<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 000-18674
MAPICS, Inc.
(Exact name of registrant as specified in its charter)
Georgia 04-2711580
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
1000 Windward Concourse Parkway
Alpharetta, Georgia 30005
(Address of principal executive offices)
(678) 319-8000
(Registrant's telephone number)
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 [ ]
The number of shares of the registrant's common stock outstanding at
February 9, 2000 was 17,727,812.
================================================================================
<PAGE>
MAPICS, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended December 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
Number Number
- ------ --------
<S> <C>
PART I - FINANCIAL INFORMATION
1. Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1999
and September 30, 1999......................................... 3
Condensed Consolidated Statements of Operations for the Three
Months Ended December 31, 1999 and 1998........................ 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended December 31, 1999 and 1998........................ 5
Notes to Condensed Consolidated Financial Statements............. 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
3. Quantitative and Qualitative Disclosures About Market Risk....... 18
PART II - OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders.............. 19
6. Exhibits and Reports on Form 8-K................................. 20
Signature........................................................ 21
Exhibit Index.................................................... 22
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
MAPICS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 25,244 $ 21,351
Accounts receivable, net of allowances of $1,785 at
December 31, 1999 and $1,781 at September 30, 1999....... 29,088 30,804
Prepaid expenses and other current assets................... 9,652 9,860
Deferred income taxes, net.................................. 1,342 1,452
------------- -------------
Total current assets................................ 65,326 63,467
Property and equipment, net................................. 6,296 6,019
Computer software costs, net................................ 19,943 19,902
Other intangible assets, net................................ 3,647 3,776
Deferred income taxes, net.................................. 1,888 2,230
Other assets................................................ 831 --
------------- -------------
Total assets........................................ $ 97,931 $ 95,394
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 5,748 $ 6,455
Accrued expenses and other current liabilities.............. 20,403 21,681
Deferred revenue............................................ 30,018 28,999
------------- -------------
Total current liabilities........................... 56,169 57,135
------------- -------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000 shares authorized Series D
convertible preferred stock, 125 shares issued
and outstanding (liquidation preference of $9,419)
at December 31, 1999 and September 30, 1999............. 125 125
Series E convertible preferred stock, 50 shares issued
and outstanding (liquidation preference of $3,768) at
December 31, 1999 and September 30, 1999................ 50 50
Common stock, $.01 par value; 90,000 shares authorized
20,357 shares issued and 17,683 shares outstanding at
December 31, 1999; 20,370 shares issued and 17,592
shares outstanding at September 30, 1999................ 204 204
Additional paid-in capital.................................. 61,943 61,899
Retained earnings (accumulated deficit)..................... 665 (1,667)
Treasury stock-at cost, 2,674 shares at December 31, 1999
and 2,778 shares at September 30, 1999.................. (21,225) (22,352)
------------- -------------
Total shareholders' equity.......................... 41,762 38,259
------------- -------------
Total liabilities and shareholders' equity.......... $ 97,931 $ 95,394
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
MAPICS, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
License .............................................. $ 14,480 $ 22,973
Services ............................................. 16,045 15,488
------------ ------------
Total revenue ................................ 30,525 38,461
------------ ------------
Operating expenses:
Cost of license revenue ................................ 3,335 3,595
Cost of services revenue ............................... 5,848 4,083
Selling and marketing .................................. 10,873 14,445
Product development .................................... 4,212 4,023
General and administrative ............................. 2,450 2,916
------------ ------------
Total operating expenses ....................... 26,718 29,062
------------ ------------
Income from operations ................................... 3,807 9,399
Other:
Interest income .......................................... 306 408
Interest expense ......................................... (12) (15)
------------ ------------
Income before income tax expense ......................... 4,101 9,792
Income tax expense ....................................... 1,579 3,770
------------ ------------
Net income ............................................... $ 2,522 $ 6,022
============ ============
Net income per common share (basic) (Note 2) ............. $ 0.14 $ 0.31
============ ============
Weighted average number of common shares
outstanding (basic) (Note 2) ........................ 17,602 19,490
============ ============
Net income per common share (diluted) (Note 2) ........... $ 0.13 $ 0.26
============ ============
Weighted average number of common shares and common
equivalent shares outstanding (diluted) (Note 2) .... 19,781 23,527
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
MAPICS, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 2,522 $ 6,022
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation ............................................ 675 517
Amortization ............................................ 1,942 1,814
Provision for bad debts ................................. 70 207
Deferred income taxes ................................... 543 3,684
Deferred stock compensation ............................. (109) 34
Stock issued to directors ............................... 9 15
------------ ------------
5,652 12,293
Changes in operating assets and liabilities:
Accounts receivable ................................... 1,646 (6,934)
Prepaid expenses and other current assets ............. 208 (272)
Other assets .......................................... (511) --
Accounts payable ...................................... (707) (1,959)
Accrued expenses and other current liabilities ........ (1,278) (3,930)
Deferred revenue ...................................... 1,019 (447)
------------ ------------
Net cash provided by (used for) operating activities 6,029 (1,249)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ................... (952) (861)
Additions to computer software costs .................. (1,163) (1,412)
Purchases of computer software ........................ (691) (636)
Prepayments of business acquisition costs ............. (195) --
------------ ------------
Net cash used for investing activities ............. (3,001) (2,909)
------------ ------------
Cash flows from financing activities:
Proceeds from stock options exercised ................. 764 950
Proceeds employee stock purchases ..................... 226 240
Prepayment of debt costs .............................. (125) --
------------ ------------
Net cash provided by financing activities .......... 865 1,190
------------ ------------
Net increase (decrease) in cash and cash equivalents ......... 3,893 (2,968)
Cash and cash equivalents at beginning of period ............. 21,351 33,442
------------ ------------
Cash and cash equivalents at end of period ................... $ 25,244 $ 30,474
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
MAPICS, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
Except for the balance sheet as of September 30, 1999, the accompanying
condensed consolidated financial statements are unaudited; however, in our
opinion, these condensed consolidated financial statements contain all
adjustments, consisting of only normal, recurring adjustments, necessary to
present fairly our consolidated financial position, results of operations and
cash flows as of the dates and for the periods indicated. We have prepared these
financial statements pursuant to the rules and regulations of the Securities and
Exchange Commission. As permitted by the rules of the SEC applicable to
quarterly reports on Form 10-Q, we have condensed these notes, and they do not
contain all disclosures required by generally accepted accounting principles.
While we believe that the disclosures presented are adequate to make these
condensed consolidated financial statements not misleading, you should read
these condensed consolidated financial statements in conjunction with our
audited consolidated financial statements and related notes included in our
Annual Report on Form 10-K for the fiscal year ended September 30, 1999 as filed
with the SEC.
We operate on a fiscal year ending September 30th. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for a full year. The accompanying condensed financial
statements are consolidated and consist of the condensed financial statements of
MAPICS, Inc. and our wholly owned subsidiaries. We eliminated all significant
intercompany accounts and transactions in the consolidation.
