
or distribution of assets upon Liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices per share
thereof are different from those of the Series A Preferred Stock, if the
holders of such class or series of stock and of the Series A Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon Liquidation, as the case may be, in proportion to their
respective dividend amounts or liquidation prices, without preference or
priority to the holders of Series A Preferred Stock; and
(iii) "junior to" the Series A Preferred Stock as to dividends or
distribution of assets upon Liquidation, if such stock shall be Common
Stock or if the holders of the Series A Preferred Stock shall be entitled
to the receipt of dividends or of amounts distributable upon Liquidation,
as the case may be, in preference or priority to the holders of shares of
such class or series.
(b) "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are not traded
on the principal exchange or the principal market through which shares of
Common Stock are traded.
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<PAGE>
(c) "Common Stock" shall mean the common stock, par value $0.01 per
share, of the Corporation; provided that for purposes of Section 6, the
--------
term "Common Stock" shall include any stock of any class of the Corporation
which (i) has no preference as to dividends or distribution of assets upon
liquidation, dissolution or winding-up and (ii) is not subject to
redemption by the Corporation. However, subject to the provisions of
Section 6(o), shares issuable on conversion of Series A Preferred Stock
shall include only shares of the class designated as Common Stock of the
Corporation as of the date of this Resolution, or shares of any class or
classes resulting from any reclassification or reclassifications thereof
and which have no preference in respect of dividends or of amounts payable
in the event of any liquidation, dissolution or winding-up, and which are
not subject to redemption by the Corporation; provided that if at any time
--------
there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
(d) "Conversion Trigger Date", for any share or shares of Series A
Preferred Stock, shall mean the earliest of (i) the date on which Bankers
Trust New York Corporation delivers to the Corporation an opinion of
counsel, reasonably acceptable in form and substance to the Corporation, to
the effect that, as a result of the receipt of approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") or
otherwise, Bankers Trust New York Corporation and its affiliates may
acquire direct or indirect ownership or control of shares of Common Stock
in a number at least equal to the number of shares that Bankers Trust New
York Corporation and its affiliates would own or control, directly or
indirectly, immediately after conversion of such shares of Series A
Preferred Stock without violating the Bank Holding Company Act of 1956, as
amended, or any successor statute, (ii) the date on which Bankers Trust New
York Corporation delivers to the Corporation a certificate stating that,
immediately after conversion of such shares of Series A Preferred Stock,
Bankers Trust New York Corporation and its affiliates would own less than
5% of any class of voting securities of the Corporation and less than 15%
of the total capital securities of the Corporation, and (iii) the date on
which such shares are first sold, transferred or otherwise
-15-
<PAGE>
disposed of by Bankers Trust New York Corporation and/or its affiliates to
any person, other than an affiliate of Bankers Trust New York Corporation,
in (A) a widely dispersed public distribution, (B) a private placement in
which no one party acquires the right to purchase in excess of 2% of the
voting shares of the Corporation (including, for purposes of such
determination, shares of Common Stock issuable upon conversion of shares of
Series A Preferred Stock), (C) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on the transferor's behalf, or (D) any other
manner approved by the Federal Reserve Board; provided that in the event of
--------
any such sale, transfer or disposition described in this clause (iii),
Bankers Trust New York Corporation shall have delivered to the Corporation
such certificates or opinions as shall reasonably be required by the
Corporation to evidence compliance with this clause (iii).
(e) "Liquidation" shall mean any liquidation, dissolution or winding-
up of the affairs of the Corporation, whether voluntary or involuntary;
provided that for purposes of Section 4, a consolidation or merger of, or
--------
share exchange by, the Corporation with any other person shall not
constitute a Liquidation.
(f) "Reference Package," at any date, shall mean that number of
shares of Common Stock into which one share of Series A Preferred Stock
shall be convertible at the Conversion Rate then in effect pursuant to
Section 6.
IN WITNESS WHEREOF, the undersigned Corporation has caused this
Certificate to be signed by a duly authorized officer and its corporate seal,
duly attested by
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<PAGE>
another such officer, to be hereunto affixed this ______ day of _____, 1994.
C.I.S. TECHNOLOGIES, INC.
[SEAL]
By____________________________
Chairman and Chief Executive
Officer
Attest:
__________________________
Secretary
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<PAGE>
EXHIBIT 10(h)
ASSETS PURCHASE AGREEMENT
-------------------------
THIS ASSETS PURCHASE AGREEMENT ("Agreement"), dated as of the 2nd day of
February, 1994, is entered into by and between C.I.S. TECHNOLOGIES, INC., a
Delaware corporation ("Parent"), Parent's wholly owned subsidiary, CIS
Healthcare Research Systems, Inc., a Delaware corporation ( "Purchaser") and
HEALTHCARE RESEARCH SYSTEMS, INC., an Illinois corporation ("Seller").
WITNESSETH:
WHEREAS, Seller owns and operates a business of providing healthcare data
to third party clients (being hereinafter referred to collectively as the
"Business"), and
WHEREAS, Parent owns 15,000 shares of common stock, or 15% of the
outstanding equity securities, of Seller, and
WHEREAS, Purchaser desires to buy and Seller desires to sell substantially
all of the assets of the Business and Purchaser and Parent are willing to assume
certain liabilities and obligations of Seller related to the Business, all upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
of the parties hereto, it is hereby agreed as follows:
1. Definitions. The following capitalized terms shall have the following
-----------
meanings unless otherwise stated herein.
"Acquired Assets' means all of the assets of Seller related to the
Business including all of its (a) real property and leaseholds, and
improvements thereon, (b) tangible Personal Property (such as office
equipment, furniture, fixtures and vehicles), (c) Intellectual Property,
including the name of Seller, goodwill associated therewith, licenses and
sub-licenses granted and obtained with respect thereto and rights
thereunder, remedies against infringements thereof, and rights to
protection of interests therein, (d) equipment leases, sub-leases, and
rights thereunder, (e) contracts and agreements defined herein as Assumed
Contracts, (f) permits, licenses, franchises, approvals, orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, (g) cash, cash on deposit and
accounts receivables, and (h) books, records, ledgers, files, documents,
correspondence, client and other lists, advertising and promotional
materials, and other printed or written materials; provided, however, that
-------------------
the Acquired Assets shall not include (i) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements
with registered agents relating to foreign qualifications, taxpayer and
other identification numbers, seals, minute books, stock transfer books,
blank stock
<PAGE>
certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation, or (ii) any of
the rights of the Seller under this Agreement.
"Assumed Contracts" shall have the meaning set forth in Paragraph 4(1)
below.
"Assumed Liabilities" shall have the meaning set forth in Paragraph 3
below.
"Closing" shall mean the date upon which physical transfer of the Acquired
Assets and the Purchaser's and Parent's joint assumption of the Assumed
Liabilities, which includes the Assumed Contracts, takes place and the exchange
of the Consideration occurs therewith.
"Closing Date" shall have the meaning set forth in Paragraph 2(a) below.
"Consideration" shall have the meaning described in paragraph 2(d) below.
"Disclosures" shall include all of the Schedules, Exhibits and other
disclosures referred to in this Agreement. The Disclosures are incorporated
herein by reference as if set forth herein.
"Intellectual Property" means all tradenames, trade marks, service marks,
and logos described in Paragraph 4(1) below.
"Knowledge" means actual knowledge, without independent investigation, of
the President, Chief Executive Officer and Chief Financial or Operating Officer
of the Seller and what could have been known by such persons following their
reasonable investigation.
"Personal Property" shall have the meaning set forth in Paragraph 4(j)
below.
2. Closing; Sale of Assets; Instruments and Consideration.
-------------------------------------------------------
(a) Closing Date. The consummation of the transactions contemplated
------------
by this Agreement shall take place in Tulsa, Oklahoma, at the offices of
Parent at 4:00 p.m. on February 1, 1994, or such other time, date and pace
as hereafter may be agreed upon in writing by Parent and Seller (the
"Closing Date").
(b) Sale and Purchase. On the Closing Date, Seller shall sell,
-----------------
assign, transfer, convey and deliver to Purchaser, and Purchaser shall buy
from Seller, free and clear of all encumbrances (except the Assumed
Liabilities) all of Seller's right, title and interest in the Acquired
Assets and the Assumed Contracts, all for the Consideration set forth in
this
2
<PAGE>
Agreement.
(c) Instruments of Transfer. The sale, assignment, transfer,
------------------------
conveyance and delivery of the Acquired Assets shall be made by such bills
of sale and other instruments of assignment, transfer and conveyance as
Purchaser shall reasonably request.
(d) Consideration. The Consideration ("Consideration") to be paid by
-------------
Parent to Seller at Closing for the Acquired Assets is (i) the cancellation
of Parent's 15,000 shares of common stock of Seller and (ii) the issuance
by Parent to Seller of a limited transferable subscription warrant to
purchase up to 200,000 shares of Parent's common stock upon the terms and
conditions contained in that form of Limited Transferable Subscription
Warrant set forth at Exhibit 2(d) hereto. In addition, Parent and
Purchaser shall assume jointly the Assumed Liabilities of Seller, as
provided in Paragraph 3 below.
3. Assumed Liabilities. On the Closing Date, Purchaser and Parent agree
-------------------
to jointly assume and be fully responsible for (i) all obligations arising after
the Closing Date under the Assumed Contracts, (ii) prepaid items related to the
Business, (iii) the obligations to the Seller's employees as set forth in
Paragraph 4(q) below, and (iv) other liabilities of Seller as are detailed in
Schedule 3 hereto, including Seller's obligations to Parent to repay amounts
loaned by Parent to Seller (collectively, the "Assumed Liabilities").
4. Representations and Warranties of Seller. Seller represents and
-----------------------------------------
warrants to Purchaser and Parent and agrees with Purchaser and Parent (which
representations and warranties shall continue to be true, correct and complete
as of the Closing Date) as follows:
(a) Organization, Standing and Power. Seller is a Corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the
State of [Illinois]. Seller has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its
business as now being conducted and to execute, deliver and perform this
Agreement and all writings related hereto. True and correct copies of
Seller's Certificate of Incorporation and Bylaws, as amended, have been
delivered to Parent and comprise one of the Disclosures. Seller owns or
has adequate rights to use all of the assets of the Business.
(b) Authorization of Seller. The execution, delivery and performance
-----------------------
of this Agreement and all writings relating hereto by Seller have been duly
and validly authorized by the board of directors of Seller and by its
shareholders. This Agreement
3
<PAGE>
and all writings relating hereto to be signed by Seller constitute valid
and binding obligations of Seller, enforceable in accordance with their
respective terms.
