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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, 1995
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
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.
As of March 15, 1996, there were 30,188,589 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 15, 1996 as reported on the NASDAQ National Market
System, was approximately $66,037,538.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report to Shareholders for the year ended
December 31, 1995, are incorporated by reference into Parts II and IV of this
Form 10-K.
Portions of the Company's Proxy Statement for the Annual Meeting of
Shareholders, to be held on May 9,1996, are incorporated by reference into
Part III of this Form 10-K.
Total Pages: 252
Exhibit Index Page: 13
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TABLE OF CONTENTS
Pages
Part I:
Item 1: Business . . . . . . . . . . . . . . . . . . . . . 3
Item 2: Properties . . . . . . . . . . . . . . . . . . . . 10
Item 3: Legal Proceedings . . . . . . . . . . . . . . . . . 10
Item 4: Submission of Matters to a Vote of Security Holders 10
Part II:
Item 5: Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . 11
Item 6: Selected Financial Data . . . . . . . . . . . . . . 11
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 11
Item 8: Financial Statements and Supplementary Data . . . . 11
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . 11
Part III:
Item 10: Directors and Executive Officers of the Registrant . . . 12
Item 11: Executive Compensation . . . . . . . . . . . . . . . . . 12
Item 12: Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . 12
Item 13: Certain Relationships and Related Transactions . . . . . 12
Part IV:
Item 14: Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . 17
Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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PART I
ITEM 1. BUSINESS
General
CIS Technologies, Inc. (the "Company" or "CIS"), a Delaware corporation, is a
full-service healthcare reimbursement and business office management company.
CIS offers outsourcing of business operations and consulting, managed care,
physician integration, and electronic data interchange (EDI). CIS products
and services are delivering value to healthcare organizations in the United
States and around the world, with more than 220 third-party payers in the
United States and 1,075 clients in 38 states, Canada, Great Britain, Australia
and New Zealand.
Recent Developments
Acquisition of Hospital Cost Consultants, Inc. ("HCC"). In June, 1995 the
Company completed the acquisition of 100% of the outstanding capital stock of
HCC for total consideration of $15.4 million plus acquisition costs;
consisting of a combination of cash, stock options and a $5 million note.
HCC is the leading provider of managed care contract management software,
offering comprehensive information systems and support for contract, cost and
data management. HCC helps hospital business offices with decision support
needs such as cost accounting, managed care, productivity, capitation, and
product line management to achieve financial wellness.
Through the acquisition of HCC, the Company has gained access to the managed
care marketplace, a segment of the healthcare industry it had previously
untapped. Overall sales opportunities for the Company now include:
electronic data interchange services; professional services; decision support
services; financial services; physician office management software; and
managed care software; including a cost system, a managed care contract
administration system, and a data management package. All of these healthcare
industry products and services will allow the Company to take full advantage
of cross-selling opportunities among existing and newly acquired clients.
Corporate Reorganization
In late 1995, CIS reorganized its corporate structure to consolidate its five
existing business units into two divisions--the Technology and Applications
Division and the Financial Services Division. This reorganization was
intended to align like product and service offerings under two Senior Vice
Presidents with responsibility for the operations and performance of the
division. The reorganization aligned all technology, software, and
applications disciplines in one division and all service sectors in another.
This new strategic direction will allow for the development of new products
and the integration of existing products.
Technology and Applications Division - Products and Services
The Technology and Application Division includes all former technology,
software and applications development divisions of CIS, AMSC, and HCC.
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 products and services which will
assist hospitals in reducing administrative costs and improving cash flows. A
brief description of each of the Division's products and services follows:
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Electronic Data Interchange ("EDI") Services. EDI is the automated transfer
of 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 40% of total revenue in 1995 was derived
from electronic data interchange, of which 83% 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.
In November 1995, the Electronic Healthcare Network Accreditation Commission
(EHNAC) granted full, unconditional accreditation to CIS for meeting the
EHNAC's standards. CIS is the first institutional electronic insurance claims
processing provider that has secured this accreditation.
PREMIS 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 more than 7,000 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 1995, the Company
processed over 27.5 million claims worth $52.8 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 2.1 in August, 1995. PREMIS 2.1 includes additional
functionality that enhances the value that clients receive from use of the
software. PREMIS replaced the previous electronic claims management system as
the Company's core product and current users of the previous electronic claims
management system are being converted to PREMIS over the next few years.
POSTPRO 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.
Eligibility Services. The Company has been offering eligibility services to
clients since 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
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re-submissions of claims due to missing or inaccurate data, but also helps
determine, before patients are discharged from the hospital, secondary
coverage and what out-of-pocket expenses are owed by the patient (such as a
deductible or co-pay balance).
Clearinghouse Services. The CIS clearinghouse is an accredited "open"
clearinghouse for claims and remittance processing that ensures secure, timely
handling and reporting of data. The Company's clearinghouse provides more
than 7,000 edits, resulting in a greater than 99% payer acceptance rate.
AMSC Integrated Physician Services. The Company is expanding its services to
the physician and emerging integrated delivery systems markets utilizing its
1994 acquisition of AMSC. 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. The
Company's EDI capabilities complement those of AMSC through the integration of
financial products and services that expedite cash flow, reduce paperwork and
increase overall business productivity. The Company has added additional
turnkey products and services to AMSC which include: master patient index,
managed care contract management, EDI eligibility verification, hospital
system interfaces, laboratory interfaces, automated charge and payment
scanning and electronic claims and remittance posting. During 1995,
approximately 13% of the Company's revenue was derived from Integrated
Physician Services.
Managed Care Services. Through its recent acquisition of HCC, the Company is
expanding its services to the managed care arena. CIS' Managed Care Services
assists hospital business offices with decision support needs such as cost
accounting, managed care, productivity, capitation and product line
management. Managed Care Services' software products include: Distinction
(for contract management), Dividend (for cost management) and Domain (for data
management). Distinction maximizes revenue by automating the complicated
terms and reimbursement formulas associated with managed care contracts.
Dividend applications determine procedure costs, manage product lines and
manage resources and costs associated with delivering patient care to reduce
operating cost through timely monitoring and enhanced accountability. Domain
provides the access tools for analyzing patient, clinical and financial data
contained within the enterprise-wide data archive system. The Domain product
enhances healthcare providers' operational and strategic decision-making by
allowing them access to a resourceful database established from the
information contained within Distinction and Dividend. Approximately 14% of
total revenue during 1995 was derived from Managed Care Services.
Financial Services Division- Products and Services
The Financial Services Division now includes the Company's former
Reimbursement Services Division, Professional Services Division and decision
support services offering. A brief description of each of the division's
services follows:
Audit Services (formerly Reimbursement Services). One of the roadblocks to
efficiency and cash flow in 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 Audit Services (formerly Hospital Billing Analysis,
Inc.) 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. Approximately 23% of total revenue during 1995 was
derived from Audit Services.
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Audit 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.
In addition, the acquisition of HCC allowed for the development of a Managed
Care Retrospective Audit service offering. This service provides hospitals
with a process for reviewing and rebilling for undercharges identified from
their managed care contracts.
Revenue from Audit Services is considered to be recurring because client
retention is high and services are typically provided over a long period of
time.
Professional Services. Hospitals often have a shortage of trained billing
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 10% of total revenue during 1995 was derived from
Professional Services.
Decision Support Services. The Company's electronic claims management system
processes approximately $4.4 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 a strategic alliance with
Bankers Trust, 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. In addition, the Company has a
strategic alliance with GE Capital, Precision Funding , to provide accounts
receivable funding to the healthcare industry.
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Marketing and Customers
The Company markets its healthcare reimbursement and business office
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 products and services are utilized by over 1,075 clients in 38
states, Canada, Great Britain, Australia, and New Zealand. The Company's
services are marketed by direct sales and account service personnel on a
decentralized basis. Regional offices are maintained in Atlanta, Georgia;
Orlando, Florida; and Pleasanton, California.
During 1996, 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 1995 and 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
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 require only
periodic updates.
Software Development for New States. Currently, the Company offers its
electronic claims management services in 38 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).
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.
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Seasonal Effects
There are no material seasonal effects on the business of the Company.
Competitive Conditions
Healthcare reimbursement management has emerged within the last 11 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). Over the
past year, considerable industry consolidation has started to take place, with
many of these smaller, privately-owned firms being acquired by larger and
larger companies. Such industry consolidation is expected to continue to
accelerate and is typical of an emerging industry such as healthcare
reimbursement management.
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, and despite the industry
consolidation that is taking place, the Company continues to be 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 Audit 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 a
similar variety of reimbursement management programs, competition by local and
regional firms is often intense.
The Company's AMSC Integrated Physician Services is the leading provider of
The Medical Manager, the most widely used practice management software in the
physician sector. The Company is aware of two or three physician management
software companies with which it competes on a national level, as well as
various local dealers of The Medical Manager. The Company has developed
numerous turnkey products and services which enhance its ability to attract
new business. However, competition within the industry is intense, price
competition is significant, and barriers to entry are low.
The Company is aware of fewer than ten national or regional firms which offer
Managed Care Services. There has been a great deal of consolidation within
the industry over the last few years, as smaller firms have been
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acquired by large, national firms, including hospital information systems
software companies. Due to the size of these contracts, the selling process
is labor intensive, and can be as long as one year. The barriers to entry in
the market are high due to significant software development costs; however,
due to the increased importance of managed care contracts, the attractiveness
of the market could lead to increased competition.
Additionally, the current administration in Washington, D.C., as well as
various governmental agencies, continue to discuss both general healthcare
insurance reform, which may include mandatory electronic processing of all
healthcare transactions, and major changes in both Medicare and Medicaid. The
Federal government has announced a plan to completely re-organize the
administration of its Medicare program by the year 1999. 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.
Factors Influencing Projections of Future Activity
In the normal course of business, the Company, in an effort to help keep its
shareholders and the public informed about the Company's operations, may, from
time to time, issue certain statements, either in writing or orally, that
contain forward-looking information. Generally, these statements relate to
projections involving anticipated revenue, operating results of acquired
subsidiaries and contract values.
As with any forward-looking statement, these statements are subject to a
number of factors that may tend to influence the accuracy of the statements
and the projections upon which the statements are based. As noted elsewhere
in this report, all phases of the Company's operations are subject to a number
of influences outside the control of the Company, any one of which, or a
combination of which, could materially effect the results of the Company's
operations.
In order to provide a more thorough understanding of the possible effects of
some of these influences on any projections made by the Company, the following
discussion sets forth certain factors that in the future could cause the
Company's consolidated results for 1996 and beyond to differ materially from
projections outlined in any such forward-looking statement made by or on
behalf of the Company.
The competitive environment in which the Company operates, as noted above, is
dynamic and ever-changing. The continued consolidation within the industry is
expected to accelerate, and although typical, could result in increased
competition and negatively impact both revenue and operating results.
The consolidation and elimination of healthcare providers, such as hospitals
and physician practices, is also expected to continue. Although this
consolidation and the creation of integrated delivery services does increase
the opportunities for the Company to sell its full suite of products and
services, the loss of clients through this process and their impact on revenue
and operating results is not easily determined.
The companies acquired by CIS in the last two years are expected to have a
significant impact on revenue and operating results in the future, from the
current client base through cross-selling, as well as to new clients. These
anticipated results could be negatively impacted by a number of factors
including integration issues, infrastructure improvements and changes, and
changes within the competitive environment in which they operate.
Employees
As of March 15, 1996, the Company had 454 full-time, 23 part-time and 12
temporary employees.
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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 Financial 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; Orlando, Florida; Pleasanton, California and Topeka,
Kansas.
The Company considers that its properties are generally suitable and adequate
for its current needs.
ITEM 3. LEGAL PROCEEDINGS
As of March 15, 1996, 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 the inside back cover of the Company's
1995 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference herein from page 1 of the Company's 1995 Annual
Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference herein from pages 17 through 20 of the Company's
1995 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference herein from pages 21 through 36 of the Company's
1995 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, 9, 10, and 19 of the Company's
Proxy Statement dated April 2, 1996.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference herein from pages 11 through 16 of the Company's
Proxy Statement dated April 2, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference herein from page 2 of the Company's Proxy Statement
dated April 2, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference herein from page 18 of the Company's Proxy Statement
dated April 2, 1996.
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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 1995
Annual Report to Shareholders are incorporated in other parts of this Report
by reference:
Annual Report
Page Number
Consolidated Balance Sheets at December 31, 1995 and 1994 . . . 22
Consolidated Statements of Operations for the Years Ended December 31,
1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . 24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . . . 27-36
Report of Independent Accountants . . . . . . . . . . . . . . . 21
Page(s) in
Form 10-K
2. Financial Statement Schedules
Report of Independent Accountants . . . . . . . . . . . . . . . . 17
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . 18
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
Page(s) of this Form or
Exhibit Exhibit Description Report previously filed*
Number
(3) Articles of Incorporation and By-
laws: Page 19
a. Certificate of Amendment to
the Certificate of Incorporation Form 10-K filed March 31,
of Registrant 1990
Form 10-K filed March 31,
b. Certificate of Incorporation 1990
of Registrant
c. Bylaws of Registrant
(4) Instruments defining the rights of Form S-3 Registration
security holders, including Statement effective February
indentures 5, 1991
a. Form of Certificate of Form 10-K filed April 14,
Designation and Terms of the 1995
Series A Participating Convertible
Preferred Stock of C.I.S.
Technologies, Inc.
13 <PAGE>
<PAGE>
Page(s) of this Form or
Exhibit Exhibit Description Report previously filed*
Number
(9) Voting trust agreement N/A
(10) Material contracts:
a. Office Building Lease Page 20
between Perimeter 400 Partners and
CIS Technologies, Inc. for
property located at 1100 Johnson
Ferry Road, Atlanta, Georgia.
Page 36
b. First Amendment to Lease by
and between Perimeter 400 Partners
and CIS Technologies, Inc. for
property located at 1100 Johnson
Ferry Road, Atlanta, Georgia. Page 40
c. Promissory Note Extension,
Waiver of Covenants and
Termination of Pledge Agreement by
and between First Financial
Management Corporation; Microbilt
Corporation; Hospital Cost
Consultants, Inc.; and C.I.S. Page 44
Technologies, Inc., dated December
27, 1995.
d. Amended and Restated Credit
Agreement by and among CIS, Inc.,
CIS Technologies, Inc. and General
Electric Capital Corporation dated
February 1, 1996, and related
annexes and exhibits.
(11) Statement re: computation of per 1995 Annual Report to
share earnings Shareholders, page 35
(12) Statement re: computation of N/A
ratios
(13) Annual report to security holders, Page 211
Form 10-Q or quarterly report to
security holders:
The Registrant's 1995 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), 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.
(16) Letter re: change in certifying N/A
accountant
(18) Letter re: change in accounting N/A
principles
14 <PAGE>
<PAGE>
Page(s) of this Form or
Exhibit Exhibit Description Report previously filed*
Number
(21) Subsidiaries of the Registrant Page 251
(22) Published report regarding matters N/A
submitted to vote of security
holders
(24) Power of Attorney N/A
(27) Financial Data Schedule Page 252
(28) Information from reports furnished N/A
to state insurance regulatory
authorities
* Incorporated herein by reference
(b) Reports on Form 8-K
The Company filed a Form 8-K dated May 19, 1995 concerning a definitive
purchase agreement with First Financial Management Corporation to acquire 100%
of the outstanding capital stock of Hospital Cost Consultants, Inc. It also
filed a Form 8-K dated June 15, 1995 reporting the completion of the
acquisition of Hospital Cost Consultants, Inc. and the amendment to the
Company's revolving credit facility agreement with General Electric Capital
Corporation. Additionally, on August 14, 1995 the Company filed a Form 8-K/A
reporting audited financial statements and pro forma financial information for
Hospital Cost Consultants and the Company, respectively.
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: 4/14/96 By /s/ Philip D. Kurtz
PHILIP D. KURTZ,
Chief Executive Officer
(Principal Executive Officer)
Date: 4/14/96 By /s/ Richard A. Evans
RICHARD A. EVANS,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: 4/14/96 By /s/ Rebecca L. Speight
REBECCA L. SPEIGHT,
Director, Finance and Accounting
(Principal Accounting Officer)
15<PAGE>
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: 3/23/96 By /s/ James L. Hersma
JAMES L. HERSMA, Director
Date: 3/23/96 By /s/ Samuel L. Jacob
SAMUEL L. JACOB, Director
Date: 3/23/96 By /s/ Philip D. Kurtz
PHILIP D. KURTZ, Director
Date: 3/22/96 By /s/ John D. Platt
JOHN D. PLATT, Director
Date: 3/23/96 By /s/ Dennis D. Pointer
DENNIS D. POINTER, Director
Date: 3/23/96 By /s/ Robert J. Simmons
ROBERT J. SIMMONS, Director
Date: 3/23/96 By /s/ N. Thomas Suitt
N. THOMAS SUITT, Director
16 <PAGE>
<PAGE>
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 21 of the 1995 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 13 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.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
February 6, 1996
17 <PAGE>
<PAGE>
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Balance at Additions: Charged to Deductions: Balance
beginning Charged to Other Write-offs at end
of period expense accounts of accounts of period
Allowance for doubtful
accounts
<S> <C> <C> <C> <C> <C>
1995 $ 320,668 $ 89,928 $ 182,788(1) $ 119,796 $ 473,588
1994 $ 318,920 $ 2,957 $ 232(2) $ 1,441 $ 320,668
1993 $ 361,433 $ 51,325 $ -- $ 93,838 $ 318,920
</TABLE>
<TABLE>
<CAPTION>
Balance at Balance at
beginning end
of period Additions Deductions of period
Valuation allowance -
Deferred Tax Asset
<S> <C> <C> <C> <C>
1995 $ 1,234,929 $ -- $ 1,234,929 $ --
1994 $ 2,281,058 $ -- $ 1,046,129 $ 1,234,929
1993 $ -- $3,311,514* $ 1,030,456 $ 2,281,058
</TABLE>
* Represents initial valuation allowance recorded at date of adoption of
Statement of Financial Accounting Standards No. 109.
1) Beginning allowance for doubtful account balance for HCC subsidiary
acquired June, 1995.
2) Subsequent collections of amounts previously written-off.
18<PAGE>
<PAGE>
Exhibit 3a
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
C.I.S. TECHNOLOGIES, INC.
Pursuant to the provisions of the General Corporation Law of the State
of Delaware, C.I.S. Technologies, Inc. (the "Company"), a Delaware
corporation, does hereby certify:
FIRST: That the Board of Directors of the Company, at a meeting
duly held December 18, 1991, adopted a resolution proposing and recommending
that Section 7 of the Company's Certificate of Incorporation be amended to
read in its entirety as follows:
7. The business and affairs of the Corporation shall be
managed by the Board of Directors. Directors of the Corporation
need not be Shareholders of the Corporation and need not be
elected by ballot unless required by the Corporation's Bylaws.
The Board of Directors may exercise all such powers and do
all such acts and things as the Corporation may exercise and do
and which are not by this Certificate or otherwise lawfully
directed or required to be exercised or taken by the Corporation
pursuant to a vote of its Shareholders, but subject nevertheless
to the provisions of this Certificate and all laws affecting the
Corporation.
SECOND: The aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 228 and 242 of the General Corporation
Law of the state of Delaware, as amended, by the approval of a majority of the
issued and outstanding stock of the company entitled to vote thereon at a
meeting of the Company's stockholders duly held on April 16, 1992.
THIRD: There are no other changes to the Company's Certificate of
Incorporation, as previously amended and on file with the Secretary of state
of the State of Delaware.
IN WITNESS WHEREOF, said C.I.S. Technologies, Inc. has caused this
Certificate of Amendment to be signed by Philip D. Kurtz, its President and
attested by Kellie Watts, its Secretary.
DATED this 25th day of August, 1993.
C.I.S. TECHNOLOGIES, INC.
By: /s/ Philip D. Kurtz
Philip D. Kurtz, President
ATTEST:
/s/ Kellie J. Watts
Kellie Watts, Secretary<PAGE>
<PAGE>
Exhibit 10a
OFFICE BUILDING LEASE
Between
Perimeter 400 Partners
(Landlord)
and
CIS Technologies, Inc. A Delaware Corporation
(Tenant)
"Perimeter 400 Center"
OFFICE BUILDING
Atlanta Georgia
(City)
(State)
<PAGE>
<PAGE>
OFFICE BUILDING LEASE AGREEMENT
STATE OF GEORGIA
COUNTY OF FULTON
THIS LEASE AGREEMENT is made and entered into this 8th day of August, 1995, by
and between the Landlord and Tenant hereinafter named.
Definitions and Basic Provisions
The following definitions and basic provisions hall be construed in
conjunction with and limited by the references thereto in other provisions of
this lease:
(a) "Landlord": Perimeter 400 Partners
(b) "Tenant": CIS Technologies, Inc., a Delaware Company
(c) "Demised Premises": approximately 9,793 square feet on Floor 8th, suite
no. 800 in the building(s) located at 1100 Johnson Ferry Road, N.E. Atlanta,
GA 30342 Center II ("Building") such premises being shown and outlined on the
plan attached hereto as Exhibit A.
(d) "Lease Term": a period of 72 months commencing on November 1, 1995 and
ending on October 31, 2001.
(e) "Basic Rental": a total sum of $1,094,367.60 payable by Tenant, subject
to adjustment as provided herein, on the first day of each calendar month of
the Lease year, in advance, at the office of the Landlord in monthly
installments as follows:
From the Commencement Date through the last day of the 12 month of the
Lease Term, equal monthly payments of $14,689.50;
From the first day of the 13 month through the last day of the 24 month
of the Lease Term, equal monthly payments of $14,893.52.
From the first day of the 25 month through the last day of the 36 month
of the Lease Term, equal monthly payments of $15,097.54; See 1A.
All rental payments shall be paid to the order of Perimeter 400 Partners
without notice, offset, reduction or abatement, subject to adjustment as set
forth in this Lease, except as expressly provided otherwise herein.
If the term shall commence upon a day other than the first day of a
calendar month, then Tenant shall pay, on or before the commencement date of
the term the monthly installment of Basic Rental prorated on a per diem basis
with respect to that fractional calendar month. All rental payments
thereafter will be for a full calendar month and will be in the amount as
specified in clause (e) above.
(f) "Prepaid Rental": $14,689.50 representing payment of rental for the
first full month and partial month, if any, of the Lease Term.
(g) "Security Deposit": $31,419.20
(h) "Permitted Use": General office use for sales, service, administrative,
and billing services related to the Health Care Industry.
(i) "Prorata Share": initially 2.7371%
(j) "Rider(s)" consisting of 3 page(s) with sections numbered consecutively
55 through 58 attached hereto and made a part hereof.
(k) "Guarantor(s)": None
Granting Clause
In consideration of the obligation of Tenant to pay Basic Rental, Operating
Expenses, and Taxes as herein provided and in consideration of the other
terms, covenants and conditions hereof, Landlord hereby demises and leases to
Tenant, and Tenant hereby takes from Landlord, the Demised Premises to have
and to hold the same for the Lease Term specified herein, all upon the terms
and conditions set forth in this Lease.
Services By Landlord
Landlord agrees to furnish Tenant while occupying the Demised Premises the
following services:<PAGE>
(a) Hot and cold water at those points of supply provided for general use of
all Building tenants.
(b) Air conditioning, heat and electric current (for lighting and fractional
horsepower machines only) during reasonable hours of generally recognized
business days, as determined by Landlord in such quantity and of such quality
as Landlord determines in its sole judgement is reasonably necessary for
Tenant's comfortable use and enjoyment of the Demised Premises.
(c) Elevator service, if any, in common with other tenants for ingress to
and egress from the Demised Premises.
(d) Janitorial cleaning services as may in the judgment of Landlord be
reasonably required.
(e) Electrical lighting for public areas and special service areas of the
Building in the manner and to the extent deemed by Landlord to be standard.
<PAGE>
1. From the first day of the 37 month through the last day of the 48 month
of the Lease Term, equal monthly payments of $15,301.56.
From the first day of the 49 month through the last day of the 60 month
of the Lease Term, equal monthly payments of $15,505.58.
From the first day of the 61 month through the last day of the 72 month
of the Lease Term, equal monthly payments of $15,709.60.
1A.1 <PAGE>
<PAGE>
Landlord shall have no obligation to furnish services to Tenant other than
those specified above. Should Landlord provide additional services to Tenant,
Tenant shall pay separately for such additional services (including, but not
limited to, heating and air conditioning services provided during hours other
than as set forth in the applicable provisions of this paragraph) at rates to
be established from time to time by Landlord. Charges for any service for
which Tenant is required to pay shall be due and payable within ten (10) days
after they are billed. If Tenant fails to make payment for any such services,
Landlord, in addition to all other rights and remedies available to Landlord
under this Lease, or at law or in equity, may, with notice to Tenant,
discontinue any or all of such additional services and such discontinuance
shall not be deemed to constitute an eviction or disturbance of Tenant's use
and possession of the Demised Premises or relieve Tenant from paying Basic
Rental or performing any of its other obligations under this Lease.
Failure to any extent to furnish, or any stoppage of these defined services,
resulting from causes beyond control of Landlord or from any cause, shall not
render Landlord liable in any respect for damages to either person or
property, nor be construed as an eviction of Tenant or work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Should any equipment or machinery break down, or for any cause cease to
function properly, Landlord shall use reasonable diligence to repair same
promptly, but Tenant shall have no claim for rebate of rent or damages on
account of any interruptions in service occasioned thereby or resulting
therefrom.
This lease is conditioned upon faithful performance by Tenant of the following
agreements, covenants, rules and regulations, herein set out and agreed to by
Tenant.
Payments
1. (A) To pay all rents and sums provided to be paid by Tenant hereunder
at the times and in the manner herein provided. The obligation of Tenant to
pay Basic Rental is an independent covenant, and no act or circumstance
whether constituting breach of covenant by Landlord or not, shall release
Tenant of the obligation to pay Basic Rental, Operating Expenses and Taxes.
(B) To pay Landlord, on a retail cost basis, for parts and labor, for
all replacement of electric lamps, fluorescent and otherwise and ballasts
following the initial installation of same, upon demand, by Landlord.
SUBSECTION (C) DELETED IN ITS ENTIRETY
Repairs by Tenant
2. Tenant will, at Tenant's own cost and expense, keep the demised Premises
and all other improvements to the extent covered by this Lease in sound
condition and good repair, and shall repair or replace any damage or injury
done to the Building, or any part thereof by Tenant or Tenant's agents,
employees, invitees and visitors, and if Tenant fails to make such repair or
replacements promptly, or within 15 days after occurrence, and to the
satisfaction of Landlord, Landlord may at its option make such repair or
replacement, and Tenant shall repay the cot thereof plus interest at the
Interest Rate (as hereinafter defined) to Landlord on demand. Tenant waives
all right to make repairs at the expense of Landlord, or to deduct the cost
the cost thereof from the rent. Tenant will not commit or allow any waste or
damage to be committed on any portion of the Demised Premises, and shall at
the termination of this Lease by lapse of time or otherwise, deliver up the
Demised Premises to Landlord in as good condition as at the date of
possession, ordinary wear and tear excepted, and upon such termination of this
Lease Landlord shall have the right to re-enter and resume possession of the
Demised Premises.
Assignment or Subletting
3. Tenant will not sell, mortgage, transfer, or assign this Lease, or allow
same to be assigned by operation of law or otherwise, or sublet the Demised
Premises, or any part thereof, or use or permit same to be used for any
purpose other than stated in the use clause hereof without the prior written
consent of Landlord, which consent will not be unreasonably withheld.
Notwithstanding the foregoing, in the event the Tenant desire to assign or
sublet the Demised Premises, Tenant shall provide Landlord with not less than
ninety (90) days written notice of Tenant's request, specifying in detail any
and all terms of such assignment or sublease. Landlord reserves the right to
cancel and terminate this Lease within thirty (30) days upon receipt of such
notice from Tenant of its request to assign or sublet the Demised Premises.
In the event Landlord consents to an assignment or sublease of the Demised
Premises, which assignment or sublease results in rental payments in excess of
the monthly payments due and owing under the terms of this Lease Agreement,
such excess rental payments shall be deemed to be rental payments due and<PAGE>
owing Landlord. Any sale, hypothecation, transfer, assignment or subletting
which is not in compliance with the provisions of this Article shall be
voidable by Landlord and shall, at the option of Landlord, constitute a
default under this Lease. Landlord's acceptance of rent directly from any
subtenant, assignee or other transferee shall not be construed as Landlord's
approval or consent thereto nor Landlord's agreement to accept the attornment
of any subtenant in the event of any termination of this Lease. In no event
shall Landlord's consent to an assignment or subletting be construed as (1)
relieving Tenant from the obligation to obtain Landlord's express written
consent to any further assignment or subletting or (ii) releasing Tenant from
any liability or obligation hereunder whether or not then accrued, and Tenant
shall continue to be fully, jointly and severally liable hereunder. As a
further condition to Landlord's consent to any subleasing, assignment or other
transfer of part or all of Tenant's interest in the Premises (i) Tenant shall
be required to pay Landlord's reasonable attorneys' fees and other costs
incurred in connection with the review and execution thereof; (ii) any
sublessee of part or all of Tenant's interest in the Premises shall agree that
in the event Landlord gives such sublessee notice that Tenant is in default
under this Lease, such sublessee shall thereafter make all sublease or other
payments directly to Landlord, which payments will be received by Landlord
without any liability whether to honor the sublease or otherwise (except to
credit such payments against sums due under this Lease); and such sublessee
shall agree to attorn to Landlord, or its successors and assigns, at its
request, should this Lease be terminated for any reason, except that in no
event shall Landlord or its successors or assigns be obligated to accept such
attornment; and (iii) Landlord may require that Tenant not then be in default
under this Lease in any respect. In the event that Tenant files any type of
petition in bankruptcy or has same filed against it and Landlord does not
elect to terminate this Lease or is deemed to have waived its right to
terminate this Lease, and in the event that the trustee or receiver appointed
by the bankruptcy court attempts to assume this Lease and thereupon assign it
to a third party, then Landlord shall have the right to terminate this Lease
within thirty (30) days upon gaining actual knowledge of such attempted
assumption and assignment, or upon being given written notice of same by
Tenant, whichever is alter.
Alterations, Additions and Improvements
4. Tenant will not make or allow to be made any alterations, additions, or
improvements in or to the Demised Premises without the written consent of
Landlord before performance; such consent will not be unreasonably withheld,
but Landlord may impose, as a condition of such consent, such requirements as
Landlord in its sole discretion may deem reasonable or desirable, including,
without limiting the generality of the foregoing, requirements as to the
manner in which, the time or times at which, and the contractor by whom such
work shall be done. Tenant shall not incorporate any hazardous materials (as
hereinafter defined) into the Demised Premises during the performance of the
alterations, additions, or improvements. All alterations, additions or
improvements when made to the Demised Premises by Tenant shall be surrendered
to Landlord and become the property of Landlord upon termination in any manner
of this Lease, but this clause shall not apply to movable non-attached
fixtures or furniture of Tenant. If, however, prior to termination of this
Lease, or within fifteen (15) days thereafter, Landlord so directs by written
notice to Tenant, Tenant shall promptly remove such alterations, additions, or
improvements, which were placed in or on the Demised Premises by Tenant and
which are designated in said notice and shall repair any damage occasioned by
such removal and in default thereof Landlord may effect said removals and
repairs at Tenant's sole cost and expense. All work with respect to
alterations, additions, and improvements must be done in a good and
workmanlike manner and diligently prosecuted to completion to the end that the
improvements on the Demised Premises shall at all times be a complete unit
except during the period of work. Any such alterations, additions and
improvements shall be performed and done strictly in accordance with the laws
and ordinances relating
<PAGE>
thereto, and with the requirements of all carriers of
insurance on the Demised Premises and the Building and the Board of
Underwriters, Fire Rating Bureau, or similar organization. Tenant shall
obtain at its sole cost and expense all required licenses and permits. In
performing the work of any such alterations, additions or improvements, Tenant
shall have the work performed in such a manner so as not to obstruct the
access to the Building or the demised premises of any other tenant. Before
commencing any such work or construction in or about the Demised Premises,
Tenant shall notify Landlord in writing of the expected date of commencement
thereof. Landlord shall have the right at any time and from time to time to
post and maintain on the Demised Premises such notices as Landlord deems
necessary to protect the Demised Premises and Landlord from liens of
mechanics, laborers, materialmen, suppliers or vendors. If any mechanic's
lien is filed against the Demised Premises or the real estate of which the
Demised Premises form a part, which lien concerns the Tenant and/or the
Demised Premises, Tenant shall cause same to be discharged within ten (10)
days after the lien is filed by Tenant paying or bonding over said lien.<PAGE>
Notwithstanding the foregoing, Tenant shall use Landlord's contractors
for alterations to or alterations affecting any of the following: heating,
ventilation, air conditioning, electrical, plumbing and life safety systems.