(2) Net Income Per Common Share
We apply Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which requires us to present "basic" and "diluted" earnings per share,
or EPS, for all periods presented in the statements of operations. We compute
basic EPS, which excludes dilution, by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that would have occurred if
holders of our preferred stock, common stock options and common stock warrants
converted or exercised their holdings into common stock that then would have
shared in our earnings. The following table presents the calculations of basic
EPS and diluted EPS:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1999 1998
------------ ------------
(In thousands,
except per share data)
<S> <C> <C>
Numerator:
- ---------
Net income .......................................................... $ 2,522 $ 6,022
============ ============
Denominator:
- -----------
Weighted average number of common shares
outstanding (denominator for net income per
common share (basic)) ............................................ 17,602 19,490
Common share equivalents:
Convertible preferred stock ..................................... 1,750 2,565
Common stock options ............................................ 263 782
Common stock warrants ........................................... 166 690
------------ ------------
Weighted average number of common shares and common equivalent shares
outstanding (denominator for net income per common
share (diluted)) ................................................. 19,781 23,527
============ ============
Net income per common share (basic) ................................. $ 0.14 $ 0.31
============ ============
Net income per common share (diluted) ............................... $ 0.13 $ 0.26
============ ============
</TABLE>
6
<PAGE>
(3) Operating Segments and Geographic Information
In fiscal 1999, we adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," which superseded SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires those enterprises
to report selected information about operating segments in interim financial
reports. SFAS No. 131 also establishes standards for related disclosures about
products and services, geographic areas and major customers. This is the first
interim period for which we have reported the operating segment and geographic
information required by SFAS No. 131.
The following table includes interim financial information for the three
months ended December 31, 1999 and 1998 related to our operating segments and
geographic areas. The information presented below may not be indicative of
results if the geographic areas were independent organizations.
<TABLE>
<CAPTION>
North
America EMEA LAAP Corporate Total
------- ------ ------ --------- -------
<S> <C> <C> <C> <C> <C>
(In thousands)
Three Months Ended December 31, 1999:
Revenues from unaffiliated customers........ $21,727 $6,812 $1,986 $ -- $30,525
------- ------ ------ --------- -------
Income from operations...................... 3,764 771 48 (776) 3,807
Interest income............................. 306
Interest expense............................ (12)
-------
Income before income tax expense............ $ 4,101
=======
Three Months Ended December 31, 1998:
Revenues from unaffiliated customers........ $25,392 $9,009 $4,060 $ -- $38,461
------- ------ ------ --------- -------
Income from operations...................... 7,080 2,349 901 (931) 9,399
Interest income............................. 408
Interest expense............................ (15)
-------
Income before income tax expense............ $ 9,792
=======
</TABLE>
(4) Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for our fiscal year that begins on October 1, 2000. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including some derivative instruments that are embedded in other contracts, and
for hedging activities. We generally do not enter into transactions involving
derivatives, except that from time to time we may enter into forward exchange
contracts or purchase options to minimize the effect of changes in exchange
rates on our financial position, results of operations and cash flows. However,
these activities are not significant.
Pursuant to the terms of our new term loan and revolving credit facility,
we will be required to enter into an interest rate protection arrangement. The
purpose of the interest rate protection arrangement is to reduce or limit our
exposure to interest rate fluctuations. An interest rate protection arrangement
may be considered a derivative. Accordingly, the adoption of SFAS No. 133 may
affect our accounting for and disclosure of this interest rate protection
arrangement in future periods. For additional information about our new term
loan and revolving credit facility, see Note (5) below.
(5) Subsequent Events
Acquisition of Pivotpoint, Inc.
On January 12, 2000, we acquired Pivotpoint, Inc. for $48.0 million in
cash. Pivotpoint is a leading provider of extended enterprise applications to
mid-sized manufacturing and distribution companies. We will account for the
acquisition as a purchase during our second fiscal quarter ending March 31,
2000. Accordingly, we will allocate the purchase price to the net tangible
assets and intangible assets acquired based on their estimated fair values at
the date of acquisition. We may also allocate a portion of the purchase
7
<PAGE>
price to in-process research and development projects of the acquired business,
which we would expense immediately in the period of acquisition. We will
allocate the balance of the purchase price to goodwill. We are currently in the
process of preparing the purchase price allocation and determining the useful
lives of the assets acquired. Furthermore, we expect to record one-time
restructuring charges related to the acquisition in the range of $8.0 million to
$13.0 million before income taxes, consisting primarily of non-cash items.
Debt Financing
On January 12, 2000, in conjunction with our acquisition of Pivotpoint, we
borrowed $40.0 million under a new term loan and revolving credit facility to
finance a portion of the purchase price. We funded the remainder of the purchase
price, the repayment of Pivotpoint's remaining debt and costs related to the
transaction with available cash. This new borrowing arrangement replaced our
previous bank credit facility and consists of a $40.0 million term loan and a
$20.0 million revolving credit facility with a syndicate of banks. The term loan
requires us to make eleven quarterly installment payments in varying amounts of
principal beginning on July 1, 2000 and ending on December 31, 2002, the
maturity date of the term loan. In addition, we must make quarterly payments of
interest based on the lender's base rate or LIBOR plus a predetermined margin.
However, we may be required under certain circumstances, based on our cash
flows, to prepay all or a portion of the outstanding balance, or we may at our
discretion without penalty elect, subject to some limitations, to prepay all or
a portion of the outstanding balance. In addition, while amounts are outstanding
under the term loan portion of the bank credit facility, we will be required to
hedge a portion of our interest rate risk by entering into an interest rate
protection arrangement.
We can borrow, subject to some limitations, up to $20.0 million under the
revolving credit portion of the bank credit facility. All borrowings outstanding
under the revolving credit facility mature on January 12, 2004. In addition, we
must pay a commitment fee for the unused portion of the revolving credit
facility.
8
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read the following discussion and analysis in conjunction with
the condensed consolidated financial statements and notes contained in "Item 1.
Financial Statements." This discussion contains forward-looking statements
relating to our future financial performance, business strategy, financing plans
and other future events that involve uncertainties and risks. Our actual results
could differ materially from the results anticipated by these forward-looking
statements as a result of many known and unknown factors, including but not
limited to those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors Affecting
Future Performance" contained in our Annual Report on Form 10-K for the fiscal
year ended September 30, 1999 as filed with the SEC. The cautionary statements
made in that Form 10-K are applicable to all related forward-looking statements
wherever they appear in this report.
Results of Operations
Acquisition of Pivotpoint, Inc.
Our results of operations for the three months ended December 31, 1999 and
1998 presented in this report do not include the results of Pivotpoint, Inc. We
completed our acquisition of Pivotpoint, which will be accounted for as a
purchase, on January 12, 2000. Accordingly, we will begin to include the results
of the acquired business from the date of acquisition forward.