(c) Noncontravention. Neither the execution and delivery of this
-----------------
Agreement, or any writings relating hereto, nor the consummation by Seller of
the transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof or thereof will: (i) conflict with or result in a breach of
the certificate of incorporation or bylaws of Seller; (ii) violate any statute,
law, rule or regulation, or any order, writ, injunction or decree of any court
or governmental authority applicable to Seller; or (iii) violate or conflict
with or constitute a default under (or give rise to any right of termination,
cancellation or accelerating under) any agreement or writing of any nature to
which Seller is a party or by which it or the Acquired Assets may be bound. No
consent or approval of or notification to any governmental authority or any
other third party is required in connection with the execution and delivery by
Seller of this Agreement or any writing relating hereto or the consummation of
the transactions contemplated hereby or thereby, except as may be necessary to
assign Seller's rights in the Assumed Contracts set forth in Schedule 4(c).
(d) Financial Statements. Included in the Disclosures heretofore delivered
--------------------
to Parent are Seller's unaudited balance sheets and related statements of
operations, shareholders' equity and cash flows as of and for each of the years
ended December 31, 1990, 1991, 1992 and 1993 (the "Financial Statements"). The
Financial Statements are complete and accurate and present fairly the financial
position of the Seller and the results of its operations as at the dates thereof
and for the periods covered thereby.
(e) Liabilities. At Closing, the Seller will have no liabilities or
------------
obligations due to anyone that would affect the Acquired Assets or the Business
(except for the Assumed Liabilities).
(f) Absence of Changes. From the date hereof until Closing, the Business
-------------------
will be operated only in the ordinary course of business consistent with past
custom and practice.
(g) Tax Matters.
------------
(i) To Seller's knowledge, all federal, state, local and foreign tax
returns and tax reports, if any, required to be filed with respect to the
Business and Acquired Assets have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns and
reports are required to be filed, all of the foregoing are true, correct
and complete, and all amounts shown as owing thereon have been paid;
4
<PAGE>
(ii) All federal, state, local and foreign income, profits, franchise,
sales, use, occupation, property, excise and other taxes (including
interest and penalties), if any, payable by the Seller or relating to or
chargeable against its assets, revenues or income through December 31, 1993
were fully paid by such date or provided for by adequate reserves and all
similar items due through the Closing Date will have been fully paid by
that date or provided for by adequate reserves and paid as and when due by
law. There are no tax liens on any of the Acquired Assets, no material tax
claims asserted against or which relate to the Acquired Assets, and no
claims not yet asserted but which, to Seller's Knowledge, could be
asserted.
(h) Title to Property and Related Matters. Seller has the ownership
-------------------------------------
in fee and good and marketable title to all the Acquired Assets, except
those which are leased to Seller, which Acquired Assets will be at Closing
free and clear of all security interests, liens, pledges, claims, charges,
escrows, encumbrances, options, rights of first refusal, mortgages,
indentures, easements, licenses, security agreements or other agreements,,
arrangements, contracts, commitments, understandings or obligations except
the Assumed Liabilities.
(i) Real Property Owned or Leased. Schedule 4(i) hereto is a
-----------------------------
description of all real property relating to or used in the operation of
the Business owned or leased by Seller. With respect to real property
owned, Seller has good and marketable title in fee simple thereto.
(j) Personal Property Owned or Leased. Schedule 4(j) hereto contains
---------------------------------
a correct and complete list of the machinery, equipment, office furniture,
fixtures, vehicles, and other personal property (collectively, the
"Personal Property") owned or leased by Seller and used in the Business.
Except as set forth in Schedule 4(j) hereto: (i) all of such leases are in
full force and effect and constitute legal, valid and binding obligations
of the respective parties thereto; (ii) there have not been and there
currently are not any material defaults thereunder by any party; and (iii)
no event has occurred which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute a
material default thereunder. Seller will furnish to Purchaser copies of
all such leases listed in Schedule 4(i) as soon as practicable.
(k) All Assets. The Acquired Assets constitute substantially all of
----------
the properties and assets necessary to operate the Business on a basis
consistent with the manner in which the Business has historically been
conducted.
5
<PAGE>
(l) Assumed Contracts. Schedule 4(1) hereto contains a list of (i)
-----------------
all licenses held by Seller relating to the Business; (ii) all trademarks,
trade names, logos and service marks owned by or registered in the name of
Seller, relating to or used in connection with the Business; and (iii) all
contracts and agreements of the Seller used in the Business (collectively,
the "Assumed Contracts"). Except as set forth in Schedule 4(1), all of
such Assumed Contracts are in full force and effect and constitute legal,
valid and binding obligations of the respective parties thereto; there have
not been and there currently are not any material defaults thereunder by
any party; and no event has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a material default thereunder. Purchaser and Parent agree to
cooperate with Seller in Purchaser's and Parent's assumption or assignment
of such Assumed Contracts, but the responsibility of obtaining said
assignments by the Closing Date is upon Seller. Seller owns all Assumed
Contracts free and clear of any liens or encumbrances.
(m) Insurance. Seller maintains in effect insurance covering the
----------
Seller's assets and the Business and any liabilities relating thereto in an
amount believed adequate by Seller, and such insurance coverage shall be
maintained by Seller through the Closing Date. Between now and the Closing
Date, Seller shall furnish to Parent such information as Parent shall
reasonably request regarding the Business's insurance. Seller shall use
its best efforts to assist Purchaser to transfer such insurance to
Purchaser, if possible, and if desired by Parent. There have been no
material property damage or personal injury claims against the Business.
(n) Agreements. All contracts, agreements and other instruments
-----------
relating to the Business or the Acquired Assets and not listed in the
Schedules hereto shall be terminated by Seller at Closing with no cost to
Purchaser or Parent except health insurance or other insurance policies to
the extent the same are transferred, at Parent's request, to Purchaser or
Parent. No employee of the Seller engaged in the Business has an
employment contract (written or oral) which is not terminable within 30
days.
(o) Litigation. There are no actions, suits, claims, investigations,
-----------
or legal or administrative or arbitration proceedings pending or, to
Seller's Knowledge, threatened against Seller relating to the Business or
the Acquired Assets, whether at law or in equity, or before or by any
federal, state, municipal or other governmental instrumentality.
(p) Compliance With Laws. Seller is in compliance in all material
--------------------
respects with all federal, state, local, or foreign
6
<PAGE>
laws, ordinances, regulations, and orders applicable to the Business or the
Acquired Assets as currently operated. To Seller's Knowledge, (i) its
licenses constitute all the federal, state, local, and foreign governmental
licenses and permits necessary for the conduct of the Business; (ii) such
licenses are in full force and effect; (iii) no violations are or have been
recorded in respect of any thereof; and (iv) no proceeding is pending or
threatened to revoke or limit any thereof.
(q) Labor Relations; Employees. To Seller's Knowledge, Seller is in
--------------------------
compliance with all federal, state and local laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. Seller will pay in full all wages,
salaries, bonuses, and other direct and indirect compensation earned by and
payable to all of its employees through the Closing Date, but shall not be
responsible for those matters described in the remaining portion of this
paragraph 4(q), which matters Purchaser and Parent agree to jointly assume
and be responsible to pay. At the Closing, Seller will terminate all its
employees and Purchaser or Parent shall enter into employment agreements
with Mr. Robert J. Simmons, Jr. ("Simmons, Jr."), Mr. Ramani Iyer ("Iyer"),
Mr. Joe Phillip ("Phillip"), Ms. Marlo Good ("Good") and Mr. Harold Pashner
("Pashner") which shall provide for (i) the employment of Simmons, Jr.,
Iyer, Phillip, Pashner, and Good for an initial term of six (6) months from
the Closing Date, at an annual base salary equal to those base salaries
being paid to Iyer, Phillip, Good, and Pashner, respectively, by Seller as
of the date hereof. Simmons, Jr. will be similarly employed for an initial
term of six (6) months at an annual base salary of $72,000. Purchaser or
Parent will provide all of such employees with employee benefits of a
similar nature to those offered Parent's other employees as of the Closing
Date.
5. Representations Warranties and Certain Agreements of Purchaser and
------------------------------------------------------------------
Parent. Purchaser and Parent represent and warrant to Seller (which
- - ------
representations and warranties shall continue to be true and correct at the
Closing Date) and agrees with Seller as follows:
(a) Organization, Standing and Power. Purchaser and Parent are each
--------------------------------
Corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware. Purchaser and Parent have all requisite
corporate power and authority to own, lease and operate their properties,
to carry on their businesses as now being conducted and to execute, deliver
and perform this Agreement and all writings relating hereto.
(b) Authority. The execution, delivery and performance of this
---------
Agreement and all writings relating hereto by Purchaser
7
<PAGE>
and Parent have been duly and validly authorized by the Boards of Directors
of Purchaser and Parent. This Agreement and all writings relating hereto
to be signed by Purchaser and Parent constitute valid and binding
obligations of Purchaser and Parent enforceable in accordance with their
respective terms.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to herein), will (i)
violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which Purchaser or Parent is subject or
any provision of their charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, or other arrangement to which Purchaser or Parent is a
party or by which they are bound or to which any of their assets is
subject. Neither Purchaser nor Parent needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for Purchaser, Parent and Seller
to consummate the transactions contemplated by this Agreement.
(d) Other Obligations. Purchaser and Parent will perform their
-----------------
obligations herein, including those set forth in Paragraph 4(q) of this
Agreement.
6. Mutual Representations and Indemnifications. Seller, on the one hand,
-------------------------------------------
and Purchaser and Parent, on the other hand, mutually represent to each other
that each has had no dealings, negotiations, or consultations with any broker,
representative, employee, agent or other intermediary in connection with the
Agreement or the sale of the Acquired Assets. Each agrees that each will
indemnify, defend and hold the other free and harmless from the claims of any
other broker(s), representative(s), employee(s), agent(s) or other
intermediary(ies) claiming to have represented Seller or Purchaser and/or
Parent, respectively, in connection with this Agreement or in connection with
the sale of the Acquired Assets.
7. Conditions of Obligations of Purchaser and Parent. The obligations of
-------------------------------------------------
Purchaser and Parent to perform this Agreement are subject to the satisfaction
of the following conditions, unless waived by the Parent and Purchaser shall use
their best efforts to cause such conditions to be fulfilled (to the extent that
they have the ability to do so):
8
<PAGE>
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller in this Agreement shall be true and correct on the
Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Seller. Seller shall have
------------------------------------
performed all agreements and material obligations required to be performed
by it under this Agreement prior to the Closing Date.
(c) Consents. Seller shall have obtained, or to the reasonable
--------
satisfaction of Parent obviated the need to obtain, all consents or waivers
from third parties necessary to convey to Purchaser all the Acquired Assets
and Seller shall have obtained all consents necessary to assume the Assumed
Contracts.
(d) No Litigation. No action, suit or other proceeding shall be
-------------
pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would
result in the violation of any law, decree or regulation of any
governmental authority having appropriate jurisdiction.
(e) Adverse Claims. No restriction or adverse claim shall have been
--------------
asserted or threatened against the Acquired Assets by any lender of Seller.