Tenant shall promptly pay to Landlord's contractors, when due, the cost of all
such alterations. Tenant shall also pay to Landlord a fifteen percent (15%)
administrative fee to reimburse Landlord for all overhead, general conditions,
fees and other costs and expenses arising from the involvement of Landlord or
landlord's agent with the alterations. Said percentage shall be payable
within thirty (30) days after completion of the alterations.
Legal Use and Violations of Insurance Coverage
5. Tenant will not occupy or use, nor permit any portion of the Demised
Premises to be occupied or used for any business or purpose which is unlawful
in part or in whole or deemed to be disreputable in any manner, or extra
hazardous on account of fire, not permit anything to be done which will in any
way increase the rate of fire insurance on the Building or contents, and in
the event that, by reason of acts of Tenant, there shall be any increase in
rate of insurance on the Building or contents created by Tenant's acts or
conduct of business, then Tenant hereby agrees to pay such increase.
Nor will Tenant use or occupy the Premises or permit the same to be used
for any purpose whatsoever other than the Permitted Use defined herein.
Tenant acknowledges and understands that the proper tenant mix of the
Office Building is essential to the successful operation of the Office
Building and that the restriction against the unauthorized use of the premises
is not intended to act as a restraint on trade but to protect and insure the
correct tenant mix.
Laws and Regulations
6. Tenant will maintain the Demised Premises in a clean and healthful
condition and comply with all laws, ordinances, orders, rules and regulations
(state, federal, municipal, and other agencies or bodies having any
jurisdiction thereof) with reference to conditions or occupancy of the Demised
Premises. Tenant shall not cause or permit any hazardous material to be
brought upon, stored, produced, emitted, disposed or used upon, above or
beneath the Building by Tenant, its agencies, employees or contractors.
Hazardous material means any material or substance defined as a "hazardous
substance" pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act as amended, or as defined in any other federal, state or
local statute, law, ordinance or regulation.
Indemnity, Liability and Loss or Damage
7. By moving into the Demised Premises or taking possession thereof, Tenant
accepts the Demised Premises as suitable for the purposes for which the same
are leased and accepts the Building and each and every appurtenance thereof,
and Tenant by said acts waives any and all defects therein, except for blatant
defects due to Landlord's negligence.
Landlord shall not be liable to Tenant or Tenant's agents, employees,
guests, invitees or to any person claiming by, through or under Tenant for any
injury to person, loss or damage to property, or for loss or damage to
Tenant's business, occasioned by or through the acts or omissions of Landlord
or any other person, or due to the Building or the Demised Premises or any
part thereof or any appurtenances thereto becoming out of repair, due to the
happening of any accident or event in or about the Building or the Demised
Premises, or by any other cause whatsoever except Landlord's negligence or
willful wrong to the extent Landlord is not prevented by law from contracting
against such liability. Tenant shall indemnify Landlord and save it harmless
from all suits, actions, damages, liability and expense in connection with
loss of life, bodily or personal injury or property damage arising from or out
of any occurrence in, upon, at or from the Demised Premises or the occupancy
or use by Tenant of the Demised Premises or any part thereof to the extent
occasioned wholly or in part by any action or omission of Tenant, its agents,
contractors, employees, servants, invitees, or licensees. If Landlord shall
without fault on its part, be made a party to any action commenced by or
against Tenant, the Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses, and reasonable attorneys' fees.
Building Rules and Regulations
8. Tenant and Tenant's agents, employees, and invitees will comply fully
with all requirements of the Building Rules and Regulations which are attached
as Exhibit B and made a part hereof as though fully set out herein. Landlord
shall at all times have the right to change such Rules and Regulations or to
amend them in such reasonable manner as may be deemed advisable for safety,
care and cleanliness of the premises and for the preservation of good order
therein, all of which Rules and Regulations, changes and amendments will be<PAGE>
forwarded to Tenant in writing and shall be carried out and observed by
Tenant.
Entry for Repairs and Inspection
9. Tenant will permit Landlord or owner, or their officers, agents and
representatives, the right tot enter into and upon all parts of the Demised
Premises, at all reasonable hours to inspect same or clean or make repairs or
alterations or additions as Landlord may deem necessary, and Tenant shall not
be entitled to any abatement or reduction of rent by reason thereof. In the
event of an emergency, Tenant hereby grants to Landlord the right to enter the
Demised Premises at any time. In addition, Tenant shall permit Landlord or
Landlord's agent and any other person authorized by the same to enter the
Demised Premises during the last six months of the Lease Term for the purpose
of exhibiting the Demised Premises to prospective lessees.
Nuisance
10. Tenant will conduct its business, and control its agents, employees,
invitees and visitors in such a manner as not to create any nuisance,
interfere with, annoy or disturb other tenants or Landlord in the management
of the Building.
Eminent Domain and Force Majeure
11. (A) If, in the reasonable opinion of the Landlord, the whole of the
Demised Premises, or so much thereof as to render the balance unusable by
Tenant is taken under power of eminent domain, or sold, transferred or
conveyed in lieu thereof, this Lease shall automatically terminate as of the
date of such condemnation, or as of the date possession is taken by the
condemning authority, whichever is later. No award for any partial or entire
taking shall be apportioned and Tenant hereby releases any claim to and
assigns to Landlord any award which may be made in such taking or
condemnation, together with any and all rights of Tenant now or hereafter
arising in or to the same or any part thereof, provided, however, that nothing
contained herein shall be deemed to give Landlord any interest in, or to
require Tenant to assign to Landlord, any award made to Tenant for the taking
of personal property and fixtures belonging to Tenant and removable by Tenant
at the expiration of the term hereof as provided hereunder or for the
interruption of, or damage to, Tenant's business. In the event of a partial
taking, or a sale, transfer or conveyance in lieu thereof, which does not
result in a termination of this Lease, pursuant to the foregoing, the Basic
Rental shall be apportioned according to the ratio that the part of the
Demised Premises remaining usable by Tenant bears to the total area of the
Demised Premises.
(B) Landlord shall not be liable or responsible for any loss or damage
to any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition or order
of a government body or authority, or other matter beyond the control of
Landlord or for any damage or inconvenience which may arise through repair or
alteration of any part of the Building or failure to make any such repairs, or
from any cause whatever except to the extent caused by Landlord's gross
negligence.
Lien for Rent
12. In consideration of the mutual benefits arising by virtue of this Lease,
Tenant does hereby mortgage unto Landlord all property of Tenant now or
hereafter placed in or upon the Demised Premises (except such part of Tenant's
property or merchandise as may be exchanged, replaced or sold from time to
time in the ordinary course of operations or trade), and such property is
hereby subject to a lien in favor of Landlord and shall be and remain subject
to such lien of Landlord for payment of all Basic Rental, Operating Expenses
and Taxes and other sums agreed to be paid by Tenant herein. Said lien shall
be in addition to and cumulative of the Landlord's lien provided by law. At
any time and from time to time, upon request by Landlord, Tenant will make,
execute and deliver or cause to be made, executed and delivered, to Landlord,
and where appropriate, filed and from time to time thereafter to be refiled at
such time and in such offices and places as shall be deemed desirable by
Landlord, any and all security agreements, financing statements, and other
documents ("Instrument") as may, in the opinion of Landlord, be necessary or
desirable in order
<PAGE>
to effectuate, complete, enlarge or perfect, or to continue
and preserve (a) the obligations of Tenant under this Lease, and (b) the lien
and security interest granted by this paragraph as a first and prior lien and
security interest upon Tenant's interest in this Lease and the personal
property of Tenant located in the Demised Premises, whether now or hereafter
acquired by Tenant except as to any existing security interest granted to any
vendor of Tenant. Upon any failure by Tenant so to do, Landlord may make,
execute, file, or refile any and all such instruments for and in the name of
Tenant, and Tenant hereby irrevocably appoints Landlord the agent and
attorney-in-fact of Tenant so to do. The lien and security interest hereof
will automatically attach, without further act, to all after acquired personal
property attached to and/or used in the operation of the Tenant's business in
the Demised Premises or any part thereof.
Abandonment
13. If the Demised Premises are abandoned or vacated by Tenant, Landlord
shall have the right, but not the obligation, to: (a) relet same for the
remainder of the period covered hereby; and if the Basic Rental, Operating
Expenses and Taxes are not received through such reletting at least equal to
the Basic Rental, Operating Expense and Taxes provided hereunder, Tenant shall
pay and satisfy any deficiencies between the amount of Basic Rental, Operating
Expenses and Taxes called for under this Lease and that received through
reletting and all expenses incurred by any such reletting, including but not
limited to, the cost of advertising, brokerage fees, renovating, altering and
decorating for a new tenant, and/or (b) provide for the storage of any
personal property remaining in the Demised Premises without liability of any
kind or for the cost of storage or the return of the personal property to
Tenant or take title to the abandoned personal property which title shall pass
to Landlord under this lease as a Bill of Sale without additional payments or
credit from Landlord to Tenant. Notwithstanding the foregoing, during the
last ninety (90) days of the term of this Lease, if Tenant removes a
substantial portion of Tenant's property or Tenant has been in physical
absence for ten (10) days it shall constitute a vacation and Landlord may
enter the Demised Premises for purposes of renovating, altering and decorating
the Demised Premises for occupancy at the end of the term b a new tenant
without in any way affecting Tenant's obligation to pay Basic Rental,
Operating Expenses and Taxes and comply with all other terms and conditions of
this Lease. Nothing herein shall be construed as in any way denying Landlord
the right, in case of abandonment, vacation of the Demised Premises, or other
breach of the contract by Tenant, to treat the same as an entire breach, and
at Landlord's option, immediately sue for the entire breach of this contract
and any and all damages occasioned Landlord thereby.
Holding Over
14. In addition to performing all of Tenant's other obligations set forth in
this Lease, Tenant shall pay to Landlord an amount equal to 200% of the
monthly installment of Basic Rental and 200% of the monthly installment of
Operating Expenses and Taxes payable by Tenant during the last month of the
Lease Term on the 1st day of each month or a portion thereof for which Tenant
shall retain possession of the Demised Premises or any part thereof after the
expiration or termination of the Lease Term or of Tenant's right of
possession, whether by lapse of time or otherwise, and also shall pay all
costs incurred and damages sustained by Landlord, whether direct or
consequential, on account of such holding over. The provisions of this
paragraph shall not be deemed to limit or constitute a waiver of any rights or
remedies of Landlord provided herein or at law. No holding over by Tenant
after the terms of this Lease, either with or without the consent and
acquiescence of Landlord, shall operate to extend this Lease for a longer
period than one month; and holding over with the consent of Landlord in
writing shall thereafter constitute this agreement a Lease from month to
month. The foregoing provisions of this Article 14 are in addition to and do
not affect Landlord's right of re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.
Attorneys' Fees
15. In the event Tenant defaults in the performance of any of the terms,
covenants, agreements or conditions contained in this Lease, and Landlord
places the enforcement of this Lease, or any part thereof, or the collection
of any Basic Rental, Operating Expenses or Taxes due, or to become due
hereunder or recovery of the possession of the Demised Premises in the hands
of an attorney or files suit upon the same, Tenant agrees to pay Landlord
reasonable attorneys' fees, and payment of the same shall be secured in like
manner as is herein provided, as to all remedies which may be invoked by
landlord to secure payment of Basic Rental, Operating Expenses and Taxes. See
Rider paragraph 58.
Damage or Destruction
16. If the Demised Premises or the Building shall be damaged by any cause or
means whatsoever not caused or contributed to by the negligence or fault of
Tenant, its employees, agents, invitees or visitors, and if insurance proceeds
have been made available therefore, and if said damage can be repaired within
a period of ninety (90) working days by using standard working methods and
procedures, Landlord shall within a reasonable time after the occurrence of
said damage, and to the extent of the insurance proceeds available therefore,
enter and make repairs, and this Lease shall not be affected but shall
continue in full force and effect. However, if said damage cannot be repaired
within a period of ninety (90) working days by using standard working methods
and procedures, then this Lease shall cease and terminate as of the date of
such occurrence, and Tenants hall pay Basic Rental, Operating Expenses, or
Taxes hereunder to such date and immediately surrender the Demised Premises to
Landlord, unless within a period of sixty (60) days from the date of such
occurrence Landlord shall elect to keep this Lease in force and to restore the
Demised Premises to substantially the condition as existed prior to the date
of such occurrence by giving Tenant written notice of such election within
said sixty (60) day period. If in any event Landlord so elects to continue
the Lease and restore the Demised Premises, Landlord shall within a reasonable
time after the date of the notice of said election enter and make repairs, and
this Lease shall not be affected, except that Basic Rental hereunder shall be
reduced or abated from the date of the casualty until such time the repairs
are substantially completed and stays in the proportion that the Demised
Premises are untenantable. If, however, such damage is contributed to or
results from the fault of Tenant, Tenant's employees, agents, invitees or
visitors, and if Landlord does not have insurance covering such damage, such
damage shall be repaired by and at the expense of Tenant under the control,
direction and supervision of Landlord, and the Basic Rental, Operating
Expenses and Taxes shall continue without abatement or reduction. The
completion of the repairs of all such damages is subject to reasonable delays
resulting from survey of such damage, obtaining plans and letting contracts
for repair, adjustment or insurance loss, strikes, labor difficulties,
unavailability of material, or other causes beyond the control of the party
obligated to make such repairs. Notwithstanding anything to the contrary
contained in this Article 16, Landlord shall not have any obligation
whatsoever to repair, reconstruct or restore the Demised Premises on account
of the damage resulting from any casualty covered under this Article 16 which
occurs during the last twelve (12) months of the term of this Lease (or any
extension thereof), nor shall Landlord be required to expend funds to repair,
reconstruct or restore beyond the extent of insurance proceeds received by
Landlord. Landlord shall not be required to repair any injury or damage by
any cause, or to make any repairs or replacement of any property insured in he
Demised Premises by Tenant, and if the Demised Premises are not restored and
the Lease not terminated then Tenant shall not be obligated to pay Basic
Rental, operating expenses and taxes from and after the date of the casualty.
Insurance
17. Tenant agrees during the term hereof to carry a broad form comprehensive
policy of commercial general liability insurance covering the Demised Premises
in an amount of not less than $2,000,000.00 combined single limit per
occurrence, personal injury and property damage insurance with companies
satisfactory to Landlord in the name of Tenant (with Landlord and, if
requested by Landlord, any mortgagee, trust deed holder, ground lessors agent
or secured party with a substantial interest in this Lease and/or the Building
named as additional insureds in the policy or by endorsement). Tenant also
agrees to pay the premiums therefore and to deliver copies of said policies
and/or endorsements thereto to Landlord, and the failure of Tenant to either
obtain said insurance or deliver copies of said policies or certificates
thereof to Landlord shall permit Landlord to procure said insurance and pay
the requisite premiums therefor; which premiums shall be repayable to Landlord
with the next monthly rental payment. Each insurer under the policies
required hereunder shall agree by endorsement on the policy issued by it or by
independent instrument furnished to Landlord that will give Landlord no less
than thirty (30) days written notice before the policy or policies in question
shall be altered or cancelled. All such insurance policies shall be primary,
noncontributing and shall contain cross-liability coverage or an endorsement.
The amounts of such insurance required hereunder shall be subject to
adjustment from time to time as requested by Landlord based upon Landlord's
determination as to the amounts of such insurance generally required at such
time for comparable tenants, premises and buildings in the general
geographical location of the Building or as requested by any ground lessor or
lender with an interest in the Building or property on which the Building is
situated.
Transfer of Landlord's Rights
18. Landlord shall have the right to transfer and assign, in whole or in
part, all and every feature of its rights and obligations hereunder and in the
Building and property referred to herein.
Default Clause
19. In the event: (a) Tenant fails to comply with any term, provision,
condition, or covenant of this Lease or any of the Rules and Regulations now
or hereafter established for the government of the Building; (b) Tenant
deserts or vacates the Demised Premises; (c) any petition is filed by or
against Tenant under any section or chapter of the Bankruptcy Reform Act of
1978, as amended, or under any similar law or statute of the United States or
of any state thereof; (d) Tenant becomes insolvent or makes a transfer in <PAGE>
fraud of creditors; (e) Tenant makes an assignment for benefit of creditors,
(f) a receiver is appointed for Tenant or any of the assets of Tenant; or (g)
any representation or warranty made by Tenant is not accurate and correct,
Landlord shall have the option to do any one or more of the following without
any notice or demand, in addition to and not in limitation of any other remedy
permitted by law or by this Lease:
(1) Take immediate possession of the Demised Premises, but if Tenant
shall fail to vacate the Demised Premises, Landlord may,
<PAGE>
without notice and without prejudice to any other remedy Landlord may have,
enter upon and take possession of the Demised Premises and expel or remove
Tenant and its effects, by force if necessary, without being liable to
prosecution or any claim for damages therefor, and Tenant agrees to
indemnify Landlord for all loss, damage and expense including reasonable
attorneys' fees which Landlord may suffer by reason of such termination.
(2) Declare the entire amount of the Basic Rental, Operating Expenses
and Taxes which would have become due and payable during the remainder of the
term of this Lease to be due and payable immediately, in which event, Tenant
agrees to pay the same at once, together with all Basic Rental, Operating
Expenses and Taxes theretofore due, to Landlord at the address specified
herein or hereunder, provided, however, that such payments shall not
constitute a penalty or forfeiture or liquidated damages, but shall merely
constitute payment in advance of the Basic Rental, Operating Expenses and
Taxes for the remainder of the said term. The acceptance of such payment by
Landlord shall not constitute a waiver of any failure of Tenant thereafter
occurring to comply with any term, provision, condition or covenant of this
Lease.
(3) Relet the Demised Premises and receive the rent therefor, and in
such event, Tenant shall pay Landlord the cost of advertising, brokerage fees,
renovating, repairing and altering the Demised Premises for a new tenant or
tenants and any deficiency that may arise by reason of such reletting, on
demand, at the address of Landlord specified herein or hereunder, provided,
however, the failure or refusal of Landlord to relet the Demised Premises
shall not release or affect Tenant's liability for Basic Rental, Operating
Expenses and Taxes or for damages and such Basic Rental, Operating Expenses
and Taxes and damages shall be paid by Tenant on the dates specified herein.
(4) Landlord may, as agent of Tenant, do whatever Tenant is obligated
to do by the provisions of this Lease and may enter the Demised Premises, by
force if necessary, without being liable to prosecution or any claim for
damages therefor, in order to accomplish this purpose. Tenant agrees to
reimburse Landlord immediately upon demand for any expenses which Landlord may
incur in thus effecting compliance with this Lease on behalf of Tenant, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
(5) Terminate this Lease, whereupon Tenant shall promptly reimburse
Landlord for the amount of actual damages suffered by Landlord.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by
law.
Cross Defaults
20. In the event Tenant, or Tenant's subsidiary or affiliate, shall have
other leases for other premises in the Building, any default by Tenant or its
subsidiary or affiliate under any lease shall be deemed to be a default under
all other leases and Landlord shall be entitled to enforce all rights and
remedies against all such leases as provided for a default herein.
Binding Effect
21. This Lease shall also inure to the benefit of the successors and assigns
of Landlord, and, with the written consent of Landlord first had and obtained,
but not otherwise, to the benefit of the heirs, executors and/or
administrators, successors and assigns of Tenant.
Remedies
22. No act or thing done by Landlord or its agents during the term hereof
shall be deemed an acceptance of a surrender of the Demised Premises, and no
agreement to accept a surrender of the Demised Premises shall be valid unless
made in writing and signed by Landlord. The mention in this Lease of any
particular remedy shall not preclude Landlord from any other remedy Landlord
might have, either in law or in equity, nor shall the waiver of or redress for
any violation of any covenant or condition in this Lease contained or any of
the Rules and Regulations attached hereto or hereafter adopted by Landlord,<PAGE>
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of Basic Rental, Operating Expenses and Taxes with knowledge of the
breach of any covenant in this Lease contained shall not be deemed a waiver of
such breach. The failure of Landlord to enforce any of the Rules and
Regulations attached hereto, or hereafter adopted, against Tenant and/or any
other tenant in the Building shall not be deemed a wavier. Waiver of said
Rules or Regulations by Landlord shall be in writing and signed by Landlord.
In case it should be necessary or proper for Landlord to bring any action
under this Lease to consult or place said Lease or any amount payable by
Tenant thereunder with an attorney concerning or for the enforcement of any of
the Landlord's rights hereunder, then Tenant agrees in each and any such case
to pay to Landlord reasonable attorneys' fees.
Quiet Possession
23. Landlord hereby covenants that Tenant, upon paying Basic Rental,
Operating Expenses and Taxes as herein reserved, and performing all covenants
and agreements herein contained on part of Tenant, shall and may peacefully
and quietly have, hold and enjoy the Demised Premises.
Improvements
24. If any improvements are made with respect to the Demised Premises at the
Tenant's expense or under any agreement with the Tenant whereby the Tenant is
given an allowance or rent reduction in exchange for Landlord's agreement to
install or allow to be installed leasehold improvements such as by way of
example but not limitation: wall coverings, floor coverings or carpet,
paneling, doors and hardware, any and all of such improvements shall become
the property of the Landlord and shall in no event be removed by the Tenant.
Possession
25. If for any reason the Demised Premises shall not be ready for occupancy
by Tenant at the time of commencement of this Lease, this Lease shall not be
affected thereby, nor shall Tenant have any claim against Landlord by reason
thereof, but not Basic Rental, Operating Expenses or Taxes shall be payable
for the period during which the Demised Premises shall not be ready for
occupancy. All claims for damages arising out of any such delay are waived
and released by Tenant. With respect to the foregoing, if delivery of
possession of the Demised Premises shall be delayed beyond the date specified
for the commencement of the Lease Term, it is understood and agreed that the
commencement of the Lease Term shall be extended to the date that the Demised
Premises are tendered to the Tenant in which event the termination date of the
Lease Term shall be correspondingly extended. In the event of such delay in
tendering the Demised Premises to the Tenant the Landlord shall not be liable
to Tenant for any damage whatsoever resulting from the delay in the delivery
of possession of the Demised Premises. notwithstanding the foregoing, it is
understood that if and to the extent that Landlord is unable to deliver timely
possession of the Demised Premises to Tenant due to delays by Tenant, then the
Basic Rental, Operating Expense and Taxes reserved shall commence to accrue on
the date possession of the Premises would have been delivered to Tenant but
for the delays of Tenant. If permission is given to Tenant to occupy the
Demised Premises prior to the date of commencement of the term hereof, such
occupancy shall be subject to all of the provisions of this Lease (including
the payment of Basic Rental, Operating Expenses and Taxes), however, the Lease
term shall be extended by the number of days of such early occupancy.
Condition of Premises
26. Tenant acknowledges that neither Landlord nor any agent of Landlord have
made any representation or warranty with respect to the Demised Premises or
the Building or with respect to the suitability of either for the conduct of
Tenant's business or profession. The taking of possession of the Demised
Premises by Tenant shall conclusively establish that the Demised Premises and
the Building were at such time in satisfactory condition.
Estoppel Certificate
27. Tenant shall at any time and from time to time, upon not less than ten
(10) days prior written notice from Landlord, execute, acknowledge and deliver
to Landlord a statement in writing certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect), the dates to which the Basic Rental, Operating Expenses and Taxes
and other charges, if any, are paid in advance and the amount of Tenant's
security deposit, if any, and acknowledging that there are not, to Tenant's
knowledge, any uncured defaults, on the part of Landlord hereunder, and that
there are no events or conditions then in existence which, with the passage of
time or notice or both, would constitute a default on the part of Landlord
hereunder, or specifying such defaults, events or conditions, if any are<PAGE>
claimed, and such further matters regarding the Lease or the Demised Premises
as Landlord may request. It is expressly understood and agreed that any such
statement may be relied upon by any prospective purchaser or encumbrancer of
all or any portion of the Building or Property on which the Building is
situated. Tenant's failure to deliver such statement within such time shall,
at the option of landlord, constitute a default under this Lease and, in the
event, shall be conclusive upon Tenant that this Lease is in full force and
effect without modification except as may be represented by Landlord in any
such certificate prepared by landlord and delivered to Tenant for execution.
Signs
28. Tenant will not place or suffer to be placed or maintained on any
exterior door, wall or window of the Demised Premises any sign, awning or
canopy, or advertising matter or other thing of any kind, and will not place
or maintain any decoration, lettering or advertising matter on the glass of
any window or door of the Demised Premises without first obtaining Landlord's
prior written
<PAGE>
approval and consent in each instance. Tenant further agrees to
maintain any such sign, awning, canopy, decoration, lettering, advertising
matter or other thing as may be approved, in good condition at all times.
Personal Property Taxes
29. With respect to Tenant's fixtures, furnishings, equipment and all other
personal property located in the Demised Premises, Tenant shall pay prior to
delinquency all taxes assessed against or levied thereon and when possible,
shall cause same to be assessed and billed separately from the property of
Landlord, but if same shall be assessed and taxed with the property of
Landlord, Tenant shall pay to Landlord its share of such taxes within ten (10)
days after Landlord's delivery to Tenant of a statement in writing setting
forth the amount of such taxes applicable to Tenant's property. In addition,
Tenant shall pay promptly when due all taxes imposed upon Tenant's rents,
gross receipts, charges and business operations.
Subordination
30. Tenant hereby subordinates this Lease and all rights of Tenant hereunder
to any mortgage or mortgages, or vendor's lien, or similar instruments which
now are or which may from time to time be placed upon the premises covered by
this Lease, and such deed to secure debt, mortgage or mortgages or liens or
other instruments shall be superior to and prior to this Lease. Tenant
further covenants and agrees that if the mortgagee or other lien holder
acquired the Demised Premises as a purchaser at any such foreclosure sale (any
such mortgagee or other lien-holder or purchaser at the foreclosure sale being
each hereinafter referred to as the "Purchaser at Foreclosure"), Tenant shall
thereafter, but only at the option of the Purchaser at Foreclosure, as
evidenced by the written notice of its election given to Tenant within a
reasonable time thereafter, remain bound by novation or otherwise to the same
effect as if a new and identical Lease between the Purchaser at Foreclosure,
as Landlord, and Tenant, as tenant, had been entered into for the remainder of
the term of the Lease in effect at the institution of the foreclosure
proceedings. No Purchaser at Foreclosure shall be liable for any default by
Landlord or any other matter which occurred prior to the date such successor
succeeded to Landlord's interest in this Lease nor shall such Purchaser at
Foreclosure be bound by or subject to any offsets or defenses which Tenant may
have against Landlord. No Purchaser at Foreclosure shall be bound to
recognize any prepayments by more than thirty (30) days of Basic Rental or
Tenant's share of Operating Expenses and Taxes. Tenant agrees to execute any
instrument or instruments which may be deemed necessary or desirable further
to effect the subordination of this Lease to each such mortgage, lien or
instrument or to confirm any election to continue the Lease in effect in the
event of foreclosure, as above provided. Tenant hereby irrevocably appoints
Landlord as its special attorney-in-fact to execute and deliver any document
or documents provided for herein for and in the name of Tenant. Such power,
being coupled with an interest, is irrevocable.
Severability Clause
31. If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or
provision that is illegal, invalid or unenforceable, there be added as a part
of this Lease, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable. The caption of each paragraph hereof is added as a
matter of convenience only and shall be considered to be of no effect on the
construction of any provision or provisions of this Lease.
Security Deposit
32. Upon the occurrence of any event of default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy use the Security
Deposit paid to Landlord by Tenant as herein provided to the extent necessary
to make good any arrears of Basic Rental, Operating Expenses, Taxes and any
other damage, injury, expense or liability caused to Landlord by such event of
default. If any portion of said deposit is so used or applied, Tenant shall,
within five (5) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the security deposit to it original amount.
Tenant shall not be entitled to interest on the security deposit. Tenant
shall not grant anyone a security interest of any kind in such security
deposit and no such security agreement shall be binding on Landlord. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit, or any balance thereof remaining, shall
be returned to Tenant at the expiration of the Lease term and upon Tenant's
vacation of the Premises. Such Security Deposit shall not be considered an
advance payment of rental or a measure of Landlord's damages in case of
default by Tenant.
In the event the Landlord should have good cause to doubt the full and
faithful performance of every provision of this lease by the Tenant, the
Landlord shall have the right to demand that the Tenant post an additional
Security Deposit in an amount equal to the current monthly amount of Basic
Rental, Operating Expenses and Taxes. Upon the showing by the Tenant that
this full and faithful performance is no longer in doubt, the additional
Security Deposit shall be returned to the Tenant.
Waiver of Subrogation
33. Each of Landlord and Tenant hereby waives any and every claim for
recovery from the other for any and all loss or damage to the Building or
Demised Premises or to the contents thereof, whether such loss or damage is
due to the negligence of Landlord or Tenant or its respective agents or
employees, to the extent that the amount of such loss or damage is recovered
under its policies of insurance; provided, however, that the foregoing waiver
shall not be operative in any case where the effect thereof is to invalidate
any insurance coverage of the waiving party or increase the cost of such
insurance coverage; provided further, however, that Landlord and Tenant each
agree to give written notice of the terms of this mutual waiver to each
insurance company which has issued, or in the future may issue, policies of
physical damage to it, and to have said insurance policies property endorsed,
if necessary, to prevent the invalidation of said insurance coverage by reason
of said waiver.
Adjustment of Rental
34. (a) Operating Expenses:
(1) The term "Operating Expenses" shall mean all costs of management,
operating and maintenance of the land, the Building and other improvements
thereon and appurtenances thereto of which the Demised Premises are a part,
all accrued and based on a calendar year period, including by way of
illustration but not limitation, utilities, insurance premiums, management
fees, janitorial and cleaning services, compliance with laws, ordinances,
rules and regulations, licenses, permits and inspection fees, heating and
cooling, maintenance and repairs, general administration costs and expenses,
labor and supplies, capital expenditures which are intended to result in labor
or cost saving device or operation and capital expenditures required by any
governmental ordinance, law, rule or regulation in which case the capital
expenditures may be amortized as reasonably determine by Landlord with
interest thereon and included on an annual basis in the Operating Expenses,
whether such Operating Expenses, or any portion thereof, are paid by the
Landlord, or paid directly by the Tenant, excluding, however, depreciation;
principal and interest payments on mortgage loans; costs of repairs,
alterations or replacements caused by casualty losses to the extent
customarily insured against by owners of office buildings of similar size,
age, and construction in he area; cost of tenant improvements and commissions
paid for leasing.
(2) It is agreed that the Basic Rental provided for herein includes
the Tenant's Prorata Share of Operating Expenses. If the amount of such
Operating Expenses for the entire Building exceeds $ those of calendar year
1995 in any calendar year, Tenant shall pay its Prorata Share of the excess in
the manner hereinafter set forth. It is further agree that if the Actual
Operating Expenses for the entire Building for any calendar year exceeds the
greater of the (i) estimated Annual Operating Expenses or (ii) the Actual
Operating Expenses for the entire Building the Tenant shall pay the Landlord
without reduction or setoff, within ten (10) days of billing, as additional
rental the Tenant's share of such excess.
(3) If the amount of Actual Annual Operating Expenses for the entire
Building for the immediately preceding year is less than the estimated Annual<PAGE>
Operating Expenses for such year, Landlord shall credit the Tenant, Tenant's
share of such amount and shall reimburse Tenant by deducting, monthly, from
its estimated payments of Operating Expenses for the current year, one-twelfth
(1/12) of such share.
(4) It is further agreed and understood that approximately January 1st
of each calendar year or as soon thereafter as the information can be
obtained, Landlord shall estimate the Annual Operating Expenses for the
current calendar year. The Landlord shall notify Tenant of such calculations
and (i) effective each January 1st, during the lease term and on the first
(1st) day of each of the succeeding eleven (11) months of each calendar year,
Tenant shall pay the Landlord one-twelfth (1/12) of its share of the estimated
Annual Operating Expenses for the current year.
(b) Taxes:
It is agreed that the Basic Rental provided for herein includes the
Tenant's Prorata Share of all real property taxes, other similar charges on
real property or improvements, personal property taxes or any other tax,
assessment, or water and sewer charge and all cots and fees incurred in
connection therewith ("Taxes"), which may be levied or assessed by any lawful
authority against the land and improvements or the Building if the amount of
such taxes, assessments, costs, fees and
<PAGE>
charges exceeds $ those of calendar year 1995, in any calendar year,
Tenant shall pay its Prorata Share of the excess in the same manner as
provided above for payment of Operating Expenses.
(c) Operating Expenses and Taxes shall at all times herein be computed
separately.