This strategic business combination enables us to immediately expand our
integrated manufacturing solutions across multiple platforms, including Windows
NT, UNIX, Linux and AS/400. In addition to MAPICS XA, our flagship enterprise
resource management, or ERM, solution, we now provide the following advanced
business systems to mid-sized manufacturers and distribution companies:
. Point.Man, a powerful suite of extended enterprise applications
designed to streamline business processes for manufacturing,
customer service and financial reporting across multiple sites,
business lines and countries. Point.Man provides the speed,
Internet accessibility and tight integration mid-sized
manufacturers expect, with broad functionality that can be
implemented as required to meet the needs of rapidly growing
companies;
. Thru-Put, an advanced planning and scheduling, or APS, system;
and
. Maincor, an enterprise asset management, or EAM, system.
Following our acquisition of Pivotpoint, we now have 3,000 customers worldwide
who have implemented our solutions.
During the next several quarters, we will focus on integrating the
Pivotpoint business, and we expect our results of operations to benefit from
increased revenue resulting from to the transaction. We also expect that our
acquisition of Pivotpoint will impact our business model. The cost structure
related to the MAPICS business is designed so that a significant portion of our
operating expenses varies in direct relation to our license revenue. These
variable expenses include particularly product royalties, which are included in
cost of license revenue, and commissions paid to affiliates, which are included
in selling and marketing expenses. Furthermore, our affiliates typically provide
implementation consulting and applications integration services for our
customers. Accordingly, we record neither the service revenue associated with
the work nor the costs associated with maintaining a consulting force. As a
result of our acquisition of Pivotpoint, we believe:
. the mix of revenue between license revenue and services revenue
may change. Services revenue may increase as a percentage of
total revenue because Pivotpoint has a group of employee
consultants that performs implementation and customization
services for its customers. Accordingly, we will record
consulting revenue related to these services as they are
performed;
9
<PAGE>
. the cost of services revenue may increase. Prior to the
acquisition, our cost of services revenue principally included
the costs of providing customer support. Following the
acquisition, our cost of services revenue will include these
costs plus (1) the additional costs of providing support for the
Point.Man, Thru-Put and Maincor products and (2) the costs
associated with maintaining a staff of consultants; and
. selling costs may increase. Whereas our affiliates have
historically sold the MAPICS products for a commission,
Pivotpoint employs a direct sales force to sell its products.
Although we are working to integrate the activities of our direct
and indirect sales forces, a higher proportion of our total
selling and marketing costs may be fixed.
Furthermore, our results of operations for the remainder of fiscal 2000
and beyond may be negatively affected by the following items related to our
acquisition of Pivotpoint:
. during the three months ending March 31, 2000, we expect to
record one-time restructuring charges related to the acquisition
in the range of $8.0 million to $13.0 million before income
taxes, consisting primarily of non-cash items;
. although we are currently in the process of preparing the
purchase price allocation and determining the useful lives of the
assets acquired, we expect that a significant portion of the
purchase price will be allocated to intangible assets and
goodwill that will negatively impact future operating results
through the recognition of amortization expense;
. we financed a portion of the purchase price with borrowings from
a syndicate of banks in the amount of $40.0 million. Interest
expense and principal repayments associated with these borrowings
will have a negative impact on our earnings and cash flows while
the debt is outstanding; and
. we will incur incremental operating expenses associated with the
acquired business.
We filed a Current Report on Form 8-K with the SEC dated January 12, 2000
reporting, pursuant to Items 2 and 7, our acquisition of Pivotpoint. At the time
of filing, it was impractical for us to provide the financial statements of
Pivotpoint and proforma financial information of the combined entities to the
extent required. This information will be provided as soon as practicable but
not later than March 27, 2000.
Additional risks associated with this acquisition and other business
combinations that we may transact are presented in Exhibit 99 to this report.
Three Months Ended December 31, 1999 Versus Three Months Ended December 31,
1998
Revenue. The following table shows information about our license revenue
and our services revenue during the three months ended December 31, 1999 and
1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
License revenue............................ $14,480 $22,973 (37.0)%
As a percentage of total revenue........... 47.4% 59.7%
Services revenue........................... $16,045 $15,488 3.6%
As a percentage of total revenue........... 52.6% 40.3%
Total revenue.............................. $30,525 $38,461 (20.6)%
</TABLE>
The decrease in license revenue during the three months ended December 31,
1999 resulted from a lower volume of product sales to both new and existing
customers. License revenue from new customers decreased $7.6 million, or 77%,
while license revenue from existing customers decreased $845 thousand, or 6%,
from the year-ago period.
10
<PAGE>
We believe that concern over the Year 2000 issue continued to cause
customers to delay purchasing decisions for our software products during the
three months ended December 31, 1999. Consequently, our license revenue was
negatively affected compared to our results for the year-earlier period.
Our operations are conducted principally in (1) North America, (2) the
Europe, Middle East and Africa region, or EMEA, and (3) the Latin America and
the Asia Pacific regions, or LAAP. During the three months ended December 31,
1999, we realized a downturn in sales activity in each of our primary geographic
areas for the reasons discussed in the immediately preceding paragraph. The
following table shows license revenue and the percentage of total license
revenue contributed by each of our primary geographic markets:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Change From
December 31, 1999 December 31, 1998 Prior Year
----------------- ----------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
North America.............................. $10,316 71.2% $14,171 61.7% (27.2)%
EMEA....................................... 3,487 24.1% 5,717 24.9% (39.0)%
LAAP....................................... 677 4.7% 3,085 13.4% (78.1)%
------- ----- ------- -----
Total................................ $14,480 100.0% $22,973 100.0% (37.0)%
======= ===== ======= =====
</TABLE>
Additional information about our operations in these geographic areas is
presented in Note (3) of the notes to our condensed consolidated financial
statements contained in "Item 1. Financial Statements."
Services revenue, which consists primarily of annual license revenue,
increased slightly during the three months ended December 31, 1999 due to a
volume increase in the number of MAPICS customers. However, annual license
revenue continued to increase at a lower rate during the three months ended
December 31, 1999 as a result of the slowdown in license sales during the last
four fiscal quarters. We anticipate that the rate of growth in annual license
revenue during the remainder of fiscal 2000 will continue to be lower than the
prior year period.
Cost of License Revenue. The following table shows information about our
cost of license revenue during the three months ended December 31, 1999 and
1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Cost of license revenue.................... $3,335 $3,595 (7.2)%
As a percentage of license revenue......... 23.0% 15.6%
As a percentage of total revenue........... 10.9% 9.3%
</TABLE>
Cost of license revenue decreased during the three months ended December
31, 1999 primarily as a result of a volume decrease in product royalty expense
due to the decrease in license revenue. However, the decrease in product royalty
expense was offset by the effect of increasing product royalty rates. We pay
product royalties to third party solution partners when we license solution
partner-developed products to our customers. As the mix of solution partner
product sales increases as a percentage of total product sales, as it has over
the past several years, the ratio of product royalty expense to license revenue
has also increased. The effective product royalty rates for the three months
ended December 31, 1999 and 1998 were 9.3% and 7.4%, respectively. We expect
that cost of license revenue will vary from period to period based on the mix of
products licensed between internally developed products and solution
partner-developed products.