(f) Changes. There shall exist no material adverse estoppel in the
-------
aggregate of the Acquired Assets or in the business, financial condition or
prospects of the Business as currently operated from the date hereof.
(g) Liens. Purchaser shall have received executed estoppel letters
-----
and releases of liens, mortgages and security interests from all holders of
liens on the Acquired Assets.
8. Conditions of Obligations of Seller. The obligations of Seller to
-----------------------------------
perform this Agreement are subject to the satisfaction of the following
conditions, unless waived and Seller shall use its best efforts to cause such
conditions to be fulfilled (to the extent that is has the ability to do so):
(a) Representations and Warranties. The representations and
------------------------------
warranties of Purchaser and Parent in this Agreement shall be true and
correct on the Closing Date as though made on and as of the Closing Date.
9
<PAGE>
(b) Performance of Obligations of Purchaser. Purchaser and Parent
---------------------------------------
shall have performed all material obligations required to be performed by
them under this Agreement prior to the Closing Date.
(c) No Litigation. No action, suit or other proceeding shall be
-------------
pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
--aspect thereof, or involving a claim that consummation thereof would
result in the violation of any law, decree or regulation of any
governmental authority having appropriate jurisdiction.
9. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made by any party to this Agreement or pursuant
hereto shall survive the Closing only for a Period of one year from the Closing
Date, except that there shall be no limitation on Indemnified Losses arising out
of fraudulent actions other than as provided by law.
10. Indemnification of Purchaser and Parent. Subject to the limitations
---------------------------------------
hereinafter set forth, Seller shall indemnify and save Purchaser and Parent
harmless from, against, for and in respect of any and all damages, losses,
liabilities, claims, actions or causes of action and reasonable costs and
expenses ("Indemnified Losses") suffered, sustained, incurred or required to be
paid by Purchaser and/or Parent because of (A) the claims of any broker or
finder engaged by Seller; (B) the untruth, inaccuracy or breach of the Seller's
representations and warranties; or (C) any liabilities or obligations of Seller
other than the Assumed Liabilities.
11. Indemnification of Seller. Subject to the limitations hereinafter set
-------------------------
forth, Purchaser and Parent shall jointly indemnify and save Seller harmless
from, against, for and in respect of any and all Indemnified Losses suffered,
sustained, incurred or required to be paid by Seller because of (A) the claims
of any c or finder engaged by Purchaser or Parent; (B) the untruth, inaccuracy
or breach of the Purchaser's or Parent's representations and warranties; or (C)
the failure of Purchaser or Parent to discharge the Assumed Liabilities.
12. Indemnification Procedure. The obligations and liabilities of each
-------------------------
indemnifying party hereunder with respect to claims resulting from the assertion
of liability by the other party or third parties shall be subject to the
following terms and conditions:
(a) Notice. The indemnified party shall give prompt written notice
------
to the indemnifying party of any claims which might give rise to an
Indemnified Loss by the indemnified party against the indemnifying party
based on the indemnity
10
<PAGE>
agreements contained in Paragraphs 10 and 11 hereof, stating the nature and
basis of said claims and the amounts thereof, to the extent known.
(b) Other Terms and Conditions. In the event any action, suit or
--------------------------
proceeding is brought against the indemnified party, with respect to which
the indemnifying party may have liability under the indemnity agreements
contained in Paragraphs 10 and 11 hereof, the action, suit or proceeding
shall, upon the written acknowledgement by the indemnifying party that it
is obligated to indemnify under such indemnity agreement, be defended
(including all proceedings on appeal or for review which counsel for the
indemnified party shall deem appropriate) by the indemnifying party. The
indemnified party shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be the
indemnified party's own expense unless (A) the employment of such counsel
and the payment of such fees and expenses both shall have been specifically
authorized by the indemnifying party in connection with the defense of such
action, suit or proceedings, or (B) such indemnified party shall have
reasonably concluded and specifically notified the indemnifying party that
there may be specific defenses available to it which are different from or
additional to those available to the indemnifying party or that such
action, suit or proceeding involves or could have an effect upon matters
beyond the scope of the indemnity agreements contained in Paragraphs 10 and
11 hereof, in any of which events the indemnifying party, to the extent
made necessary by such defenses, shall not have the right to direct the
defense of such action, suit or proceeding on behalf of the indemnified
party. In such case only that portion of such fees and expenses reasonably
related to matters covered by the indemnity agreements contained in
Paragraphs 10 and 11 hereof shall be borne by the indemnifying party. The
indemnified party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is so represented. The
indemnifying party shall make available to the indemnified party and its
attorneys and accountants all books and records of the indemnifying party,
relating to such proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonable require of each
other in order to ensure the proper and adequate defense of any such
action, suit or proceeding.
13. Incorporation of Letter of Intent Terms. The terms of paragraphs 7,
---------------------------------------
8, 9, 10, 11, 12 and 13 of that certain Letter of Intent between Seller and
Parent dated December 15, 1993 (set forth at Exhibit "13-1" hereto) are
incorporated herein by reference to the same extent as if set forth at length
herein. References therein to "HRS" shall be deemed references to Seller and
references therein to "CIS" shall be deemed references to Purchaser and/or
Parent, as appropriate. With respect to paragraph 8 of the said
11
<PAGE>
Letter of Intent, the covenant not to compete referred to therein shall be in
the form of Exhibit "13-2" hereto and shall be delivered to Purchaser and Parent
by Seller at the Closing.
14. Miscellaneous.
--------------
(a) Parties in Interest. This Agreement shall be
-------------------
binding upon, inure to the benefit or, and be enforceable by Seller and its
successors and assigns, and Purchaser and its successors and assigns.
(b) Entire Agreement and Amendments. This Agreement and the other
-------------------------------
writing referred to herein or delivered in connection herewith contain the
entire understanding of the parties with respect to its subject matter.
This Agreement may be amended only by a written instrument duly executed by
all of the parties.
(c) Headings. The section and subsection headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(d) Notices. All notices, claims, certificates, requests, demands and
-------
other communications ("communication") hereunder shall be in writing and shall
be deemed to have been duly given when hand delivered or on the first business
day after pickup by overnight delivery such as Federal Express to the following
addresses:
If to Seller:
290 East Deerpath Road
Suite 290
Lake Forest, Illinois 60045
Phone: (708) 615-1173
Fax: (708) 614-1176
If to Purchaser
or Parent:
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136
ATTN: Philip D. Kurtz, President
Phone: (918) 496-2451
Fax: (918) 481-4275
With Copy To:
Thomas G. Noulles, Esq.
Pray, Walker, Jackman, Williamson and Marlar
900 Oneok Plaza
Tulsa, Oklahoma 74103
Phone: (918) 581-5500
12
<PAGE>
Fax: (918) 581-5599
or in each case to such other address as either party may from time to time
designate by giving notice in writing to the other party. Telephone and
facsimile numbers are for informational purposes only. Effective notice will be
deemed given only as provided above.
(e) Further Assurances. After the Closing Date, without further
------------------
consideration, Seller, Purchaser and Parent shall execute and deliver such
further instruments and documents as either party shall reasonably request
to consummate the transactions contemplated by the Agreement.
(f) Waivers. Any party to this Agreement may, by written notice to
-------
the other party hereto, waive any provision of this Agreement. The waiver
by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
(g) Attorney Fees. In the event legal proceedings are instituted to
-------------
enforce or interpret the provisions of this Agreement, the prevailing party
shall be entitled to recover its reasonable legal fees from the other party
hereto.
(h) Governing Law. The laws of the State of Oklahoma shall govern
-------------
the interpretation and enforceability of this Agreement.
(i) No Third Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
(j) Assignment. No party may assign either this Agreement or any of
----------
its rights, interests, or obligations hereunder without the prior written
approval of the other party, except that Purchaser may assign this
Agreement to any other corporation that is wholly owned by Parent.
(k) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(l) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and affixed their seals as of the date and year first above written.
"PARENT"
C.I.S. TECHNOLOGIES, INC.
By__________________________________
President
"PURCHASER"
CIS HEALTHCARE RESEARCH SYSTEMS, INC.
By__________________________________
President
"SELLER"
HEALTHCARE RESEARCH SYSTEMS, INC.
By___________________________________
President
14
<PAGE>
EXHIBIT 10(i)
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL AND/OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE
AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE
ACTS.
LIMITED TRANSFERABLE WARRANT TO PURCHASE
SHARES OF COMMON STOCK
C.I.S. TECHNOLOGIES,INC.
(a Delaware Corporation)
C.I.S. TECHNOLOGIES,INC., a Delaware corporation (the "Company"), hereby
certifies that Healthcare Research Systems, Inc., its permitted successors and
assigns, registered on the books of the Company maintained f or such purposes as
the registered holder hereof (the "Holder"), for value received, is entitled to
purchase from the Company fully paid and non-assessable shares of Common Stock
of the Company, $0.01 par value ("Shares"), at the purchase price of $3.0625 per
Share (the "Exercise Price") (the number of Shares and Exercise Price being
subject to adjustment as hereinafter provided) upon the terms and conditions
herein provided. Certain capitalized terms used herein which are otherwise not
defined are defined in the Assets Purchase Agreement dated February 2, 1994
(the "Agreement") to which Holder and the Company are parties.
1. Number of Underlying Shares; Conditions to Exercisability. The
maximum number of Shares which the Holder shall be entitled to purchase upon
exercise of this Warrant shall be 200,000,with 40,000 thereof being immediately
so purchasable and such purchase of the remaining 160,000 thereof being subject
to (i) the achievement by December 31, 1999 of certain annual milestones of
financial performance and (ii) certain limitations and conditions, all as set
forth on Exhibit "A" hereto, (hereinafter, the "Annual Milestones").
2. Exercise of Warrants.
(a) Subject to the prior achievement of the Annual Milestones and further
subject to subsection (b) of this Section 2, upon presentation and surrender of
this Warrant Certificate, with the attached Purchase Form duly executed, at the
principal of f ice of the Company at Tulsa, Oklahoma, or at such other place as
the Company may designate by notice to the Holder hereof, together with a
certified or bank cashier's check payable to the order of the
<PAGE>
Company in the amount of the Exercise Price times the number of Shares being
purchased, the Company shall deliver to the Holder hereof, as promptly as
practicable, certificates representing the Shares being purchased. To the extent
that applicable Annual Milestones have been achieved, this Warrant may be
exercised in whole or in part; and, in case of exercise hereof in part only, the
Company, upon surrender hereof, will deliver to the Holder a new Warrant
Certificate or Warrant Certificates of like tenor entitling the Holder to
purchase, subject to any subsequently required achievement of Annual Milestones,
the number of Shares as to which this Warrant has not been exercised.
(b) This Warrant must be exercised on or prior to December 31, 2000, after
which time it will be void and of no further force or effect.