(d) If the average occupancy in any calendar year is less than ninety
percent (90%), then the Operating Expenses for such year shall be adjusted to
reflect what the Operating Expenses would have been at an average occupancy of
ninety-five percent (95%).
(e) It is further agreed that the provisions of Article 34 shall
survive the termination of this Lease and be applicable to such portion of the
calendar year as this Lease was in effect.
(f) In no event shall any provision of this Article 34 result in any
reduction in the Basic Rental.
(g) Delay in computing any item of Operating Expenses or Taxes shall
neither be deemed a default by Landlord or a wavier of the right to collect
the item of Operating Expenses or Taxes in question. Notwithstanding anything
seemingly to the contrary in this Lease, Tenant shall make monthly payments on
account of each item of Operating Expenses and Taxes, the amount of which is
to be estimated by Landlord, based on the amount that Landlord's most recent
estimate thereof exceeds the amount of Operating Expenses and Taxes included
in Basic Rental, until Landlord notifies Tenant of a revision to such
estimate.
(h) Tenant acknowledges that the amounts of Operating Expenses and
Taxes included in the Basic Rental in Section 34 hereof are amounts agreed
upon by Landlord and Tenant and do not purport to be estimates of the
Operating Expenses and Taxes for the year in which the Lease Term commences or
for any other year.
Net Worth
35. Tenant shall maintain at all times a net worth in excess of that at the
signing of this Lease. If at any time Tenant's net worth should not exceed
that amount, Tenant shall notify Landlord of this fact in writing.
Defaults by Tenant on Third Party Agreements
36. Tenant shall not default on any of its covenants under any loan
agreements with any lending, mortgage or financial institution. Nor shall
Tenant default on any loan or financial agreement with any third party wherein
there is an outstanding balance owed by Tenant. Tenant immediately shall
advise Landlord in writing if any such default by Tenant should occur.
Sale of Assets
37. Tenant shall not transfer any portion of his assets outside the ordinary
course of his business so that the effect causes the Tenant to default under
paragraph 36 of this lease.
Interest on Past Due Obligations
38. All payments becoming due under this Lease and remaining unpaid when due
shall bear interest until paid at a rate per annum (the "Interest Rate") equal
to 18%. Tenant recognizes that late payment of Basic Rental or any other sum
due hereunder will result in administrative expenses to Landlord, the extent
of which additional expenses are extremely difficult and economically
impractical to ascertain and Tenant hereby agrees that the amounts discussed
herein are reasonable. Tenant theretofore agrees that when Basic Rental,
Operating Expenses, Taxes or any other sum is due and payable from Tenant to
Landlord pursuant to the terms of this Lease, and such amount remains unpaid
five (5) days after such amount is due, the amount of such unpaid Basic
Rental, Operating Expenses, Taxes or other sum shall be increased by a late
charge to be paid to Landlord by Tenant equal to the greater of (a) $100.00 or
(b) 10% of the unpaid Basic Rental or other sum.
The provisions of this Paragraph shall in no way relieve Tenant of the
obligation to pay Basic Rental, Operating Expenses, Taxes or other payments on
or before the date on which they are due, nor shall the collection by Landlord
of any amount under this paragraph impair (a) the ability of Landlord to
collect the amount charged under this paragraph or (b) Landlord's Remedies set
forth in Section 19 of this Lease.
Relocation
39. (a) In the event Tenants Demised Premises or a portion of Tenants
Demised Premises is less than 5,000 RSE then at any time hereafter, Landlord
shall have the right to substitute for the Demised Premises then being leased
or to be leased hereunder (the "Existing Premises") other premises within the
Building herein referred to as the "New Premises" provided that the New
Premises shall be of at least substantially the same size and shall either
have substantially the same perimeter configuration or a perimeter
configuration substantially as usable for the purposes for which the Existing
Premises were being used by Tenant or, if possession of the Existing Premises
had not yet been received by Tenant, then for the purposes for which the
Existing Premises were to be used by Tenant.
(b) If Tenant shall not have received possession of the Existing
Premises, then, as of the date Landlord gives notice of a substitution, such
substitution shall be effective, the New Premises shall be the Demised
Premises hereunder and the Existing Premises shall cease to be the Demised
Premises hereunder.
(c) The provisions of this subparagraph (c) shall apply if Tenant
shall have already received possession of the Existing Premises as of the date
Landlord gives notice of substitution. Tenant shall vacate and surrender the
Existing Premises not later than the later of the 30th day after the date that
Landlord shall notify Tenant of Landlord's intent to make the substitution in
question or the 15th day after Landlord shall have substantially completed the
work to be done by Landlord in the New Premises pursuant to this subparagraph
(c). As of the sooner of such 15th day or the date of such surrender and
vacation, the New Premises shall be the Demised Premises leased under this
Lease and the Existing Premises shall cease to be the Demised Premises leased
under this Lease. Landlord shall (A) pay the actual and reasonable out-of-
pocket expenses of Tenant's moving of its property from the Existing Premises
to the New Premises, and (B) shall improve the New Premises so that they are
substantially similar to the Existing Premises and promptly reimburse Tenant
for its actual and reasonable out-of-pocket costs in connection with the
relocation of any telephone or other communications equipment from the
Existing Premises to the New Premises. However, instead of only paying the
expenses of Tenant's moving of its property, Landlord may elect to either move
Tenant's property or provide personnel to do so under Tenant's direction, in
which event such move may not be made except during evenings, weekends or
holidays, so as to incur the lease inconvenience to Tenant.
(d) Tenant shall not be entitled to any compensation for any
inconvenience or interference with Tenant's business, nor to any abatement or
reduction in Basic Rental, nor shall Tenant's obligations under this Lease be
otherwise affected, as a result of the substitution, except as otherwise
provided in this Section 39.
Tenant agrees to cooperate with Landlord so as to facilitate the prompt
completion by Landlord of its obligations under this subparagraph. Without
limiting the generality of the preceding sentence, Tenant agrees to promptly
provide to Landlord such approvals, instructions, plans, specifications or
other information as may be reasonably requested by Landlord.
Inability to Perform
40. This Lease and the obligations of Tenant hereunder shall not be affected
or impaired because Landlord is unable to fulfill any of its obligations
hereunder or is delayed in doing so, if such inability or delay is caused by
reason of strike or other labor troubles, or act of God, or any other cause
beyond the control of Landlord.<PAGE>
Incorporation of Prior Agreements; Amendments
41. This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreement or understanding pertaining to any such matter shall be effective
for any purpose. No provision of this Lease may be amended or added to except
by an agreement in writing signed by the parties hereto or their respective
successors in interest. Any written addenda to this Lease, when signed or
initialed by the contracting parties shall be deemed a part of this Lease to
the same full extent as if incorporated herein.
Gender
42. Throughout this Lease the masculine gender shall be deemed to include
the feminine and the neuter and the singular, the plural and vice versa.
Accord and Satisfaction
43. No payment by Tenant or receipt by Landlord of a lesser amount than that
stipulated herein for Basic Rental, Operating Expenses, Taxes or any other
charge shall be deemed to be other than on account of the earliest stipulated
Basic Rental, Operating Expenses, Taxes or other charge then due, nor shall
any endorsement or statement on a check or letter accompanying any check or
payment be deemed an accord and satisfaction and Landlord may accept such
check or payment without prejudice to Landlord's rights to
<PAGE>
recover the balance of such Basic Rental, Operating Expenses, Taxes or other
charges or pursue any other remedy in this Lease, at law or in equity.
Time of Essence
44. Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
Brokers
45. Tenant warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, excepting only the
Miller-Richmond Company ("Broker") and that Tenant knows of no other real
estate broker or agent who is or might be entitled to a commission in
connection with this Lease. Tenant agrees to indemnify, defend and hold
Landlord harmless from and against all claims made by any broker or finder
other than the above-named broker for a commission in connection with this
Lease, provided that Landlord has not retained such broker.
Lease Effective Upon Execution
46. Delivery of this Lease, duly executed by Tenant, constitutes an offer to
lease the Demised Premises as herein set forth, and under no circumstances
shall such delivery be deemed to create an option or reservation to lease the
Demised Premises for the benefit of Tenant. This Lease shall only become
effective and binding upon execution hereof by Landlord and delivery of a
signed copy to Tenant.
Notices
47. Any notice required or permitted to be given hereunder by one party to
the other shall be deemed to be given when deposited in the United States
Mail, with sufficient postage prepaid, or overnight courier addressed to the
respective party to whom notice is intended to be given at the following
address of such party:
If to Landlord: If to Tenant:
Perimeter 400 Partners CIS Technologies, Inc.
1100 Johnson Ferry Road, N.E., Suite 200 1100 Johnson Ferry Road, N.E.,
Suite 800
Atlanta, GA 30342 Atlanta, GA 30342
with copies with copies
in the case of Landlord to: in the case of Tenant to:
Balcor Property Management, Inc. Kellie Watts
4849 Golf Road 6100 S. Yale Drive
Skokie, IL 60077 Suite 1900
Attn: Legal Department Tulsa, OK 74136
Surrender of Possession
48. Upon the expiration of the Lease Term or upon the termination of
Tenant's right of possession, whether by lapse of time or at the option of
Landlord as herein provided, Tenant shall forthwith surrender the Demised
Premises to Landlord in good order, repair and condition, ordinary wear
excepted. Prior to the expiration or termination of the Lease Term or of
Tenant's right of possession of the Demised Premises, Tenant shall remove its
office furniture, trade fixtures, office equipment, telephone and computer
systems (and all wiring related thereto) and all other items of Tenant's
property (including, without limitation, any alterations made or installed
after the commencement of the Lease Term other than the alterations approved
pursuant to Section 4 hereof) from the Demised Premises and shall surrender
the Demised Premises to Landlord in broom-clean condition. In addition,
Landlord may require removal of extraordinary improvements that were installed
by landlord or Tenant prior to the commencement of the Lease Term.
Extraordinary improvements include, but shall not be limited to, raised floors
or safes. Tenant shall pay to Landlord upon demand the cost of repairing any
damage to the Demised Premises and to the Building caused by any such removal.
Prohibition Against Recording
49. Neither this Lease, nor any memorandum, affidavit or other writing with
respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant, and the recording thereof in violation of this
provision shall make this Lease null and void at Landlord's election.
Only Landlord/Tenant Relationship
50. Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by an third party to create the relationship of principal
and agent, partnership, joint venturer or any association between Landlord and
Tenant, it being expressly understood and agreed that neither the method of
computation of Basic Rental nor any act of the parties hereto shall be deemed
to create any relationship between Landlord and Tenant other than the
relationship of landlord and tenant. This Lease shall create a usufruct only
which cannot be attached by Tenant's creditors and is not assignable except as
set forth in paragraph 3 above.
Governing
51. Interpretation of this Lease shall be governed by the internal laws of
the state where the Building is located.
Authorized Signatory
52. If Tenant is a corporation or partnership, each signatory of Tenant
personally represents and warrants that he is a duly authorized signatory for
and on behalf of the Tenant, and agrees that if the representation and
warranty contained in this paragraph is false, each signatory shall be
personally liable under this Lease.
Financial Information
53. Tenant represents and warrants that all financial information heretofore
and hereafter delivered to Landlord is true and correct and that no material
misstatements, misrepresentations or omissions exist therein.
Limitation on Landlord's Liability
54. It is expressly understood and agreed by Tenant that none of Landlord's
covenants, or undertakings or agreements are made or intended as personal
covenants, undertakings or agreements by Landlord or the partners in Landlord,
and any liability of Landlord or the partners in Landlord for damages or
breach or nonperformance by Landlord or otherwise arising under or in
connection with this Lease or the relationship of Landlord and Tenant
hereunder, shall be collectible only out of Landlord's interest in the
Building and the land upon which the Building is located (or if Landlord is
the beneficiary of a land trust, Landlord's right, title and interest in such
land trust), in each case as the same may then be encumbered, and no personal
liability is assumed by, nor at any time may be asserted against, Landlord or
the partners in Landlord or any of its or their officers, agents, employees,
legal representatives, successors or assigns, all such liability, if any,
being expressly waived and released by Tenant.
IN WITNESS WHEREOF this lease is entered into by the parties hereto on the
date and year first set forth above.
LANDLORD: TENANT:
Perimeter 400 Partners CIS Technologies, Inc. (SEAL)
an Illinois General Partnership
By: Balcor Pension Investors VI
an Illinois Limited Partnership
By: Balcor Mortgage Advisors VI By: /s/ Jim Hersma
an Illinois General Partnership Title: President
By: The Balcor Company a Delaware Corp.
By: /s/ Tom Molina V.P. Attest: /s/ Kellie J.
Watts
Attest: /s/ Jerry M. Ogle Title: Secretary
Title: Vice President and Secretary
<PAGE>
ACKNOWLEDGEMENT - LANDLORD
STATE OF ILLINOIS )
) SS
COUNTY OF LAKE )
I, Janice A. Berger, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that Tom Molina, personally known to me to be the
V.P. (Title), of Balcor Property Management Services, Inc., an Illinois
corporation, and _______ personally known to me to be the ________ Secretary
of said corporation and personally known to me to be the same persons whose
names are subscribed to the foregoing instrument, appeared before me this day
in person and severally acknowledged that they signed and delivered the said
instrument as their free and voluntary act and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and Notarial Seal this 20th day of September, 1995.
/s/ Janice A. Berger
Notary Public
My Commission Expires: 6/29/97 OFFICIAL SEAL
JANICE A. BERGER
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 6-29-97
ACKNOWLEDGEMENT - TENANT (CORPORATION)
STATE OF OKLAHOMA )
) SS
COUNTY OF TULSA )
I, Jeanne L. Day, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that James L. Hersma, personally known to me to
be the President of CIS Technologies, Inc. a(n) Delaware corporation, and
Kellie J. Watts, personally known to me to be the Secretary of said
corporation and personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, appeared before me this day in person
and severally acknowledged that they signed and delivered the said instrument
as their free and voluntary act and as the free and voluntary act and deed of
said corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 15th day of September, 1995.
/s/ Jeanne L. Day
Notary Public
My Commission Expires:
September 19, 1998
ACKNOWLEDGEMENT - TENANT (INDIVIDUAL)
STATE OF )
) SS
COUNTY OF )
I, __________, a Notary Public in and for said County, in the State aforesaid,
do hereby certify that ________, appeared before me this day in person and
acknowledged that (he)(they) signed and delivered the said instrument as
(his/her)(their) free and voluntary act for the uses and purposes therein set
forth.
GIVEN under my hand and Notarial Seal this ______ day of ________, 19__.
__________________________
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT "A"
OFFICE PLAN
TO BE ATTACHED
Floor plan of entire floor on which Demised Premises is located
and
Detailed interior floor plan of Demised Premises
<PAGE>
<PAGE>
EXHIBIT "B"
BUILDING RULES AND AGREED REGULATIONS
1. Tenant agrees to make a deposit, in an amount fixed by Landlord from
time to time, for each key or security access card issued by landlord to
Tenant for its offices, and upon termination of this Lease, to return all keys
to Landlord. Tenant shall not make duplicate copies of such keys and in the
event of the Tenant's loss of a key, Tenant shall pay to Landlord the cost of
replacing same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such a change.
2. Directories will be placed by Landlord in inconspicuous places in the
Building at the sole discretion of Landlord. No other directories shall be
permitted, unless previously consented to by Landlord in writing.
3. Tenants will refer all contractors, contractor's representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval, and control before performance of any
contractual service. This provision shall apply to all work performed in the
Building including installations of telephones, telegraph equipment,
electrical devices and attachments, and installations of any nature affecting
floors, walls, woodwork, trim, windows, ceilings, equipment or any other
physical portion of the Building.
4. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of any merchandise or materials which require
use of elevators or stairways, or movement through Building entrances or lobby
shall be restricted to hours designated by Landlord. All such movement shall
be under supervision of Landlord and in the manner agreed between Tenant and
Landlord by prearrangement before performance. Such prearrangement initiated
by Tenant will include determination by Landlord and subject to its decision
and control, as to the time, method, and routing of movement and as to
limitations imposed for safety or other concerns which may prohibit any
article, equipment or any other item from being brought into the Building.
Tenant is to assume all risk as to damage to articles moved and injury to
persons or the public engaged or not engaged in such movement, including
equipment, property, and personnel of Landlord if damaged or injured as a
result of acts in connection with carrying out this service for Tenant, from
time of entering property to completion of work, and Landlord shall not be
liable for acts of any person engaged in, or any damage or loss to any of said
property or persons resulting from any act in connection with such service
performed for Tenant.
5. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors, or other parts of the Building, except of color, size
and style and in such places, as shall be first approved in writing by
Landlord. No nails, hooks, or screws shall be driven or inserted in any part
of the building, except by the Building maintenance personnel nor shall any
part be defaced by Tenant. All signs will be contracted for by Landlord at
the rate fixed by Landlord from time to time, and Tenant will be billed and
pay for such service accordingly.
6. Canvassing, soliciting, peddling or begging in or around the Building
are prohibited and Tenant shall report such activities to Landlord and
cooperate to prevent such conduct.
7. Tenant shall not place, install or operate in the Demised Premises or in
any part of the Building, any engine or machinery, or maintain, use or keep
any inflammable, explosive, or hazardous material without the express written
consent of Landlord.
8. Landlord will not be responsible for lost or stolen personal property,
equipment, money, or jewelry from Tenant's area or public rooms regardless of
whether such loss occurs when the area is locked against entry or not.
9. No birds or animals shall be brought into or kept in or about Building.
10. Employees of Landlord shall not receive or carry messages for or to
Tenant or any other person, nor contract with or render free or paid services
to Tenant's agents, employees, or invitees.
11. Landlord shall have the right, from time to time, to designate smoking
and non-smoking areas in, around or throughout the Building and shall further
be permitted to prohibit or limit such activity in order to fully comply with
any applicable governmental ordinance, law or regulation.
12. The entries, passages, doors, elevators, elevator doors, hallways or
stairways shall not be blocked or obstructed; no rubbish, litter, trash, or
material of any nature shall be placed, emptied or thrown into these areas;
and such areas shall not be used at any time except for ingress or egress by
Tenant, Tenant's agents, employees, invitees or visitors to or from the<PAGE>
Demised Premises.
13. Plumbing fixtures and appliances shall be used only for purposes for
which constructed, and no sweepings, rubbish, rages or other unsuitable
material shall be thrown or placed therein. Damage resulting to any such
fixtures or appliances from misuse by Tenant shall be repaired and replaced at
Tenant's sole cost and expense, and Landlord shall not in any case be
responsible therefor.
14. Tenant shall not do, or permit anything to be done in or about the
Building, or bring or keep anything therein, that will in any way increase the
rate of fire or other insurance on the Building, or on property kept therein,
or obstruct or interfere with the rights of, or otherwise injure or annoy,
other tenants, or do anything in conflict with the valid pertinent laws, rules
or regulations of any governmental authority.
15. The Landlord desires to maintain the highest standards of environmental
comfort and convenience of the tenantry. It will be appreciated if any
undesirable conditions or lacks of courtesy or attention are reported directly
to the management.
16. The work of the janitor or cleaning personnel shall not be hindered by
Tenant after 5:30 p.m. and such work may be done at any time when the offices
are vacant; the windows, doors, and fixtures may be cleaned at any time.
Tenant shall provide adequate waste and rubbish receptacles, cabinets, book
cases, map cases, etc., necessary to prevent unreasonable hardship to Landlord
in discharging its obligation regarding cleaning service.
17. Landlord shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment including safes, file
systems, etc., that are to be placed in the Building, and only those which in
the opinion of Landlord might not with reasonable probability do damage to the
floors, structure and/or freight elevator, may be moved into said Building.
Any damage occasioned in connection with the moving or installing of such
aforementioned articles in said Building or the existence of same in said
Building shall be paid for by Tenant, unless otherwise covered by insurance.
18. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant, which, in Landlord's opinion, tends
to impair the reputation of the Building or its desirability for the executive
offices of Landlord or of other tenants, and, upon written notice from
Landlord, Tenant will refrain from or discontinue such publicity.
19. The Demised Premises shall not be used for lodging, sleeping, or cooking
or for any immoral or illegal purpose or for any purpose that will damage the
Demised Premises or the Building or the reputation thereof, or for any purpose
other than that specified in the lease covering the premises.
<PAGE>
<PAGE>
LEASE RIDER
RIDER ATTACHED TO AND MADE A PART OF THE LEASE AGREEMENT dated August 8,
1995, (hereinafter referred to as the "Lease") by and between Perimeter 400
Partners, an Illinois general partnership (hereinafter referred to as
"Landlord") and CIS Technologies, Inc., hereinafter referred to as "Tenant")
concerning the premises known as Suite 800 in the office building commonly
known as Perimeter 400 Center in Atlanta, Georgia. In the event of any
conflict between the terms and conditions of the Lease and the terms and
conditions of this Rider, the terms and conditions contained in this Rider
shall control.
55. Tenant Improvements.
A. Landlord agrees to contribute up to the product of ten dollars
($10.00) multiplied by the number of rentable square feet in the Demised
Premises (the "Improvement Allowance") towards the cost of preparation of
design, mechanical and electrical drawing and other construction drawings and
specifications for, and the construction of, certain tenant improvements (the
"Tenant Improvements") for the Demised Premises in accordance with the above
plans (the "Plans"). The Plans shall be approved by both Landlord and Tenant.
Tenant agrees it shall not make any changes to the Plans without obtaining the
prior written consent of Landlord, which consent shall not be unreasonably
withheld. It is understood and agreed that Landlord's contractors shall
perform the work in connection with the Tenant Improvements.
B. The Tenant Improvements shall also include the installation of
sub-metering for electrical usage (i) in the computer/equipment room, (ii)
wherever else the Plans indicate that other than 110 volt service will be
installed and (iii) wherever Tenant's usage of equipment will be in excess of,
or the type of equipment does not constitute, normal and customary usage for
an office tenant.
C. If, for whatever reason, the cost to construct the Tenant
Improvements pursuant to the Plans exceeds the Improvement Allowance, then
within twenty (20) days of Tenant's receipt of an invoice from Landlord,
Tenant shall pay Landlord, as additional rent, by certified or cashier's
check, an amount equal to the amounts due in excess of the Improvement
Allowance. In the event Tenant shall make changes to the Plans that are
approved by Landlord and which result in an additional cost to Landlord to
complete the Tenant Improvements in excess of the Improvement Allowance,
Tenant shall pay to Landlord prior to construction of such changes, as
additional rent, any increase in the cost of completing the Tenant
Improvements in excess of the Improvement Allowance resulting from such
changes in the Plans. Tenant's failure to pay timely any amounts to be paid
by Tenant as set forth in this Paragraph shall be an event of default under
the Lease.
D. If the actual costs to complete the Tenant Improvements is less
than the Improvement Allowance (the "Excess Allowance"), then Tenant may seek
reimbursement from Landlord for costs incurred in connection with data and
telecommunications equipment installed in the Demised Premises or actual
moving expenses provided that the maximum amount of the Excess Allowance which
may be used for such purpose is up to the product of three dollars $3.00)
multiplied by the number of rentable square feet in the Demised Premises.
Landlord shall disburse any such amounts within thirty (30) days after Tenant
submits paid invoices provided such disbursement is made within six months
following the Commencement Date. Any remaining balance of the Excess
Allowance shall remain the property of the Landlord and Tenant shall have no
right thereto.
E. If for any reason (i) the Demised Premises shall not be ready for
occupancy by Tenant on or before the Commencement Date, or (ii) the Tenant
Improvements are not completed on or before the Commencement Date, this Lease
shall not be affected thereby, nor shall Tenant have any claim against
Landlord by reason thereof except as provided in Paragraph 25 of the Lease.
All claims for damages arising out of any such delay are waived and released
by Tenant.
56. Parking. Landlord agrees that Tenant shall have the right to use no
more than 4.58 spaces in the parking area per 1,000 square feet of rentable
space in the Demised Premises. These spaces shall not be reserved or
identified for Tenant's exclusive use, but shall be available on a first-come,
first served basis. This calculation is made with respect to the initial area
of the Demised Premises and the number of parking spaces shall not be adjusted
if the area of the Demised Premises increases, but shall be adjusted if the
area of the Demised Premises decreases or if Tenant subleases the Demised
Premises. Any recalculation of the number of parking spaces shall be based on
a ratio of 3.8 parking spaces per 1,000 square feet of rentable area.
<PAGE>
<PAGE>
57. Security Deposit. Notwithstanding anything in this Lease to the
contrary, provided this Lease is in full force and effect and Tenant:
(i) is occupying and doing business from the Demised Premises; and
(ii) is not in default under the Lease; and
(iii) has maintained a history of payments within the applicable grace
period, if any, provided under the Lease; then
At any time after the 15th month of the Lease Term, Landlord shall
refund one-half (1/2) of Tenant's Security Deposit in the amount of $15,709.60
within thirty (30) days after Landlord's receipt of Tenant's written request
therefor.
58. Attorneys' Fees. Notwithstanding anything to the contrary in the Lease,
if there is any litigation between the parties relating to the Lease, the
prevailing party shall recover all costs, and expenses, including without
limitation reasonable attorney fees and reasonable costs incurred by such
party in connection with the litigation.
LANDLORD: TENANT:
PERIMETER 400 PARTNERS, CIS TECHNOLOGIES, INC.
an Illinois general partnership,
By: Balcor Pension Investors-VI, By: /s/ Jim Hersma
an Illinois limited partnership,
general partner Its: President
By: Balcor Mortgage Advisors-VI, Witness: /s/ Kellie J. Watts
an Illinois general partnership,
its general partner Date:
By: The Balcor Company, a Delaware
corporation, its general partner
By: /s/ Tom Molina
Tom Molina, an Authorized Agent
Witness: /s/ Cindy Asensky
Date: 9-20-95<PAGE>
<PAGE>
Exhibit 10b
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the Agreement ) is made and entered
into this 31 day of December, 1995, by and between Perimeter 400
Partners (hereinafter referred to as Landlord ), and CIS
Technologies, Inc. (hereinafter referred to as Tenant ).
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a lease
agreement dated August 8, 1995 (the Lease ) for the use and
occupancy of certain premises by Tenant (the Demised Premises )
located in the Perimeter 400 Building in Atlanta, Georgia (the
Building ); and
WHEREAS, Landlord and Tenant do hereby intend to amend and modify the
Lease as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Expansion Space. Commencing on March 1, 1996 (the Expansion
Space Commencement Date ), approximately 3,311 rentable
square feet on the area shown on the attached site plan
identified as Exhibit A, and incorporated herein, (the
Expansion Space ) shall be added to the Demised Premises so
that as of the Expansion Space Commencement Date, the Demised
Premises shall consist of approximately 13,104 rentable square
feet.
2. Rental. The total Basic Rental for the Demised Premises,
including the Expansion Space, is hereby increased to
$1,449,472.50, payable in advance, in equal monthly
installments as follows:
December 1, 1995 - February 29, 1996 $14,689.50 per month
March 1, 1996 - November 30, 1996 $19,656.00 per month
December 1, 1996 - November 30, 1997 $19,929.00 per month
December 1, 1997 - November 30, 1998 $20,202.00 per month
December 1, 1998 - November 30, 1999 $20,475.00 per month
December 1, 1999 - November 30, 2000 $20,748.00 per month
December 1, 2000 - November 30, 2001 $21,021.00 per month
Notwithstanding the terms of the Lease to the contrary, as of
the date hereof, December 1, 1995 shall be deemed to be the
Commencement Date of the Lease, and November 30, 2001 shall
be deemed to be the Termination Date of the Lease.
As of the Expansion Space Commencement Date, Tenant s Prorata
Share of Operating Expenses and Taxes, as set forth in the
subject Lease, shall be increased to 3.6625%. In addition,
Tenant s security deposit shall be increased by $4,966.50 to a
total of $36,385.70 on or before the Expansion Space
Commencement Date. In no event shall any of this increase in
the security deposit due to the addition of the Expansion Space
be returned to Tenant under the provisions of Section 57 of the
Lease. Tenant's occupancy of the Expansion Space shall be
subject to all of the general terms and conditions contained in
the Lease. <PAGE>
<PAGE>
3. Tenant Improvements. Landlord agrees to contribute up to
Thirty-One Thousand Seven Hundred Nineteen and 38/100 Dollars
($31,719.38) (such sum based upon an assumption that Tenant
shall occupy the Expansion Space on the Expansion Space
Commencement Date), calculated at Ten and No/100 Dollars
($10.00) per renewable square foot of the Expansion Space,
prorated based on the Commencement Date and the remaining Lease
Term (the Tenant Allowance ), towards the cost of preparation
of design, mechanical and electrical drawings, as well as other
construction drawings, and specifications for and the
construction of certain tenant improvements (the Tenant
Improvements ) for the Demised Premises in accordance with the
space plan (the Plans ) to be approved by both Landlord and
Tenant within days of the date of execution of
this Agreement. For illustration purposes only, if Tenant were
to expand effective on the first day of the fourth (4th) month
of the Lease Term, Landlord would contribute 69/72nds of the
maximum allowance of Ten and No/100 Dollars ($10.00) per square
foot Tenant Allowance as set forth herein. It is understood
and agreed that Landlord s contractors shall perform the work
in connection with the Tenant Improvements. If the cost to
construct the Tenant Improvements pursuant to the Plans exceeds
the Tenant Allowance, then within ten (10) days of Tenant s
receipt of an invoice from Landlord, Tenant shall pay Landlord,
as additional rent, by certified or cashier s check, an amount
equal to the difference between the cost to construct the
Tenant Improvements and the Tenant Allowance. Tenant agrees it
shall not make any changes to the Plans without obtaining the
prior written consent of Landlord. In the event Tenant shall
make changes to the Plans that are approved by Landlord and
which result in an additional cost to Landlord of completing
the Tenant Improvements in excess of the Tenant Allowance,
Tenant shall pay to Landlord prior to construction of such
changes, as additional rent, any increase in the cost of
completing the Tenant Improvements in excess of the Tenant
Allowance resulting from such changes in the Plans.
In the event Tenant, its employees or agents, causes any delays
or is otherwise responsible, in whole or in part, for any
additional costs in excess of the Tenant Allowance incurred by
Landlord in constructing the Tenant Improvements (other than
additional costs arising due to changes to the Plans as
described above), Tenant shall pay to Landlord with ten (10)
business days of receipt of written notice from Landlord, as
additional rent, any such additional costs in excess of the
Tenant Allowance incurred by Landlord. Tenant s failure to
timely pay any such amounts to be paid by Tenant as set forth
in this Paragraph, at the time and in the manner set forth in
this Paragraph, shall be an event of default. If for any
reason (i) the Expansion Space shall not be ready for occupancy
by Tenant on or before the Expansion Space Commencement Date,
or (ii) the Tenant Improvements are not completed on or before
the Expansion Space Commencement Date, this Lease shall not be
affected thereby, nor shall Tenant have any claim against
Landlord by reason thereof. All claims for damages arising out
of any such delay are waived and released by Tenant. <PAGE>
4. Early Access. Tenant will be allowed early access to the
Expansion Space as of February 1, 1996, so that Tenant may
enter the Expansion Space for the purposes of installing
furniture, cabling and telecommunications equipment. During
such period of access for the installation purposes described
herein, Tenant shall not be responsible for payment of Basic
Rental or the Tenant s pro rata share of Operating Expenses and
Taxes for the Demised Premises, but shall otherwise be
responsible for and comply with all other provisions of <PAGE>
<PAGE>
the Lease and this Agreement. Such activities of Tenant, its
agents, employees or contractors shall not interfere with
construction of Landlord or Landlord s contractors of the
Tenant Improvements.
5. Brokers. Tenant warrants that it has had no dealings with any
real estate broker or agent in connection with the negotiation
of this Agreement other than Insignia Commercial Group, Inc.
and Miller Richmond Company and that Tenant knows of no other
real estate broker or agent who is or might be entitled to a
commission in connection with this Agreement. Tenant agrees to
indemnify and hold Landlord harmless from and against all
Claims made by any broker or finder for a commission in
connection with this Agreement provided that Landlord has not
retained such broker.
6. Conflict of Terms. Except as expressly amended herein, all
terms and conditions in the Lease shall remain unchanged and in
full force and effect, and all capitalized terms not otherwise
defined herein shall have the meaning set forth in the Lease.
In the event of any conflict between the terms and conditions
of the Lease and the terms and conditions of the Agreement, the
terms and conditions of this Agreement shall control.
LANDLORD: TENANT:
PERIMETER 400 PARTNERS, an CIS TECHNOLOGIES, INC.