Amortization of computer software costs was generally flat during the three
months ended December 31, 1999 as compared to the prior year period.
Consequently, the cost of license revenue did not decrease in proportion with
the decrease in license revenue but rather increased as a percentage of both
license revenue and total revenue.
11
<PAGE>
Cost of Services Revenue. The following table shows information about our
cost of services revenue during the three months ended December 31, 1999 and
1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Cost of services revenue................... $5,848 $4,083 43.2%
As a percentage of services revenue........ 36.4% 26.4%
As a percentage of total revenue........... 19.2% 10.6%
</TABLE>
The increase in cost of services revenue is principally attributable to a
reallocation of employees from sales and marketing and product development
functions to service groups focused on providing services for our extended
application products and creating e-business solutions for our customers. We
reallocated these employees during the second half of fiscal 1999, and we expect
that cost of services revenue will continue to increase during the remainder of
fiscal 2000 as we further implement our e-business strategy.
In addition, the cost of providing customer support increased during the
three months ended December 31, 1999 principally as a result of increases in
fees payable to affiliates and solution partners for providing support services
in the EMEA and LAAP regions. These increases were partially offset by a
decrease in distribution costs due to the decrease in product sales.
Selling and Marketing Expenses. The following table shows information about
our selling and marketing expenses during the three months ended December 31,
1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Selling and marketing expenses............. $10,873 $14,445 (24.7)%
As a percentage of total revenue........... 35.6% 37.6%
</TABLE>
Selling and marketing expenses decreased during the three months ended
December 31, 1999 primarily as a result of a $3.4 million decrease in
commissions earned by affiliates due to the decrease in license revenue.
Otherwise, selling and marketing expenses were relatively flat as the increase
in spending for selling and marketing programs was almost completely offset by
the reduction in selling and marketing headcount associated with the
reallocation of employees to services groups as mentioned above.
Product Development Expenses. The following table shows information about
our product development expenses during the three months ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Product development costs.................. $ 4,963 $ 4,723 5.1 %
Software translation costs................. 412 712 (42.1)%
------- -------
Total............................. 5,375 5,435 (1.1)%
------- -------
Less:
Capitalized product development costs...... (943) (778)
Capitalized software translation costs..... (220) (634)
------- -------
(1,163) (1,412)
------- -------
Product development expenses............... $ 4,212 $ 4,023 4.7 %
======= =======
As a percentage of total revenue........... 13.8% 10.5%
</TABLE>
12
<PAGE>
Spending on product development activities increased only slightly during
the three months ended December 31, 1999. Software translation costs, which
decreased during the three months ended December 31, 1999, are typically project
related, and the timing of those expenditures is subject to change from period
to period.
In connection with the acquisition of Pivotpoint, we discontinued our
product development efforts to re-engineer our MAPICS software applications to
the Windows NT server platform. Although this change in development strategy did
not have any impact on our results of operations during the three months ended
December 31, 1999, we expect to realize future cost savings in the development
of MAPICS products as a result of discontinuing these development activities.
The amounts of product development costs capitalized during the three
months ended December 31, 1999 and 1998 represented 19.0% and 16.5% of product
development costs, respectively. The amounts of software translation costs
capitalized during the three months ended December 31, 1999 and 1998 represented
53.4% and 89.0% of software translation costs, respectively. Capitalization
rates are generally affected by the nature and timing of development activities
and vary from period to period.
General and Administrative Expenses. The following table shows information
about our general and administrative expenses during the three months ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
General and administrative expenses........ $2,450 $2,916 (16.0)%
As a percentage of total revenue........... 8.0% 7.6%
</TABLE>
General and administrative expenses decreased during the three months ended
December 31, 1999 primarily due to a $137 thousand decrease in bad debt expense
and other various items including a slight decrease in headcount. Because a
significant portion of general and administrative expenses is fixed, the
increase as a percentage of total revenue was amplified by the decrease in
license revenue during the three months ended December 31, 1999.
Interest Income and Interest Expense. The following table shows information
about our interest income and interest expense during the three months ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Interest income............................ $306 $408 (25.0)%
Interest expense........................... (12) (15) (20.0)%
----- -----
Interest income, net....................... $294 $393 (25.2)%
===== =====
As a percentage of total revenue........... 1.0% 1.0%
</TABLE>
Interest income decreased during the three months ended December 31, 1999
due primarily to a decrease in the average balance of cash and cash equivalents.
We anticipate that interest income will continue to decrease as the average
balance of cash and cash equivalents decreases due to our debt funding
requirements.
We expect interest expense to increase significantly beginning in the
quarter ending March 31, 2000 as a result of the outstanding borrowings under
the term loan portion of our new bank credit facility. We must make quarterly
payments of interest based on the lender's base rate or LIBOR plus a
predetermined margin. In addition, we are required to pay a commitment fee on
the unused portion of our revolving credit facility. During the quarter ending
March 31, 2000, we plan to enter into an interest rate protection arrangement
that will reduce or limit our exposure to interest rate fluctuations.
13
<PAGE>
Income Tax Expense. The following table shows information about our income
tax expense during the three months ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------
Change From
1999 1998 Prior Year
---- ---- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Income before income tax expense........... $ 4,101 $ 9,792 (58.1)%
Income tax expense......................... 1,579 3,770 (58.1)%
Effective income tax rate.................. 38.5% 38.5%
As a percentage of total revenue........... 5.2% 9.8%
</TABLE>
The effective tax rate for the three months ended December 31, 1999 and
1998 differs from the statutory federal income tax rate of 35.0% principally due
to the impact of state income taxes. We expect that our effective tax rate will
increase in future periods because of differences between financial and income
tax reporting for costs associated with the acquisition of Pivotpoint.
Liquidity and Capital Resources
The following tables show information about our cash flows during the three
months ended December 31, 1999 and 1998 and selected balance sheet data as of
December 31, 1999 and September 30, 1999. You should read these tables and the
discussion that follows in conjunction with our condensed consolidated
statements of cash flows and balance sheets contained in "Item 1. Financial
Statements" and in our Annual Report on Form 10-K for the fiscal year ended
September 30, 1999 as filed with the SEC.
<TABLE>
<CAPTION>
Summary of Cash Flows
----------------------
Three Months Ended
December 31,
------------
1999 1998
-------- ---------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities before changes in operating assets
and liabilities............................................................. $ 5,652 $ 12,293
Increase (decrease) in operating assets and liabilities........................ 377 (13,542)
-------- ---------
Net cash provided by (used for) operating activities........................... 6,029 (1,249)
Net cash used for investing activities......................................... (3,001) (2,909)
Net cash provided by financing activities...................................... 865 1,190
-------- ---------
Net increase (decrease) in cash and cash equivalents........................ $ 3,893 $ (2,968)
======== =========
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data
------------------
December 31, September 30,
1999 1999
-------- ---------
(In thousands)
<S> <C> <C>
Cash and cash equivalents...................................................... $ 25,244 $ 21,351
Working capital................................................................ 9,157 6,332
Working capital (excluding deferred revenue)................................... 39,175 35,331
Total assets................................................................... 97,931 95,394
Total shareholders' equity..................................................... 41,762 38,259
</TABLE>
We have funded our operations and capital expenditures primarily with cash
generated from operating activities. The changes in net cash provided by
operating activities generally reflect the changes in earnings plus the effect
of changes in working capital. Changes in working capital, especially trade
accounts receivable, trade accounts payable and accrued expenses, are generally
the result of timing differences between collection of fees billed and payment
of operating expenses.