3. Rights and Obligations of Warrant Holder.
(a) The Holder of this Warrant Certificate shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or in
equity; provided if any certificate representing the Shares is issued to the
Holder hereof upon exercise of this Warrant, such Holder shall, for all
purposes, be deemed to have become the holder of record of such Shares on the
date on which this Warrant Certificate, together with a duly executed Purchase
Form, was surrendered and payment of the Exercise Price was made, irrespective
of the date of delivery of such Share certificate. The rights of the Holder of
this Warrant are limited to those expressed herein and the Holder of this
Warrant, by its acceptance hereof , consents to and agrees to be bound by and to
comply with all the provisions of this Warrant Certificate. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the Company maintained for such purpose as the
absolute, true and lawful owner for all purposes whatsoever, notwithstanding any
notation of ownership or other writing thereon, and the Company shall not be
affected by any notice to the contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled to
vote or receive dividends or to be deemed the holder of Shares for any purpose,
nor shall anything contained in this Warrant Certificate be construed to confer
upon any Holder of this Warrant Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
action by the Company, whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise,
receive notice of meetings or other action affecting shareholders (except for
notices provided for herein), receive dividends, subscription rights or
otherwise, until this Warrant shall have become exercisable and been exercised
and the Shares purchasable upon the exercise thereof shall have become
deliverable
2
<PAGE>
as provided herein; provided that any such exercise on any date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for those Shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open, and the Warrant surrendered shall not be deemed to have been
exercised, in whole or in part as the case may be, until the next succeeding day
on which the stock transfer books are open for the purpose of determining
entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants. The Company covenants and agrees that all
Shares delivered upon exercise of this Warrant shall, upon delivery and payment
therefor, be duly and validly authorized and issued, fully-paid and non-
assessable, and free from all stamp-taxes, liens, and charges with respect to
the purchase thereof. In addition, the Company agrees at all times to reserve
and keep available an authorized number of Shares sufficient to permit the
exercise in full of this Warrant.
5. Limitations on Transferability of Warrant. This Warrant is not
transferable prior to the achievement of the Annual Milestones and, then, only
to the extent of that number of shares underlying this Warrant which are
issuable upon exercise hereof subsequent to the achievement of each Annual
Milestone. Notwithstanding the foregoing, this Warrant may be subdivided into
two or more warrants ("Subdivided Warrants") which may at any time be
transferred by Holder to and among any or all of its shareholders ("Individual
Holders"), provided, however, the exercisability hereof at any given point in
time shall be allocated among each Individual Holder in the same percentage that
such Subdivided Warrant is of this entire Warrant.
6. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate and any transferee hereof or of the Shares issuable upon the
exercise of this Warrant Certificate, by their acceptance hereof, hereby
understand and agree that the Warrant, and the Shares issuable upon the exercise
hereof, have not been registered under either the Securities Act of 1933 (the
"Act") or applicable state securities laws (the "State Acts") and shall not be
sold, pledged, hypothecated, donated or otherwise transferred (whether or not
for consideration) except upon the issuance to the Company of a favorable
opinion of counsel and/or submission to the Company of such evidence as may be
satisfactory to counsel for the Company, in each such case, to the effect that
any such transfer shall not be in violation of the Act and the State Acts. It
shall be a condition to the transfer of this Warrant that any transferee thereof
deliver to the Company its written agreement to accept and be bound by all of
the terms and conditions of this Warrant Certificate.
3
<PAGE>
7. Adjustments.
(a) Stock Dividends. If after the date hereof, the number of outstanding
----------------
Shares is increased by a stock dividend payable in Shares or by a split-up of
Shares, then, on the day following the date fixed for the determination of
holders of Shares entitled to receive such stock dividend or split-up, the
number of Shares issuable on exercise of the Warrants shall be increased in
proportion to such increase in outstanding Shares and the then applicable
Exercise Price shall be correspondingly decreased.
(b) Aggregation of Shares. If after the date hereof, the number of
-----------------------
outstanding Shares is decreased by a combination or reclassification of Shares,
then, after the effective date of such combination or reclassification, the
number of Shares issuable on exercise of the Warrants shall be decreased in
proportion to such decrease in outstanding Shares and the then applicable
Exercise Price shall be correspondingly increased.
(c) Special Stock Dividend. If after the date hereof, shares of any class
----------------------
of the Company (other than common stock) are issued by way of a stock dividend
on outstanding common stock then, commencing with the day following the date
fixed for the determination of holders of common stock entitled to receive such
stock dividend, in addition to any Shares receivable upon exercise of the
Warrants, the Holder shall, upon such exercise of the Warrants, be entitled to
receive, as nearly as practicable, the same number of shares of dividend stock,
plus any shares issued upon any subsequent change, replacement, subdivision or
combination thereof to which the holders would have been entitled had their
Warrants been exercised immediately prior to such stock dividend.
(d) Reorganization. If after the date hereof any capital reorganization or
---------------
reclassification of the common stock of the Company, or consolidation or merger
of the Company with another Corporation, or the sale of all or substantially all
of its assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful and
fair provisions shall be made whereby the Holders shall thereafter have the
right to purchase and receive in lieu of the Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding Shares equal to the number
of Shares immediately theretofore purchasable and receivable upon the exercise
of the rights represented by the Warrants had such reorganization,
reclassification, consolidation, merger or sale not taken place and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the Holders to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and the
number of Shares purchasable upon the exercise of the Warrants) shall thereaf-
4
<PAGE>
ter be applicable as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and delivered to the Holders
the obligation to deliver to the Holders such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase.
(e) Notice to Warrant Holders of Adjustment. Whenever the number of Shares
-----------------------------------------
purchasable or the Exercise Price hereunder is adjusted as herein provided, the
Company shall cause to be mailed to the Holder in accordance with the provisions
of this Section a notice (i) stating that the number of Shares purchasable upon
exercise or the Exercise Price of this Warrant have been adjusted, (ii) setting
forth the adjusted number of Shares purchasable upon the exercise of this
Warrant or the adjusted Exercise Price, and (iii) showing in reasonable detail
the computations and the facts, including the amount of consideration received
or deemed to have been received by the Company, upon which such adjustments are
based.
8. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement or bond satisfactory in form, substance and
amount to the Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
9. Survival. The various rights and obligations of the Holder hereof as
set forth herein shall survive the exercise of the Warrants represented hereby
and the surrender of this Warrant Certificate.
10. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed as follows:
C.I.S. Technologies, Inc.
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136
and if to the Holder, it will be addressed to the registered Holder
5
<PAGE>
at his address as it appears on the books of the Company.
C.I.S. TECHNOLOGIES, INC.
By: ______________________________________
Title: ___________________________________
ATTEST:
______________________________
____________________ Secretary
6
<PAGE>
PURCHASE FORM
Date______________________
TO: C.I.S. TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise the attached Warrant
Certificate to the extent of ____________ shares of the Common Stock, $0.01 par
value, of C.I.S. Technologies, Inc. and hereby makes payment of $______________
in accordance with the provisions of Section 2 of the Warrant Certificate in
payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(Please typewrite or print in block letters)
Address:
Soc. Sec. or Employer I.D. No.
By:
7
<PAGE>
EXHIBIT "A"
to
LIMITED TRANSFERABLE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
ANNUAL MILESTONES
-----------------
The Warrant to which this Exhibit forms a part is not exercisable as to
160,000 of the underlying Shares unless and until the following conditions,
limitations and annual milestones of financial performance have been met,
complied with and achieved.
1. Definitions. For purposes hereof, the following words shall have the
meanings indicated:
1.1 "Anti-Dilution Amount" shall mean that number of Shares which,
when added to the Outstanding Shares, would cause the CIS+HRS EPS to be
reduced to the Company EPS.
1.2 "Business" shall mean that business of providing health care
data to third parties which was formerly conducted by Holder and which,
upon the consummation of the Agreement and the resultant acquisition of the
Business and Acquired Assets by the Company's wholly owned subsidiary, CIS
Healthcare Research Systems, Inc. a Delaware corporation ("CIS-HRS"), is
now conducted by CIS-HRS. "Business" shall also include all third party
health care data sales activities conducted by or through the Company or
other subsidiaries of the Company.
1.3 "Company EPS" shall mean the amount of consolidated earnings per
share of the Company for a given Fiscal Year calculated in accordance with
generally accepted accounting principals ("GAAP"), exclusive of the portion
-------------
thereof attributable to the HRS Gross Margin for such Fiscal Year.
1.4 "Company+HRS EPS" shall mean the amount of consolidated earnings
per share of the Company for a given Fiscal Year calculated in accordance
with GAAP, including the portion thereof attributable to the HRS Gross
----------
Margin for such Fiscal Year. For purposes hereof, the portion of
Company+HRS EPS for a given Fiscal Year attributable to the HRS Gross
Margin for such Fiscal Year shall be the HRS Gross Margin for such Fiscal
Year divided by the Outstanding Shares as of the end of such Fiscal Year.
1.5 "Cumulative Annual Maximum" shall mean, following the Fiscal
Year ended December 31, 1994, 100,000 Shares; following the Fiscal Year
ended December 31, 1995, 160,000 Shares, and following the Fiscal Year
ended December 31, 1996, 200,000 Shares, all of which amounts are inclusive
of those 40,000 Shares which are initially purchasable upon exercise of
this Warrant.
8
<PAGE>
1.6 "Fiscal Year" shall mean the fiscal year of the Company.
1.7 "HRS Gross Margin" shall mean the direct revenues attributable
to the Business less the direct expenses attributable to the Business.
1.8 "Outstanding Shares" shall mean the weighted average number of
Shares outstanding calculated in accordance with GAAP as of the end of a
given Fiscal Year.
All other capitalized terms not otherwise defined are defined in the Warrant
Certificate to which this Exhibit is attached.
2. Annual Calculations and Determinations. As soon as practicable
following the completion of a given Fiscal Year, but in no event later than the
date upon which the Company's audited financial statements for such Fiscal Year
are completed, the amounts of HRS Gross Margin, Outstanding Shares, Company EPS,
Company+HRS EPS and Annual Dilution Amount attributable to such Fiscal Year
shall be calculated and the number of Shares thereafter acquirable upon exercise
of this Warrant shall be determined as follows:
2.1 Limitations on Exercise. The following limitations shall apply
to the number of Shares which would otherwise become acquirable upon
exercise of this Warrant:
2.1.1 Minimum HRS Gross Margin. This Warrant shall not be
exercisable (except to the extent it previously became exercisable)
unless the total of the HRS Gross Margins for each Fiscal Year
commencing with the Fiscal Year ending December 31, 1994 exceeds
$55,000 time the number of such Fiscal Years.
2.1.2 No Exercisability in Excess of Cumulative Annual Maximum.
In no event shall the aggregate number of Shares otherwise acquirable
upon exercise of this Warrant, together with the total of the Shares
previously so acquired, exceed the Cumulative Annual Maximum
applicable to any particular point in time.