Illinois general partnership
By: Balcor Pension Investors-VI,
an Illinois limited partnership,
a general partner
By: Balcor Mortgage Advisors-VI,
an Illinois general partnership,
its general partner
By: The Balcor Company, a Delaware
corporation, its general partner
By: /s/ Tom Molina By: /s/ Richard A. Evans
Its: VP Its: Treasurer
Witness: /s/ Cindy Asinsen Witness: /s/Dora Durland
Date: 1/3/96 Date: 12/28/95
<PAGE>
<PAGE>
EXHIBIT A
MAP
PERIMETER 400 CENTER <PAGE>
<PAGE>
Exhibit 10c
PROMISSORY NOTE EXTENSION,
WAIVER OF COVENANTS
AND
TERMINATION OF PLEDGE AGREEMENT
This agreement is made and entered into as of the 27th day of December,
1995, by and between FIRST FINANCIAL MANAGEMENT CORPORATION, a Georgia
Corporation (Lender); MICROBILT CORPORATION, a Georgia Corporation
(Seller) which is a wholly owned subsidiary of Lender; HOSPITAL COST
CONSULTANTS, INC., a California Corporation ( Borrower ), and C.I.S.
TECHNOLOGIES, INC., a Delaware Corporation, ( Guarantor ).
RECITALS:
Guarantor has acquired all of the outstanding common stock of Borrower
from Seller pursuant to the terms of a Stock Purchase and Sale Agreement
between Lender, Seller and Guarantor dated May 31, 1995 (as amended, the
Purchase Agreement ).
Borrower is obligated to Lender pursuant to the terms of that certain
Promissory Note of Borrower dated May 31, 1995 (the Note ). Pursuant to the
Note and a written notice of extension thereof heretofore delivered by
Borrower to Lender, all amounts owing by Borrower to Lender are due and
payable on December 29, 1995.
In order to secure payment of the Note and related obligations of
Borrower to Lender, Borrower has granted to Lender a Security interest in
certain Collateral as defined in and pursuant to an Accounts Security
Agreement dated May 31, 1995 entered into by Borrower and accepted by Lender
(the Security Agreement ).
Guarantor, which is the 100% parent of Borrower, has unconditionally
guaranteed the due and punctual payment in full of all principal and interest
on the Note pursuant to the terms of a Corporate Guaranty dated May 31, 1995
entered into by Guarantor (the Guaranty ). Pursuant to the terms of a Pledge
Agreement dated May 31, 1995 entered into by Guarantor in its capacity as
Pledgor thereunder (the Pledge ), Guarantor has pledged and granted to
Lender, as security for the Guaranty, a security interest in the outstanding
shares of stock of Borrower and all additional stock of Borrower thereafter
acquired, received, or <PAGE>
owned by Guarantor, together with certificates representing such shares and
all products and proceeds of such shares.
Guarantor and another of Guarantor's wholly owned subsidiaries, C.I.S.,
Inc., have received a written commitment from C.I.S., Inc.'s principal lender,
General Electric Capital Corporation ( GE Capital ), to extend additional
credit sufficient in amount, and restricted in its use, to satisfy all
o b ligations to Lender pursuant to the Note and the Guaranty ( the
Commitment ). The Commitment is contingent upon, inter alia, (1) the
consummation of a corporate reorganization of the subsidiaries of Guarantor,
including Borrower, (the Reorganization ) which will result in the cessation
of the corporate existence of Borrower, and, thereafter, (2) the negotiation,
execution, and delivery of definitive credit documentation reflecting both the
c o r p o rate structure of Guarantor and its affiliates following the
Reorganization and the extension of additional credit by GE Capital (the GE
Documentation ).
Borrower has requested that Lender (1) grant an extension of the due
date of the Note to February 29, 1996 in order to allow sufficient time within
w h i c h to complete the Reorganization and GE Documentation and (2)
conditionally waive any violation of the Security Agreement that would
otherwise result from the Reorganization. Guarantor has requested that Lender
effectively consent to the cessation of the corporate existence of Borrower as
a result of the Reorganization by means of agreeing (1) to a termination of
the Pledge Agreement concurrently with the Reorganization, and (2) together
with Seller, to waive the convenants of Guarantor with respect to the conduct
of the business of the Borrower prior to repayment of the Note contained in
the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, the parties hereto do hereby agree as
follows:
1. EXTENSION OF NOTE MATURITY DATE. Lender hereby agrees to extend
the maturity date upon which the principal amount of the Note is due and
payable to February 29, 1996, whereupon the principal amount of the Note shall
be due and payable in full, together will all interest accrued thereon and
unpaid, calculated at the same rate as currently provided for in the Note.
<PAGE>
<PAGE>
2. CONDITIONAL WAIVER OF CERTAIN COVENANTS OF BORROWER IN SECURITY
AGREEMENT. In order to facilitate the Reorganization and consequent cessation
of the corporate existence of Borrower and on the condition that Borrower
takes all action necessary or reasonably requested by Lender to amend any
financing or continuation statement filed in connection with the Security
Agreement so that such statement(s) is (are) not seriously misleading within
the meaning of Section 9-402(7) of the Uniform Commercial Code of the State of
New York all as set forth in greater detail in Section 5(c) of the Security
Agreement (which action Borrower hereby covenants it will take). Lender does
hereby waive the covenant of Borrower set forth at Section 5(c) of the
Security Agreement together with any other violation of the Security Agreement
which might otherwise result from the Reorganization.
3. TERMINATION OF PLEDGE AGREEMENT. In order to facilitate the
Reorganization and consequent cessation of the corporate existence of
Borrower, Lender does hereby consent and agree to the termination of the
Pledge Agreement effective concurrently with the effectiveness of the
Reorganization, whereupon Lender shall return to Guarantor all certificates
formerly representing outstanding share of stock of Borrower.
4. WAIVER OF CERTAIN COVENANTS OF GUARANTOR IN PURCHASE AGREEMENT.
In order to facilitate the Reorganization and consequent cessation of the
corporate existence of Borrower, Lender and Seller do hereby agree to waive,
effective concurrently with effectiveness of the Reorganization, the covenants
of Guarantor with respect to the conduct of the business of the Borrower prior
to repayment of the Note as set forth at Section 8.13 of the Purchase
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTOR.
Borrower and Guarantor hereby represent and warrant to Lender that
(a) no Event of Default as defined in the Note and in the Pledge
Agreement, respectively, has occurred and is continuing, and
(b) neither Guarantor, C.I.S., Inc., nor any of Guarantor's other
affiliates has received written notice from GE Capital of its intention to
terminate the Commitment.<PAGE>
6. CONDITION PRECEDENT. As a Condition to the effectiveness of this
Agreement, Lender shall have received payment of all unpaid interest on the
Note which accrues or has accrued through December 29, 1995.
7. MISCELLANEOUS PROVISIONS.
(a) This agreement shall be governed by and construed in
accordance with the internal laws (as opposed to conflicts of law provisions)
of the State of New York.
(b) Except as modified hereby, the terms of the Note shall
remain in full force and effect.
LENDER
FIRST FINANCIAL MANAGEMENT CORPORATION
By: /s/
Title: V.P.
SELLER
MICROBILT CORPORATION
By: /s/
Title: V.P.
BORROWER
HOSPITAL COST CONSULTANTS, INC.
By: /s/Richard A. Evans
Title: Treasurer
GUARANTOR
By: /s/Richard A. Evans
Title: Treasurer
<PAGE>
<PAGE>
Exhibit 10d
U.S. $14,250,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 1, 1996
among
C.I.S., INC.,
as Borrower,
C.I.S. TECHNOLOGIES, INC.,
as Parent,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
<PAGE>
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is
entered into as of February 1, 1996 by and among C.I.S., INC., an
Oklahoma corporation ("Borrower"), C.I.S. TECHNOLOGIES, INC., a
D e laware 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. Borrower, Parent and Lender are parties to that certain Credit
Agreement dated as of October 15, 1994, as amended by the First
Amendment, dated as of May 31, 1995, and the Second Amendment, dated
as of July 21, 1995 (as so amended, the "Existing Credit Agreement").
B. Effective 12:01 a.m. on January 1, 1996 each of the following
of Parent's subsidiaries (i) CIS Administrative Services, Inc., a
Delaware corporation, (ii) CIS Funding Corp., a Delaware corporation,
(iii) CIS Healthcare Research Systems, Inc., a Delaware corporation,
(iv) Hospital Billing Analysis, Inc., a California corporation
("HBA"), and (v) Hospital Cost Consultants, Inc., a California
corporation ("HCCI") merged with and into Borrower, with Borrower in
e a c h case as the surviving corporation (collectively, the
"Reorganization").
C. Pursuant to the Existing Credit Agreement, Lender has agreed to
make certain loans to Borrower upon the terms and conditions set
forth therein.
D. In connection with the Reorganization, Borrower has requested
that Lender enter into this Agreement to amend and restate the
Existing Credit Agreement to, among other things, increase the
Revolving Credit Commitment (as defined in Annex A) from $5,000,000
to $6,000,000 and increase the Term Loan Commitment (as defined in
Annex A) by an additional $5,000,000.
E. To effectuate the foregoing, each of the parties hereto is
agreeable to amending and restating the Existing Credit Agreement on
the terms and conditions set forth herein.
F. 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:
STM-62336.3
<PAGE>
<PAGE>
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 Borrower's use and upon the request of Borrower
therefor to Lender, advances (each, including such advances made
pursuant to the terms of the Existing Credit Agreement which remain
outstanding as of the Closing Date, 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. Borrower 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.
(b) Borrower 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 Borrower 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 Borrower to Lender at its address at 201 High Ridge Road,
Stamford, Connecticut 06927, Attention: Portfolio Analyst
Department, Telephone No. (203) 316-7500, Telecopy No. (203) 316-
7816/7817, 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 Borrower. 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 Borrower 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 on the Closing Date and otherwise
duly completed, which note shall be substituted in exchange for (but
not in repayment of) that certain revolving credit note, dated
October 31, 1994, delivered by Borrower and HBA in connection with
the Existing Credit Agreement. 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) Borrower 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
Borrower, which sets forth a calculation of the Borrowing Base at the
times and for the periods set forth in Annex E. Borrower agrees that
in making any Revolving Credit Advance hereunder Lender shall be
entitled to rely upon the most recent Borrowing Base Certificate
delivered to Lender. Borrower further agrees that, if Borrower shall
have failed to deliver a Borrowing Base Certificate to Lender within
the specified period,
STM-62336.3
-2- <PAGE>
<PAGE>
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 (or has made available in connection
with the terms of the Existing Credit Agreement, as the case may be)
to Borrower the Term Loan in a maximum principal amount equal to the
Lender's Term Loan Commitment as follows: (i) on the Closing Date
(as defined in the Existing Credit Agreement), in a single funding, a
portion of the Term Loan in a principal amount equal to $1,000,000
(the "Tranche A Term Loan"); (ii) on the date of consummation of the
acquisition of AMSC, in a single funding, a portion of the Term Loan
in a principal amount equal to $1,000,000 (the "Tranche B Term
Loan"); (iii) on the effective date of the Second Amendment to the
Existing Credit Agreement, dated as of July 21, 1995, in a single
funding, a portion of the Term Loan in a principal amount equal to
$1,250,000 (the "Tranche C Term Loan"); and (iv) on the Closing Date,
in a single funding, a portion of the Term Loan in a principal amount
equal to $5,000,000 (the "Tranche D Term Loan"). The Term Loan shall
be evidenced by a single promissory note of Borrower substantially in
the form of Exhibit D, dated the date hereof, payable to Lender in a
principal amount equal to $7,138,888.78 (which amount represents the
outstanding principal amount of the Term Loan as of the Closing Date)
and otherwise duly completed, which note shall be in substitution and
exchange for (but not in repayment of) that certain term note, dated
October 31, 1994, delivered by Borrower and HBA in connection with
the Existing Credit Agreement.
(b) Subject to the terms and conditions of this Agreement, on
any date of funding of the Tranche A Term Loan, the Tranche B Term
Loan, the Tranche C Term Loan or the Tranche D 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,
the Tranche B Term Loan, the Tranche C Term Loan and the Tranche D
Term Loan shall be payable in quarterly installments until paid in
full as follows:
<TABLE>
<CAPTION>
Payment Tranche A Tranche B Tranche C Tranche D
Date Term Loan Term Loan Term Loan Term Loan
<S> <C> <C> <C> <C>
01/1/95 $83,333.33 $83,333.33 $ 0 $ 0
04/1/95 83,333.33 83,333.33 0 0
07/1/95 83,333.33 83,333.33 0 0
10/1/95 83,333.33 83,333.33 138,888.88 0
01/1/96 83,333.33 83,333.33 138,888.88 0
04/1/96 83,333.33 83,333.33 138,888.88 12,500.00
07/1/96 83,333.33 83,333.33 138,888.88 312,500.00
10/1/96 83,333.33 83,333.33 138,888.88 312,500.00
01/1/97 83,333.33 83,333.33 138,888.88 312,500.00
04/1/97 83,333.33 83,333.33 138,888.88 312,500.00
07/1/97 83,333.33 83,333.33 138,888.88 312,500.00
10/1/97 83,333.37 83,333.37 138,888.89 3,125,000.00
Total $1,000,000.00 $1,000,000.00 $1,250,000.00 $5,000,000.00
</TABLE>
STM-62336.3
-3- <PAGE>
<PAGE>
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) Borrower hereby promises 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.
(b) In the event that the outstanding balance of the Revolving
Credit Loan shall at any time exceed the Borrowing Availability, (i)
Borrower 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) Borrower 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, Borrower's right to receive Revolving Credit Advances
shall simultaneously terminate and Borrower's 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, Borrower shall pay to Lender in immediately available
funds all of the Obligations and any accrued and unpaid interest
thereon. In the event that Borrower, Parent or any of their
respective Subsidiaries or Affiliates, as the case may be, issues,
with (to the extent required pursuant to the terms hereof) the
written consent of Lender, any Stock, Borrower shall, on the first
Business Day after such issuance, prepay the Tranche D Term Loan in
an amount equal to the Net Proceeds of such issuance. Any such
prepayment shall be applied to the installments of the Tranche D Term
Loan in the inverse order of their scheduled maturities until such
Tranche D Term Loan has been satisfied in full.
(d) Borrower 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) Borrower shall use the proceeds of the Revolving Credit Loan
for (i) the payment of costs and expenses of the financing
transactions contemplated by this Agreement that are payable by
Borrower, and (ii) for working capital, other corporate purposes and
acquisitions permitted by the terms of this Agreement and the other
Loan Documents.
(b) Borrower shall use (or has used in accordance with the terms
of the Existing Credit Agreement, as the case may be) the proceeds of
the Term Loan as follows: (i) the Tranche B Term Loan has been used
only for the financing of the acquisition of AMSC; (ii) the
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Tranche A Term Loan has been used only for working capital and other
corporate purposes permitted by the terms of this Agreement and the
other Loan Documents; (iii) the Tranche C Term Loan has been used
only to repay outstanding Revolving Credit Advances; and (iv) the
Tranche D Term Loan shall be used only to repay in full the
outstanding principal amount of the FFMC Note.
1.5 Interest.
(a) Borrower shall pay interest on the Term Loan (including,
without limitation, interest on any portion of the Tranche D Term
Loan prepaid in accordance with Section 1.3(c)) 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 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) Borrower 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 Borrower 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
c o mpetent 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, Borrower 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
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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 Obligations, and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
1.6 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Lender and on other information
available to Lender, Lender shall determine which Accounts shall be
deemed to be Eligible Accounts and Eligible Charge Recovery Accounts
for purposes of determining the amounts, if any, to be advanced to
Borrower 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 Borrower, Borrower agrees 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,
Borrower will establish (if it has not already done so pursuant to
the terms of the Existing Credit Agreement) and maintain until the
Termination Date, the cash management system described in Annex B.
1.9 Receipt of Payments. Borrower 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. Borrower
irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received from or on behalf of
Borrower, and Borrower irrevocably agrees that Lender shall have the
continuing exclusive right to apply any and all such payments against
the then due and payable Obligations of Borrower 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 Borrower for payment of all
Fees, expenses, charges, costs, principal, interest, or other
Obligations then due and payable by Borrower under this Agreement or
any of the Loan Documents, even if the making of such Revolving
Credit Advance causes the
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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 Borrower. Each and
every such accounting shall (absent manifest error) be deemed final,
binding and conclusive upon Borrower in all respects as to all
matters reflected therein, unless Borrower, within thirty (30) days
after the date any such accounting is rendered, shall notify Lender
in writing of any objection which Borrower 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
Borrower. Lender's determination, based upon the facts available, of
any disputed item shall (absent manifest error) be final, binding and
conclusive on Borrower.
1.12 Indemnity.
(a) Borrower 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 Borrower 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, Borrower 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 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 Borrower, all such obligations of Borrower shall be
and remain enforceable against, and only against, Borrower and shall
not be enforceable against Lender.
(b) Borrower hereby acknowledges and agrees 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
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to influence the conduct of any Loan Party with respect to the
ownership, operation or management of any of the Subject Property.
1.13 Access. Borrower and Parent shall (and shall cause each of
their respective 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 Borrower and Parent agree to render to
Lender at Borrower's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
Borrower shall, and shall cause each of its Subsidiaries, if any, to,
make available to Lender and its 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. 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. Borrower 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 Borrower 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 Borrower 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) Borrower shall make such deductions, and (iii)
Borrower shall pay the full amount deducted to the relevant taxing or
other authority in accordance with applicable law.
(b) In addition, Borrower agrees 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) Borrower 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, Borrower shall furnish to Lender, the
original or a certified copy of a receipt evidencing payment thereof.
2. CONDITIONS PRECEDENT
2.1 Conditions to the effectiveness of this Agreement and the
Tranche D Term Loan and further Revolving Credit Advances pursuant to
this Agreement. Notwithstanding any other provision of this
Agreement, the effectiveness of this Agreement and the obligation of
Lender to make the Tranche D Term Loan and further Revolving Credit
Advances pursuant to this Agreement on the Closing Date or Lender's
obligation to take, fulfill, or perform any other action hereunder
are subject to the following conditions having been fulfilled to the
satisfaction of Lender:
(a) This Agreement or counterparts thereof shall have been duly
executed by Borrower, Parent and acknowledged and agreed to by AMSC
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) 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.
(d) 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 endorsements, as appropriate, in
favor of Lender and in form and substance satisfactory to Lender.
(e) Payment by Borrower 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).
(f) 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.
(g) Section 3.1 of the Limited Liability Company Agreement of SA
Services, L.L.C., dated as of October 31, 1994, between Parent and GE
Capital Commercial Finance, Inc. shall have been amended in a manner
satisfactory to Lender.
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(h) Evidence satisfactory to Lender that all Indebtedness and
other obligations of Borrower under its financing agreements and
instruments with FFMC (including, without limitation, the FFMC Note,
the FFMC Guaranty, the FFMC Security Agreement and the FFMC Pledge
Agreement) (collectively, the "FFMC Agreements") will be performed
and paid in full from the proceeds of the Tranche D Term Loan and all
Liens upon any of the property of any Loan Party securing such
Indebtedness shall be terminated and released immediately upon such
payment, and Lender and FFMC shall have entered into an escrow or
other agreement in form and substance satisfactory to Lender
providing for the release and termination of all such Liens,
termination of the FFMC Agreements and acknowledgement of payment in
full of all outstanding Indebtedness and other obligations under or
relating to the FFMC Agreements.
(i) Evidence satisfactory to Lender that the Reorganization has
been duly completed in accordance with all applicable laws.
(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
r e a s onably, with the nature and status of all contractual
o b ligations, securities, labor, tax, ERISA, employee benefit,
environmental, health and safety matters, in each case, involving or
affecting any Loan Party.
2.2 Further Conditions to Each Loan. It shall be a further
condition to the funding of the Tranche A Term Loan, the Tranche B
Term Loan, the Tranche C Term Loan or the Tranche D Term Loan and
each 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.
(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 D Term Loan, the principal
amount of the FFMC Note shall be indefeasibly paid in full with the
proceeds of such Loan and Lender shall have received such evidence of
such payment as it may require, including, without limitation, the
FFMC Note marked cancelled.
The request and acceptance by Borrower 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 Borrower that the
conditions in this Section 2.2 have been satisfied and (ii) a
confirmation by Parent and Borrower of the granting and continuance
of Lender's Liens pursuant to the Collateral Documents.
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3. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, Borrower 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 power 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.
3.3 Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by each Loan Party of the
Loan Documents and all other instruments 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(c), 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
a c cordance with its terms, subject to applicable bankruptcy,
i n s olvency, moratorium, reorganization or other similar laws
affecting creditors' rights and to equitable principles of general
applicability.
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3.4 Financial Statements. Borrower 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
w h i ch are not reflected in the audited December 31, 1994,
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, 1994, 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, 1994, 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
L o a n Party are subject to any Liens, except (x) Permitted
Encumbrances and (y) 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 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
Borrower's 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 Borrower's 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 Borrower's 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 Borrower's or Parent's
knowledge, threatened. Hours worked by
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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 Borrower's 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 Borrower's 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 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 G o vernment 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
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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 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 Borrower 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 Borrower 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 Borrower 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
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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
Borrower 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 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 Borrower 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
c o nducted 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 Borrower's 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 Borrower's 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 the Existing Credit
Agreement, 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
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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 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 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. Borrower 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, Borrower shall
cause to be delivered to Lender a certificate of Borrower's
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. Borrower 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,
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, Borrower
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
Borrower 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,
Borrower 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. Borrower 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"). Borrower 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 Borrower to Lender and shall be additional
Obligations hereunder secured by the Collateral, provided, that if
and to the extent Borrower 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
Borrower for payment thereof.
(b) Lender reserves the right at any time, upon review of
Borrower's 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 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,
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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. Borrower shall
not, 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 Borrower, provided, that Borrower 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 Borrower.
5.8 Supplemental Disclosure. On the request of Lender (in the
event that such information is not otherwise delivered by Borrower or
Parent to Lender pursuant to this Agreement), Borrower 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
o r 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.
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
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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 for ClinLab, Inc.
and AMSC Midwest, Inc. 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. Borrower 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.
6. NEGATIVE COVENANTS
Borrower 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, Borrower 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 the merger or
consolidation of a Wholly-owned Subsidiary with another Wholly-owned
Subsidiary of Parent, so long as the Subsidiary surviving such merger
or consolidation is a Wholly-owned Subsidiary. Without limiting the
foregoing prohibitions, 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) 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; and (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.
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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
(d) of Section 6.7 (including such types of Liens described on
Schedule 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) the Acquisition
Notes.
6.4 Affiliate Transactions. Except as otherwise expressly
permitted hereunder, no Loan Party shall enter into any lending,
b o r r owing 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: (i) intercompany advances by any Loan Party ("Lender Loan
Party") to another Loan Party not in excess of $100,000 (net of any
intercompany advances made to such Lender Loan Party by such Loan
Party) in the aggregate outstanding at any time for all Loan Parties;
(ii) intercompany advances by Borrower to AMSC not in the aggregate
at any time in excess of $1,200,000 (net of any intercompany advances
made by AMSC to Borrower); (iii) intercompany advances by any Loan
Party to Borrower; and (iv) redemption of Parent's common stock from
Philip Kurtz in repayment of the loan referred to in 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 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
i t s 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); (c) for performance bonds or indemnities entered
into in the ordinary course of business consistent with past
practices; and (d) the indemnities set forth in Section 12.2 of the
Stock Purchase Agreement.
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; (c) Liens in favor of the
holders of the Acquisition Notes on the stock of AMSC owned by Parent
pursuant to documentation satisfactory to Lender; and (d) 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
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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, neither Borrower nor 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 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 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; or (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
a n y claim or Indebtedness owing to it, except for adequate
consideration and in the ordinary course of its business.
6.14 R e stricted Payments. No Loan Party shall make any
Restricted Payment to any Person other than to 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
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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.
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 any Loan Party to create,
incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
6.19 Amendments to FFMC Documents. No Loan Party without the
prior written consent of Lender shall amend (or permit to be amended)
the Stock Purchase Agreement, the Earn Out Agreement to increase the
monetary obligations of Borrower (as successor in interest to HCCI
thereunder) or otherwise adversely affect the interests of Lender, or
any other HCCI Acquisition Document in effect after the Closing Date.
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.
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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.
(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
Borrower 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.
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(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 applicable federal, state or foreign
b a nkruptcy 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 Borrower.
(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, 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
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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.
8.3 Waivers. Except as otherwise provided for in this Agreement
and applicable law, to the full extent permitted by applicable law,
Borrower waives (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of
a c celeration, 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 Borrower may in any way be liable, and Borrower
hereby ratifies and confirms 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 exercising any of its remedies, and (c)
the benefit of any right of redemption and all valuation, appraisal
and exemption laws. Borrower 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
Borrower, Parent, Lender, and their respective successors and
assigns, except as otherwise provided herein or therein. Neither
Borrower nor 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 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
Borrower 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 A s s ignments 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 Borrower's
obligations hereunder. Borrower 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.
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<PAGE>
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 to the subject matter
hereof and thereof and supersede all prior agreements, commitments,
understandings or inducements (oral or written, expressed or
implied). Neither this Agreement nor any other Loan Document nor any
terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in
writing signed by Borrower and Lender.
10.2 Fees and Expenses.
(a) Borrower shall pay on demand all out-of-pocket costs and
expenses (including reasonable fees of counsel) of Lender in
connection with the preparation, negotiation, approval, execution,
delivery, administration, modification, amendment, waiver and
enforcement (whether through negotiations, legal proceedings or
otherwise) of the Loan Documents, and commitments relating thereto,
and the other documents to be delivered hereunder or thereunder and
the transactions contemplated hereby and thereby and the fulfillment
or attempted fulfillment of conditions precedent hereunder,
including: (i) any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents or advice in connection
with the administration of the advances made pursuant hereto or its
rights hereunder or thereunder; (ii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender,
Borrower, Parent or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements to be
executed or delivered in connection therewith or herewith, whether as
party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced in good faith by or
against Borrower, Parent or any other Person that may be obligated to
Lender by virtue of the Loan Documents, including any litigation,
contest, dispute, suit, case, proceeding or action (and any appeal or
review) in connection with a case under title 11 of the United States
Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy or similar insolvency
law; (iii) any attempt to enforce any rights of Lender against
Borrower, Parent or any other Person that may be obligated to Lender
by virtue of any of the Loan Documents; or (iv) any effort to (A)
monitor the Revolving Credit Loan, the Term Loan and the Loan
Documents, (B) evaluate, observe, assess Borrower or its affairs, or
(C) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of the Collateral.
(b) Borrower shall pay on demand all reasonable costs and
expenses (including reasonable fees of counsel) of Lender in
connection with any Default and any enforcement or collection
proceedings resulting therefrom or any amendment, modification or
waiver of, or consent with respect to, any of the Loan Documents in
connection with any Default.
(c) Without limiting the generality of clauses (a) and (b)
above, Borrower's obligation to reimburse Lender for costs and
expenses shall include the reasonable fees and expenses of counsel
(and local, foreign or special counsel, advisors, consultants and
auditors retained by such counsel), as well as the fees and expenses
o f accountants, environmental advisors, appraisers, investment
bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplicating expenses; court reporter
fees, costs and expenses; long distance telephone charges; air
express charges; telegram charges; secretarial overtime charges;
expenses for travel, lodging and food; and all other out-of-pocket
costs and
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expenses of every type and nature paid or incurred in connection with
the performance of such legal or other advisory services.
10.3 No Waiver. No failure on the part of Lender, at any time or
times, to require strict performance by any Loan Party, of any
provision of this Agreement and any of the other Loan Documents shall
waive, affect or diminish any right of Lender thereafter to demand
strict compliance and performance therewith. Any suspension or
waiver of a Default shall not suspend, waive or affect any other
Default whether the same is prior or subsequent thereto and whether
of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Loan
Party contained in this Agreement or any of the other Loan Documents
and no Default by any Loan Party shall be deemed to have been
suspended or waived by Lender, unless such waiver or suspension is by
an instrument in writing signed by an officer of or other authorized
e m ployee of Lender and directed to Borrower specifying such
suspension or waiver.
10.4 Remedies. The rights and remedies of Lender under this
Agreement shall be cumulative and nonexclusive of any other rights
and remedies which Lender may have under any other agreement,
including the Loan Documents, by operation of law or otherwise.
Recourse to the Collateral shall not be required.
10.5 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Agreement.
10.6 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to
the applicable provisions of this Agreement, if any provision
contained in this Agreement is in conflict with, or inconsistent
with, any provision in any of the other Loan Documents, the
provisions contained in this Agreement shall govern and control.
10.7 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by
law, to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Lender to or for the credit or the
account of Borrower against any and all of the Obligations now or
hereafter existing irrespective of whether or not Lender shall have
made any demand under this Agreement or any other Loan Document and
although such Obligations may be unmatured. Lender agrees promptly
to notify Borrower after any such setoff and application made by
Lender; provided, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of
Lender under this Section are in addition to the other rights and
remedies (including other rights of setoff) which Lender may have.
10.8 Authorized Signature. Until Lender shall be notified by
Borrower to the contrary, the signature upon any document or
instrument delivered pursuant hereto and believed by Lender or any of
Lender's officers, agents, or employees to be that of an officer or
duly authorized representative of a Borrower listed in Schedule 10.8
shall bind Borrower and be deemed to be the act of Borrower affixed
pursuant to and in accordance with resolutions duly adopted by
Borrower's Board of Directors, and Lender shall be entitled to assume
the authority
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of each signature and authority of the Person whose signature it is
or appears to be unless the Person acting in reliance on such
signature shall have actual knowledge of the fact that such signature
is false or the Person whose signature or purported signature is
presented is without authority.
10.9 Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to
or served upon either of the parties by the other party, or whenever
either of the parties desires to give or serve upon the other party
any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been
validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper
postage prepaid, (b) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or facsimile
promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 10.9, (c)
one Business Day after deposit with a reputable overnight courier
with all charges prepaid, or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated below
or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other
communication to any Person (other than a Borrower or Lender)
designated below to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
(a) If to Lender at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Daniel R. Pengue
Telecopier No.: (203) 316-7823
With copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Legal Counsel
Telecopy No.: (203) 316-7889
With a copy to:
Paul, Hastings, Janofsky & Walker
1055 Washington Boulevard
Stamford, Connecticut 06901
Attention: Mario J. Ippolito, Esq.
Telecopy No.: (203) 359-3031
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(b) If to Borrower or Parent, at:
c/o C.I.S. Technologies, Inc.
One Warren Place
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136-1903
Attention: Richard A. Evans
Telecopy No.: (918) 481-4281
With a copy to:
c/o C.I.S. Technologies, Inc.
One Warren Place
6100 South Yale, Suite 1900
Tulsa, Oklahoma 74136-1903
Attention: Thomas G. Noulles, Esq.
Telecopy No.: (918) 481-4281
10.10 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of this
Agreement.
10.11 Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
10.12 Time of the Essence. Time is of the essence of this
Agreement and each of the other Loan Documents.
10.13 Publicity. Neither Borrower nor Parent will, or will permit
any of its Subsidiaries to, disclose the name of Lender in any press
release or in any prospectus, proxy statement or other materials
filed with any governmental entity without Lender's prior written
consent which shall not be unreasonably withheld. Borrower and
Parent consent to Lender publishing a tombstone or similar
advertising material relating to the financing transaction
contemplated by this Agreement.
10.14 GOVERNING LAW; CONSENT TO JURISDICTION. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER
AND PARENT HEREBY CONSENT AND AGREE 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 ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS; PROVIDED, THAT LENDER, PARENT AND BORROWER ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
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HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. EACH OF BORROWER
AND PARENT EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
EACH OF BORROWER AND PARENT HEREBY WAIVES ANY OBJECTION WHICH
BORROWER AND PARENT 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. BORROWER AND PARENT 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,
COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO BORROWER AND PARENT AT THE ADDRESS SET FORTH IN
SECTION 10.9 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S AND PARENT'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID.
10.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY 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 ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
10.16 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.
10.17 Acknowledgement. Each of the parties hereto (including AMSC
by its acknowledgement and agreement to this Agreement in the space
provided below) (i) acknowledges and consents to each of the
amendments to the Existing Credit Agreement effected by this
Agreement, (ii) acknowledges and consents that each Collateral
Document, to which it is a party is, and shall continue to be in full
force and effect after the effectiveness of this Agreement, that all
references therein to the Credit Agreement shall mean this Agreement
and each such Collateral Document is hereby ratified and confirmed in
all respects, and (iii) in the case of Parent and AMSC, hereby
confirms and agrees that its obligations under the Parent
STM-62336.3
-31- <PAGE>
<PAGE>
Guaranty or its Subsidiary Guaranty, as the case may be, shall
continue without any diminution thereof and shall remain in full
force and effect on and after the effectiveness of this Agreement and
that each reference to the Credit Agreement in each such Guarantee
shall mean this Agreement.