We generated positive cash flows from operating activities of $6.0 million
during the three months ended December 31, 1999 compared to negative cash flows
from operating activities of $1.2 million during the three months ended December
31, 1998. The decrease in earnings and its effect on cash flows from operations
during the three months ended December 31, 1999 was offset by the
14
<PAGE>
fact that operating assets and liabilities remained relatively unchanged from
September 30, 1999, whereas we incurred a significant decrease in working
capital during the three months ended December 31, 1998 due to the timing of
cash flows related to trade accounts receivable, trade accounts payable and
accrued expenses.
The nature and amounts of net cash flows from investing and financing
activities during the three months ended December 31, 1999 were comparable to
those in the prior year period, except that during the three months ended
December 31, 1999 we incurred transactional costs related to the acquisition of
Pivotpoint. In our first quarter of fiscal 2000, we paid professional and
regulatory fees associated with the acquisition. We deferred these costs and
will treat them as a component of the purchase price that will be allocated to
the assets and liabilities during the quarter ending March 31, 2000. We also
prepaid some costs associated with our new bank credit facility. We also
deferred these debt-related costs and will amortize them as a component of
interest expense over the life of the bank credit facility.
We significantly altered our financial position in January 2000. On January
12, 2000, in conjunction with the acquisition of Pivotpoint, we borrowed $40.0
million under a new term loan and revolving credit facility to finance a portion
of the purchase price. We funded the remainder of the purchase price, the
repayment of Pivotpoint's remaining debt and costs related to the transaction
with available cash. This new borrowing arrangement replaced our previous bank
credit facility and consists of a $40.0 million term loan and a $20.0 million
revolving credit facility with a syndicate of banks. The term loan requires us
to make eleven quarterly installment payments in varying amounts of principal
beginning on July 1, 2000 and ending on December 31, 2002, the maturity date of
the term loan. In addition, we must make quarterly payments of interest based on
the lender's base rate or LIBOR plus a predetermined margin. However, we may be
required under certain circumstances, based on our cash flows, to prepay all or
a portion of the outstanding balance, or we may at our discretion without
penalty elect, subject to some limitations, to prepay all or a portion of the
outstanding balance. In addition, while amounts are outstanding under the term
loan portion of the bank credit facility, we will be required to hedge a portion
of our interest rate risk by entering into an interest rate protection
arrangement.
We can borrow, subject to some limitations, up to $20.0 million under the
revolving credit portion of the bank credit facility. All borrowings outstanding
under the revolving credit facility mature on January 12, 2004. In addition, we
must pay a commitment fee for the unused portion of the revolving credit
facility.
We believe that cash and cash equivalents on hand as of December 31, 1999,
together with cash flows from operating activities and available borrowings
under the revolving credit facility, will be sufficient for us to make the
scheduled payments on borrowings outstanding under the term loan portion of our
bank credit facility and to maintain our operations for at least the next 12
months.
Year 2000 Issue
Many existing computer hardware and software systems are designed to use
only two digits to identify a year in date fields, such as "99" for "1999".
These systems may not properly recognize a year that begins with "20" instead of
"19." If not corrected, these systems could fail or could create erroneous
results when working with dates beyond the year 1999. This is commonly referred
to as the Year 2000 issue.
We believe that the Year 2000 issue has affected demand for our products
and, although we are now beyond January 1, 2000, the Year 2000 issue may still
affect us. Even though we have not experienced any known technical disruption to
our business systems or become aware of any significant Year 2000-related
problems with our products, business partners or vendors to date, Year 2000
issues may still exist which have not yet been identified.
Our Readiness Status
We develop and market software programs that are date sensitive and may be
affected by the Year 2000 issue. In July 1997, we received Information
Technology Association of America 2000, or ITAA 2000, certification, validating
that our development processes meet the information technology industry's best
software development practices for addressing the Year 2000 issue. MAPICS XA
releases since 1995 and the last release of MAPICS/DB in 1995 have been
converted and tested to be Year 2000 compliant. We believe that the products we
currently produce adequately address the Year 2000 issue. Our solution partners
have certified to us that their products are also Year 2000 compliant. However,
we cannot assure that these products or future products
15
<PAGE>
developed by us or our solution partners contain or will contain all necessary
date code changes or that errors will not be found in these products at a later
time. The costs to resolve any resulting Year 2000 related errors could have a
material adverse impact on our business, financial condition and results of
operations.
Many hardware, operating system and application products developed by third
parties interact or operate with our applications. In addition, customers or
others may modify our products after they have been installed. We cannot assess
the Year 2000 readiness of these hardware, operating system and application
products or modified MAPICS products. The performance and functionality of our
applications that work with these products could be adversely affected if these
products are not Year 2000 compliant. Although we believe that we would not be
responsible for these Year 2000 problems, we are unable to assess the effect
they may have on our business, financial condition and results of operations.
We believe the Year 2000 issue is affecting the demand for Year 2000
enabled hardware and software products, including the demand for our products
and services. During fiscal 1998 and the first quarter of fiscal 1999, the Year
2000 issue may have driven increased demand for our Year 2000 enabled products.
However, we currently believe that both existing customers and potential new
customers have deferred and may continue to defer purchase decisions for our
products because they are required to divert their resources to address other
Year 2000 issues within their businesses. In addition, once companies have
replaced their existing systems that were not Year 2000 enabled, they may no
longer demand our products. We are unable to quantify the effect that the demand
for Year 2000 enabled products has had on our past or current business,
financial condition and results of operations and cannot predict the effect that
any increase or decrease in demand will have on us in the future.
We principally rely on our MAPICS XA product to support our internal
accounting, payables and invoicing operations. While MAPICS XA has been
converted and tested to be Year 2000 compliant, we also rely on third party
systems developed by others for many of our critical internal operations. Our
business, financial condition and results of operations may be materially
adversely affected if these third party systems are not Year 2000 compliant. In
addition, our internal operations may also be affected by Year 2000 issues
affecting third parties with whom we have relationships, including affiliates,
solution partners and other vendors such as utilities, distributors and banks. A
Year 2000 problem affecting one or more of these third parties may also have a
material adverse effect our business, financial condition and results of
operations.