2.1.3 No Exercisability in Excess of Anti-Dilution Amount. In
no event shall the number of additional Shares for which this Warrant
otherwise becomes exercisable following any particular Fiscal Year
exceed the Anti-Dilution Amount.
2.2 Shares Acquirable Upon Exercise. Subject to the foregoing
limitations, the number of Shares for which this Warrant may be exercised
following a given Fiscal Year shall be
9
<PAGE>
one-half of the Anti-Dilution Amount ("Earned Shares") plus such portion of
any previously Earned Shares as did not previously become exercisable (due
to a prior Cumulative Annual Maximum) as does not, when taken together with
the current Earned Shares, exceed the lesser of the most recent (i) Anti-
Dilution Amount or (ii) Cumulative Annual Maximum.
3. Termination of Non-Exercisable Warrants. Following the determination
of the exercisability of this Warrant attributable to the Fiscal Year ended
December 31, 1998, this Warrant shall not thereafter become further exercisable
and the number of Shares underlying this Warrant shall be reduced to that number
which are then acquirable upon exercise of this Warrant.
4. Adjustments. In the event any adjustments to the number of Shares and
Exercise Price are effected pursuant to Section 7 of this Warrant, corresponding
adjustments to this Exhibit A will likewise apply.
10
<PAGE>
CIS TECHNOLOGIES 1994 ANNUAL REPORT
- - --------------------------------------------
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA EXHIBIT 13
- - --------------------------------------------
CIS Technologies, Inc. and Subsidiaries
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenue $ 31,689,204 $ 33,284,893 $ 30,523,284 $ 17,766,464 $ 10,204,824
Operating Income (loss) $ 2,336,771 $ (225,723) $ 3,098,208 $ 1,239,200 $ (425,982)
Net Income $ 2,197,002 $ 1,221,007 $ 3,095,455 $ 1,430,546 $ 121,451
PER SHARE DATA:
Earnings $ 0.08 $ 0.05* $ 0.12 $ 0.06 $ -
Market price: High $ 4.00 $ 7.75 $ 7.88 $ 7.94 $ 6.19
Market price: Low $ 1.94 $ 3.00 $ 4.00 $ 3.50 $ 2.50
Weighted average shares outstanding 27,617,091 27,053,698 26,864,844 25,894,710 26,357,051
Common shares outstanding 30,093,706 26,857,049 26,722,502 26,349,851 25,993,393
CAPITAL POSITION:
Current assets $ 24,582,630 $ 11,607,244 $ 11,579,626 $ 9,501,313 $ 8,741,426
Current liabilities $ 5,555,583 $ 4,360,412 $ 3,234,032 $ 3,197,140 $ 913,633
Long-term liabilities $ 3,676,826 $ 486,753 $ 614,205 $ 1,246,473 $ 531,768
Working capital $ 19,027,047 $ 7,246,832 $ 8,345,594 $ 6,304,173 $ 7,827,793
Total assets $ 49,501,882 $ 29,087,361 $ 26,520,830 $ 22,903,143 $ 13,532,177
Shareholders' equity $ 40,269,473 $ 24,240,196 $ 22,672,593 $ 18,459,530 $ 12,086,776
INVESTMENT SPENDING:
Capital expenditures $ 4,557,854 $ 4,000,131 $ 3,192,393 $ 1,322,542 $ 799,003
Acquisitions $ 1,075,000 $ - $ - $ 2,647,864 $ -
FINANCIAL RATIOS:
Current ratio 4.4 2.7 3.6 3.0 9.6
Debt to equity 12% 2% 3% 7% 12%
Net profit margin 7% 4% 10% 8% 1%
Return on equity 5% 5% 14% 8% 1%
-------------------------------------------------------------------------------------
OPERATING STATISTICS:
Clients 700 562 550 478 306
Employees 414 396 530 313 97
Claims processed 24,050,000 22,163,000 18,137,000 12,500,000 7,272,000
-------------------------------------------------------------------------------------
</TABLE>
*Includes effect of adopting Statement No. 109 ($0.03 per share).
- - -16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition
The Company's financial position was strengthened during 1994 as a result
of earnings, issuance of common stock and a new credit agreement. At
December 31, 1994, working capital was $19.1 million and the current ratio
was 4.4, compared to $7.2 million and 2.7 at December 31, 1993. The increase
in working capital and the current ratio primarily reflects the increase in
cash and cash equivalents as a result of the sale of the Company's stock.
Property and equipment at December 31, 1994, was $9.8 million, an
increase of 45%, or $3.1 million, from December 31, 1993. The majority of
the increase is due to software development related primarily to the latest
version of the PREMIS product. In addition, intangible assets, net of
amoritization, totaled $13.7 million, an increase of $5.1 million, or 59%,
which reflects goodwill recognized in the acquisition of AMSC, Inc. (See Note
13 to the Financial Statements).
Liquidity
The Company's 1994 cash requirements were met primarily through internally
generated funds and borrowings under its credit facility. At December 31, 1994,
the Company has $11.4 million in cash and cash equivalents and a $5.0 million
revolving credit facility which expires October 31, 1997. As of December 31,
1994, there were borrowings of $44,000 under the credit facility. The Company
has $4 million of long-term debt, $2 million which was part of the GE Capital
Agreement and $2 million which was issued as part of the AMSC acquisition.
Cash provided from operating activities increased $800,000 from 1993 to 1994
due to a $976,000 increase in net income and increased depreciation and
amortization as products were released to customers, offset by increases in
trade and charge recovery receivables. In addition, in 1993, the Company wrote
off $620,000 in capitalized software due to a contract termination (see
"Contract Termination," below) which was offset by the cumulative effect of
adopting Statement of Financial Accounting Standards No. 109.
Cash used in investing activities increased $1.6 million from 1993 to 1994.
Of the $4.6 million in additions to property and equipment, $3.8 million was for
software development. The Company develops internally the majority of the
products it provides to its customers. During 1994, development activity was
focused on two primary areas: (1) a major enhancement of the PREMIS product
released in July which included additional functionality; and (2) development of
payer-specific edits. The Company capitalized $3.7 million in software
development costs during 1993, primarily associated with its PREMIS product.
Cash provided from financing activities during 1994 of $12.6 million
resulted principally from the issuance of stock. Borrowing and repayment
activities on long-term debt and lines of credit, as well as other financing
activities, largely offset each other. Positive financing cash flows in 1993
were the result of proceeds from the exercise of stock options and book
overdrafts at December 31, 1993.
Capital resources available should be sufficient to meet the needs of the
Company's business on both a short- and long-term basis. The Company expects
future software development costs and working capital requirements will be
provided by cash investments, internally generated cash flow and its line of
credit facility.
Capital Expenditures
The Company has spent $4.6 million, $4.0 million and $3.2 million on
additions to property and equipment during the last three years. The majority of
the expenditures were for software development costs as discussed above. The
1995 capital budget anticipates capital expenditures of $3.7 million, with $2.8
million planned for continuing software development and the remainder budgeted
for computer equipment and leasehold improvements.
Results of Operations - 1994 compared to 1993
Revenue decreased $1.6 million, or 5%, primarily due to the October 1993
discontinuation of the Company's business office operations with revenues of
$3.8 million in 1993 (see "Discontinuation of Outsourcing Contract," below).
Excluding business office operations, 1994 revenues increased $2.2 million, or
7%, due to $1.5 million in revenues related to AMSC, acquired in October 1994,
and an additional $1.5 million attributable to new service offerings and an
increasing customer base for recurring services. These increases were offset by
an $800,000 reduction in licensing and installation revenues.
Operating expenses decreased 12%, or $4.2 million, in 1994 due to $5.9
million in non-recurring 1993 expenses and a net reduction in ongoing personnel
costs of $300,000 mostly due to bringing previously contracted programming
services in-house. These decreases were offset by depreciation, amortization,
computer lease, and communication expense increases of $900,000; and by the 1994
addition of AMSC operating expenses of $1.2 million. Non-recurring 1993 expenses
included $4.4 million related to the discontinued business office operation, and
a $1.5 million charge related to the termination of a software development
contract with a third-party vendor (see "Contract Termination," below).
Results of Operations - 1993 compared to 1992
Revenue increased $2.8 million, or 9%, primarily due to the Company's
outsourcing contract (see "Discontinuation of Outsourcing Contract," below). The
majority of the Company's other 1993 revenues was consistent with prior year.
Growth in these other revenues was constrained primarily due to software
delivery delays associated with the contract terminated in early 1993 (see
"Contract Termination," below). In addition, fewer short-term consulting and
billing projects negatively impacted 1993 revenues by approximately $1.7
million.
-17-
<PAGE>
- - ------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
- - ------------------------------------
Operating expenses for 1993 increased 22%, or $6.1 million, over 1992. $1.5
million of the increase was due to the contract termination (see "Contract
Termination," below), with $4.4 million of the remaining increase attributable
to the Company's outsourcing contract which began in August 1992 (see
"Discontinuation of Outsourcing Contract," below). Development and operations
expenses increased $429,000 due to increased personnel and office space for
customer and development support. General and administrative expenses increased
$444,000 as a result of additional personnel and marketing expenditures related
to new products. The income tax benefit of $556,000 in 1993 resulted primarily
from a refund of taxes paid in prior years.
Acquisition of AMSC
- - -------------------
Effective November 3, 1994, the Company acquired 100% of the common stock of
AMSC, Inc. ("AMSC") for $5 million plus acquisition costs, consisting of cash,
stock and notes (see Note 13 to the Financial Statements).
Equity Partner
- - --------------
On November 21, 1994, Bankers Trust acquired 2,384,182 shares of non-voting
convertible preferred stock and 1,615,818 shares of the Company's common stock
for $10 million. In addition, Bankers Trust acquired warrants to purchase
500,000 shares of non-voting convertible preferred stock exercisable at $3.25
per share over 3 years.
Credit and Equity Partner
- - -------------------------
On October 31, 1994, the Company entered into agreements with GE Capital
receiving a $2 million term loan and a $5 million, three-year revolving credit
facility. In addition, GE Capital acquired 840,336 shares of the Company's
common stock for $2 million. The two companies have entered into a strategic
alliance, Precision Funding, to provide receivable financing for hospitals.
Cumulative Effect of Accounting Change
- - --------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" effective January 1, 1993. Statement No. 109
requires the measurement of deferred tax assets for deductible temporary
differences and operating loss carryforwards and of deferred tax liabilities for
taxable temporary differences. The cumulative effect of this change in
accounting for income taxes as of January 1, 1993, increased net income by
$900,000 ($.03 per share) and is reported separately in the consolidated
statements of operations.
Contract Termination
- - --------------------
In February 1993, the Company discontinued its relationship with a third-
party software vendor because of delivery postponements and the discovery of
numerous software defects and performance and support deficiencies. The Company
recorded $1.5 million in costs relating to the discontinuance of the software
enhancement and development arrangement in the first quarter of 1993 as contract
termination expense.