STM-62336.3
-32- <PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
Borrower:
C.I.S., INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title: Treasurer
Date: February __, 1996
Parent:
C.I.S. TECHNOLOGIES, INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title: Treasurer
Date: February __, 1996
Lender:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Dan Pengue
Name: Daniel R. Pengue
Title: Authorized Signatory
Date: February __, 1996
Acknowledged and Agreed to:
AMSC, Inc.
By: /s/Richard A. Evans
Name: Richard A. Evans
Title: Vice President
Date: February __, 1996
STM-62336.3
-33- <PAGE>
<PAGE>
TABLE OF CONTENTS
Section Page
1. AMOUNT AND TERMS OF CREDIT . . . . . . . . . . . . . . . . 2
1.1 Revolving Credit Advances . . . . . . . . . . . . . . 2
1.2 Term Loan . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Repayment; Termination of Commitment . . . . . . . . 4
1.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . 4
1.5 Interest . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Eligible Accounts . . . . . . . . . . . . . . . . . . 6
1.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 Cash Management System . . . . . . . . . . . . . . . 6
1.9 Receipt of Payments . . . . . . . . . . . . . . . . . 6
1.10 Application and Allocation of Payments . . . . . . . 6
1.11 Accounting . . . . . . . . . . . . . . . . . . . . . 7
1.12 Indemnity . . . . . . . . . . . . . . . . . . . . . . 7
1.13 Access . . . . . . . . . . . . . . . . . . . . . . . 8
1.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 8
2. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 9
2.1 Conditions to the . . . . . . . . . . . . . . . . . 9
2.2 Further Conditions to Each Loan . . . . . . . . . . . 10
3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 11
3.1 Corporate Existence; Compliance with Law . . . . . . 11
3.2 Executive Offices; Collateral Locations; Corporate or
Other Names . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Corporate Power; Authorization; Enforceable Obligations 11
3.4 Financial Statements . . . . . . . . . . . . . . . . 12
3.5 Material Adverse Change . . . . . . . . . . . . . . . 12
3.6 Ownership of Property; Liens . . . . . . . . . . . . 12
3.7 Restrictions; No Default . . . . . . . . . . . . . . 12
3.8 Labor Matters . . . . . . . . . . . . . . . . . . . . 12
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Government Regulation . . . . . . . . . . . . . . . . 13
3.11 Margin Regulations . . . . . . . . . . . . . . . . . 13
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14 No Litigation . . . . . . . . . . . . . . . . . . . . 15
3.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . 15
3.16 Intellectual Property . . . . . . . . . . . . . . . . 15
3.17 Full Disclosure . . . . . . . . . . . . . . . . . . . 15
3.18 Hazardous Materials . . . . . . . . . . . . . . . . . 16
3.19 Insurance Policies . . . . . . . . . . . . . . . . . 16
3.20 Deposit and Disbursement Accounts . . . . . . . . . . 16
4. FINANCIAL STATEMENTS AND INFORMATION . . . . . . . . . . . 16
4.1 Reports and Notices . . . . . . . . . . . . . . . . . 16
4.2 Communication with Accountants . . . . . . . . . . . 16
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 17
5.1 Maintenance of Existence and Conduct of Business . . 17
5.2 Payment of Charges and Claims . . . . . . . . . . . . 17
5.3 Books and Records . . . . . . . . . . . . . . . . . . 17
5.4 Litigation . . . . . . . . . . . . . . . . . . . . . 18
5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Compliance with Laws . . . . . . . . . . . . . . . . 18
5.7 Agreements . . . . . . . . . . . . . . . . . . . . . 19
5.8 Supplemental Disclosure . . . . . . . . . . . . . . . 19
5.9 Environmental Matters . . . . . . . . . . . . . . . . 19
5.10 Subsidiaries . . . . . . . . . . . . . . . . . . . . 20
5.11 Application of Proceeds . . . . . . . . . . . . . . . 20
5.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 20
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 20
6.1 Mergers, Subsidiaries, Etc. . . . . . . . . . . . . . 20
6.2 Investments . . . . . . . . . . . . . . . . . . . . . 20
STM-62336.3
-i- <PAGE>
<PAGE>
TABLE OF CONTENTS cont'd
Section Page
6.3 Indebtedness . . . . . . . . . . . . . . . . . . . . 21
6.4 Affiliate Transactions . . . . . . . . . . . . . . . 21
6.5 Capital Structure and Business . . . . . . . . . . . 21
6.6 Guaranteed Indebtedness . . . . . . . . . . . . . . . 21
6.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Sale of Assets . . . . . . . . . . . . . . . . . . . 21
6.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Financial Covenants . . . . . . . . . . . . . . . . . 22
6.11 Hazardous Materials . . . . . . . . . . . . . . . . . 22
6.12 Sale-Leasebacks . . . . . . . . . . . . . . . . . . . 22
6.13 Cancellation of Indebtedness . . . . . . . . . . . . 22
6.14 Restricted Payments . . . . . . . . . . . . . . . . . 22
6.15 Bank Accounts . . . . . . . . . . . . . . . . . . . . 22
6.16 No Speculative Investments . . . . . . . . . . . . . 23
6.17 Margin Regulations . . . . . . . . . . . . . . . . . 23
6.18 Limitation on Negative Pledge Clauses . . . . . . . . 23
6.19 Amendments to FFMC Documents . . . . . . . . . . . . 23
7. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Duration . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Survival of Obligations . . . . . . . . . . . . . . . 23
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES . . . . . . . . . . 24
8.1 Events of Default . . . . . . . . . . . . . . . . . . 24
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 25
8.3 Waivers . . . . . . . . . . . . . . . . . . . . . . . 26
9. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 26
9.1 Successors and Assigns . . . . . . . . . . . . . . . 26
9.2 Assignments and Participations . . . . . . . . . . . 26
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 27
10.1 Complete Agreement; Modification of Agreement . . . . 27
10.2 Fees and Expenses . . . . . . . . . . . . . . . . . . 27
10.3 No Waiver . . . . . . . . . . . . . . . . . . . . . . 28
10.4 Remedies . . . . . . . . . . . . . . . . . . . . . . 28
10.5 Severability . . . . . . . . . . . . . . . . . . . . 28
10.6 Conflict of Terms . . . . . . . . . . . . . . . . . . 28
10.7 Right of Set-off . . . . . . . . . . . . . . . . . . 28
10.8 Authorized Signature . . . . . . . . . . . . . . . . 28
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . 29
10.10 Section Titles . . . . . . . . . . . . . . . . . . . 30
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . 30
10.12 Time of the Essence . . . . . . . . . . . . . . . . . 30
10.13 Publicity . . . . . . . . . . . . . . . . . . . . . . 30
10.14 GOVERNING LAW; CONSENT TO JURISDICTION . . . . . . . 30
10.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 31
10.16 Dating . . . . . . . . . . . . . . . . . . . . . . . 31
10.17 Acknowledgement . . . . . . . . . . . . . . . . . . . 31
STM-62336.3
-ii- <PAGE>
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Documents
Annex D - Schedule of Certain Fees
Annex E - Financials and Notices
Annex F - Insurance Requirements
Annex G - Financial Covenants
Schedule 3.2 - Executive Offices; Trade Names
Schedule 3.4 - Financials
Schedule 3.5 - Dividends
Schedule 3.6 - Real Estate and Leases
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and
Licenses
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Bank Accounts
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Loans to and Transactions with
Employees
Schedule 6.7 - Liens
Schedule 10.8 - Authorized Signatories
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Revolving Credit Note
Exhibit D - Form of Term Note
Exhibit E - Parent Guaranty
Exhibit F - Security Agreement
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - Form of Subsidiary Security Agreement
Exhibit I - Form of Pledge Agreement
STM-62336.3
-iii- <PAGE>
<PAGE>
Exhibit 10d (cont.)
PHJ&W DRAFT
1/30/96
EXHIBIT C
PROMISSORY NOTE
$6,000,000 February _, 1996
New York, New York
FOR VALUE RECEIVED, the undersigned, C.I.S., INC., an Oklahoma
corporation ("Borrower"), hereby unconditionally promises to pay on the
Commitment Termination Date to the order of GENERAL ELECTRIC CAPITAL
CORPORATION ("Lender"), at the office of LENDER located at 201 High
Ridge Road, Stamford, Connecticut 06927, in lawful money of the United
States of America and in immediately available funds, the principal
amount of the lesser of (a) SIX MILLION DOLLARS ($6,000,000) and (b) the
aggregate unpaid principal amount of all Revolving Credit Advances
(including Revolving Credit Advances originally made pursuant to the
terms of the Existing Credit Agreement) made by Lender to Borrower
pursuant to the Credit Agreement referred to below. All capitalized
terms, unless otherwise defined herein, shall have the respective
meanings assigned to such terms in the Credit Agreement referred to
below.
Borrower further agrees to pay interest on the unpaid principal
amount outstanding hereunder from time to time from February 1, 1996 in
like money and funds at such office at the rates per annum and on the
dates provided in the Credit Agreement referred to below. The date and
amount of each Revolving Credit Advance made by Lender to Borrower, the
rate of interest applicable thereto and each payment made on account of
the principal thereof, shall be recorded by Lender on its books,
provided that the failure of Lender to make any such recordation or
endorsement shall not affect the obligations of Borrower to make a
payment when due of any amount owing under the Credit Agreement referred
to below or this Revolving Credit Note in respect of the Revolving
Credit Advances made by Lender.
This Promissory Note is the Revolving Credit Note referred to
in the Amended and Restated Credit Agreement, dated as of February 1,
1996, among Borrower, C.I.S. Technologies, Inc. and Lender (as amended,
supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"), is entitled to the benefits thereof, is secured as
provided therein and is subject to optional and mandatory prepayment in
whole or in part as provided therein.
If any payment of this Promissory Note 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.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on
this Promissory Note shall become, or may be declared to be, immediately
due and payable, all as provided therein.
Borrower expressly waives diligence, presentment, protest,
demand and other notices of any kind.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.
STM-63916.1 <PAGE>
<PAGE>
This Promissory Note is in substitution and exchange for (but
not in payment of) that certain Promissory Note dated October 31, 1994
in the original principal amount of $5,000,000 made by Borrower and HBA
in favor of Lender.
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to
be duly executed and delivered under seal by its officer thereunto duly
authorized as of the date hereof.
C.I.S., INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title: Treasurer
-2-
<PAGE>
Exhibit 10.d (cont.)
PHJ&W DRAFT
1/30/96
PROMISSORY NOTE
$7,138,888.78 February _, 1996
New York, New York
FOR VALUE RECEIVED, the undersigned, C.I.S., INC., an Oklahoma
corporation ("Borrower"), hereby unconditionally promises to pay to the
order of GENERAL ELECTRIC CAPITAL CORPORATION ("Lender"), at the office
of LENDER located at 201 High Ridge Road, Stamford, Connecticut 06927,
in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a) SEVEN MILLION
ONE HUNDRED THIRTY EIGHT THOUSAND EIGHT HUNDRED EIGHTY EIGHT AND 78/100
($7,138,888.78) and (b) the aggregate unpaid principal amount of the
Tranche A Term Loan, the Tranche B Term Loan, the Tranche C Term Loan
and the Tranche D Term Loan (collectively, the "Term Loan") made by
Lender to Borrower pursuant to the Credit Agreement referred to below on
the dates and in the principal amounts provided in the Credit Agreement
referred to below. All capitalized terms, unless otherwise defined
herein, shall have the respective meanings assigned to such terms in the
Credit Agreement referred to below.
Borrower further agrees to pay interest on the unpaid principal
amount outstanding hereunder from time to time from February 1, 1996, in
like money and funds at such office at the rates per annum and on the
dates provided in the Credit Agreement referred to below. The date and
amount of each Term Loan made by Lender to Borrower, the rate of
interest applicable thereto and each payment made on account of the
principal thereof, shall be recorded by Lender on its books, provided
that the failure of Lender to make any such recordation shall not affect
the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement referred to below or this Promissory
Note in respect of the Term Loan made by Lender.
This Promissory Note is the Term Note referred to in the
Amended and Restated Credit Agreement, dated as of February 1, 1996,
among Borrower, C.I.S. Technologies, Inc. and Lender (as amended,
supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"), is entitled to the benefits thereof, is secured as
provided therein and is subject to optional and mandatory prepayment in
whole or in part as provided therein.
If any payment of this Promissory Note 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.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on
this Promissory Note shall become, or may be declared to be, immediately
due and payable, all as provided therein.
Borrower expressly waives diligence, presentment, protest,
demand and other notices of any kind.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.
STM-63911.1 <PAGE>
<PAGE>
This Promissory Note is in substitution and exchange for (but
not in payment of) that certain Amended and Restated Promissory Note
dated October 31, 1994 in the original amount of $3,250,000 made by
Borrower and HBA in favor of Lender.
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to
be duly executed and delivered under seal by its officer thereunto duly
authorized as of the date hereof.
C.I.S., INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title: Treasurer
-2-
<PAGE>
Exhibit 10d (cont.)
EXHIBIT I
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and
entered into as of February 1, 1996 by C.I.S. TECHNOLOGIES,
INC., a Delaware corporation ("Pledgor), in favor of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation
(together with its successors and assigns in such capacity,
"Lender").
W I T N E S S E T H:
WHEREAS, Pledgor is the legal and beneficial owner
of the outstanding shares of stock set forth on Schedule I
hereto (the "Pledged Shares") and issued by C.I.S., Inc., an
Oklahoma corporation ("Borrower");
WHEREAS, Pledgor, Lender and Borrower have entered
into the Amended and Restated Credit Agreement dated as of
February 1, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit
Agreement"), providing for the extension of credit by Lender
to Borrower to, among other things, refinance certain
indebtedness of Borrower and to provide for ordinary working
capital needs of Borrower, upon the terms and subject to the
conditions set forth therein. Capitalized terms used herein
and not otherwise defined herein shall have the meanings
given to such terms in the Credit Agreement;
WHEREAS, Pledgor is and shall be the corporate
parent of Borrower, and it is to the advantage of Pledgor
that Lender enter into the Credit Agreement;
WHEREAS, Pledgor has entered into a Guaranty, dated
as of October 15, 1994, in favor of Lender (as amended,
supplemented or otherwise modified from time to time, the
"Parent Guaranty"), providing for the guarantee by Pledgor
of Borrower's Obligations under the Credit Agreement; and
STM-63734.1 <PAGE>
<PAGE>
WHEREAS, Lender has required, as a condition to
entering into the Credit Agreement, that Pledgor pledge and
grant to Lender, a security interest in the Pledged
Collateral (as defined herein) to secure the payment and
performance by Pledgor of its obligations under the Parent
Guaranty;
NOW, THEREFORE, in consideration of the premises and
in order to induce Lender to extend credit under the Credit
Agreement, Pledgor hereby agrees with the Lender, as
follows:
SECTION 1. PLEDGE. Pledgor hereby pledges and
grants to Lender a continuing security interest in all of
the following property now owned or at any time hereafter
acquired by Pledgor or in which Pledgor now has, or may
acquire in the future, any right, title or interest thereto
(collectively, the "Pledged Collateral"):
(a) the Pledged Shares of Pledgor; and
(b) all additional shares of Stock of Borrower
hereafter acquired, received or owned by Pledgor (the
"Additional Shares"); and
(c) the certificates representing the Pledged
Shares and the Additional Shares (all of which shall be
deemed to be part of the Pledged Shares), and all products
and Proceeds of any of such Pledged Shares, including,
without limitation, all dividends, cash, instruments,
subscriptions, warrants and any other rights and options and
other property from time to time received, receivable or
otherwise distributed to Pledgor in respect of or in
exchange for any or all of such Pledged Shares.
SECTION 2. SECURITY FOR OBLIGATIONS. This
Agreement secures, and the Pledged Collateral is security
for, the prompt payment in full when due, whether at stated
maturity, by acceleration or otherwise, and performance of
all of Pledgor's obligations under the Parent Guaranty,
whether now existing or hereafter incurred, (collectively,
the "Secured Obligations").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All
certificates or instruments representing or evidencing the
Pledged Collateral shall be delivered to and held by or on
behalf of Lender pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by
-2- STM-63734.1 <PAGE>
<PAGE>
duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor
represents and warrants to Lender as follows:
(a) The Pledged Shares have been duly authorized
and validly issued and are fully paid and non-assessable.
There are no existing options, warrants, calls or
commitments of any character whatsoever relating to any of
the Pledged Shares. None of the Pledged Shares is subject
to any shareholder agreement, voting trust agreement or any
other agreement in respect of the rights of shareholders.
(b) Pledgor is the sole legal and beneficial owner
of the Pledged Collateral, free and clear of any Lien or
claims of any Person except for the security interest
created by this Agreement. None of the Pledged Shares has
been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any
applicable jurisdiction.
(c) This Agreement has been duly authorized,
executed and delivered by Pledgor and constitutes a legal,
valid and binding obligation of Pledgor enforceable in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws
affecting the rights of creditors generally or by the
application of general equity principles.
(d) The pledge and delivery of the Pledged
Collateral pursuant to this Agreement creates a valid first
priority perfected security interest in the Pledged
Collateral pledged by Pledgor, securing the payment of the
Secured Obligations.
(e) No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority
or any other Person is required either (i) for the pledge by
Pledgor of the Pledged Collateral pursuant to this Agreement
or for the execution, delivery or performance of this
Agreement by Pledgor or (ii) for the exercise by Lender of
the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral of Pledgor
pursuant to this Agreement (except as may be required in
connection with the disposition of the Pledged Collateral by
laws affecting the offering and sale of securities
generally).
-3- STM-63734.1 <PAGE>
<PAGE>
(f) Pledgor has full power, authority and legal
right to pledge all the Pledged Collateral pledged by
Pledgor pursuant to this Agreement.
(g) The Pledged Shares constitute 100% of the
issued and outstanding capital stock of all classes of
Borrower as set forth on Schedule I hereto.
The foregoing representations and warranties shall
be deemed to have been made by Pledgor on each date of each
extension of credit by Lenders under the Credit Agreement.
SECTION 5. FURTHER ASSURANCES; ADDITIONAL SHARES.
(a) Pledgor agrees that at any time and from time
to time, at Pledgor's expense, Pledgor will promptly execute
and deliver, or cause to be executed and delivered, all
stock powers, proxies, assignments, instruments and
documents and take all further action, at Lender's request,
that is reasonably necessary, in order to perfect, or
maintain perfection of, any security interest granted or
purported to be granted hereby or to enable Lender to
exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral pledged by Pledgor and to
carry out the provisions and purposes hereof.
(b) Pledgor further agrees that it will, upon
obtaining any Additional Shares pledge such Additional
Shares to Lender and promptly (and in any event within three
(3) Business Days) deliver to Lender a duly executed Pledge
Agreement Supplement in substantially the form of Schedule
II hereto (a "Pledge Agreement Supplement") identifying the
Additional Shares which are pledged by Pledgor pursuant to
this Agreement. Pledgor hereby authorizes Lender to attach
each executed Pledge Agreement Supplement to this Agreement
and agrees that all Additional Shares listed on any Pledge
Agreement Supplement delivered to Lender shall for all
purposes hereunder constitute Pledged Shares and Pledged
Collateral.
(c) Pledgor agrees to defend the title to the
Pledged Collateral pledged by Pledgor and the security
interest therein of Lender under this Agreement against the
Lien or claim of any Person and to maintain and preserve
such security interest until the Termination Date.
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<PAGE>
SECTION 6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) Subject to Section 6(d) hereof, Pledgor shall
be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Shares or any
part thereof; provided, however, that Pledgor shall not
exercise or shall refrain from exercising any such right if
such action or inaction could have a material adverse effect
on the value of the Pledged Collateral or any part thereof
or affect the priority or perfection of Lender's Lien
thereon or be inconsistent with or violate any provisions of
this Agreement (including without limitation, Section 11
hereof), the Parent Guaranty, the Credit Agreement or any of
the other Loan Documents. Lender shall execute and deliver
(or cause to be executed and delivered) to Pledgor all such
proxies and other instruments as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the
voting and other rights which it is entitled to exercise
pursuant to this Section 6(a).
(b) Subject to Section 6(d) hereof, and to the
extent permitted by the Credit Agreement, Pledgor shall be
entitled to receive all cash dividends paid from time to
time in respect of the Pledged Shares in the normal course
of business of Borrower and consistent with past practice
and which are permitted under the Credit Agreement.
(c) Any and all (i) dividends or other
distributions paid or payable in the form of instruments and
other property (other than cash dividends permitted under
Section 6(b) hereof) received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged
Collateral, (ii) dividends and other distributions paid or
payable in cash in respect of any Pledged Shares in
connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, and (iii) cash paid,
payable or otherwise distributed in redemption of, or in
exchange for, any Pledged Shares, shall be in each case
forthwith delivered to Lender to hold as Pledged Collateral
for the benefit of Lender and shall, if received by Pledgor,
be received in trust for the benefit of Lender, be
segregated from the other property or funds of Pledgor, and
be forthwith delivered to Lender as Pledged Collateral in
the same form as so received (with any necessary
endorsements).
(d) Upon the occurrence and during the continuance
of an Event of Default, (i) all rights of
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<PAGE>
Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to
this Section 6 hereof shall cease, and all such rights shall
thereupon become vested in Lender which shall thereupon have
the sole right to exercise such voting and other consensual
rights and (ii) all cash dividends or other distributions
payable in respect of the Pledged Shares shall be paid to
Lender for its benefit and Pledgor's right to receive such
payments and distributions pursuant to Section 6(b) hereof
shall immediately cease.
(e) All dividends or other distributions which are
received by Pledgor contrary to the provisions of this
Section 6 shall be received in trust for the benefit of
Lender, shall be segregated from other funds of Pledgor and
shall be forthwith paid over to Lender as Pledged Collateral
for the benefit of Lender in the same form as so received
(with any necessary endorsements).
SECTION 7. COVENANTS. Pledgor covenants and agrees
with Lender from and after the date of this Agreement until
the Termination Date that Pledgor will not (a) sell,
transfer or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral pledged by Pledgor
without the prior written consent of Lender, (b) create or
permit to exist any Lien upon or with respect to any of the
Pledged Collateral pledged by Pledgor, except for the
security interest granted under this Agreement, and
(c) enter into any agreement or understanding that purports
to or may restrict or inhibit Lender's rights or remedies
hereunder, including, without limitation, Lender's right to
sell or otherwise dispose of the Pledged Collateral pledged
by Pledgor.
SECTION 8. LENDER APPOINTED ATTORNEY-IN-FACT.
Pledgor hereby irrevocably appoints Lender Pledgor's true
and lawful attorney-in-fact, coupled with an interest, with
full authority in the place and stead of Pledgor and in the
name of Pledgor or otherwise, from time to time in Lender's
discretion, for the purpose of carrying out the terms of
this Agreement, to take any action and to execute any
instrument which Lender may deem necessary or advisable to
further perfect and protect the security interest granted
hereby, including, without limitation, to receive, endorse
and collect all instruments made payable to Pledgor
representing any dividend, interest or principal payment or
other distribution in respect of the Pledged Collateral
pledged by Pledgor or any part thereof and to give full
discharge for the same.
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<PAGE>
SECTION 9. LENDER MAY PERFORM. If Pledgor fails to
perform any agreement contained herein, Lender may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of Lender incurred in connection
therewith shall be payable by Pledgor.
SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE
CARE. The rights and powers granted to Lender hereunder are
being granted in order to preserve and protect Lender's
security interest in and to the Pledged Collateral granted
hereby and shall not be interpreted to, and shall not,
impose any duties on Lender in connection therewith. Lender
shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment
substantially equal to that which Lender accords its own
property, it being understood that Lender shall not have any
responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, tenders or other
matters relative to any Pledged Collateral, whether or not
Lender has or is deemed to have knowledge of such matters,
or (b) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.
SECTION 11. SUBSEQUENT CHANGES AFFECTING
COLLATERAL. Pledgor represents to Lender that Pledgor has
made its own arrangements for keeping informed of changes or
potential changes affecting the Pledged Collateral pledged
by Pledgor (including, but not limited to, rights to
convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting
rights), and Pledgor agrees that Lender shall have no
responsibility or liability for informing Pledgor of any
such changes or potential changes or for taking any action
or omitting to take any action with respect thereto.
Pledgor covenants that it will not, without the prior
written consent of Lender, vote to enable, or take any other
action to permit, Borrower to issue any capital stock or to
sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral pledged by Pledgor
or create or permit to exist any Lien upon or with respect
to any of the Pledged Collateral pledged by Pledgor, except
for the security interests granted under this Agreement.
SECTION 12. DEFAULTS AND REMEDIES.
(a) Upon the occurrence of an Event of Default and
during the continuation of such Event of Default, Lender
(personally or through an agent) is hereby authorized and
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<PAGE>
empowered to transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates or instruments
representing or evidencing the Pledged Collateral for
certificates or instruments of smaller or larger denomina-
tions, to exercise the voting rights with respect thereto,
to collect and receive all cash dividends and other
distributions made thereon, to sell in one or more sales
after five (5) days' notice of the time and place of any
public sale or of the time after which a private sale is to
take place (which notice Pledgor agrees is commercially
reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged
Collateral and to otherwise act with respect to the Pledged
Collateral as though Lender were the outright owner thereof,
but in each case in accordance with applicable law;
provided, however, Lender shall not have any duty to
exercise any such right or to preserve the same and shall
not be liable for any failure to do so or for any delay in
doing so. Any sale shall be made at a public or private
sale at Lender's place of business, or at any public
building in the City of New York or elsewhere to be named in
the notice of sale, either for cash or upon credit or for
future delivery at such price as Lender may deem fair, and
Lender may be the purchaser of the whole or any part of the
Pledged Collateral so sold and hold the same thereafter in
its own right free from any claim of Pledgor or any right of
redemption. Each sale shall be made to the highest bidder,
but Lender reserves the right to reject any and all bids at
such sale which, in its discretion, it shall deem
inadequate. Demands of performance, except as otherwise
herein specifically provided for, notices of sale,
advertisements and the presence of property at sale are
hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer, employee or agent of Lender.
(b) If, at the original time or times appointed for
the sale of the whole or any part of the Pledged Collateral,
the highest bid, if there be but one sale, shall be
inadequate to discharge in full all the Secured Obligations,
or the Pledged Collateral be offered for sale in lots, if at
any of such sales, the highest bid for the lot offered for
sale would indicate to Lender, in its discretion, the
unlikelihood of the proceeds of the sales of the whole of
the Pledged Collateral being sufficient to discharge all the
Secured Obligations, Lender may, on one or more occasions
and in its discretion, postpone any of said sales by public
announcement at the time of sale or the time of previous
postponement of sale, and no other notice of
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<PAGE>
such postponement or postponements of sale need be given,
any other notice being hereby waived; provided, however,
that any sale or sales made after such postponement be after
five (5) days' notice to Pledgor.
(c) If, at any time when Lender in its sole
discretion determines, following the occurrence and during
the continuance of an Event of Default, that, in connection
with any actual or contemplated exercise of its rights (when
permitted under this Section 12) to sell the whole or any
part of the Pledged Collateral hereunder, it is necessary or
advisable to effect a public registration of all or part of
the Pledged Collateral pursuant to the Securities Act of
1933, as amended (or any similar statute then in effect)
(the "Act"), Pledgor shall, in an expeditious manner, cause
Borrower to:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a registration
statement with respect to the Pledged Collateral and use its
best efforts to cause such registration statement to become
and remain effective.
(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 Act with respect to the
sale or other disposition of the Pledged Collateral covered
by such registration statement whenever Lender shall desire
to sell or otherwise dispose of the Pledged Collateral.
(iii) Furnish to Lender such number of copies
on a prospectus and a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents
as Lender may request in order to facilitate the public sale
or other disposition of the Pledged Collateral by Lender.
(iv) Use its best efforts to register or
qualify the Pledged Collateral covered by such registration
statement under such other securities or blue sky laws of
such jurisdictions within the United States and Puerto Rico
as Lender shall request, and do such other reasonable acts
and things as may be required of it to enable Lender to
consummate the public sale or other disposition in such
jurisdictions of the Pledged Collateral by Lender.
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<PAGE>
(v) Furnish, at the request of Lender, on the
date that the Pledged Collateral is delivered to the
underwriters for sale pursuant to such registration or, if
the Pledged Collateral is not being sold through
underwriters, on the date that the registration statement
with respect to such Pledged Collateral becomes effective,
(A) an opinion, dated such date, of the independent counsel
representing such registrant for the purposes of such
registration, addressed to the underwriters, if any, and in
the event the Pledged Collateral is not being sold through
underwriters, then to Lender, in customary form and covering
matters of the type customarily covered in such legal
opinions; and (B) a comfort letter, dated such date, from
the independent certified public accountants of such
registrant, addressed to the underwriters, if any, and in
the event the Pledged Collateral is not being sold through
underwriters, then to Lender, in a customary form and
covering matters of the type customarily covered by such
comfort letters and as the underwriters or Lender shall
reasonably request. The opinion of counsel referred to
above shall additionally cover such other legal matters with
respect to the registration in respect of which such opinion
is being given as Lender may reasonably request. The letter
referred to above from the independent certified public
accounts shall additionally cover such other financial
matters (including information as to the period ending not
more than five (5) Business Days prior to the date of such
letter) with respect to the registration in respect of which
such letter is being given as Lender may reasonably request.
(vi) Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as
reasonably practicable, but not later than 18 months after
the effective date of the registration statement, an
earnings statement covering the period of at least 12 months
beginning with the first full month after the effective date
of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(d) All expenses incurred in complying with Section
12 hereof, including, without limitation, all registration
and filing fees (including all expenses incident to filing
with the National Association of Securities Dealers, Inc.),
printing expenses, fees and disbursements of counsel for the
registrant, the fees and expenses of counsel for Lender,
expenses of the independent certified public accounts
(including any special audits incident to or required by any
such registration) and
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expenses of complying with the securities or blue sky laws
of any jurisdictions, shall be part of the Secured
Obligations.
(e) Pledgor acknowledges that notwithstanding the
legal availability of a private sale or a sale subject to
the restrictions described below in paragraph (g), Lender
may, in its discretion, elect to register any or all the
Pledged Collateral under the Act (or any applicable state
securities law) in accordance with its rights hereunder.
Pledgor, however, recognizes that Lender may be unable to
effect a public sale of any or all the Pledged Collateral
and may be compelled to resort to one or more private sales
thereof. Pledgor also acknowledges that any such private
sale may result in prices and other terms less favorable to
the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a
commercially reasonable manner. Lender shall be under no
obligation to delay a sale of any of the Pledged Collateral
for the period of time necessary to permit the registrant to
register such securities for public sale under the Act, or
under applicable state securities laws, even if Pledgor
would agree to do so.
(f) Pledgor further agrees that a breach of any of
the covenants contained in this Section 12 will cause
irreparable injury to Lender, that Lender has no adequate
remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained
in this Section 12 shall be specifically enforceable against
Pledgor, and Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of
such covenants except for a defense that the Secured
Obligations are not then due and payable in accordance with
the agreements and instruments governing and evidencing such
obligations. Pledgor further acknowledges the impossibility
of ascertaining the amount of damages which would be
suffered by Lender by reason of a breach of any of such
covenants and, consequently, agrees that, if Lender shall
sue for damages for breach, it shall pay, as liquidated
damages and not as a penalty, an amount equal to the lesser
of (i) the value of the Pledged Collateral pledged by
Pledgor on the date Lender shall demand compliance with this
Section 12, and (ii) the amount required to pay in full the
Secured Obligations.
(g) In addition to remedies set forth in Section 12
above, Lender may, in its discretion (subject only to
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<PAGE>
applicable requirements of law), sell such Pledged
Collateral or a part thereof by private sale in such manner
and under such circumstances as Lender may deem necessary or
advisable. Without limiting the generality of the
foregoing, in any such event, Lender may, in its discretion,
(x) in accordance with applicable securities laws, proceed
to make such private sales, (y) approach and negotiate with
a single possible purchaser to effect such sale, and (z)
restrict such sale to a purchaser who will represent and
agree that such purchaser is purchasing for its own account,
for investment and not with a view to the distribution or
sale of such Pledged Collateral or part thereof. In
addition to a private sale as provided above in this Section
12, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the
Act at the time of any proposed sale pursuant to this
Section 12, then Lender shall not be required to effect such
registration or cause the same to be effected but, in its
discretion (subject only to applicable requirements of law),
may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (i) as to the
financial sophistication and ability of any Person permitted
to bid or purchase at any such sale, (ii) as to the content
of legends to be placed upon any certificates representing
the Pledged Collateral sold in such sale, including
restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person, bidding
or purchasing at such sale relating to that Person's access
to financial information about Pledgor and such Person's
intentions as to the holding of the Pledged Collateral so
sold for investment, for its own account, and not with a
view to the distribution thereof, and (iv) as to such other
matters as Lender may, in its discretion, deem necessary or
appropriate in order that such sale (notwithstanding any
failure to so register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement
of creditors' rights and the Act and all applicable state
securities laws.