We have assembled a Year 2000 taskforce made up of representatives from our
development, marketing, support, information systems, facilities, finance and
legal departments to assess the Year 2000 readiness of our internal operations
and the readiness of third parties on which we rely. The taskforce has
identified and assessed the Year 2000 readiness of most of the material
information technology and non-information technology systems, including fax
machines, phone switches and badge access readers, used internally as part of
our operations. Based on information obtained from third party vendors or
testing that we have performed, we believe that all such internal systems are
Year 2000 ready or that we have the appropriate plans in place to achieve timely
Year 2000 readiness for such internal systems. However, our on-going program
could reveal Year 2000 issues that are not currently identified or fully
understood.
The taskforce has also worked to identify third parties on which our
operations materially rely. This includes our affiliates, solution partners and
other suppliers. The taskforce has gathered written materials published by many
of these third parties or otherwise communicated directly with these third
parties in order to determine the Year 2000 readiness of their business
operations or the readiness of the products or services they supply to us. While
the taskforce has collected many responses and other materials from these third
parties regarding their Year 2000 readiness, we are not certain that the Year
2000 issue will be properly and timely resolved by all of our suppliers,
affiliates, or solution partners. Any unresolved problems could have a material
impact on our business, financial condition and results of operations.
Our Costs to Address the Year 2000 Issue
We have incurred approximately $330,000 in costs to make our products and
internal systems Year 2000 compliant. In addition, during fiscal 1999, we spent
approximately $455,000 to replace our customer support call management system.
We made this replacement in fiscal 1999 primarily for business reasons other
than the Year 2000 issue, although the previous system was not Year
2000-enabled. We do not expect to incur material additional costs to remedy any
remaining Year 2000 problems with our products and internal systems. However, we
cannot currently assess the costs of remedying problems resulting from the Year
2000 issues of others. Our business, financial condition and results of
operations may be materially adversely affected if the costs of remedying these
Year 2000 problems prove to be significant.
16
<PAGE>
Risks
Despite assurances and testing, it is possible that our internal systems or
those of our affiliates or our suppliers may not be Year 2000 ready. Such
failure could have a material adverse effect on our business, financial
condition and results of operations.
In addition, "business interruption" litigation may arise out of the Year
2000 issue. We are not aware of any possible claim against us arising from
instances of business interruption. However, we are uncertain how we may be
affected by any such litigation. In particular, many of our applications that
are currently in use but were sold before our 1995 application releases are not
Year 2000 enabled. We no longer support these applications. While we have made
Year 2000 enabled replacement software available to most customers using older
applications, we cannot assure that all of these customers are aware of the Year
2000 issue or that they have adopted these replacements or other remedies. In
addition, we cannot assure that these customers will not bring Year 2000-related
claims against us which, with or without merit, could be time consuming and
expensive for us to defend or resolve. Any adverse outcome in any such
litigation could subject us to significant liability. As a result, business
interruption litigation could have a material adverse effect on our business,
financial condition and results of operations.
Contingency Plans
We did not experience an unusual increase in requests for customer support
and assistance from our customers during the period of time immediately
preceding and following January 1, 2000. However, we maintain contingency plans
that better identify the available development and customer support resources
during this time, including resources belonging to affiliates who provide
customers with local support. Because we have not received responses from all
suppliers on which we rely and because Year 2000 issues may arise which are not
currently identified or fully understood, additional contingency plans specific
to potential exposures may have to be developed in the future.
Cautionary Statements
The continued assessment, progress and timing of our Year 2000 readiness
efforts and potential exposures as described above depend upon the cooperation
and responsiveness of third parties, the accuracy and reliability of responses
provided and testing procedures, and the availability of skilled resources, both
internal and external, to address Year 2000 issues that exist or may arise. We
can give no assurance that assessments to date will prove to be accurate.
Serious deficiencies that are not currently identified or fully understood may
arise in the future and may have a material adverse impact on our business,
financial condition and results of operations. We plan to continue our taskforce
into the year 2000 to assess the impact of Year 2000 issues brought to our
attention and develop appropriate contingency plans where necessary in an effort
to minimize our potential exposure to the Year 2000 issue.
As previously discussed in this report, we recently acquired Pivotpoint.
They are subject to Year 2000 risks like those we have disclosed above. Like us,
they have taken steps to address the Year 2000 readiness of their products and
operations. They also did not experience any known technical disruption to their
business systems or relationships. However, Year 2000 issues may still exist
which have not yet been identified. Serious deficiencies that are not currently
identified or fully understood may arise in the future and may have a material
adverse impact on our business, financial condition and results of operations.
Euro Conversion Issue
On January 1, 1999, a new currency called the "euro" was introduced in 11
of the 15 member countries of the European Union. In 2002, each of these
participating countries will adopt the euro as their single currency. This event
is referred to as the Euro Conversion. Until that time, however, financial
transactions in these participating countries may be conducted in either the
euro or the local national currency. As a result, companies operating or
conducting business in these participating countries during this transition
period must be able to process financial transactions in either the euro or the
local national currency.
Beginning with MAPICS XA Release 5, which we introduced in the first
quarter of fiscal 1999, our product includes a solution designed to address the
Euro Conversion. Although this product is designed to enable companies to
process financial transactions in the euro and the local national currencies, we
cannot assure that we will satisfactorily address all Euro Conversion issues.
The costs to resolve any resulting Euro Conversion related errors could have a
material adverse effect on our business, financial condition and results of
operations.
17
<PAGE>
We, like our customers and others who operate or conduct business in the
participating countries, must be able to process financial transactions in both
the euro and the local national currencies of the participating countries. To
date, we have not experienced a significant amount of financial transactions
with our customers, vendors, affiliates or others that were denominated in the
euro. Furthermore, we do not expect such transactions to be commonplace during
the initial phase of the transition to the euro.
We believe that we can process a minimal amount of euro-related
transactions without modification to our existing internal systems. However,
over time, as companies adopt the euro as the preferred currency for some or all
of their business transactions, we will be required to process euro-related
transactions in increasing volume. We currently plan to implement our
euro-enabled MAPICS XA Release 5 before this volume becomes significant. We
expect that the costs of implementing MAPICS XA Release 5 for our own use will
be insignificant and do not expect to experience significant conversion and/or
operational problems associated with the implementation of our own software
product. However, if we are required to process a significant amount of
financial transactions in the euro before we are able to implement MAPICS XA
Release 5 for our own use, or if subsequently MAPICS XA Release 5 does not allow
us to satisfactorily process financial transactions in the euro, it may result
in unforeseen costs or a disruption to our business, either of which could have
a material adverse effect on our business, financial condition and results of
operations.
We do not believe that the translation of financial transactions into euros
will have a significant effect on our business, financial condition or results
of operations. The Euro Conversion, however, may have an impact on economic
factors that affect our business, including its effect on interest rates,
exchange rates and contract prices. Moreover, the Euro Conversion may create
strategic challenges as companies across Europe adapt to a single transnational
currency. The participating countries' adoption of the euro will likely result
in greater transparency of pricing, making Europe a more competitive
environment. Although we have adapted our European price list to accommodate the
introduction of the euro, we are currently unsure of the potential impact it
could have on competitive conditions in European markets.