Discontinuation of Outsourcing Contract
- - ---------------------------------------
During October 1993, the Company sold its business office operation at
Straub Clinic & Hospital. As part of the transaction, the Company's trade
accounts receivable from Straub were converted into a note receivable. The
Company had been operating the Straub business office since August 1992 and this
client accounted for $3.8 million and $1.6 million of total revenue and $4.4
million and $1.4 million of total field operations expense during 1993 and 1992,
respectively.
Looking Forward
- - ---------------
1994 was an exciting year as the Company increased earnings, sought and
obtained new equity partners and strategic alliances, and completed an
acquisition. The Company believes 1995 will be a year of change and growth, as
the Company seeks new alliances and acquisitions, converts existing clients to
PREMIS 2.0 and sells its expanded services to new and existing clients. The
Company continues to stay well informed on healthcare reform initiatives and is
an integral part of the healthcare electronic information highway.
Inflation
- - ---------
To date, inflation has not had a material effect on the Company's
operations. In management's opinion, inflation should not have a significant
impact upon its future operating results.
- - -18-
<PAGE>
---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders
CIS Technologies, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of CIS
Technologies, Inc. and Subsidiaries (the "Company") as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
(included on pages 20 through 23 and 25 through 32) present fairly, in all
material respects, the consolidated financial position of CIS Technologies, Inc.
and Subsidiaries as of December 31, 1994 and 1993 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 8 to the consolidated financial statements, the Company
changed its method of accounting for income taxes during 1993.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
February 7, 1995
-19-
<PAGE>
- - ---------------------------
CONSOLIDATED BALANCE SHEETS
- - ---------------------------
CIS Technologies, Inc. and Subsidiaries
At December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,416,151 $ 385,313
Accounts receivable:
Trade, net of allowance for doubtful accounts of $320,668 in 1994 and $318,920 in 1993 6,837,580 5,366,747
Charge recovery 4,917,913 4,370,901
Related party receivables 191,335 56,244
Prepaid expenses 385,082 303,530
Other current assets 834,569 1,124,509
Total current assets 24,582,630 11,607,244
NON-CURRENT ASSETS:
Related party receivables 106,205 97,149
Property and equipment, net 9,814,762 6,747,604
Intangible assets, net 13,640,804 8,552,652
Deferred tax asset (Note 8) 900,000 900,000
Other non-current assets 457,481 1,182,712
Total non-current assets 24,919,252 17,480,117
TOTAL ASSETS $ 49,501,882 $ 29,087,361
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 3,435,862 $ 3,413,313
Borrowings under line of credit 43,877 -
Current maturities of long-term debt 980,816 152,096
Current portion of capital leases 180,208 204,459
Related party payables 16,709 -
Deferred revenue 898,111 590,544
Total current liabilities 5,555,583 4,360,412
NON-CURRENT LIABILITIES:
Long-term debt 3,518,863 105,574
Capital lease obligations - 173,216
Deferred income taxes (Note 8) 157,963 207,963
Total non-current liabilities 3,676,826 486,753
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock: $0.01 par value, 20,000,000 shares authorized, 23,842 -
2,384,182 shares issued and outstanding at December 31, 1994
Common stock: $0.01 par value, 50,000,000 shares authorized, 316,065 283,698
31,611,451 shares issued and 30,093,706 shares outstanding at December 31, 1994
28,374,794 shares issued and 26,857,049 shares outstanding at December 31, 1993
Paid in capital in excess of par 52,698,023 38,921,957
Treasury stock, at cost: 1,517,745 shares at December 31, 1994 and 1993 (1,768,544) (1,768,544)
Accumulated deficit (10,999,913) (13,196,915)
Total stockholders' equity 40,269,473 24,240,196
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,501,882 $ 29,087,361
</TABLE>
See notes to the consolidated financial statements.
- - -20-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
CIS Technologies, Inc. and Subsidiaries
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
REVENUE:
Service revenue $ 30,203,268 $ 33,284,893 $ 30,523,284
Hardware and software sales 1,485,936 - -
Total revenue 31,689,204 33,284,893 30,523,284
OPERATING EXPENSES:
Development and field operations 18,382,113 22,272,139 18,780,026
General and administrative 7,559,732 7,446,406 7,002,564
Depreciation and amortization 2,701,671 2,292,071 1,642,486
Cost of hardware and software sales 708,917 - -
Contract termination - 1,500,000 -
Total operating expenses 29,352,433 33,510,616 27,425,076
Operating income (loss) 2,336,771 (225,723) 3,098,208
Other income (expense) (125,805) (9,661) 79,166
Income (loss) before income taxes and
cumulative effect of change of accounting principle 2,210,966 (235,384) 3,177,374
(Provision) benefit for income taxes (Note 8) (13,964) 556,391 (81,919)
Income (loss) before cumulative
effect of change in accounting principle 2,197,002 321,007 3,095,455
Cumulative effect of change in
accounting principle (Note 8) - 900,000 -
Net income $ 2,197,002 $ 1,221,007 $ 3,095,455
Weighted average common and common
equivalent shares outstanding 27,617,091 27,053,698 26,864,844
EARNINGS PER COMMON SHARE, PRIMARY
AND FULLY-DILUTED:
Income before cumulative effect of
change in accounting principle $ 0.08 $ 0.02 $ 0.12
Cumulative effect of change in
accounting principle - 0.03 -
Net income $ 0.08 $ 0.05 $ 0.12
</TABLE>
See notes to the consolidated financial statements.
-21-
<PAGE>
- - -----------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- - -----------------------------------------------
CIS Technologies, Inc. and Subsidiaries
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
----------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK
Beginning balance $ - $ - $ -
Issuance of preferred stock 23,842 - -
Ending balance 23,842 - -
COMMON STOCK
Beginning balance 283,698 282,340 278,499
Exercise of stock options 418 1,358 3,841
Issuance of common stock 24,561 - -
Common stock issued in connection with acquisition of subsidiary 7,388 - -
Ending balance 316,065 283,698 282,340
PAID-IN CAPITAL
Beginning balance 38,921,957 38,544,873 37,829,597
Exercise of stock options 72,126 377,084 715,276
Issuance of common stock 5,890,399 - -
Common stock issued in connection with acquisition of subsidiary 1,992,612 - -
Issuance of preferred stock 5,753,329 - -
Issuance of common stock warrants 67,600 - -
Ending balance 52,698,023 38,921,957 38,544,873
TREASURY STOCK
Beginning balance (1,768,544) (1,736,698) (1,679,043)
Purchase of treasury stock - (31,846) (57,655)
Ending balance (1,768,544) (1,768,544) (1,736,698)
GUARANTEED ESOP OBLIGATION
Beginning balance - - (456,146)
Payment of ESOP obligation - - 456,146
Ending balance - - -
ACCUMULATED DEFICIT
Beginning balance (13,196,915) (14,417,922) (17,513,377)
Net income 2,197,002 1,221,007 3,095,455
Ending balance (10,999,913) (13,196,915) (14,417,922)
TOTAL STOCKHOLDERS' EQUITY $ 40,269,473 $ 24,240,196 $ 22,672,593
---------------------------------------------------
</TABLE>
See notes to the consolidated financial statements.
- - --------------------------------------------------
- - -22-
<PAGE>
-------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
CIS Technologies, Inc. and Subsidiaries
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
----------------------------------------------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,197,002 $ 1,221,007 $ 3,095,455
Noncash items:
Depreciation and amortization 2,701,671 2,292,071 1,642,486
Provision for bad debts - 51,325 120,363
Cumulative effect of accounting change - (900,000) -
Writeoff of capitalized software - contract termination - 620,533 -
Deferred income taxes (50,000) 123,449 -
Other 13,783 (30,102) (43,749)
Changes in operating assets and liabilities:
Accounts receivable (1,570,242) 109,485 (3,979,944)
Related party receivables (24,091) 83,291 138,540
Prepaid expenses and other current assets 315,289 (298,351) 30,823
Other assets 685,689 (475,963) (387,205)
Accounts payable and other accrued liabilities (551,423) 344,670 (177,020)
Deferred revenue 307,567 88,114 125,758
Related party payable 16,709 - -
Cash provided by (used in) operating activities 4,041,954 3,229,529 565,507
INVESTING ACTIVITIES:
Additions to property and equipment (4,557,854) (4,000,131) (3,192,393)
Sales of property and equipment - - 502,471
Acquisition of subsidiary (1,075,000) - -
Sales of marketable securities - - 287,890
Reductions in (additions to) other assets - (57,683) (44,761)
Cash provided by (used in) investing activities (5,632,854) (4,057,814) (2,446,793)
FINANCING ACTIVITIES:
Borrowings on line of credit 32,162,478 23,185,036 470,000
Repayments of line of credit (32,118,602) (23,185,036) (470,000)
Proceeds from issuance of stock, net of costs 11,692,131 - -
Proceeds from term note 2,000,000 - -
Book overdrafts (618,023) 618,023 -
Repayment of long-term debt (329,320) (44,106) (40,924)
Payment of capital lease obligation (197,467) (232,111) (163,218)
Proceeds from exercise of employee stock options 30,541 336,442 677,116
Cash provided by (used in) financing activities 12,621,738 678,248 472,974
Net increase (decrease) in cash and cash equivalents during the period 11,030,838 (150,037) (1,408,312)
Cash and cash equivalents at the beginning of the period 385,313 535,350 1,943,662
Cash and cash equivalents at the end of the period $ 11,416,151 $ 385,313 $ 535,350
- - ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 127,198 $ 104,660 $ 92,603
Income taxes paid $ 51,772 $ 158,060 $ 759,175
Capital lease obligations for computer equipment and furniture and fixtures $ - $ 141,146 $ 172,067
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the consolidated financial statements.
-23-
<PAGE>
- - --------------------
A REVIEW BY QUARTERS
- - --------------------
(Unaudited)
<TABLE>
<CAPTION>
----------------------------------------------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
First Quarter ended March 31 $ 7,800,995 $ 7,944,256 $ 6,412,426
Second Quarter ended June 30 7,300,260 8,915,777 7,398,557
Third Quarter ended September 30 7,656,890 8,592,844 7,975,071
Fourth Quarter ended December 31 8,931,059 7,832,016 8,737,230
OPERATING INCOME
First Quarter ended March 31 $ 712,474 $(2,562,901) $ 411,475
Second Quarter ended June 30 349,998 862,901 1,113,761
Third Quarter ended September 30 643,885 767,773 746,072
Fourth Quarter ended December 31 630,414 706,507 826,900
NET INCOME
First Quarter ended March 31 $ 618,739 $(1,685,002)* $ 411,873
Second Quarter ended June 30 414,734 1,422,657** 1,065,083
Third Quarter ended September 30 503,771 758,246 798,053
Fourth Quarter ended December 31 659,958 725,106 820,446
EARNINGS PER SHARE
First Quarter ended March 31 $ 0.02 $ (0.06)*** $ 0.02
Second Quarter ended June 30 0.02 0.05 0.04
Third Quarter ended September 30 0.02 0.03 0.03
Fourth Quarter ended December 31 0.02 0.03 0.03
MARKET PRICE PER SHARE
March 31 $ 2.88 $ 4.81 $ 5.00
June 30 2.13 4.75 4.50
September 30 2.44 5.00 5.00
December 31 2.31 3.19 7.75
---------------------------------------------
</TABLE>
* Includes the effect of $1,500,000 of contract termination costs and
cumulative effect of adopting Statement No. 109 of $900,000.