SECTION 13. APPLICATION OF PROCEEDS. Any cash held
by Lender as Pledged Collateral and all cash proceeds
received by Lender in respect of any sale of, collection
from, or other realization upon all or any part of the
Pledged Collateral shall be applied by Lender in accordance
with the terms of the Parent Guaranty and the Credit
Agreement.
SECTION 14. IRREVOCABLE AUTHORIZATION AND
INSTRUCTION TO BORROWER. Pledgor hereby authorizes and
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instructs Borrower to comply with any instruction received
by Borrower from Lender in writing that (a) states that an
Event of Default has occurred and (b) is otherwise in
accordance with the terms of this Agreement, without any
other or further instructions from Pledgor, and Pledgor
agrees that Borrower shall be fully protected in so
complying.
SECTION 15. MISCELLANEOUS PROVISIONS.
SECTION 15.1 No Waiver; Cumulative Remedies.
Except by a written instrument pursuant to Section 15.5
hereof, Lender shall not, by any act, delay, indulgence,
omission or otherwise, be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or in
any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the
part of Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver
by Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or
remedy which Lender would otherwise have on any future
occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
SECTION 15.2 Notices. All notices, approvals,
consents or other communications required or desired to be
given hereunder shall be in the form and manner, and
delivered in accordance with, Section 10.9 of the Credit
Agreement.
SECTION 15.3 Headings. The headings in this
Agreement are for purposes of reference only and shall not
affect the meaning or construction of any provision of this
Agreement.
SECTION 15.4 Severability. The provisions of this
Agreement are severable, and if any clause or provision
shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any
manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
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<PAGE>
SECTION 15.5 Amendments, Waivers and Consents. Any
amendment or waiver of any provision of this Agreement and
any consent to any departure by Pledgor from any provision
of this Agreement shall be effective only if made pursuant
to a written instrument executed by Pledgor and Lender (or
if a waiver or a consent, a written letter or agreement
executed by Lender).
SECTION 15.6 Interpretation of Agreement. Time is
of the essence in each provision of this Agreement of which
time is an element. All terms not defined herein or in the
Credit Agreement shall have the meaning set forth in the
applicable Uniform Commercial Code, except where the context
otherwise requires. To the extent a term or provision of
this Agreement conflicts with the Parent Guaranty or the
Credit Agreement, as the case may be, and is not dealt with
herein with more specificity, the Parent Guaranty or Credit
Agreement, as the case may be, shall control with respect to
the subject matter of such term or provision. Acceptance of
or acquiescence in a course of performance rendered under
this Agreement shall not be relevant to determine the
meaning of this Agreement even though the accepting or
acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
SECTION 15.7 Continuing Security Interest. This
Agreement shall create a continuing security interest in the
Pledged Collateral and shall (a) remain in full force and
effect until the Termination Date, (b) be binding upon
Pledgor, its successors and assigns, and (c) inure, together
with the rights and remedies of Lender hereunder, to the
benefit of Lender and its respective successors, transferees
and assigns.
SECTION 15.8 Survival of Provisions. All
representations, warranties and covenants of Pledgor
contained herein shall survive the execution and delivery of
this Agreement, and shall terminate only on the Termination
Date.
SECTION 15.9 Lien Absolute. All rights of Lender
hereunder, and all obligations of Pledgor hereunder, shall
be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the
Parent Guaranty, Credit Agreement, any other Loan Document
or any other agreement or instrument governing or evidencing
any Secured Obligations;
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<PAGE>
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Secured Obligations, or any other amendment or waiver of or
any consent to any departure from the Parent Guaranty,
Credit Agreement, any other Loan Document or any other
agreement or instrument governing or evidencing any Secured
Obligations;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any of
the Secured Obligations; or
(d) any other circumstances which might otherwise
constitute a defense available to, or a discharge of,
Pledgor.
SECTION 15.10 Reinstatement. This Agreement shall
remain in full force and effect and continue to be effective
should any petition be filed by or against Pledgor for
liquidation or reorganization, should Pledgor become
insolvent or make an assignment for the benefit of creditors
or should a receiver or trustee be appointed for all or any
significant part of Pledgor's assets, and shall continue to
be effective or be reinstated, as the case may be, if at any
time payment and performance of the Secured Obligations, or
any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether
as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced
only by such amount paid and not so rescinded, reduced,
restored or returned.
SECTION 15.11 Waivers. Pledgor waives notice of
acceptance of this Agreement, and also presentment, demand,
protest and notice of dishonor or default of any and all of
the Secured Obligations, and all other notices to which
Pledgor might otherwise be entitled, except as otherwise
expressly provided herein or in the Parent Guaranty or in
the Credit Agreement.
SECTION 15.12 Authority of Lender. Lender shall
have and be entitled to exercise all powers hereunder which
are specifically granted to Lender by the terms hereof,
together with such powers as are reasonably incident
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<PAGE>
thereto. Lender may exercise any of its duties hereunder or
in connection with the Pledged Collateral by or through
agents or employees and shall be entitled to retain counsel
and to act in reliance upon the advice of counsel concerning
all such matters. Neither Lender nor any Affiliate of
Lender or any director, officer, employee, attorney or agent
of Lender or such Affiliate shall be liable to Pledgor for
any action taken or omitted to be taken by it or them
hereunder, except for actions or inactions solely relating
to its or their own gross negligence or willful misconduct
as determined by a final judgment of a court of competent
jurisdiction, nor shall Lender be responsible for the
validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. Lender and
its Affiliates and their respective directors, officers,
employees, attorneys and agents shall be entitled to rely on
any communication, instrument or document believed by it or
them to be genuine and correct and to have been signed or
sent by the proper person or persons.
SECTION 15.13 Release; Termination of Agreement.
This Agreement shall terminate on the Termination Date. At
such time, Lender shall, at the request of Pledgor, reassign
and redeliver to Pledgor all of the Pledged Collateral
pledged by Pledgor hereunder which has not been sold,
disposed of, retained or applied by Lender in accordance
with the terms hereof, and execute and deliver to Pledgor
such documents as may reasonably be requested by Pledgor to
evidence the same. Such reassignment and redelivery shall
be without warranty by or recourse to Lender, except as to
the absence of any prior assignments by Lender of its
interest in the Pledged Collateral pledged by Pledgor, and
shall be at the expense of Pledgor.
SECTION 15.14 Final Expression. This Agreement,
together with any other agreement executed in connection
herewith, is intended by the parties as a final expression
of this Agreement and is intended as a complete and
exclusive statement of the terms and conditions thereof.
Acceptance of or acquiescence in a course of performance
rendered under this Agreement shall not be relevant to
determine the meaning of this Agreement even though the
accepting or acquiescing party had knowledge of the nature
of the performance and opportunity for objection.
SECTION 15.15 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original but all of which shall together
constitute one and the same agreement.
-16- STM-63734.1 <PAGE>
<PAGE>
SECTION 15.16 GOVERNING LAW; CONSENT TO
JURISDICTION AND VENUE. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
PLEDGOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK CITY SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN PLEDGOR AND LENDER PERTAINING TO THIS AGREEMENT OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE PARENT GUARANTY, THE CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, PROVIDED, THAT LENDER AND PLEDGOR
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK CITY AND,
PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGEMENT OR OTHER COURT ORDER
IN FAVOR OF LENDER. PLEDGOR EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND PLEDGOR HEREBY WAIVES ANY
OBJECTION WHICH PLEDGOR MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINTS AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO PLEDGOR AT THE ADDRESS SET FORTH IN SECTION
10.9 OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF PLEDGOR'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.
SECTION 15.17 MUTUAL WAIVER OF JURY TRIAL. BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY
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
-17- STM-63734.1 <PAGE>
<PAGE>
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE
PARTIES ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT, THE PARENT GUARANTY, THE
CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
SECTION 15.18 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.
SECTION 15.19 ACKNOWLEDGMENTS. PLEDGOR HEREBY
ACKNOWLEDGES THAT:
(a) IT HAS BEEN ADVISED BY COUNSEL IN THE
NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT;
(b) LENDER HAS NO FIDUCIARY RELATIONSHIP TO
PLEDGOR, AND THE RELATIONSHIP BETWEEN LENDER, ON THE ONE
HAND, AND PLEDGOR, ON THE OTHER HAND, IS SOLELY THAT OF
CREDITOR AND DEBTOR, RESPECTIVELY; AND
(c) NO JOINT VENTURE EXISTS AMONG LENDER AND
PLEDGOR.
-18- STM-63734.1<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the date
first above written.
PLEDGOR:
C.I.S. TECHNOLOGIES, INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title:
Date:
Accepted and Acknowledged by:
LENDER:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Dan Pengue
Name:
Title: Authorized Signatory
Date:
-19- STM-63734.1 <PAGE>
<PAGE>
Schedule I
PLEDGED SHARES
Attached to and forming a part of that certain Pledge
Agreement, as amended, supplemented or otherwise modified,
dated as of February 1, 1996 made by C.I.S. TECHNOLOGIES,
INC. in favor of GENERAL ELECTRIC CAPITAL CORPORATION
relating to the shares of capital stock of C.I.S., Inc. set
forth below.
Stock
Class of Certificate Par Number Percentage
Stock Number Value of Shares Outstanding
100%
STM-63734.1 <PAGE>
<PAGE>
SCHEDULE II
PLEDGE AGREEMENT SUPPLEMENT
This Pledge Agreement Supplement, dated as of
_______, 19__, is delivered pursuant to Section 5 of the
Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Agreement Supplement may be attached
to the Pledge Agreement, dated as of February 1, 1996 (as
amended, restated, supplemented or otherwise modified from
time to time, the "Pledge Agreement"; the terms defined
therein and not otherwise defined herein being used as
therein defined), made by C.I.S. Technologies, Inc. to
General Electric Capital Corporation and that the shares
listed on this Pledge Agreement Supplement shall be and
become part of the Pledged Shares and Pledged Collateral
referred to in the Pledge Agreement and shall secure all
Secured Obligations.
The undersigned agrees that the shares listed below
shall for all purposes constitute Pledged Shares and Pledged
Collateral and shall be subject to the security interest
created by the Pledge Agreement.
The undersigned hereby certifies that the
representations and warranties set forth in Section 4 of the
Pledge Agreement of the undersigned are true and correct as
to the Pledged Collateral listed herein on and as of the
date hereof.
C.I.S. TECHNOLOGIES, INC.
By:
Name:
Title:
Stock
Class of Certificate Par Number
Stock Number(s) Value of Shares
STM-63734.1 <PAGE>
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated as of February 1, 1996, made and entered into by
and between C.I.S. TECHNOLOGIES, INC. and GENERAL ELECTRIC CAPITAL
CORPORATION ("Lender") (the "Pledge Agreement"). The undersigned agrees
for the benefit of Lender as follows:
1. The undersigned will be bound by the terms of the
Pledge Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify Lender promptly in writing
of the occurrence of any of the events described in Section 6(c) of the
Pledge Agreement.
3. The terms of Section 12(g) of the Pledge Agreement
shall apply to it, mutatis mutandis, with respect to all actions that
may be required of it under or pursuant to or arising out of Section 12
of the Pledge Agreement.
C.I.S., INC.
By: /s/ Richard A. Evans
Name: Richard A. Evans
Title: Treasurer
STM-63734.1 <PAGE>
<PAGE>
Exhibit 10d (cont.)
FIRST AMENDMENT
TO
LIMITED LIABILITY COMPANY AGREEMENT
OF
SA SERVICES, L.L.C.
FIRST AMENDMENT, dated as of February 1, 1996
(this "Amendment"), to the Limited Liability Company
Agreement referred to below by and between C.I.S.
Technologies, Inc., a Delaware corporation (together with
its successors and permitted assigns, "CIS Technologies"),
and GE Capital Commercial Finance, Inc., a Delaware
corporation (together with its successors and permitted
assigns, "CF").
W I T N E S S E T H
WHEREAS, CIS Technologies and CF are parties to
that certain Limited Liability Company Agreement, dated as
of October 31, 1994 (as amended, supplemented or otherwise
modified from time to time, the "LLC Agreement"); and
WHEREAS, CIS Technologies and CF have agreed to
amend the LLC Agreement in the manner, and on the terms and
conditions, provided for herein;
NOW, THEREFORE, in consideration of the
premises and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby
acknowledged, CIS Technologies and CF hereby agree as
follows:
1. Definitions. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to
them in the LLC Agreement.
2. Amendment to Section 3.1 of the LLC
Agreement. Section 3.1 of the LLC Agreement is hereby
amended as of the Amendment Effective Date (as hereinafter
defined) by deleting the last sentence of Section 3.1 in its
entirety and substituting in lieu thereof the following new
sentence to read as follows: "If on the Complete Windup
Date, the full amount of such $1,500,000 has not been paid
to or on behalf of the Company by CF, CF shall not be
obligated to pay to the
STM-63722.1 <PAGE>
<PAGE>
Company or on its behalf or to CIS Technologies or to any
other Person such unused amount."
3. No Other Amendments. Except as expressly
amended herein, the LLC Agreement shall be unmodified and
shall continue to be in full force and effect in accordance
with its terms.
4. Effectiveness. This Amendment shall become
effective as of February 1, 1996 (the "Amendment Effective
Date").
5. Representations and Warranties. Each
Member (for purposes of CIS Technologies' representations
and warranties under this Section 5, "Member" as used below
shall be deemed to refer to each of CIS Technologies and
C.I.S., Inc.) represents, warrants and covenants to the
other Member that:
(a) Organization and Corporate Power. Such
Member is an entity duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its
organization. Such Member has all required power and
authority to carry out the transactions contemplated by this
Amendment and the LLC Agreement as amended hereby (the
"Amended LLC Agreement").
(b) Authorization. The execution, delivery
and performance of this Amendment and the transactions
contemplated hereunder and the performance of the Amended
LLC Agreement, have been duly authorized by all necessary
corporate action on the part of such Member, and each of
this Amendment and the Amended LLC Agreement constitutes a
l e gal, valid and binding obligation of such Member,
enforceable in accordance with its terms, except as such
e n forcement may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights
generally and by general principles of equity.
(c) Effect of Transactions. The execution,
delivery and performance of this Amendment, the performance
of the Amended LLC Agreement and the transactions contem-
plated hereby and thereby do not and will not (i) conflict
with or result in a breach or violation of the terms,
conditions or provisions of, or constitute a default under,
(ii) result in the creation of any lien, security interest,
charge or encumbrance upon such Member's capital stock or
assets pursuant to, or (iii) require any authorization,
consent, approval, exemption or other action by or notice to
any court
STM-63722.1 <PAGE>
<PAGE>
or administrative or governmental body pursuant to (A) the
organizational documents of such Member, (B) any agreement
to which such Member is a party or is bound or to which its
a s sets are subject, or (C) any law, statute, rule,
regulation, judgment, injunction, order or decree to which
such Member is subject; which, in each case, would prevent
such Member from performing its obligations under this
Amendment and the Amended LLC Agreement.
6. Governing Law. This Amendment and the
rights of the parties hereunder will be governed by,
interpreted, and enforced in accordance with the laws of the
State of Delaware.
7. Multiple Counterparts. This Amendment may
be executed in several counterparts, each of which will be
deemed an original but all of which will constitute one and
the same instrument. However, in making proof hereof it
will be necessary to produce only one copy hereof signed by
the party to be charged.
-3- STM-63722.1 <PAGE>
<PAGE>
IN WITNESS WHEREOF, the Members have executed
this Amendment on the date set forth below their signatures,
to be effective, however, as of the Amendment Effective
Date.
GE CAPITAL COMMERCIAL FINANCE, INC.
By: /s/ Dan Pengue
Title: Authorized Signatory
Date:
C.I.S. TECHNOLOGIES, INC.
By: /s/ Thomas G. Noulles
Title: Assistant Secretary
Date:
-4- STM-63722.1 <PAGE>
<PAGE>
Exhibit 10d (cont.)
February 7, 1996
General Electric Capital
Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Ladies and Gentlemen:
Reference is made to (i) that certain promissory
note in the original aggregate principal amount of
$5,000,000 originally made by Hospital Cost Consultants,
Inc., a California corporation ("HCCI") (and subsequently
assumed by operation of law by C.I.S., Inc., an Oklahoma
corporation ("Borrower"), in connection with the merger of
HCCI with and into Borrower) in favor of First Financial
Management Corporation, a Georgia corporation ("FFMC"), (ii)
the Security Agreement dated as of May 31, 1995 made by HCCI
in favor of FFMC, whereby HCCI has granted in favor of FFMC
a second priority security interest in HCCI's accounts
receivable, (iii) that certain Corporate Guaranty dated as
of May 31, 1995 made by C.I.S. Technologies, Inc., a
Delaware corporation ("Parent"), in favor of FFMC, and (iv)
the Stock Pledge Agreement dated as of May 31, 1995, between
Parent and FFMC whereby Parent has pledged in favor of FFMC
all of the capital stock of HCCI (collectively, the "Credit
Documents"). Upon our confirmation by telephone today of
the initiation of a federal funds wire transfer to us in
payment of $5,064,428.24 (the "Payoff Amount"), pursuant to
the Credit Documents, we agree that you may then take
delivery of the UCC termination statements, releases of
liens, discharges, terminations and other release
documentation (all as set forth on Schedule A hereto)
executed by us releasing any liens and security interests
held by us in any property or assets of Borrower, Parent and
its subsidiaries (the "Property") which documents have been
provided by us in escrow to your counsel, Mario J. Ippolito,
Esq. of Paul, Hastings, Janofsky & Walker.
In addition, we agree and acknowledge that, upon our
receipt of the Payoff Amount, all outstanding indebtedness
and other obligations of Borrower and Parent or
STM-64022 <PAGE>
<PAGE>
any subsidiary, affiliate, shareholder, partner or limited
partner thereof under or relating to the Credit Documents
shall be paid and satisfied in full and the Credit Documents
and related loan and security documents shall terminate.
Further, we agree to take all reasonable additional steps as
may be necessary to release our security interests in the
Property.
The Payoff Amount referred to above should be sent
by federal funds wire to The Chase Manhattan Bank, New York,
New York, ABA No. 02-1000-02-1, Reference: HCC Note,
Attention: Susan Vinson, First Data Corporation, (770) 857-
7158.
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STM-64022
- 2 - <PAGE>
<PAGE>
If you need additional information, please do not
hesitate to contact me.
Very truly yours,
FIRST FINANCIAL MANAGEMENT
CORPORATION
By: /s/ Randolph L.M. Hutto
Name: Randolph L.M. Hutto
Title: VP
<PAGE>
Exhibit 10d (cont.)
RELEASE
FIRST FINANCIAL MANAGEMENT CORPORATION, a Georgia
corporation ("FFMC" or "Secured Party"), for good and
valuable consideration, receipt whereof is hereby
acknowledged, does hereby release and discharge C.I.S., INC.
("Borrower") and C.I.S. TECHNOLOGIES, INC. ("Parent"), their
respective subsidiaries or affiliates and each of their
officers, directors, employees, attorneys and agents
(collectively, the "Released Parties"), from all loans and
other financing arrangements heretofore entered into by
Secured Party, Borrower, Parent and any other Released
Party, and all agreements, documents, notes, and instruments
executed by the Released Parties in connection therewith,
including, without limitation, (i) that certain promissory
note in the original aggregate principal amount of
$5,000,000 originally made by Hospital Cost Consultants,
Inc., a California corporation ("HCCI") in favor of Secured
Party and subsequently assumed by Borrower in connection
with the merger of HCCI with and into Borrower, (ii) the
Security Agreement dated as of May 31, 1995 made by HCCI in
favor of FFMC, whereby HCCI has granted in favor of FFMC a
second priority security interest in HCCI's accounts
receivable, (iii) that certain Corporate Guaranty dated as
of May 31, 1995 made by Parent in favor of FFMC, and (iv)
the Stock Pledge Agreement dated as of May 31, 1995, between
Parent and FFMC, whereby Parent has pledged in favor of FFMC
all of the capital stock of HCCI, and all other security
agreements, guaranty agreements, pledge agreements and other
documents or instruments executed in connection therewith
(collectively, the "Agreements") and from payment and
performance of all obligations, liabilities and indebtedness
to Secured Party of every kind, nature and description,
arising under or in connection with the Agreements
(hereinafter the "Obligations").
Secured Party does hereby terminate and release any
security interest or liens on any property, assets or other
collateral ("Collateral", which includes without limitation
accounts, general intangibles, contract rights, documents,
instruments, chattel paper, inventory, equipment, fixtures
and the proceeds and products thereof, as such terms are
defined in the Uniform Commercial Code) of any
-1- STM-64032.2 <PAGE>
<PAGE>
Released Party heretofore granted to Secured Party as
security for the Obligations, whether pursuant to the
Agreements or otherwise, and reassigns to each Released
Party all Collateral pledged by such Released Party.
Secured Party herewith agrees to deliver Uniform
Commercial Code termination statements covering all
financing statements which have been filed by Secured Party
against any Released Party, together with, to the extent
applicable, mortgage satisfactions and other lien releases
to evidence the termination and release of security
interests and liens provided herein. Secured Party further
agrees to furnish additional termination statements,
satisfactions and lien releases and such other and further
documents and instruments as may reasonably be requested in
order to effect and evidence more fully the matters covered
hereby.
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-2- STM-64032.2 <PAGE>
<PAGE>
IN WITNESS WHEREOF, this Release has been duly
executed on behalf of the undersigned by a duly authorized
officer this ___day of February, 1996.
FIRST FINANCIAL MANAGEMENT
CORPORATION
By: /s/ Randolph L.M. Hutto
Title: VP
-3- STM-64032.2 <PAGE>
<PAGE>
Exhibit 10d (cont.)
ANNEXES, SCHEDULES AND EXHIBITS
TO
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 1, 1996
among
C.I.S., INC.,
as Borrower,
C.I.S. TECHNOLOGIES, INC.,
as Parent,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
STM-62344.3
<PAGE>
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Closing Documents
Annex D - Schedule of Certain Fees
Annex E - Financial Statements and Notices
Annex F - Insurance Requirements
Annex G - Financial Covenants
Schedule 3.2 - Executive Offices; Trade Names
Schedule 3.4 - Financial Statements
Schedule 3.5 - Dividends
Schedule 3.6 - Real Estate and Leases
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Bank Accounts
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Loans to and Transactions with Employees
Schedule 6.7 - Liens
Schedule 10.8 - Authorized Signatures
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Revolving Credit Note
Exhibit D - Form of Term Note
Exhibit E - Parent Guaranty
Exhibit F - Security Agreement
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - Form of Subsidiary Security Agreement
Exhibit I - Form of Pledge Agreement
STM-62344.3
-i- <PAGE>
<PAGE>
ANNEX A
to
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of February 1, 1996
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.
"Acquisition Notes" shall mean those notes each dated November
31, 1994 made by Parent in connection with the acquisition by Parent of
all of the capital stock of AMSC in favor of Randall Ray and Wendy R.
Lewis in the original principal amount of $245,000 and $255,000 in the
case of the convertible notes made in favor of Randall Ray and Wendy R.
Lewis, respectively, and $735,000 and $765,000 in the case of the non-
convertible notes made in favor of such Persons, respectively.
"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 or is under common control with such Person or any
Affiliate of such
STM-62598.3 <PAGE>
<PAGE>
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 Amended and Restated 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.
"Audit Services" shall mean the audit services provided by
Borrower (as successor in interest to HBA) to Persons in or related to
the medical care industry, including, but not limited to, charge
r e covery and verification services, services in connection with
Borrower's (as successor in interest to HBA) Defense Audit Program,
Concurrent Audit Programs, and supplemental audit support services.
"Borrower" 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 eighty-five percent (85%) of Eligible Accounts
(other than Eligible Charge Recovery Accounts); and
(b) up to the lesser of (i) fifty percent (50%) of Eligible
Charge Recovery Accounts 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.
"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.
STM-62598.3
-2- <PAGE>
<PAGE>
"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
Borrower are not owned directly by Parent.
"Charge Recovery Account" shall mean any Account that arises
from the provision by Borrower (as successor in interest to the business
of 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 Accounts" shall mean Accounts of Borrower which are not
HBA Accounts.
"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
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Lender's sole discretion, or waived in writing by Lender, and the
Tranche D Term Loan has 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, the
Pledge 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 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, dated as of October 31, 1994, between Borrower and GE Capital
Finance, Inc. and the Services Agreement and the Technology Agreement,
each dated as of October 31, 1994 among Parent, Borrower, 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.
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"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.
"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.
"Earn Out Agreement" shall mean that certain agreement dated
May 11, 1995 by and among FFMC, Parent, John A. Booth and each of the
parties listed on the signature lines thereto as Shareholders.
"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 Borrower and
AMSC, such Accounts of Borrower or AMSC 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
Borrower or AMSC in the ordinary course of Borrower's or AMSC's, as the
case may be, business;
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(b) upon which (i) Borrower's or AMSC's right to receive
payment is not absolute or is contingent upon the fulfillment of any
condition whatever, or (ii) Borrower or AMSC 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;
(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 Borrower or AMSC, as the case may
be, 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 Borrower or AMSC, as the
case may be, or an entity which has common officers or directors with
Borrower or AMSC;
(h) that is the obligation of an Account Debtor that is the
Federal government or a political subdivision thereof, unless Borrower
or AMSC, as the case may be, 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
Borrower or AMSC, as the case may be, is or may become liable for goods
sold or services rendered by the Account Debtor to Borrower or AMSC;
(l) that arises with respect to goods or services which are
delivered or rendered on a cash-on-delivery basis or placed on consign-
ment, 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:
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(i) with respect to any CIS Account or Account of AMSC,
such CIS Account or Account of AMSC, as the case may be, 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 HBA Account (other than a
Charge Recovery Account), such HBA 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 Borrower's or AMSC's, as the
case may be, submission of a claim in respect thereof to the insurer
or other third party payor;
(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 Borrower's or AMSC's, as the case may be, standard terms;
(p) that arises from any bill-and-hold or other sale of goods
which remain in Borrower's or AMSC's possession or under Borrower's or
AMSC'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 Borrower's or
AMSC's, as the case may be, 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.
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"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. Section 9601 et seq.)
("CERCLA"); the Hazardous Material Transportation Act, as amended (49
U.S.C. Section 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Section 2601
et seq.); the Clean Air Act, as amended (42 U.S.C. Section 740 et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.
Section 651 et seq.) ("OSHA"); and the Safe Drinking Water Act, as amended
(42 U.S.C. Section 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.
"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 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
w h ich might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the
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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.
"Existing Credit Agreement" shall have the meaning assigned to
it in the Recitals to this Agreement.
"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.
"FFMC" shall mean First Financial Management Corporation, a
Georgia corporation.
"FFMC Guaranty" shall mean that certain Corporate Guaranty
dated as of May 31, 1995 by Parent in favor of FFMC.
"FFMC Note" shall mean that certain promissory note in the
original aggregate principal amount of $5,000,000 originally made by
HCCI (and subsequently assumed by Borrower in connection with the
Reorganization) in favor of FFMC.
"FFMC Pledge Agreement" shall mean that certain Stock Pledge
Agreement, dated as of May 31, 1995, between Parent and FFMC whereby
Parent has pledged in favor of FFMC all of the capital stock of HCCI.
"FFMC Security Agreement" shall mean that certain Security
Agreement dated May 31, 1995 made by HCCI in favor of FFMC, whereby HCCI
has granted in favor of FFMC a second priority security interest in
HCCI's accounts receivable.
"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
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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 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, 1994 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
a s s o ciations, 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.
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"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 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. Section 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. Section 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 Recitals to this
Agreement.
"HBA Accounts" shall mean Accounts of Borrower which are
attributable to that portion of Borrower's business which prior to the
Reorganization was HBA's business.
"HCCI" has the meaning assigned to it in the Recitals to this
Agreement.
"HCCI Acquisition" shall mean the acquisition by Parent of all
the capital stock of HCCI from MicroBilt Corporation pursuant to the
Stock Purchase Agreement and the other HCCI Acquisition Documents.
"HCCI Acquisition Documents" shall mean the Stock Purchase
Agreement, the Earn Out Agreement and any other document directly
related to the HCCI Acquisition.
"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.
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"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 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.
"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.
"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.
"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.
STM-62598.3
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<PAGE>
"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 Borrower, Parent and each Subsidiary of
Parent or Borrower.
"Lock Box Account Agreements" shall have the meaning assigned
to it in Annex B.
"Lock Box Accounts" 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 Borrower or the industry within which Parent or 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 of any Person that is not a
direct or indirect Wholly-owned Subsidiary of Parent, unless received by
Parent in cash.
"Net Proceeds" shall mean with respect to any issuance of Stock
by Borrower, Parent or any of their respective Subsidiaries or
Affiliates subsequent to the Closing Date, the cash proceeds received by
such Person from such issuance net of investment banking fees, legal
fees, accountants fees, underwriting discounts and commissions and other
customary fees and expenses and other reasonable costs and expenses
actually incurred in connection therewith other than such amounts
payable to an Affiliate of Borrower.
STM-62598.3
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<PAGE>
"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
p r incipal, 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, dated as of
October 15, 1994, attached hereto as Exhibit E 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, continu-
ations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"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, if any, 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 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
STM-62598.3
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<PAGE>
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.
"Pledge Agreement" shall mean the Pledge Agreement,
substantially in the form of Exhibit I attached hereto, made by Parent
in favor of Lender.
"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 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.
STM-62598.3
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<PAGE>
"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 inter-
pretation 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.
"Reorganization" shall have the meaning assigned to it in the
Recitals to this Agreement.
"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 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 Borrower pursuant to Section
1.1 in the aggregate principal amount outstanding not to exceed at any
time $6,000,000, 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 three and seventy-five one hundredths percent (3.75%) per annum.
STM-62598.3
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<PAGE>
"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, dated
as of October 15, 1994, attached hereto as Exhibit F, between Lender,
Borrower 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).
"Stock Purchase Agreement" shall mean that certain Stock
Purchase and Sale Agreement dated the 11th day of May, 1995 by and among
FFMC, MicroBilt Corporation and Parent.
"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 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,
including, without limitation, that certain guaranty dated as of
November 1, 1994, made by AMSC in favor of Lender.
"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, including without
limitation, that certain security agreement, dated as of November 1,
1994, between AMSC and Lender.
"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, the Tranche B
Term Loan, the Tranche C Term Loan and the Tranche D Term Loan made by
Lender to Borrower in accordance with the terms of Section 1.2.
"Term Loan Commitment" shall mean, the commitment of Lender to
make the Term Loan to Borrower pursuant to Section 1.2 in the aggregate
principal amount of $8,250,000.
STM-62598.3
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<PAGE>
"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 four
percent (4%) 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.
"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 Borrower and for
any of Borrower's Accounts, at the end of each Fiscal Quarter of
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 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 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.
"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).
"Tranche C Term Loan" shall have the meaning assigned to it in
Section 1.2(a)(iii).
"Tranche D Term Loan" shall have the meaning assigned to it in
Section 1.2(a)(iv).
"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.
STM-62598.3
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<PAGE>
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 accord-
ance 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 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.
STM-62598.3
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<PAGE>
ANNEX B
to
CREDIT AGREEMENT
Dated as of February 1, 1996
CASH MANAGEMENT SYSTEM
Borrower and Parent agree to establish and maintain (and to cause
each of its Subsidiaries to establish and maintain), until the
Termination Date, the cash management system described below:
1. No Loan Party shall maintain any deposit, checking,
operating or other bank account except for those accounts identified in
Schedule 3.20. So long as any Revolving Credit Advance is outstanding,
no more than $250,000 in the aggregate may, for any two (2) consecutive
Business Days, be maintained in the accounts of Loan Parties identified
in Schedule 3.20.
2. For so long as any Obligations are outstanding, Loan
Parties shall deposit or, if directed by Lender, cause to be deposited
directly, in either case on the date of receipt thereof, all cash,
checks, notes, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral into
lock boxes or lock box accounts in Borrower's or Lender's name
(collectively, the "Lock Box Accounts") at the banks set forth in
Attachment I hereto. On or before the Closing Date, Borrower shall have
established a concentration account in Borrower's name (the
"Concentration Account") at the bank set forth in Attachment I hereto.