Inflation
To date, we believe inflation has not had a material impact on our
operations.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
We do not engage in trading market risk sensitive instruments nor do we
purchase, whether for investment, hedging or purposes "other than trading,"
instruments that are likely to expose us to market risk, whether foreign
currency exchange rate, interest rate, commodity price or equity price risk,
except as discussed in the following paragraphs. We have not issued any debt
instruments, entered into any forward or futures contracts, purchased any
options or entered into any swaps, except as discussed in the following
paragraphs.
Foreign Currency Exchange Rate Risk
Our foreign operations, primarily those in Western Europe, involve
financial transactions that are denominated in foreign currencies. From time to
time, we may enter into forward exchange contracts or purchase options to
minimize the effect of changes in exchange rates on our financial position,
results of operations and cash flows. We did not enter into any forward exchange
contracts or purchase options during the three months ended December 31, 1999
and 1998 nor did we have any open forward exchange contracts or options at
December 31, 1999 or September 30, 1999.
Interest Rate Risk
On January 12, 2000, in conjunction with the acquisition of Pivotpoint, we
borrowed $40.0 million under a new term loan and revolving credit facility to
finance a portion of the purchase price. This new borrowing arrangement replaced
our previous bank credit facility and consists of a $40.0 million term loan and
a $20.0 million revolving credit facility with a syndicate of banks.
Borrowings under the bank credit facility bear interest at the lender's
base rate or LIBOR plus a predetermined margin. In addition, while amounts are
outstanding under the term loan portion of the bank credit facility, we will be
required to hedge a portion of our interest rate risk by entering into an
interest rate protection arrangement. The purpose of the interest rate
protection arrangement is to reduce or limit our exposure to interest rate
fluctuations. An interest rate protection arrangement may be considered a
derivative. We have until April 11, 2000 to enter into an interest rate
protection arrangement.
18
<PAGE>
PART II: OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on February 10, 2000, the
following matters were brought before, voted upon and approved by the
shareholders with the number of votes as indicated below:
1. A proposal to elect two directors to serve as class III directors until the
2003 annual meeting of shareholders.
Withheld
For Authority
--- ---------
Terry H. Osborne 17,336,961 664,013
H. Mitchell Watson, Jr. 17,337,145 663,829
2. A proposal to approve an amendment to our articles of incorporation to
delete Section 2(b) of Annex A and Section 2(b) of Annex B.
Series D Series E
Common Preferred Preferred
------ --------- ---------
For 11,236,186 1,000,000 499,990
Against 1,429,540
Abstain 35,078
Broker non-vote 3,800,180 250,000
3. A proposal to approve an amendment to our 1998 Long-Term Incentive Plan to
increase the number of shares of common stock available for awards under
the plan from 2,000,000 to 3,500,000 shares.
For 10,295,195
Against 3,877,617
Abstain 27,982
Broker-non vote 3,800,180
4. A proposal to approve the adoption of the 2000 Employee Stock Purchase Plan
to replace our 1998 Employee Stock Purchase Plan.
For 13,789,795
Against 317,246
Abstain 26,926
Broker-non vote 3,867,007
5. A proposal to approve an amendment to our 1998 Non-Employee Director Stock
Option Plan to change the number of option shares granted annually and
their vesting schedule.
For 17,022,417
Against 879,331
Abstain 32,399
Broker-non vote 66,827
19
<PAGE>
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
--- -----------
2 Agreement and Plan of Merger dated as of December 15, 1999,
by and among MAPICS, Inc., MAPICS Merger Corp., and
Pivotpoint, Inc. (incorporated herein by reference to
Exhibit 2.2 to MAPICS, Inc.'s Annual Report on Form 10-K for
the fiscal year ended September 30, 1999).
3.1 Articles of Amendment of MAPICS, Inc.
3.2 Articles of Incorporation of MAPICS, Inc. as amended
10.1* MAPICS, Inc. Amended and Restated 1998 Long-Term Incentive
Plan
10.2* MAPICS, Inc. 2000 Employee Stock Purchase Plan
10.3* MAPICS, Inc. 1998 Non-Employee Director Stock Option Plan
(f/k/a Marcam Corporation 1991 Non-Employee Director Stock
Option Plan, as amended and restated as of February 10,
2000)
10.4 Amended and Restated Revolving Credit and Term Loan
Agreement dated as of January 12, 2000 among MAPICS, Inc.,
BankBoston N.A., the other lending institutions set forth on
Schedule 1, BankBoston, N.A. as agent and FleetBoston
Robertson Stephens Inc. as arranger
10.5* Employment Agreement with Steven C. Haley
21 Subsidiaries
27 Financial Data Schedule for the three months ended December
31, 1999 (for SEC use only)
99 Disclosure regarding certain acquisition risks
- --------------
* Compensatory management plan
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K with the SEC dated January 12, 2000
reporting, pursuant to Items 2 and 7, our acquisition of Pivotpoint. At the time
of filing, it was impractical for us to provide the financial statements of
Pivotpoint and proforma financial information of the combined entities to the
extent required. This information will be provided as soon as practicable but
not later than March 27, 2000.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on February 14, 2000.
MAPICS, Inc.
By: /s/ William J. Gilmour
------------------------------
William J. Gilmour
Vice President of Finance and
Chief Financial and Accounting Officer
21
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
2 Agreement and Plan of Merger dated as of December 15, 1999,
by and among MAPICS, Inc., MAPICS Merger Corp., and
Pivotpoint, Inc. (incorporated herein by reference to
Exhibit 2.2 to MAPICS, Inc.'s Annual Report on Form 10-K for
the fiscal year ended September 30, 1999).
3.1 Articles of Amendment of MAPICS, Inc.
3.2 Articles of Incorporation of MAPICS, Inc. as amended
10.1* MAPICS, Inc. Amended and Restated 1998 Long-Term Incentive
Plan
10.2* MAPICS, Inc. 2000 Employee Stock Purchase Plan
10.3* MAPICS, Inc. 1998 Non-Employee Director Stock Option Plan
(f/k/a Marcam Corporation 1991 Non-Employee Director Stock
Option Plan, as amended and restated as of February 10,
2000)
10.4 Amended and Restated Revolving Credit and Term Loan
Agreement dated as of January 12, 2000 among MAPICS, Inc.,
BankBoston N.A., the other lending institutions set forth on
Schedule 1, BankBoston, N.A. as agent and FleetBoston
Robertson Stephens Inc. as arranger
10.5* Employment Agreement with Steven C. Haley
21 Subsidiaries
27 Financial Data Schedule for the three months ended December
31, 1999 (for SEC use only)
99 Disclosure regarding certain acquisition risks
- --------------
* Compensatory management plan
22
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
MAPICS, INC.
I.
The name of the corporation is MAPICS, Inc.
II.
The Articles of Incorporation are hereby amended to delete Section 2(b) of
Annex A and Section 2(b) of Annex B.
III.
The amendment to delete Section 2(b) of Annex A and Section 2(b) of Annex B
of the Articles of Incorporation was duly approved by the shareholders of the
corporation on February 10, 2000 in accordance with the provisions of Section
14-2-1003 of the Georgia Business Corporation Code.