** Includes the effect of $600,000 of income tax benefit.
***Earnings per share before cumulative effect of adopting Statement No.
109 was $(0.09).
- - -24-
<PAGE>
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of CIS Technologies,
Inc. and all majority-owned subsidiaries (collectively, "the Company"). All
intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments
with a maturity when acquired of three months or less.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation and
amortization. All material property and equipment additions are capitalized and
depreciated on a straight-line basis over the estimated useful life of the
assets.
Software Development Costs
Software development costs are capitalized in accordance with Financial
Accounting Standards Board Statement No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed." Costs incurred
during the initial design phase of software development are expensed. Once the
software has been clearly defined and technological feasibility has been
established, software development costs are capitalized and amortized on a
straight-line basis over an estimated useful life of five years. Software
development costs are carried at their net realizable value and, as such, an
annual review of software development costs is conducted and the costs of
obsolete software are written off.
Purchased Contracts and Goodwill
Purchased contracts are stated at the lower of cost (net of accumulated
amortization) or net realizable value and are amortized on a straight-line basis
over 15 years. Goodwill represents the excess of the cost of acquired businesses
over the fair value of the net assets and is amortized on a straight-line basis
over 20 years. Goodwill is evaluated annually for impairment based on estimated
undiscounted cash flows of the acquired entities and written down to net
realizable value if necessary. No impairment has been recorded at December 31,
1994.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Statement No.
109 requires the measurement of deferred tax assets for deductible temporary
differences and operating loss carryforwards, and of deferred tax liabilities
for taxable temporary differences. Measurement of current and deferred tax
liabilities and assets is based on provisions of enacted tax law; the effects
of future changes in tax laws or rates are not included in the measurement.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax
assets and liabilities.
Revenue Recognition
EDI Services. Initial license fees are recognized upon execution of the
contract. Installation fees are recognized upon completion of the installation.
Revenue from claims processing and software maintenance is recognized monthly
based upon the terms of the contract.
Audit Services. Charge recovery revenue is recognized monthly based upon a
contracted percentage of the total lost charges identified and billed to
insurance companies. Other types of audit services revenue are recognized in the
period the services are performed.
Other Services. Revenue is recognized monthly based upon the terms of the
contract.
Hardware and Software Sales. Revenue is recognized upon delivery.
Earnings Per Share
Earnings per share are computed using the weighted average number of common
shares outstanding during the periods presented, including, if dilutive, shares
issuable under the stock option plans, warrants and convertible preferred stock.
-25-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
Reclassifications
Certain reclassifications were made to prior year financial statements to
conform to the 1994 financial statement format.
Concentrations of Credit Risk
Trade receivables with hospitals potentially subject the Company to
concentrations of credit risk. Such credit risk, however, is considered by
management to be limited because of the Company's sizable and geographically
diverse client base. The Company performs ongoing credit evaluations of its
clients and generally does not require collateral. At December 31, 1994, the
Company had cash in one bank of approximately $1.1 million.
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
-------------------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer hardware and purchased software $ 3,000,955 $ 3,464,777
Computer hardware under capital lease 454,708 454,708
Software development costs 10,525,606 6,677,667
Furniture and fixtures 741,160 662,553
Furniture and fixtures under capital lease 423,807 423,807
Leasehold improvements 715,013 502,433
Equipment 146,731 -
Vehicles 93,367 -
$ 16,101,347 $ 12,185,945
Accumulated depreciation and amortization (6,286,585) (5,438,341)
Property and equipment, net $ 9,814,762 $ 6,747,604
------------ ------------
</TABLE>
The following table details software development cost information for the
years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
------------------------------------------------------------
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unamortized software development costs, beginning balance $ 4,896,443 $ 2,581,203 $ 693,290
Capitalized software development costs 3,759,784 3,676,971 2,127,828
Software acquired in acquisition 113,700 - -
Amortization of software development costs (1,282,096) (741,198) (239,915)
Write-off of software development costs (113,004) (620,533) -
Unamortized software development costs, ending balance $ 7,374,827 $ 4,896,443 $ 2,581,203
</TABLE>
- - -26-
<PAGE>
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
<TABLE>
<CAPTION>
3. INTANGIBLE ASSETS
---------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased Contracts $ 1,300,000 $ 1,300,000
Goodwill:
Teleclaim 1,270,089 1,270,089
HBA 7,426,297 7,426,297
AMSC 5,701,931 -
Other intangible assets 37,667 449,951
---------------------------------
$ 15,735,984 $ 10,446,337
Accumulated amortization (2,095,180) (1,893,685)
---------------------------------
Intangible assets, net $ 13,640,804 $ 8,552,652
---------------------------------
</TABLE>
Purchased contracts and Teleclaim goodwill resulted from the purchase of the
Teleclaim Processing Division ("Teleclaim") of Medaphis Corporation in 1988. The
HBA goodwill resulted from the purchase of Hospital Billing Analysis, Inc.
("HBA") in 1991. The AMSC goodwill resulted from the acquisition of AMSC, Inc.
("AMSC") in 1994 (See Note 13).
<TABLE>
<CAPTION>
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
---------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable, trade $ 1,736,782 $ 1,914,488
Book overdrafts - 618,023
Wages, bonus and commissions payable 745,420 409,787
Employee benefits payable 166,910 296,530
Accrued income taxes payable 121,350 -
Other accrued liabilities 665,400 174,485
---------------------------------
Accounts payable and accrued liabilities $ 3,435,862 $ 3,413,313
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
5. LONG-TERM DEBT
---------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Term Loan, due 1997 (a) $ 2,000,000 $ -
Convertible notes, due 2007 (b) 500,000 -
Non-convertible notes, due 2007 (b) 1,500,000 -
Other 499,679 257,670
---------------------------------
$ 4,499,679 $ 257,670
Current maturities 980,816 152,096
---------------------------------
Long-term debt $ 3,518,863 $ 105,574
---------------------------------
</TABLE>
(a) In October 1994, the Company entered into a new Credit Agreement which
provided for a $2,000,000 term loan and a $5,000,000 line of credit. This
Agreement was used to replace the existing credit agreement and indebtedness,
and provided funding for the acquisition of AMSC, Inc. This note is
collateralized by virtually all assets of the Company, and the Agreement expires
in October 1997. Under this Agreement, the Company is required to maintain
certain financial ratios. In addition, this Agreement limits reductions of the
collateralized asset base, places restrictions on investments permitted and
additional indebtedness, and
-27-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
includes a subjective acceleration clause. The term loan portion of this
agreement is payable in quarterly principal installments of $166,667, with
interest payments on the outstanding balance due monthly, and bears interest at
a floating rate equal to an index rate plus 4% (9.66% at December 31, 1994). The
revolving credit facility accrues interest, payable monthly, at a floating rate
equal to an index rate plus 3.75% (9.41% at December 31, 1994). As of December
31, 1994, borrowings under this facility were $43,877, leaving an available
balance of $4,956,123.
(b) Convertible promissory notes, provided as partial consideration in the AMSC
acquisition, are convertible to shares of the Company's common stock at market
value on the date of the conversion in minimum amounts of $50,000. These notes
bear interest at 7.5%, and are payable in monthly installments of $7,373
commencing December 1997 and maturing November 2007. Non-convertible promissory
notes were also provided as partial consideration in the AMSC acquisition, and
are not convertible to common stock. These notes bear interest at 7.5%, and are
payable in monthly installments of $22,120 commencing December 1997 and
maturing November 2007. The notes are collateralized by stock in AMSC held by
the Company.
The aggregate maturities on all long-term debt are $980,816, $717,247,
$721,740, $203,761 and $220,291, respectively, for each of the years ending
December 31, 1995, through 1999.
6. COMMITMENTS AND CONTINGENCIES
The Company leases computer hardware, office space and furniture under various
capital and operating lease agreements.
The following table summarizes the future minimum lease payments for the next
five years:
<TABLE>
<CAPTION>
---------------------------------------
Operating leases Capital leases
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 1,731,505 $ 206,149
1996 1,046,971 -
1997 707,051 -
1998 656,863 -
1999 432,650 -
-------------------------------------
Minimum payments for the next five years $ 4,575,040 $ 206,149
Interest on capital leases 25,941
-------------------------------------
Capital lease obligation, current $ 180,208
-------------------------------------
</TABLE>
For the years ended December 31, 1994, 1993, and 1992, rental expense on
operating leases was $2,319,523, $1,142,028, and $882,298 respectively.
The Company is a party to various legal proceedings arising in the ordinary
course of business none of which, in the Company's opinion, should result in
a judgement which would have a material adverse effect on the Company.
7. PREFERRED STOCK AND WARRANTS
The Company issued 2,384,182 shares of convertible preferred stock. The stock is
non-voting, has no dividend, includes a liquidation preference of $.01 per share
and is convertible into common stock on a share for share basis (subject to
certain adjustments) on or after the occurrence of one of several triggering
events. At December 31, 1994, the Company had warrants outstanding to acquire
500,000 shares of non-voting convertible preferred stock exercisable at $3.25
per share over three years. The Company also has outstanding warrants to acquire
200,000 shares of common stock at $3.0625 per share through February 1999,
40,000 of which are currently exercisable.
- - -28-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
8. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" as of January 1, 1993. The cumulative effect of
this change in accounting for income taxes as of January 1,1993 increased net
income by $900,000 ($.03 per share) and is reported separately in the
consolidated statements of operations. Prior years' financial statements were
not restated.