3. On or before the Closing Date, the banks at which the
Lock Box Accounts are held shall have entered into tri-party lock box
agreements (the "Lock Box Account Agreements") with Lender, Borrower and
Parent, in form and substance acceptable to Lender. Each such Lock Box
Account Agreement shall provide, among other things, that (a) such bank
executing such agreement has no rights of setoff or recoupment or any
other claim against such Lock Box Account, other than for payment of its
service fees and other charges directly related to the administration of
such account, and (b) such bank agrees to sweep on a daily basis all
available amounts in the Lock Box Account to the Concentration Account.
4. On or before the Closing Date, the bank at which the
Concentration Account is held shall have entered into a tri-party
blocked account agreement (the "Concentration Account Agreement") with
Lender, Borrower and Parent, in form and substance acceptable to Lender.
Such Concentration Account Agreement shall provide, among other things,
that (a) such bank executing such agreement has no rights of setoff or
recoupment or any other claim against such Concentration Account, other
than for payment of its service fees and other charges directly related
to the administration of such account, and (b) at any time upon Lender's
request (which Lender may give or refrain from giving in its sole
discretion), such bank agrees to sweep on a daily basis all amounts
received in the Concentration Account to the Collection Account.
5. On the Closing Date (to the extent not previously
operative pursuant to the terms of the Existing Credit Agreement), (a)
the blocked account arrangements shall immediately become operative at
the banks at which the Lock Box Accounts and the Concentration Account
a r e maintained, and (b) subject to clause (b) of paragraph 4
above, amounts outstanding under the Revolving Credit Loan shall
STM-62598.3
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<PAGE>
be reduced through daily sweeps, by wire transfer, of the Lock Box
Accounts into the Concentration Account, and of the Concentration
Account into the Collection Account, as provided in this Annex B.
Borrower acknowledges that, at any time after Lender has given the
notice referred to in Paragraph 4(b) above, it shall have no right to
gain access to any of the moneys in the Lock Box Accounts or the
Concentration Account until the Termination Date.
6. Borrower may maintain, in its name, an account or
accounts (the "Disbursement Accounts") at a bank acceptable to Lender
into which Lender shall deposit the proceeds of the Term Loan and, from
time to time, deposit proceeds of Revolving Credit Advances made
pursuant to Section 1.1 for use solely in accordance with the provisions
of Section 1.4. The Disbursement Accounts as of the Closing Date are
listed in Attachment I hereto. If Lender so requires, on or before the
Closing Date, or at any time thereafter, the banks set forth in
paragraph 3 of Attachment I hereto shall have entered into agreements
(the "Disbursement Account Agreements") acknowledging Lender's security
interest in the Disbursement Accounts in form and substance acceptable
to Lender.
7. So long as no Default has occurred, Borrower may amend
Attachment I hereto to add or replace a Lock Box Account, Concentration
Account or Disbursement Account; provided, that (a) Lender shall have
consented to the opening of such account with the relevant bank, and
(b) with respect to any Lock Box Account or the Concentration Account,
at the time of the opening of such account, Borrower and such bank shall
have executed and delivered to Lender a Concentration Account Agreement,
in form and substance satisfactory to Lender, and with respect to any
Disbursement Account, at the time of the opening of such account,
Borrower and such bank shall have executed and delivered to Lender a
Disbursement Account Agreement. Borrower shall close any of its
accounts (and establish replacement accounts in accordance with the
foregoing sentence) within 30 days of notice from Lender that the
creditworthiness of the bank holding such accounts is no longer
acceptable in Lender's sole judgment. The Lock Box Accounts, the
Disbursement Account and the Concentration Account shall be cash
collateral accounts with all cash, checks and other similar items of
payment in such accounts securing payment of the Obligations, and in
which Borrower shall have granted a first priority perfected Lien to
Lender for the benefit of Lender pursuant to the Security Agreement.
8. All amounts deposited in the Collection Account shall be
deemed received by Lender in accordance with the terms of Section 1.10
and shall be applied (and allocated) by Lender in accordance with the
terms of Section 1.10. In no event shall any amount be so applied
unless and until such amount shall have been credited in immediately
available funds to the Collection Account.
9. Borrower hereby constitutes and irrevocably appoints
Lender its true and lawful attorney, with full power of substitution, to
demand, collect, receive and sue for all amounts which may become due or
payable under the Lock Box Accounts and the Concentration Account, and
to execute all withdrawal receipts or other orders for Borrower, in its
own name or in Borrower's name or otherwise, which Lender deems
necessary or appropriate to protect and preserve its right, title and
interest in such accounts.
10. Upon request of Lender, Borrower shall forward to Lender,
on a daily basis, evidence of the deposit of all items of payment
received by Borrower into the Lock Box Accounts and copies of all such
c h ecks and other items, together with a statement showing the
application of those items relating to payments on Accounts to
outstanding Accounts and a collection report with regard thereto in form
and substance satisfactory to Lender. So long as no Default has
occurred and is continuing, in making any such
STM-62598.3
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<PAGE>
request, Lender shall consider (i) whether Borrower's financial
condition necessitates the receipt by Lender of such information to
monitor and protect the Collateral, and (ii) the amount of Excess
Borrowing Availability.
STM-62598.3
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<PAGE>
ATTACHMENT I TO ANNEX B
LIST OF LOCK BOX ACCOUNTS, CONCENTRATION ACCOUNT AND DISBURSEMENT
ACCOUNT
1. Lock Box Accounts.
C.I.S. Technologies - Lockbox 3267-04-4
Liberty Tulsa (Oxford Branch)
P.O. Box One
Tulsa, OK 74193
(918) 586-1000
2. Concentration Account.
C.I.S. Technologies - Operating 3053-04-8
Liberty Tulsa (Oxford Branch)
P.O. Box One
Tulsa, OK 74193
(918) 586-1000
3. Disbursement Account.
C.I.S. Technologies 639
Peoples National Bank
320 N. Main
Kingfisher, OK 73750
(405) 375-5911
STM-62598.3
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<PAGE>
ANNEX C
to
CREDIT AGREEMENT
Dated as of February 1, 1996
SCHEDULE OF CLOSING DOCUMENTS
The effectiveness of this Agreement and the obligation of
Lender to make the Tranche D Term Loan is subject to satisfaction of the
condition precedent that Lender shall have received the following, each,
unless otherwise specified below, dated the Closing Date, in form and
substance satisfactory to Lender and its counsel, unless otherwise
specified below:
I. PRINCIPAL LOAN DOCUMENTS.
(a) Credit Agreement. The Credit Agreement duly executed by
Borrower and Parent.
(b) Notes. A duly executed Revolving Credit Note and Term Note to
the order of Lender.
II. COLLATERAL DOCUMENTS.
(a) Pledge Agreement. The Pledge Agreement duly executed by Parent
together with delivery to Lender of:
i) Certificates or other evidences of ownership representing
the Pledged Shares (as defined therein) and appropriate
undated stock powers (or the equivalent thereof) executed
in blank; and
ii) Evidence that all action necessary or, in the opinion of
and at the request of Lender, desirable to perfect and
protect the security interests created by the Pledge
Agreement has been taken.
(b) Recordings and Filings. Evidence of the completion of all
recordings and filings as may be necessary or, in the opinion
of and at the request of Lender, desirable to perfect or
continue to perfect the Lien created by the Collateral
Documents; and
(c) Evidence of Insurance. Evidence that the insurance required by
the terms hereof is in full force and effect.
III. THIRD PARTY AGREEMENTS.
(a) Cash Management System. To the extent not previously
delivered to Lender in connection with the Existing Credit Agreement,
duly executed Lock Box Account Agreements, Concentration Account
Agreement and Disbursement Account Agreement as contemplated by Annex B.
STM-62598.3
-1- <PAGE>
<PAGE>
IV. DOCUMENTS DELIVERED BY BORROWER.
(a) Board Resolutions and Incumbency Certificates. A
certificate of the Secretary or an Assistant Secretary of:
i) Parent certifying (A) the resolutions adopted by
the Board of Directors of Parent approving each Loan Document to be
entered into in connection with this Agreement to which Parent is a
party and the transactions contemplated hereby and thereby, (B) all
documents evidencing other necessary corporate action by Parent and
required governmental and third party approvals with respect to each
such Loan Document, and (C) the names and true signatures of the
authorized officers of Parent; and
ii) Borrower certifying (A) the resolutions adopted by
the Board of Directors of such Borrower approving the Loan Documents
to be entered into in connection with this Agreement to which
Borrower is a party and the transactions contemplated thereby, (B)
all documents evidencing other necessary corporate action by Borrower
and required governmental and third party approvals with respect to
the Loan Documents to which it is a party, and (C) the names and true
signatures of the authorized officers of Borrower.
(b) Articles of Incorporation; By-Laws and Good Standing
Certificates. Each of the following documents:
i) the certificate of incorporation of each of Parent,
Borrower, and AMSC as in effect on the Closing Date, certified by the
Secretary of State or other appropriate authority of the State of its
incorporation as of a recent date, and the by-laws of Parent,
Borrower, and AMSC as in effect on the Closing Date, certified by the
Secretary, Assistant Secretary or other appropriate officer or
director of Parent, Borrower and AMSC; and
ii) a good standing certificate for each of Parent,
Borrower and AMSC from the Secretary of State or other appropriate
authority of the State of its incorporation as of a recent date.
(c) Financial Statements. Copies of the financial statements
described in Schedule 3.4.
V. LEGAL OPINIONS.
(a) Legal Opinion. An opinion of Tom Noulles, Chief Legal
Counsel to Parent and Borrower, in form and substance satisfactory to
Lender and its special counsel.
STM-62598.3
-2- <PAGE>
<PAGE>
ANNEX D
to
CREDIT AGREEMENT
Dated as of February 1, 1996
SCHEDULE OF CERTAIN FEES
1. Closing Fee. Borrower shall pay to Lender, for the account of
Lender, a closing fee of $125,000 (the "Closing Fee") on the Closing
Date.
2. Non-Use Fee. Borrower shall pay to Lender, for the account of
Lender, an unused facility fee (the "Non-Use Fee"), equal to one-half of
one percent (0.5%) per annum on the average unused daily balance of the
Revolving Credit Commitment, payable in arrears (i) for the preceding
calendar month, on the first Business Day of each calendar month
commencing December 1, 1994, and (ii) on the Commitment Termination
Date. All computations of the foregoing fees shall be made by Lender on
the basis of a three hundred sixty (360) day year, and for the actual
number of days occurring in the period for which such fee is payable.
3. Collateral Examination Charge. Borrower shall pay to Lender,
for Lender's own account, a collateral examination charge of $500 per
day per individual in connection with any field examination conducted by
Lender.
STM-62598.3
-1- <PAGE>
<PAGE>
ANNEX E
to
CREDIT AGREEMENT
Dated as of February 1, 1996
FINANCIAL STATEMENTS AND NOTICES
1. As frequently as Lender may request for any period, and in any
event no later than the tenth (10th) Business Day of each Fiscal Month:
(a) a Borrowing Base Certificate as of the last day of the
preceding period;
(b) at the request of Lender, a collateral report for
Borrower with respect to (i) all additions and reductions (both cash and
non-cash) with respect to Borrower's Accounts and (ii) reports of
Borrower's Accounts other than Eligible Accounts; and
2. By no later than the tenth (10th) Business Day of each Fiscal
Month, for Borrower, a monthly aged Accounts trial balance by Account
Debtor and a schedule detailing ineligible Accounts for adjustments to
the Borrowing Base, and a reconciliation of such aged Accounts trial
balance to Borrower's general ledger for the previous Fiscal Month and
monthly financial statement, in each case accompanied by such supporting
detail and documentation as Lender may request.
3. At the request of Lender, by no later than thirty (30) days
after the end of each Fiscal Month:
(a) an internally prepared income statement and statement of
cash flows for such Fiscal Month and that portion of the current Fiscal
Year ending as of the close of such Fiscal Month, and balance sheet as
at the end of such Fiscal Month, for Parent on a consolidated basis,
which financial and other information shall provide comparisons to the
prior year's equivalent period, both on a monthly and year-to-date
basis, and to budget; and
(b) a certification of the Chief Executive Officer or Chief
Financial Officer of Parent and Borrower that all such financial
statements are complete and correct and present fairly the financial
position, the results of operations and the changes in financial
position of Parent as at the end of such Fiscal Month and for the period
then ended, and that there was no Default in existence as of such time
or specifying those Defaults of which he or she was aware.
4. Within forty-five (45) days after the close of each Fiscal
Quarter:
(a) copies of the quarterly unaudited financial statements of
Parent determined on a consolidated and consolidating basis, each
consisting of a balance sheet and statement of operations, retained
earnings and cash flow, setting forth in comparative form the figures
for the same Fiscal Quarter of the previous Fiscal Year, which financial
statements shall be prepared in accordance with GAAP and
STM-62598.3
-1- <PAGE>
<PAGE>
accompanied by a statement in reasonable detail showing the calculations
used in determining compliance with the financial covenants set forth in
Annex G;
(b) a report of the Chief Executive Officer or the Chief
Financial Officer of Parent setting forth management's discussion and
analysis of all current income statement, balance sheet and cash flow
financial trends; and
(c) a certification of the Chief Executive Officer or Chief
Financial Officer of Parent that all such financial statements are
complete and correct and present fairly in accordance with GAAP the
financial position, the results of operations and the changes in
financial position of such Parent as at the end of such Fiscal Quarter
and for the period then ended, and that there was no Default in
existence as of such time or specifying those Defaults of which he or
she was aware.
5. Within ninety (90) days after the close of each Fiscal Year:
(a) copies of the annual audited financial statements of
Parent determined on a consolidated and consolidating basis (together
with an auditor's compilation thereof), each consisting of a balance
sheet and statement of operations, retained earnings and cash flow,
setting forth in comparative form the figures for the previous Fiscal
Year, which financial statements shall be prepared in accordance with
GAAP, certified without qualification by Coopers & Lybrand or another
firm of independent certified public accountants of recognized national
standing selected by Parent and acceptable to Lender, and accompanied by
(i) a statement in reasonable detail showing the calculations used in
determining Parent's and Borrower's compliance with the financial
covenants set forth in Annex G, and (ii) a report from such accountants
to the effect that in connection with their audit examination, they did
not become aware of any Default, or specifying those Defaults, of which
they became aware;
(b) a report of the Chief Executive Officer or the Chief
Financial Officer of Parent setting forth management's discussion and
analysis of all current income statement, balance sheet and cash flow
financial trends;
(c) the annual letter from each Loan Parties' Chief Executive
Officer or Chief Financial Officer to such accountants in connection
with their audit examination detailing such Loan Party's contingent
liabilities and material litigation, ERISA, labor and environmental
matters; and
(d) a certification of the Chief Executive Officer or Chief
Financial Officer of Parent that all such financial statements are
complete and correct and present fairly in accordance with GAAP the
financial position, the results of operations and the changes in
financial position of such Loan Party as at the end of such Fiscal Year
and for the period then ended, and that there was no Default in
existence as of such time or specifying those Defaults of which he or
she was aware.
6. Not later than January 31 of each Fiscal Year, a final
operating plan which shall include a quarterly budget (including a
Capital Expenditures budget) for the Loan Parties acceptable to Lender
for such Fiscal Year approved by the applicable Loan Party's board of
directors and, in each case, which includes the following:
(a) projected balance sheets for such Fiscal Year, on a
quarterly basis:
STM-62598.3
-2- <PAGE>
<PAGE>
(b) projected cash flow statements and, with respect to
Borrower, forecasted Excess Borrowing Availability, including summary
details of cash disbursements (including Capital Expenditures) for such
Fiscal Year, on a quarterly basis;
(c) projected statements of operations for such Fiscal Year,
on a quarterly basis; and
(d) projected annual balance sheet, cash flow statements, and
statements of operations of Parent on a consolidated basis for such
Fiscal Year; together with a description of major assumptions used in
generating such balance sheets, cash flows and income statements, and
operating plan, and other appropriate supporting details as requested by
Lender.
7. As soon as practicable, but in any event within two (2)
Business Days after Parent or Borrower becomes aware of the existence of
any Default, or any development or other information that would have a
Material Adverse Effect, telephonic or telegraphic notice specifying the
nature of such Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in
writing within five (5) days.
8. Upon Lender's request, copies of all federal, state, local and
foreign tax returns, information returns and reports in respect of
income, franchise or other taxes on or measured by income (excluding
sales, use or like taxes) filed by any Loan Party thereof.
9. Promptly upon their becoming available, copies of any final
registration statements and the regular, periodic and special reports,
if any, which any Loan Party thereof shall have filed with the
S e c urities and Exchange Commission (or any governmental agency
substituted therefor) or any national securities exchange.
10. Promptly upon the mailing thereof to the shareholders of Parent
generally, copies of all financial statements, reports and proxy
statements so mailed.
11. As soon as possible, and in any event within 10 days after
Parent or Borrower knows or has reason to believe that any of the events
or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by the chief financial
officer of such Loan Party setting forth details respecting such event
or condition and the action, if any, that such Loan Party or any ERISA
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by such Loan
Party or any ERISA Affiliate with respect to such event or condition):
(a) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event (provided that a failure to meet the minimum funding standard
of Section 412 of the IRC or Section 302 of ERISA shall be a reportable
event regardless of the issuance of any waivers in accordance with
Section 412(d) of the IRC);
(b) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
STM-62598.3
-3- <PAGE>
<PAGE>
(c) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Borrower, any Subsidiary thereof
or any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer Plan;
(d) the complete or partial withdrawal by any Loan Party or
any ERISA Affiliate under Section 4201 or 4204 of ERISA from a
Multiemployer Plan, or the receipt by any Loan Party or any ERISA
A f f iliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A of
ERISA; and
(e) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Loan Party or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days.
12. Such other reports and information respecting any Loan Party's
businesses, financial condition or prospects as Lender may, from time to
time, reasonably request.
STM-62598.3
-4- <PAGE>
<PAGE>
ANNEX F
to
CREDIT AGREEMENT
Dated as of February 1, 1996
INSURANCE REQUIREMENTS
I. Coverage Requirements. The insurance policies maintained by Loan
Parties provide for, without limitation, the following insurance
coverage:
(a) "All Risk" physical damage on all of the Loan Parties'
tangible, real and personal property and assets, wherever located, and
covers, without limitation, fire and extended coverage, boiler and
machinery coverage, flood, earthquake, theft, burglary, explosion,
collapse, and all other hazards and risks ordinarily insured against by
owners or users of such properties in similar businesses. All policies
of insurance on such real and personal property contain an endorsement,
in form and substance acceptable to Lender, showing loss payable to
Lender (Form 438 BFU or its equivalent). Such endorsement, or an
independent instrument furnished to Lender, provides that the insurance
companies will give Lender at least thirty (30) days prior written
notice before any such policy or policies of insurance shall be altered
or canceled and that no act or default of any Loan Party or any other
Person shall affect the right of Lender to recover under such policy or
policies of insurance in case of loss or damage;
(b) Comprehensive general liability insurance on an
"occurrence basis" against claims for personal injury, bodily injury and
property damage with a minimum limit of $1,000,000 per occurrence and
$2,000,000 in the aggregate. Such coverage includes, without
limitation, premises/operations, broad form contractual liability,
underground, explosion and collapse hazard, independent contractors,
broad form property coverage, products and completed operations
liability;
(c) Statutory limits of worker's compensation insurance which
includes employee's occupational disease and employer's liability in the
amount of $500,000 for each accident or occurrence;
(d) Automobile liability insurance for all owned, non-owned
or hired automobiles against claims for personal injury, bodily injury
and property damage with a minimum combined single limit of $1,000,000
per occurrence;
(e) Umbrella insurance of $10,000,000 per occurrence and
$10,000,000 in the aggregate; and
(f) Crime insurance with respect to employee dishonesty in an
amount not less than $250,000.
All of such policies (i) shall have deductibles acceptable to
Lender (it being understood that current deductibles are acceptable);
(ii) shall provide that Lender will be notified by written notice at
l e ast thirty (30) days prior to such policy's cancellation or
modification; (iii) are in full force and effect; (iv) are in form and
with insurers recognized as adequate by Lender (insurers with an A.M.
Best rating lower
STM-62598.3
-1- <PAGE>
<PAGE>
than "A" will not be considered adequate); and (v) provide coverage of
such risks and for such amounts as is customarily maintained for
businesses of the scope and size of Lender and as otherwise acceptable
to Lender. Each property insurance policy contains a clause which
provides that Lender's interest under such policy shall not be
invalidated by any act or omission to act of, or any breach of warranty
by, the insured, or by any change in the title, ownership or possession
of the insured property, or by the use of the property for purposes more
hazardous than is permitted in such policy. The Loan Parties have
delivered to Lender a certificate of insurance that evidences the
existence of such policy of insurance, payment of all premiums therefor
and compliance with all provisions of this Agreement.
STM-62598.3
-2- <PAGE>
<PAGE>
ANNEX G
to
CREDIT AGREEMENT
Dated as of February 1, 1996
FINANCIAL COVENANTS
1. Fixed Charge Coverage Ratio. Parent and its Subsidiaries, on a
consolidated basis, shall maintain for each four Fiscal Quarter period,
commencing with the four Fiscal Quarter period ending on September 30,
1995, a Fixed Charge Coverage Ratio for such period of not less than the
amount for such period set forth below:
<TABLE>
<CAPTION>
For Four Fiscal Minimum
Quarter Period Ending Ratio
<S> <C>
September 30, 1995 1.9 to 1.0
December 31, 1995 1.9 to 1.0
March 31, 1996 1.9 to 1.0
June 30, 1996 1.9 to 1.0
September 30, 1996 1.9 to 1.0
December 31, 1996 1.9 to 1.0
March 31, 1997 1.9 to 1.0
June 30, 1997 1.9 to 1.0
September 30, 1997 1.9 to 1.0
</TABLE>
2. Minimum Net Worth. Parent shall maintain as at the end of each
Fiscal Quarter Net Worth of the Parent and its Subsidiaries on a
consolidated basis of not less than the amount for such period set forth
below:
<TABLE>
<CAPTION>
Fiscal Quarter
Ending Minimum Net Worth
<S> <C>
September 30, 1995 27,225,000
December 31, 1995 27,600,000
March 31, 1996 27,975,000
June 30, 1996 28,350,000
September 30, 1996 28,725,000
December 31, 1996 29,100,000
March 31, 1997 29,475,000
June 30, 1997 29,850,000
September 30, 1997 30,225,000
</TABLE>
STM-62598.3
-1- <PAGE>
<PAGE>
3. Total Days Sales in Accounts. Total Days Sales in Accounts as
at the end of each Fiscal Quarter shall not exceed (i) with respect to
CIS Accounts, 85, (ii) with respect to HBA Accounts (other than Charge
Recovery Accounts), 65, and (iii) with respect to Charge Recovery
Accounts, 275.
4. Current Ratio. Parent and its Subsidiaries on a consolidated
basis shall maintain a ratio of Current Assets to Current Liabilities as
at the end of each Fiscal Quarter of not less than 1.75 to l.
STM-62598.3
-2- <PAGE>
<PAGE>
SCHEDULE 3.4
to
CREDIT AGREEMENT
Dated as of February 1, 1996
FINANCIAL STATEMENTS
All of the following balance sheets and statements of operations and
cash flows of the Parent and its Subsidiaries on a consolidated basis,
copies of which are attached hereto and have been furnished by the
Parent to Lender prior to the date of this Agreement, have been, except
as noted therein, prepared in conformity with GAAP and present fairly
the financial position of the Parent and its Subsidiaries on a
consolidated basis in each case as at the dates thereof, and the results
of operations and cash flows for the periods then ended (as to the
unaudited interim financial statements, subject to normal year-end audit
adjustments and the absence of footnotes):
(i) the unaudited consolidated and consolidating balance
sheet of the Parent as at September 30, 1995 and the related
consolidated and consolidating statement of operations and cash flows
for the nine Fiscal Months ending September 30, 1994; and
(ii) the audited and certified consolidated and consolidating
balance sheet of the Parent as of December 31, 1994 and the consolidated
and consolidating statement of operations and cash flows for the year
then ended, with the opinion thereon of Coopers & Lybrand L.L.P.
STM-62598.3
<PAGE>
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Revenue $ 43,227,339 $ 31,689,204 $ 33,284,893 $ 30,523,284 $ 17,766,464
Operating income (loss) $ 3,893,304 $ 2,336,771 $ (225,723) $ 3,098,208 $ 1,239,200
Net income $ 2,674,149 $ 2,197,002 $ 1,221,007 $ 3,095,455 $ 1,430,546
Per Share Data:
Earnings $ 0.08 $ 0.08 $ 0.05* $ 0.12 $ 0.06
Market price: High $ 4.50 $ 4.00 $ 7.75 $ 7.88 $ 7.94
Market price: Low $ 2.00 $ 1.94 $ 3.00 $ 4.00 $ 3.50
Weighted average shares outstanding 32,806,712 27,617,091 27,053,698 26,864,844 25,894,710
Common shares outstanding 30,188,589 30,093,706 26,857,049 26,722,502 26,349,851
Capital Position:
Current assets $ 19,752,717 $ 24,582,630 $ 11,607,244 $ 11,579,626 $ 9,501,313
Current liabilities $ 11,078,058 $ 5,555,583 $ 4,360,412 $ 3,234,032 $ 3,197,140
Long-term liabilities $ 7,850,757 $ 3,676,826 $ 486,753 $ 614,205 $ 1,246,473
Working capital $ 8,674,659 $ 19,027,047 $ 7,246,832 $ 8,345,594 $ 6,304,173
Total assets $ 62,352,934 $ 49,501,882 $ 29,087,361 $ 26,520,830 $ 22,903,143
Stockholders' equity $ 43,424,119 $ 40,269,473 $ 24,240,196 $ 22,672,593 $ 18,459,530
Investment Spending:
Capital expenditures $ 4,476,932 $ 4,557,854 $ 4,000,131 $ 3,192,393 $ 1,322,542
Acquisitions $ 10,059,539 $ 1,075,000 $ -- $ -- $ 2,647,864
Financial Ratios:
Current ratio 1.8 4.4 2.7 3.6 3.0
Debt to equity 32% 12% 2% 3% 7%
Net profit margin 6% 7% 4% 10% 8%
Return on equity 6% 5% 5% 14% 8%
Operating Statistics:
Clients 1,075 700 562 550 478
Employees 469 414 396 530 313
Claims processed 27,515,000 24,050,000 22,163,000 18,137,000 12,500,000
</TABLE>
*Includes effect of adopting Statement No. 109 - $0.03 per share.
1
CIS TECHNOLOGIES, INC.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
CIS Technologies, Inc. is a full-service healthcare reimbursement and business
management company. The Company offers technology-based products and services
that enable healthcare organizations to realize their full financial potential.
Participants in a healthcare delivery system realize benefits through proven
methods to enhance business office efficiency, creative financing alternatives,
state-of-the-art managed care and clinical practice management systems, and EDI
tools to reduce paperwork and administrative costs. In 1995, the Company
continued to grow and expand its presence in the healthcare industry with the
strategic acquisition of Pleasanton, California-based Hospital Cost Consultants,
Inc. ("HCC"). As a result of the internal growth initiatives implemented in 1994
and the strategic acquisitions of HCC in June 1995, and AMSC, Inc. ("AMSC") in
November 1994, the Company enjoyed a year of record revenue. Revenue in 1995
reached $43.2 million, a 36% increase over 1994 revenue. The Company's products
and services are currently delivering value to healthcare organizations in the
United States and around the world, with more than 220 third-party payers in the
United States and 1,075 clients in 38 states, Canada, Great Britain, Australia,
and New Zealand.
RESULTS OF OPERATIONS - 1995 COMPARED TO 1994
Revenue increased $11.5 million, or 36%, over 1994 due to both internal growth
and acquisitions. The increase is primarily attributable to the acquisitions of
HCC and AMSC. These new business units contributed revenues of $6 million and
$5.5 million, respectively, constituting 27% of total revenue for 1995.
Professional Services and EDI revenues also contributed to overall growth.
Professional Services revenue was up $2.2 million, or 96%, over the prior year.
EDI revenue grew $483,000, or 3%, from prior year. These increases were
partially offset by a decrease in Audit Services revenue of $1 million, or 9%,
due to lower charge recovery sales.
Overall operating expenses increased 34%, or $10 million, in 1995. However,
total operating expenses as a percent of revenue declined to 91% in 1995 from
93% in 1994, the result of management's commitment to decreasing operating
expenses. The increase in operating expenses is the result of an additional $4.9
million in expense from HCC, $6.5 million from a full year of AMSC offset by a
9% reduction in general and administrative expenses, and decreases in technical
operations and sales and client service expenditures due to the harvesting of
cost saving strategies initiated in 1994. Included in the $11.4 million in
operating expenses from the two new acquisitions are $921,000 (HCC) and $584,000
(AMSC) in expenses related to the depreciation of the assets acquired and
related amortization of intangible assets.
The Company's operating income increased 67% to $3.9 million in 1995. Net income
also increased 22% to $2.7 million.
The effective income tax rate rose to 18% in 1995. The Company's effective
income tax rate in recent years has been significantly impacted by the financial
statement recognition of its net operating loss carryforwards. As of December
31, 1995 the Company's operating loss carryforwards have been fully recognized
for financial reporting purposes. Due to the full utilization of such
carryforwards, the Company's effective tax rate in future years will be in
excess of the statutory tax rate (federal and state) due to the effect of
non-deductible amortization of intangible assets. Realization of the Company's
net deferred tax asset of $2.3 million at December 31, 1995 is dependent on
generating sufficient taxable income prior to expiration of the loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
17
CIS TECHNOLOGIES, INC.
<PAGE>
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 outsourcing operation which
generated revenues of $3.8 million in 1993. 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.
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 arrangements in the first quarter of 1993 as a contract
termination expense.
During October 1993, the Company sold its business office outsourcing operation
at Straub Clinic & Hospital. The Company had been operating the Straub business
office since August 1992 and this client accounted for $3.8 million of total
revenue and $4.4 million of total sales and client service expense during 1993.
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 ($0.03 per share) and is reported separately in the consolidated
statements of operations.
FINANCIAL CONDITION
The Company's financial position changed significantly during 1995 as a result
of the acquisition of HCC for $10 million cash and the assumption of a $5
million note. At December 31, 1995, working capital was $8.7 million and the
current ratio was 1.8, compared to $19 million and 4.4 at December 31, 1994.
These decreases reflect the decrease in cash and cash equivalents as a result of
the purchase of HCC.
Property and equipment at December 31, 1995 was $15 million, an increase of 53%,
or $5.2 million, from December 31, 1994. The majority of the increase is due to
the acquisition of HCC. In addition, intangible assets, net of amortization,
totaled $24.7 million, an increase of $11.1 million, or 81%, which primarily
reflects goodwill, acquired customer list, and non-compete agreement recognized
in the acquisition of HCC. At December 31, 1995, the Company had $24.7 million
of intangible assets, including $21.8 million of goodwill, net of accumulated
amortization. Goodwill of acquired entities 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 had been recorded at
December 31, 1995. Such estimated future cash flows are regularly revised as
actual results are obtained, which revision could necessitate a future reduction
in the near term of the goodwill associated with the acquired entities.
18
CIS TECHNOLOGIES, INC.
<PAGE>
LIQUIDITY
The Company's 1995 cash requirements were met primarily through cash reserves,
the result of private stock issuances to two institutional investors in 1994,
external financing, and internally generated funds. At December 31, 1995, the
Company had $598,000 in cash and cash equivalents and a $5 million revolving
credit facility which expires October 31, 1997. As of December 31, 1995, there
were borrowings of $3.7 million under the credit facility. In February 1996, the
line of credit was increased to $6 million. The Company has $9.6 million of
debt; $7.4 million from a term loan ($5 million related to the HCC acquisition)
with GE Capital and $2.2 million which was issued as a part of the AMSC
acquisition.
Cash used in operating activities was $520,000, a change of $4.6 million from
1994 to 1995. The increase in cash used in 1995 was primarily the result of the
net change in operating assets and liabilities offset by increased net income of
$477,000, depreciation and amortization of $2 million, and deferred taxes of
$578,000. The net change in operating assets and liabilities (which excludes the
effect of the HCC acquisition) was due primarily to: (1) an increase in trade
receivables of $4 million; (2) a decrease in deferred revenue of $2 million
related to completion of installations in process; and (3) a decrease in
accounts payable and accrued liabilities of $2.1 million.
Cash used in investing activities increased $8.9 million from 1994 to 1995. Of
the $4.5 million in additions to property and equipment, $3.7 million was
capitalized for software development. The Company develops internally the
majority of the products it provides to its customers. During 1995, development
activity was focused on two primary areas: (1) the completion of version 2.1 of
the Premis product which was released in August 1995 and includes additional
functionality; and (2) the development of a host edit clearinghouse which allows
the Company's clearinghouse to process claims from hospitals, physicians and
other healthcare providers, even if they are not currently using the Company's
Premis product. The Company also used $10 million to purchase HCC in 1995.