The components of income tax benefit (expense) are as follows:
<TABLE>
<CAPTION>
---------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ 108,656 $ 723,449 $ (289,658)
Deferred - - 289,658
State:
Current (172,620) (43,609) (81,919)
Deferred 50,000 (123,449) -
---------------------------------------------
Total $ (13,964) $ 556,391 $ (81,919)
---------------------------------------------
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
federal statutory tax rates to pre-tax income as follows:
<TABLE>
<CAPTION>
---------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory regular taxes $ (751,725) $ 80,030 $(1,080,307)
Amortization of goodwill (171,136) (156,876) (169,480)
Utilization of tax basis net operating loss carryforward - - 1,249,787
Recognition of tax assets 1,031,405 795,949 -
State income taxes (80,929) (167,058) (81,919)
Other (41,579) 4,346 -
---------------------------------------------
Income tax benefit (expense) $ (13,964) $ 556,391 $ (81,919)
---------------------------------------------
</TABLE>
The components of the net deferred tax asset at December 31, 1994 and 1993
include:
<TABLE>
<CAPTION>
-----------------------------
1994 1993
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 4,636,032 $ 4,804,767
Allowance for doubtful accounts 121,117 121,190
Accrued expenses - 60,800
Alternative minimum tax credit carryforward 21,365 -
-----------------------------
4,778,514 4,986,757
-----------------------------
Deferred tax liabilities:
Depreciation and amortization (2,801,548) (2,013,662)
-----------------------------
1,976,966 2,973,095
Valuation allowance (1,234,929) (2,281,058)
-----------------------------
Net deferred tax asset $ 742,037 $ 692,037
-----------------------------
</TABLE>
-29-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
The net deferred tax asset is reflected in the consolidated balance sheets as a
deferred tax asset of $900,000 for those tax jurisdictions where the Company has
operating loss carryforwards and a deferred tax liability of $157,963 and
$207,963 as of December 31, 1994 and 1993, respectively, for those states in
which the Company does not have operating loss carryforwards.
At December 31, 1994, the Company has unused net operating loss carryforwards of
$12.2 million for tax purposes and $12.1 million for alternative minimum-tax
purposes, expiring from 1999 to 2004.
9. RELATED PARTY TRANSACTIONS
Receivables from officers and management at December 31, 1994 and 1993, were
$297,540 and $153,393, respectively, and consisted of principal and accrued
interest at 6.66% and 7% on unsecured notes. The notes are to be repaid in
annual installments through April 1997.
On February 2, 1994, the Company acquired certain assets from HRS, a company
majority-owned by a Board member, in exchange for its 15% interest in HRS and
warrants for 200,000 shares of the Company's common stock.
10. EMPLOYEE BENEFIT AND STOCK OPTION PLANS
Employee Stock Purchase Plan
All full-time employees may purchase common stock of the Company at market price
through the Employee Stock Purchase Plan. The Company matches purchases in an
amount equal to 25% of the purchase price.
CIS Thrift and Profit Sharing 401(k) Plan
All full-time employees with at least 90 days of service are eligible to
participate in the CIS 401(k) Plan, to which employees may contribute up to 25%
of their gross salary. The Company matches 25% of the contribution up to 6% of
the employee's base salary. The cost of this benefit plan to the Company for the
years ended December 31, 1994, 1993 and 1992 was $115,912, $108,548 and $97,025,
respectively.
Stock Option Plan
Key employees, as determined by the Board of Directors, may participate in the
Stock Option Plan (formerly the Incentive Stock Option Plan), for which the
Company has reserved 3,000,000 shares for the grant of options. The exercise
price for tax qualified "incentive stock options" may be no less than the market
value of CIS common stock on the date of grant. Exercise prices and expiration
dates are subject to determination by the Board for non-qualified options,
however, no option may be exercised prior to the expiration of one year from the
date of grant. Options expire no later than 10 years from the date of grant.
During 1994, the Company granted options for 45,000 common shares at an exercise
price of $3.25 per share to non-employee members of the Board of Directors.
During 1993, the Company granted options for 95,000 common shares at exercise
prices ranging from $6.00 to $7.00 per share to non-employee members of the
Board of Directors. All of the options are exercisable one year from the date of
grant. As of December 31, 1994, 65,000 options granted to Board members had been
exercised.
Employee Stock Option Plan
All full-time employees are eligible to receive options granted pursuant to the
Employee Stock Option Plan, for which the Company has reserved 2,000,000 shares.
Options are granted as determined by the Board of Directors. The option price is
equal to the market value of CIS common stock on the date of grant. Options
expire no later than 10 years from the date of grant.
- - -30-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
The following table details stock option activity for the years ended December
31, 1994, 1993, and 1992:
<TABLE>
<CAPTION>
STOCK OPTION PLAN 1994 Price range 1993 Price range 1992 Price range
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 1,366,500 $1.06-$7.00 827,000 $1.06-$5.63 1,097,000 $1.06-$4.88
Options granted 185,000 2.25-3.25 686,000 3.75-7.00 75,000 4.50-5.00
Options exercised (18,000) 1.09 (100,000) 2.25-4.88 (345,000) 1.09-3.88
Options expired or forfeited (130,500) 5.00-6.00 (46,500) 4.50-6.00 - -
Ending balance 1,403,000 1.06-7.00 1,366,500 1.06-7.00 827,000 1.06-5.63
Exercisable 913,322 1.06-7.00 549,000 1.06-6.00 514,000 1.06-5.63
---------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION PLAN
Beginning balance 632,949 $1.38-$6.81 435,447 $1.38-$6.81 259,404 $1.38-$6.81
Options granted 440,119 2.50-2.63 338,375 4.88 265,238 4.63
Options exercised (7,943) 1.38 (27,142) 1.38-6.81 (30,967) 1.38-5.00
Options expired or forfeited (140,498) 1.38-6.81 (113,731) 1.38-6.81 (58,228) 4.63-6.81
Ending balance 924,627 1.38-6.81 632,949 1.38-6.81 435,447 1.38-6.81
Exercisable 484,594 1.38-6.81 321,487 1.38-6.81 190,522 1.38-6.81
</TABLE>
The outstanding options expire from November 1998 to August 2004.
11. REVENUE FROM SIGNIFICANT CUSTOMERS
For the year ended December 31, 1993, 11% or $3.8 million of total revenue was
derived from one customer, relating to an outsourcing contract that was
terminated in October 1993.
12. EARNINGS PER SHARE
The following table reconciles the number of common shares outstanding as shown
on the Consolidated Balance Sheets with the weighted average common shares
outstanding as shown on the Consolidated Statements of Operations for the years
ended December 31, 1994, 1993, and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Common shares outstanding 30,093,706 26,857,049 26,722,502
Effect of using weighted average common and common
equivalent shares outstanding (2,514,586) (44,536) (235,601)
Effect of shares issuable under stock option plans
based on the treasury stock method 37,971 241,185 377,943
Weighted average common and common equivalent shares outstanding 27,617,091 27,053,698 26,864,844
</TABLE>
Earnings per share was computed by dividing net income by weighted average
common shares outstanding for each year.
-31-
<PAGE>
- - ------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - ------------------------------------------
13. ACQUISITION OF AMSC, INC.
Effective November 3, 1994, the Company acquired 100% of the common stock of
AMSC, Inc. ("AMSC"), of Orlando, Florida, for $5,000,000 (plus acquisition
costs) consisting of:
<TABLE>
<CAPTION>
Cash $ 1,000,000
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CIS common stock (738,758 shares) 2,000,000
Convertible note (see Note 5) 500,000
Non-convertible note (see Note 5) 1,500,000
------------
$ 5,000,000
------------
</TABLE>
The acquisition was accounted for as a purchase. Under the purchase method, the
net assets of AMSC were recorded at their estimated fair values and the excess
of cost over net assets acquired was recorded as goodwill. The operating results
of AMSC are included in the Company's consolidated results of operations from
November 3, 1994.
The following unaudited pro forma information shows the consolidated operating
results of the Company as though the purchase of AMSC had been made at the
beginning each year:
<TABLE>
<CAPTION>
1994 1993
--------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 34,986,928 $ 37,742,216
--------------------------
Net Income (loss) $ 1,446,589 $ (504,233)
--------------------------
Earnings (loss) per share $ 0.06 $ (0.02)
--------------------------
</TABLE>
The pro forma results of operations are not necessarily indicative of the actual
results of operations that would have occurred had the purchase actually been
made at the beginning of the respective periods, nor of the results which may
occur in the future.
- - -32-
<PAGE>
- - --------------
CORPORATE DATA
- - --------------
Independent Public Accountants
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
Transfer Agent and Registrar
Chemical Shareholder Services Group, Inc.
450 West 33rd Street, 8th Floor
New York, NY 10001
(800) 635-9270
Legal Counsel
Pray, Walker, Jackman
Williamson & Marlar
Tulsa, Oklahoma
Trademarks
CIS(R) is a registered trademark of CIS, Inc. PREMIS(R) is a registered
trademark of CIS, Inc. POSTPRO(TM) is a trademark of CIS, Inc. Microsoft(R)
is a registered trademark of Microsoft Corporation. Windows(TM) is a
trademark of Microsoft Corporation.
Common Stock
CIS Technologies, Inc. common stock is traded on The Nasdaq Stock Market
(National Market) under the symbol CISI. The following tables show the
quarterly range of high and low closing sales prices of the common stock
during the fiscal period indicated. No cash dividends have been declared or
paid on the Company's common stock in the past three years. The terms of the
Company's debt contain substantial restrictions on the Company's ability to
pay dividends. As of March 3, 1995, CIS Technologies has 2,068 shareholders
of record.
<TABLE>
<CAPTION>
Fiscal Year 1993 Fiscal Year 1994
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 7.38 4.38 4.00 2.50
Second Quarter 5.88 4.38 3.44 2.13
Third Quarter 5.50 4.50 2.56 1.94
Fourth Quarter 5.25 3.06 3.00 2.25
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1995
High Low
<S> <C> <C>
Through March 3, 1995 2.44 2.00
</TABLE>
Form 10-K
The Company's Annual Report on Form 10-K will be sent free of charge upon
written request to Investor Relations.
Corporate Headquarters
CIS Technologies, Inc.
6100 South Yale, Suite 1900
Tulsa, OK 74136-1903
Notice of Annual Meeting
The annual meeting of stockholders will be held on April 27, 1995, at 2:00 p.m.
C.S.T. at the Doubletree Hotel at Warren Place, 6100 S. Yale, Tulsa, Oklahoma.
- - -34-
<PAGE>
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT 21
LIST OF SUBSIDIARIES
CIS, Inc., an Oklahoma corporation
Hospital Billing Analysis, Inc., a California corporation
CIS Fundings Corporation, a Delaware corporation
CIS Healthcare Research Systems, Inc., a Delaware corporation
CIS Administrative Services, Inc., a Delaware corporation
AMSC, Inc., a Florida corporation
229
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 11,416,151
<SECURITIES> 0
<RECEIVABLES> 12,076,161
<ALLOWANCES> 320,668
<INVENTORY> 139,120
<CURRENT-ASSETS> 24,582,630
<PP&E> 16,101,347
<DEPRECIATION> 6,286,585
<TOTAL-ASSETS> 49,501,882
<CURRENT-LIABILITIES> 5,555,583
<BONDS> 3,518,863
<COMMON> 316,065
0
23,842
<OTHER-SE> 39,929,566
<TOTAL-LIABILITY-AND-EQUITY> 49,501,882
<SALES> 1,485,936
<TOTAL-REVENUES> 31,689,204
<CGS> 708,917
<TOTAL-COSTS> 29,352,433
<OTHER-EXPENSES> 125,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,500
<INCOME-PRETAX> 2,210,966
<INCOME-TAX> 13,964
<INCOME-CONTINUING> 2,197,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,197,002
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