Cash provided by financing activities was $4.2 million for the year ended 1995,
which resulted principally from borrowings associated with the purchase of HCC.
The Company obtained an additional term loan of $1.25 million in July 1995. The
Company utilized $2 million on the line of credit facility to acquire HCC and
increased the usage of the line of credit by an additional $1.7 million to fund
the Company's growth in operations, offset by an increase in debt repayments. In
February 1996, GE Capital refinanced the Company's short-term note to the seller
of HCC in order to extinguish the $5 million note related to the acquisition.
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 internally generated cash flow and its line of credit facility.
CAPITAL EXPENDITURES
The Company has spent $4.5 million, $4.6 million and $4 million on additions to
property and equipment during 1995, 1994, and 1993, respectively. The majority
of the expenditures were for software development costs as discussed above. The
1996 capital budget anticipates capital expenditures of $4.1 million, with $3.7
million planned for continuing software development and the remainder budgeted
for computer equipment and leasehold improvements.
ACQUISITIONS
Effective November 3, 1994, the Company acquired 100% of the common stock of
AMSC, Inc. for $5 million plus acquisition costs, consisting of cash, stock and
notes. Effective June 1, 1995, the Company acquired 100% of the common stock of
Hospital Cost Consultants, Inc. for $15.4 million plus acquisition costs,
consisting of cash, stock options and a $5 million note. (See Note 13 to the
Financial Statements.) Certain additional consideration in the HCC acquisition
may be payable based on the achievement of specified earnings levels of the
acquired entity, such consideration which will be recorded as additional cost of
the acquisition when it is determinable.
19
CIS TECHNOLOGIES, INC.
<PAGE>
LOOKING FORWARD
1995 resulted in revenue of $43.2 million, an increase of $11.5 million or 36%;
operating income of $3.9 million, an increase of $1.6 million or 67%; and net
income of $2.7 million, an increase of $477,000 or 22%. The acquisition of HCC
and AMSC contributed significantly to the growth in revenue and improved
operating results despite increased operating expenses due to these
acquisi-tions. The additional operating costs incurred related to these
acquisitions should be viewed as an investment in the future of the Company. In
an effort to realize the synergies between the Company's core products and
services and those offered by HCC and AMSC, management has devoted and will
continue to devote significant resources to integrate these acquisitions into
the Company. The Company believes these operating costs will decrease in the
future as it capitalizes on potential synergies. The Company believes the
products acquired are essential to the Company meeting the demands of the
ever-changing healthcare industry.
Through the acquisition of HCC, the Company has gained access to the managed
care marketplace, a segment of the healthcare industry it had previously
untapped. Sales opportunities for the Company now include: Electronic Data
Interchange Services; Financial Services which include billing services,
accounts receivable resolution, business office management, and retrospective,
defense, and concurrent auditing; Integrated Physician Services; and Managed
Care Services including a cost system, a managed care system, and a data
management package. All of these healthcare industry products and services will
allow the Company to take full advantage of cross-selling opportunities among
existing clients and newly acquired clients.
The Company released version 2.1 of its PREMIS product in August 1995 which has
been well accepted by our customers and has translated into many conversions and
upgrades. The Company is beta testing an internal software application that will
allow the Company's clearinghouse to process claims from hospitals, physicians,
and other healthcare providers, even if they are not currently using the
Company's PREMIS product. The Company's core product line has been complemented
by the products provided by HCC and AMSC. The cross-selling opportunities
provided by this full suite of products is expected to result in continued and
steady revenue growth. In addition, the Company continues to identify and pursue
acquisition opportunities to fill unrepresented market niches and to broaden
market penetration in the physician and hospital markets.
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.
IMPACT OF FINANCIAL ACCOUNTING PRONOUNCEMENTS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" was issued. The statement allows
companies the option of recording or disclosing compensation expense for grants
of stock, stock options, and other equity instruments issued to employees based
on fair value. The Company will elect the disclosure method of complying with
the new statement. Under existing accounting rules, the Company's stock option
grants have not resulted in compensation expense. Accordingly, under the
provisions of the new statement, pro forma net income to be disclosed will be
lower than net income reported in the financial statements.
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of"
was issued. The statement establishes accounting standards for the impairment of
long-lived assets, such as property and equipment and goodwill, and will be
effective for the Company beginning with the year ending December 31, 1996. The
Company does not believe the new standard will significantly impact its
financial statement evaluation of impairment of long-lived assets.
20
CIS TECHNOLOGIES, INC.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
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, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These consolidated 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 present
fairly, in all material respects, the consolidated financial position of CIS
Technologies, Inc. and Subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, 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 6, 1996
21
CIS TECHNOLOGIES, INC.
<PAGE>
CONSOLIDATED BALANCE SHEETS
At December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 598,072 $ 11,416,151
Accounts receivable:
Trade, net of allowance for doubtful accounts of $473,588 in 1995
and $320,668 in 1994 12,607,913 6,837,580
Charge recovery 4,476,270 4,917,913
Related party receivables 97,733 191,335
Prepaid expenses 650,288 385,082
Deferred tax asset (Note 8) 599,309 --
Other current assets 723,132 834,569
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 19,752,717 24,582,630
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Current Assets:
Related party receivables 54,228 106,205
Property and equipment, net 14,990,925 9,814,762
Intangible assets, net 24,737,423 13,640,804
Deferred tax asset (Note 8) 1,940,181 900,000
Other non-current assets 877,460 457,481
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-current assets 42,600,217 24,919,252
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 62,352,934 $ 49,501,882
====================================================================================================================================
Liabilities And Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 3,265,416 $ 3,435,862
Borrowings under line of credit 3,738,169 43,877
Current maturities of long-term debt 2,230,568 980,816
Current portion of capital leases 192,462 180,208
Related party payables -- 16,709
Deferred revenue 1,651,443 898,111
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 11,078,058 5,555,583
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Current Liabilities:
Long-term debt 7,413,806 3,518,863
Capital lease obligations 166,498 --
Deferred income taxes (Note 8) 270,453 157,963
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-current liabilities 7,850,757 3,676,826
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments And Contingencies (note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock: $0.01 par value, 20,000,000 shares authorized,
2,384,182 shares issued and outstanding at December 31, 1995 and 1994 23,842 23,842
Common stock: $0.01 par value, 50,000,000 shares authorized,
31,722,334 shares issued and 30,188,589 shares outstanding at December 31, 1995
31,611,451 shares issued and 30,093,706 shares outstanding at December 31, 1994 317,173 316,065
Paid in capital in excess of par 53,236,381 52,698,023
Treasury stock, at cost: 1,533,745 shares at December 31, 1995 and
1,517,745 shares at December 31, 1994 (1,827,513) (1,768,544)
Accumulated deficit (8,325,764) (10,999,913)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 43,424,119 40,269,473
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 62,352,934 $ 49,501,882
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
22
CIS TECHNOLOGIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 43,227,339 $ 31,689,204 $ 33,284,893
- ------------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Technical operations 4,262,078 2,357,321 3,017,637
Sales and client service 23,979,427 17,275,767 19,590,114
General and administrative 6,388,757 7,017,674 7,110,794
Contract termination -- -- 1,500,000
Depreciation and amortization 4,703,773 2,701,671 2,292,071
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 39,334,035 29,352,433 33,510,616
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 3,893,304 2,336,771 (225,723)
Interest expense, net (643,985) (49,278) (70,726)
Other income (expense) 21,350 (76,527) 61,065
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of change in accounting principle 3,270,669 2,210,966 (235,384)
(Provision) benefit for income taxes (Note 8) (596,520) (13,964) 556,391
- ------------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting principle 2,674,149 2,197,002 321,007
Cumulative effect of change in accounting principle (Note 8) -- -- 900,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 2,674,149 $ 2,197,002 $ 1,221,007
====================================================================================================================================
Weighted average common and common equivalent shares outstanding 32,806,712 27,617,091 27,053,698
====================================================================================================================================
Earnings Per Common Share, Primary And Fully-Diluted:
Income before cumulative effect of change in accounting principle $ 0.08 $ 0.08 $ 0.02
Cumulative effect of change in accounting principle -- -- 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per share $ 0.08 $ 0.08 $ 0.05
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
23
CIS TECHNOLOGIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock:
Beginning balance $ 23,842 $ -- $ --
Issuance of preferred stock -- 23,842 --
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance 23,842 23,842 --
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock:
Beginning balance 316,065 283,698 282,340
Exercise of stock options 1,108 418 1,358
Issuance of common stock -- 24,561 --
Common stock issued in connection with acquisition of subsidiary -- 7,388 --
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance 317,173 316,065 283,698
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-In Capital:
Beginning balance 52,698,023 38,921,957 38,544,873
Exercise of stock options 146,078 72,126 377,084
Issuance of common stock -- 5,890,399 --
Stock options issued in connection with acquisition of subsidiary 392,280 -- --
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 53,236,381 52,698,023 38,921,957
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock:
Beginning balance (1,768,544) (1,768,544) (1,736,698)
Purchase of treasury stock (58,969) -- (31,846)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance (1,827,513) (1,768,544) (1,768,544)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated Deficit:
Beginning balance (10,999,913) (13,196,915) (14,417,922)
Net income 2,674,149 2,197,002 1,221,007
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance (8,325,764) (10,999,913) (13,196,915)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity $ 43,424,119 $ 40,269,473 $ 24,240,196
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
24
CIS TECHNOLOGIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 2,674,149 $ 2,197,002 $ 1,221,007
Noncash items:
Depreciation and amortization 4,703,773 2,701,671 2,292,071
Provision for bad debts 89,928 -- 51,325
Cumulative effect of accounting change -- -- (900,000)
Writeoff of capitalized software-contract termination -- -- 620,533
Deferred income taxes 528,000 (50,000) 123,449
Other -- 13,783 (30,102)
Changes in operating assets and liabilities:
Accounts receivable (4,079,234) (1,570,242) 109,485
Related party receivables 86,610 (24,091) 83,291
Prepaid expenses and other current assets (35,640) 315,289 (298,351)
Other assets (412,802) 685,689 (475,963)
Accounts payable and accrued liabilities (2,098,350) (551,423) 344,670
Deferred revenue (1,959,464) 307,567 88,114
Related party payable (16,709) 16,709 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities (519,739) 4,041,954 3,229,529
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Additions to property and equipment (4,476,932) (4,557,854) (4,000,131)
Acquisition of subsidiaries (10,059,539) (1,075,000) --
Reductions in (additions to) other assets -- -- (57,683)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (14,536,471) (5,632,854) (4,057,814)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Borrowings on line of credit 17,709,978 32,162,478 23,185,036
Repayments of line of credit (14,015,686) (32,118,602) (23,185,036)
Proceeds from issuance of stock, net of costs -- 11,692,131 --
Proceeds from term note 1,250,000 2,000,000 --
Book overdrafts 551,576 (618,023) 618,023
Repayment of long-term debt (1,105,305) (329,320) (44,106)
Payment of capital lease obligation (250,071) (197,467) (232,111)
Proceeds from exercise of stock options 97,639 30,541 336,442
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 4,238,131 12,621,738 678,248
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents during the period (10,818,079) 11,030,838 (150,037)
Cash and cash equivalents at the beginning of the period 11,416,151 385,313 535,350
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $ 598,072 $ 11,416,151 $ 385,313
====================================================================================================================================
Supplemental Disclosures:
Interest paid $ 786,339 $ 127,198 $ 104,660
Income taxes paid $ 254,372 $ 51,772 $ 158,060
Capital lease obligations for computer equipment
and furniture and fixtures $ 176,692 $ -- $ 141,146
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
25
CIS TECHNOLOGIES, INC.
<PAGE>
A REVIEW BY QUARTERS
(Unaudited)
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
First Quarter ended March 31 $ 8,396,113 $ 7,800,995 $ 7,944,256
Second Quarter ended June 30 11,067,629 7,300,260 8,915,777
Third Quarter ended September 30 12,694,952 7,656,890 8,592,844
Fourth Quarter ended December 31 11,068,645 8,931,059 7,832,016
Operating Income (Loss)
First Quarter ended March 31 $ 888,738 $ 712,474 $ (2,562,901)
Second Quarter ended June 30 1,405,962 349,998 862,901
Third Quarter ended September 30 1,639,801 643,885 767,773
Fourth Quarter ended December 31 (41,197) 630,414 706,504
Net Income (Loss)
First Quarter ended March 31 $ 852,621 $ 618,739 $ (1,685,002)(1)
Second Quarter ended June 30 1,015,676 414,534 1,422,657)(2)
Third Quarter ended September 30 959,433 503,771 758,246
Fourth Quarter ended December 31 (153,581) 659,958 725,106
Earnings (Loss) Per Share(4)
First Quarter ended March 31 $ 0.03 $ 0.02 $ (0.06)(3)
Second Quarter ended June 30 0.03 0.02 0.05
Third Quarter ended September 30 0.03 0.02 0.03
Fourth Quarter ended December 31 0.00 0.02 0.03
Closing Market Price Per Share
March 31 $ 2.00 $ 2.88 $ 4.81
June 30 2.94 2.13 4.75
September 30 3.88 2.44 5.00
December 31 3.25 2.31 3.19
</TABLE>
(1) Includes the effect of $1,500,000 of contract termination costs and
cumulative effect of adopting Statement No. 109 of $900,000.
(2) Includes the effect of $600,000 of income tax benefit.
(3) Loss per share before cumulative effect of adopting Statement No. 109 was
$(0.09).
(4) Due to the effect of rounding, earnings per share for a year's four
quarters, which are based on income (loss) and average shares outstanding
during each quarter, does not equal the annual earnings per share, which
are based on the net income and average shares outstanding for the year.
26
CIS TECHNOLOGIES, INC.
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
CIS Technologies, Inc. is a full-service healthcare reimbursement and business
office management company. CIS offers technology-based products and services
that enable healthcare organizations to realize their full financial potential.
CIS products and services are delivering value to healthcare organizations in
the United States and around the world, with more than 220 third-party payers in
the United States and 1,075 clients in 38 states, Canada, Great Britain,
Australia and New Zealand.
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.
INTANGIBLE ASSETS
Purchased contracts and customer lists are stated at cost (net of accumulated
amortization) and are amortized on a straight-line basis over 15 years.
Non-compete agreements are stated at cost (net of accumulated amortization) and
are amortized on a straight-line basis over three to five 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
of acquired entities 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 had been recorded at December 31,
1995. Such estimated future cash flows are regularly revised as actual results
are obtained, which revision could necessitate a future reduction in the near
term of the goodwill associated with the acquired entities.
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 assets and
liabilities is based on provisions of 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
27
CIS TECHNOLOGIES, INC.
<PAGE>
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.
Integrated Physician Services. All software sales fees are recognized upon the
completion of the installation. Revenue from software maintenance is recognized
monthly based upon the terms of the contract.
Managed Care Services. Initial software license fees are recognized upon
execution of the contract. Installation fees are recognized as the work is
performed on a percentage-of-completion basis.
Hardware and Software Sales. Revenue is recognized upon delivery.
Other Services. Revenue is recognized monthly based upon the terms of the
contract.
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.
RECLASSIFICATIONS
Certain reclassifications were made to prior year financial statements to
conform to the 1995 financial statement format.
CONCENTRATIONS OF CREDIT RISK
Trade and charge recovery 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, 1995 and 1994, the Company had cash in one bank of approximately
$500,000 and $1.1 million, respectively.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
28
CIS TECHNOLOGIES, INC.
<PAGE>
IMPACT OF FINANCIAL ACCOUNTING PRONOUNCEMENTS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" was issued. The statement allows
companies the option of recording or disclosing compensation expense for grants
of stock, stock options, and other equity instruments issued to employees based
on fair value. The Company will elect the disclosure method of complying with
the new statement. Under existing accounting rules, the Company's stock option
grants have not resulted in compensation expense. Accordingly, under the
provisions of the new statement, pro forma net income to be disclosed will be
lower than net income reported in the financial statements.
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of," was issued. The statement establishes accounting standards for the
impairment of long-lived assets, such as property and equipment and goodwill,
and will be effective for the Company beginning with the year ending December
31, 1996. The Company does not believe the new standard will significantly
impact its financial statement evaluation of impairment of long-lived assets.
2. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer hardware and purchased software $ 4,375,186 $ 3,000,955
Computer hardware under capital lease 880,593 454,708
Software development costs 16,695,285 10,525,606
Furniture and fixtures 868,992 741,160
Furniture and fixtures under capital lease 497,023 423,807
Leasehold improvements 986,214 715,013
Equipment 171,768 146,731
Vehicles 42,244 93,367
- --------------------------------------------------------------------------------
$ 24,517,305 $ 16,101,347
Accumulated depreciation and amortization (9,526,380) (6,286,585)
- --------------------------------------------------------------------------------
Property and equipment, net $ 14,990,925 $ 9,814,762
================================================================================
</TABLE>
The following table details software development cost information for the years
ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unamortized software development costs, beginning balance $ 7,374,827 $ 4,896,443 $ 2,581,203
Capitalized software development costs 3,651,261 3,759,784 3,676,971
Software acquired in acquisition 2,660,000 113,700 --
Amortization of software development costs (2,160,385) (1,282,096) (741,198)
Write-off of software development costs (52,527) (113,004) (620,533)
- ------------------------------------------------------------------------------------------------------------------------------------
Unamortized software development costs, ending balance $ 11,473,176 $ 7,374,827 $ 4,896,443
====================================================================================================================================
</TABLE>
29
CIS TECHNOLOGIES, INC.
<PAGE>
3. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<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 5,313,271 5,201,931
HCC 10,555,463 --
Acquired customer list 1,521,000 --
Non-compete agreements 1,000,000 500,000
Other intangible assets 37,667 37,667
- --------------------------------------------------------------------------------
$ 28,423,787 $ 15,735,984
Accumulated amortization (3,686,364) (2,095,180)
- --------------------------------------------------------------------------------
Intangible assets, net $ 24,737,423 $ 13,640,804
================================================================================
</TABLE>
Purchased contracts and Teleclaim goodwill resulted from the purchase of the
Teleclaim Processing Division of Medaphis Corporation in 1988. The HBA goodwill
resulted from the purchase of Hospital Billing Analysis, Inc. in 1991. The AMSC
goodwill resulted from the purchase of AMSC, Inc. in 1994. The HCC goodwill and
intangibles resulted from the purchase of Hospital Cost Consultants, Inc. in
1995 (See Note 13).
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable, trade $ 885,892 $1,736,782
Book overdrafts 551,576 --
Wages, bonus and commissions payable 278,996 745,420
Employee benefits payable 323,129 166,910
Accrued income taxes payable 28,337 121,350
Accrued interest payable 238,379 29,137
Other accrued liabilities 959,107 636,263
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities $3,265,416 $3,435,862
================================================================================
</TABLE>
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Term loan, due 1997(a) $7,444,444 $2,000,000
Convertible notes, due 2007(b) 500,000 500,000
Non-convertible notes, due 2007(b) 1,500,000 1,500,000
Other 199,930 499,679
- --------------------------------------------------------------------------------
$9,644,374 $4,499,679
Current maturities 2,230,568 980,816
- --------------------------------------------------------------------------------
Long-term debt $7,413,806 $3,518,863
================================================================================
</TABLE>
30
CIS TECHNOLOGIES, INC.
<PAGE>
(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. In July 1995, the Company
obtained an additional term loan of $1,250,000 to fund operations related to the
HCC acquisition. In February 1996, the Company increased this term loan by $5
million to $7.4 million, replacing the debt assumed as part of the HCC
acquisition. In addition, the line of credit was increased to $6 million. The
term loan portion of the revised Agreement is payable in quarterly principal
installments of $618,056, with interest payments on the outstanding balance due
monthly, and bears interest at a floating rate equal to an index rate plus 4%
(9.8% at December 31, 1995). A balloon payment of $3,125,000 will be due upon
maturity in October 1997. The revolving credit facility accrues interest,
payable monthly, at a floating rate equal to an index rate plus 3.75% (9.55% at
December 31, 1995). As of December 31, 1995, borrowings under this facility were
$3,738,169. This Credit Agreement 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 includes
a subjective acceleration clause.
(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. 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 of all long-term debt are $2,230,568, $5,336,902,
$203,761, $220,291 and $232,114, respectively, for each of the years ending
December 31, 1996, through 2000.
Based on borrowing rates currently available to the Company for debt with
similar terms and maturities, long-term debt at December 31, 1995 approximates
its fair value.
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 CAPITAL
LEASES LEASES
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $2,410,088 $ 223,340
1997 1,944,453 139,600
1998 1,644,890 39,002
1999 865,055 --
2000 401,189 --
- --------------------------------------------------------------------------------
Minimum payments for the next five years $7,265,675 $ 401,942
================================================================================
Interest on capital leases 42,982
- --------------------------------------------------------------------------------
Net present value of capital leases 358,960
Current portion of capital leases 192,462
- --------------------------------------------------------------------------------
Capital lease obligation $ 166,498
================================================================================
</TABLE>
31
CIS TECHNOLOGIES, INC.
<PAGE>
For the years ended December 31, 1995, 1994, and 1993, rental expense on
operating leases was $2,751,368, $2,319,523, and $1,142,028, 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
judgment which would have a material adverse effect on the Company.
7. PREFERRED STOCK AND WARRANTS
The Company has 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, 1995, 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.
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 ($0.03 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>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $ -- $ 108,656 $ 723,449
Deferred (410,967) -- --
State:
Current (68,520) (172,620) (43,609)
Deferred (117,033) 50,000 (123,449)
- --------------------------------------------------------------------------------
Total $(596,520) $ (13,964) $ 556,391
================================================================================
</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>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory regular taxes $(1,112,027) $ (751,725) $ 80,030
Amortization of goodwill (410,436) (171,136) (156,876)
Recognition of tax assets 1,234,929 1,031,405 795,949
State income taxes (185,553) (80,929) (167,058)
Other (123,433) (41,579) 4,346
- --------------------------------------------------------------------------------
Income tax benefit (expense) $ (596,520) $ (13,964) $ 556,391
================================================================================
</TABLE>
32
CIS TECHNOLOGIES, INC.
<PAGE>
The components of the net deferred tax asset at December 31, 1995 and 1994
include:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 5,600,104 $ 4,636,032
Allowance for doubtful accounts 195,020 121,117
Accrued expenses 75,004 --
Alternative minimum tax credit carryforward 23,057 21,365
Deferred revenue 329,195 --
- --------------------------------------------------------------------------------
$ 6,222,380 $ 4,778,514
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment (3,306,147) (2,801,548)
Intangibles (647,196) --
- --------------------------------------------------------------------------------
$(3,953,343) $(2,801,548)
Valuation allowance -- (1,234,929)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 2,269,037 $ 742,037
================================================================================
</TABLE>
The net deferred tax asset at December 31, 1995 and 1994 is reflected in the
consolidated balance sheets as a current tax asset of $599,309 and $0,
respectively, and a long-term deferred tax asset of $1,940,181 and $900,000,
respectively, for those tax jurisdictions where the Company has operating loss
carryforwards, and a deferred tax liability of $270,453 and $157,963 as of
December 31, 1995 and 1994, respectively, for those states in which the Company
does not have operating loss carryforwards. Realization is dependent on
generating sufficient taxable income prior to expiration of the loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
At December 31, 1995, the Company has unused net operating loss carryforwards of
$16.4 million for tax purposes and $16.0 million for alternative minimum tax
purposes, expiring from 2002 to 2009.
9. RELATED PARTY TRANSACTIONS
Receivables from officers and management at December 31, 1995 and 1994 were
$151,961 and $297,540, 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 July 1997.
10. EMPLOYEE BENEFIT AND STOCK OPTIONS 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 23%
of their gross salary with a cap of $9,500. The Company matches 50% 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, 1995, 1994 and 1993 was
$132,421, $115,912 and $108,548, respectively.
33
CIS TECHNOLOGIES, INC.
<PAGE>
STOCK OPTION PLAN
At the Annual Shareholders Meeting held in April 1995, the shareholders approved
the changes to create the Stock Incentive Plan and the creation of a Directors'
Stock Option Plan. The Stock Incentive Plan replaced the Stock Option Plan and
Employee Stock Option Plan. In May 1995, the HCC Management Stock Option Plan
was created to provide options to certain former shareholders of HCC as part of
the HCC acquisition.
Key employees, as determined by the Board of Directors, may participate in the
Stock Incentive Plan (formerly the Stock Option and Employee Stock Option
Plans), for which the Company has reserved 5,000,000 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 exercise and expiration dates are subject to determination by the
Board for non-qualified options. All options expire no later than 10 years from
the date of grant.
During 1995, the Company did not grant any options to non-employee members of
the Board of Directors. The Company did, however, grant 20,000 options to
Bankers Trust in lieu of Director's fees for a Board member, over which Bankers
Trust has sole power to exercise once such options are vested. During 1994, the
Company granted 45,000 options at an exercise price of $3.25 per share to
non-employee members of the Board of Directors. All of the options granted in
1994 and prior years are exercisable one year from the date of grant.
The following table details stock option activity for the years ended December
31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
STOCK INCENTIVE PLAN 1995 PRICE RANGE 1994 PRICE RANGE 1993 PRICE RANGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 2,327,627 $1.06-$7.00 1,999,449 $1.06-$7.00 1,262,447 $1.06-$6.81
Options granted 1,370,299 2.00-4.13 625,119 2.25-3.25 1,024,375 3.75-7.00
Exercised (110,833) 1.19-2.63 (25,943) 1.09-1.38 (127,142) 1.38-6.81
Expired or forfeited (435,499) 2.13-6.00 (270,998) 1.38-6.81 (160,231) 1.38-6.81
- ------------------------------------------------------------------------------------------------------------------------------------
Ending balance 3,151,594 1.06-7.00 2,327,627 1.06-7.00 1,999,449 1.06-7.00
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable 1,415,170 1.06-7.00 1,397,916 1.06-7.00 870,487 1.06-6.81
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HCC STOCK OPTION PLAN 1995 PRICE RANGE
- --------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance -- --
Options granted 281,418 2.25
Exercised -- --
Expired or forfeited (68,340) 2.25
- --------------------------------------------------------------------------------
Ending balance 213,078 2.25
- --------------------------------------------------------------------------------
Exercisable 91,790 2.25
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS'
STOCK OPTION PLAN 1995 PRICE RANGE
- --------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance -- --
Options granted 20,000 2.32
Exercised -- --
Expired or forfeited -- --
- --------------------------------------------------------------------------------
Ending balance 20,000 2.32
- --------------------------------------------------------------------------------
Exercisable -- --
- --------------------------------------------------------------------------------
</TABLE>
The outstanding options expire between November 1998 to August 2005.
34
CIS TECHNOLOGIES, INC.
<PAGE>
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
in the Consolidated Balance Sheets with the weighted average common shares
outstanding as shown in the Consolidated Statements of Operations for the years
ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares outstanding 30,188,589 30,093,706 26,857,049
Effect of using weighted average common and common
equivalent shares outstanding 2,313,606 (2,514,586) (44,536)
Effect of shares issuable under stock option plans
based on the treasury stock method 304,517 37,971 241,185
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average common and common equivalent shares outstanding 32,806,712 27,617,091 27,053,698
====================================================================================================================================
</TABLE>
Earnings per share was computed by dividing net income by weighted average
common and common equivalent shares outstanding for each year.
13. ACQUISITION OF HOSPITAL COST CONSULTANTS, INC.
Effective June 1, 1995, the Company acquired 100% of the common stock of
Hospital Cost Consultants, Inc., of Pleasanton, California, for $15,392,000
(plus acquisition costs) consisting of:
<TABLE>
<S> <C>
Cash $10,000,000
Note payable $ 5,000,000
Stock options issued $ 392,000
- --------------------------------------------------------------------------------
$15,392,000
================================================================================
</TABLE>
Certain additional consideration may be payable based on the achievement of
specified earnings levels of the acquired entity, such consideration which will
be recorded as additional cost of the acquisition when it is determinable.
The acquisition was accounted for as a purchase. Under the purchase method, the
net assets of HCC were recorded at their estimated fair values and the excess of
cost over net assets acquired was recorded as goodwill. The operating results of
HCC are included in the Company's consolidated results of operations from June
1, 1995. The $5 million note has been refinanced as of February 1, 1996.
35
CIS TECHNOLOGIES, INC.
<PAGE>
The following unaudited pro forma information shows the consolidated operating
results of the Company as though the purchase of HCC had been made at the
beginning of 1995 and 1994:
1995 1994
- --------------------------------------------------------------------------------
Revenue $ 45,511,000 $ 39,686,000
Net income (loss) $ 580,000 $ (1,386,000)
Earnings (loss) per share $ .02 $ (.05)
================================================================================
HCC results of operations for 1994 included expenses related to the
re-engineering of their software products, which re-engineering increased the
sales cycle time and negatively impacted revenues. These pro forma results of
operations are not necessarily indicative of what actually would have occurred
if the acquisition had been in effect for the entire periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from the combined operations.
36
CIS TECHNOLOGIES, INC.
<PAGE>
SHAREHOLDER INFORMATION
BOARD OF DIRECTORS
Philip D. Kurtz
Chairman of the Board and
Chief Executive Officer
CIS Technologies, Inc.
Elected in 1985
James L. Hersma
President and
Chief Operating Officer
CIS Technologies, Inc.
Elected in 1993
Samuel L. Jacob
Managing Director
Bankers Trust
Elected in 1995
John D. Platt
President
Platt Interests
Elected in 1986
Dennis D. Pointer
John J. Hanlon Professor of Health
Services Research and Policy
San Diego State University
Elected in 1986
Robert J. Simmons
President
RJS Healthcare, Inc.
Elected in 1986
N. Thomas Suitt
Former President
Hospital Billing Analysis, Inc.
Elected in 1992
OFFICERS
Philip D. Kurtz
Chief Executive Officer
James L. Hersma
President & Chief
Operating Officer
Richard A. Evans
Chief Financial Officer & Treasurer
Kathleen Harris Pena
Senior Vice President, Financial
Services Division
Ralph J. Riccardi, Jr.
Senior Vice President, Technology &
Applications Division
John P. Indrigo
Senior Vice President, General
Manager, AMSC
John Booth
Vice President, General Manager,
HCC
Angela K. Lux
Vice President, Chief Technology
Officer
Thomas G. Noulles
Vice President,
Chief Legal Counsel &
Secretary
INDEPENDENT PUBLIC
ACCOUNTANTS
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
TRANSFER AGENT
REGISTRAR
Chemical Mellon Shareholder
Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660-2104
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. The Medical
Manager(R) is a registered trademark of Personalized Programming, 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. No cash dividends have ever been
declared or paid on the Company's common stock. The terms of the Company's debt
contain substantial restrictions on the Company's ability to pay dividends. As
of March 15, 1996, CIS Technologies has 1,818 shareholders of record.
<TABLE>
<CAPTION>
Fiscal Year 1994
Stock Price
High Low
<S> <C> <C>
First Quarter 4.00 2.50
Second Quarter 3.44 2.13
Third Quarter 2.56 1.94
Fourth Quarter 3.00 2.25
<CAPTION>
Fiscal Year 1995
Stock Price
High Low
<S> <C> <C>
First Quarter 2.50 2.00
Second Quarter 3.63 2.00
Third Quarter 4.50 2.75
Fourth Quarter 4.38 2.88
</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, CIS Technologies, Inc.
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 May 9, 1996, at 2:00 p.m. at
the Doubletree Hotel, 6100 S. Yale, Tulsa, Oklahoma.
<PAGE>
C.I.S. TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT 21
LIST OF SUBSIDIARIES
CIS, Inc., an Oklahoma corporation
AMSC, Inc., a Florida corporation
Clinlab, Inc., a Florida corporation
AMSC Midwest, Inc., a Florida corporation<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 598,072
<SECURITIES> 0
<RECEIVABLES> 17,557,771
<ALLOWANCES> 473,588
<INVENTORY> 555,930
<CURRENT-ASSETS> 19,752,717
<PP&E> 24,517,305
<DEPRECIATION> 9,526,380
<TOTAL-ASSETS> 62,352,934
<CURRENT-LIABILITIES> 11,078,058
<BONDS> 0
<COMMON> 317,173
0
23,842
<OTHER-SE> 43,083,104
<TOTAL-LIABILITY-AND-EQUITY> 62,352,934
<SALES> 43,227,339
<TOTAL-REVENUES> 43,227,339
<CGS> 0
<TOTAL-COSTS> 39,334,035
<OTHER-EXPENSES> 622,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 990,080
<INCOME-PRETAX> 3,270,669
<INCOME-TAX> 596,520
<INCOME-CONTINUING> 2,674,149
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,674,149
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