IN WITNESS WHEREOF, MAPICS, Inc. has caused these Articles of Amendment to
be executed by a duly authorized officer this 10th day of February, 2000.
MAPICS, INC.
By: /s/ Martin D. Avallone
-----------------------------------
Name: MARTIN D. AVALLONE
---------------------------------
Title: Vice President, General Counsel
--------------------------------
And Secretary
<PAGE>
EXHIBIT 3.2
ARTICLES OF INCORPORATION
OF
MAPICS, INC.
ARTICLE ONE
-----------
Name
----
The name of the corporation is MAPICS, Inc.
ARTICLE TWO
-----------
Authorized Shares
-----------------
The corporation shall have authority, to be exercised by the Board of
Directors, to issue not more than 90,000,000 shares of Common Stock, $.01 par
value per share, and not more than 1,000,000 shares of Preferred Stock, $1.00
par value per share. The shares of Common Stock shall have unlimited voting
rights and shall be entitled to receive the net assets of the corporation upon
dissolution. Subject to the provisions of these Articles of Incorporation and to
the provisions of the Georgia Business Corporation Code, the Board of Directors
is authorized to determine (a) the preferences, limitations, and relative rights
of the class of Preferred Stock prior to the issuance of any shares of Preferred
Stock and (b) the preferences, limitations, and relative rights of one or more
series within the class of Preferred Stock and may designate the number of
shares within that series prior to the issuance of any shares of that series;
provided, however, that the preferences, limitations and relative rights of the
corporation's (x) Series D Convertible Preferred Stock, par value $1.00 per
share, (y) Series E Convertible Preferred Stock, par value $1.00 per share, and
(z) Series F Junior Participating Preferred Stock, par value $1.00 per share,
are set forth in Annex A, Annex B and Annex C hereto, respectively. Any shares
of Common Stock purchased or otherwise acquired by the corporation in any manner
whatsoever shall become treasury shares.
ARTICLE THREE
-------------
Incorporator, Registered Agent and Office
-----------------------------------------
The name of the incorporator and the initial registered agent of the
corporation is Martin D. Avallone. The address of the incorporator and of the
initial registered office and initial principal office of the corporation is
5775-D Glenridge Drive, Suite 300, Atlanta, Georgia 30328.
<PAGE>
ARTICLE FOUR
------------
Directors
---------
4.1 The number of directors of the corporation shall not be less than
three nor more than eleven, the precise number to be fixed by resolution of the
shareholders or of the Board of Directors from time to time. The directors shall
be divided into three classes, each consisting, as nearly equal in number as
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the first election of directors of the corporation, the
first class of directors (Class I) shall be elected for a term expiring at the
third next annual meeting of shareholders and upon the election and
qualification of their respective successors, the second class of directors
(Class III) shall be elected for a term expiring at the second next annual
meeting of shareholders and upon the election and qualification of their
respective successors, and the third class of directors (Class II) shall be
elected for a term expiring at the next following annual meeting of shareholders
and upon the election and qualification of their respective successors. At each
succeeding annual meeting of shareholders, successors to the class of directors
whose term expires at the annual meeting of shareholders shall be elected for a
three-year term. Except as provided in Section 4.3 of this Article Four, a
director shall be elected by the affirmative vote of the holders of a plurality
of the shares represented at the meeting of shareholders at which the director
stands for election and entitled to elect such director.
4.2 The entire Board of Directors or any individual director may be
removed from office but only for cause and only by the affirmative vote of the
holders of at least 80% of all classes of stock of the corporation entitled to
vote in the election of such director or directors, considered for purposes of
this Section as one class. For purposes of this Section, "cause" shall mean only
(a) conviction of a felony, (b) declaration of unsound mind by order of a court,
(c) gross dereliction of duty, (d) commission of an action involving moral
turpitude or (e) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
corporation. Notwithstanding the foregoing, in the event that Preferred Stock of
the corporation is issued and authorizes the election of one or more directors
by the holders of such Preferred Stock, any individual director elected by the
holders of such Preferred Stock may be removed only by the holders of the
outstanding shares of such Preferred Stock in accordance with the terms of the
Preferred Stock as provided therein. Removal action may be taken at any
shareholders' meeting with respect to which notice of such purpose has been
given.
4.3 Any vacancies on the Board of Directors for any reason, including
vacancies resulting from an increase in the number of directors, may be filled
only by the Board of Directors, acting by the affirmative vote of a majority of
the total number of directors then remaining in office, though they constitute
fewer than a quorum of the Board of Directors. Notwithstanding the foregoing,
(a) in the event that a vacant office was held by a director elected by holders
of Preferred Stock of the corporation who are entitled to elect such director
pursuant to the terms of such Preferred Stock, only the remaining directors
elected by the holders of such Preferred Stock, or in the absence of any such
directors, the holders of such Preferred Stock, shall be entitled to fill such
vacancy in accordance with the terms of the Preferred Stock as provided therein
and (b) any vacancy on the Board of Directors resulting from the removal of a
director by shareholder action may be filled by the shareholders at their annual
meeting or at a special meeting the notice or waiver of notice of which
specifies such action as an item of business for such meeting. Any director
appointed to fill a vacancy shall be elected for the unexpired term of the
predecessor in office and until the successor is elected and qualified, except
that when a directorship is to be
-2-
<PAGE>
filled by reason of an increase in the number of directors, the term of such
director shall expire at the next election of directors by the shareholders and
upon the election and qualification of the successor.
4.4 Notwithstanding any other provision hereof or any provision of law
which might otherwise permit a lesser vote or no vote, the affirmative vote of
the holders of at least 80% of all classes of stock ordinarily entitled to vote
in the election of directors, considered for the purposes of this Section as one
class, shall be required to alter, amend or repeal this Article Four.
ARTICLE FIVE
------------
Limitation of Director Liability
--------------------------------
5.1 A director of the corporation shall not be liable to the corporation
or its shareholders for monetary damages for any action taken, or any failure to
take any action, as a director, except liability (i) for any appropriation, in
violation of his or her duties, of any business opportunity of the corporation,
(ii) for acts or omissions which involve intentional misconduct or a knowing
violation of law, (iii) of the types set forth in Section 14-2-832 of the
Georgia Business Corporation Code (or any successor provision), or (iv) for any
transaction from which the director received an improper personal benefit.
5.2 Any repeal or modification of the provisions of this Article by the
shareholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the liability of a director of the
corporation with respect to any act or omission occurring prior to the effective
date of such repeal or modification.
5.3 If the Georgia Business Corporation Code is hereafter amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the corporation, in addition to the
limitation on liability provided herein, shall be limited to the fullest extent
permitted by the Georgia Business Corporation Code, as so amended.
5.4 In the event that any of the provisions of this Article (including any
provision within a single sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by law.
ARTICLE SIX
-----------
Constituency Considerations
---------------------------
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any action on the corporation or its
shareholders, may consider the interests of the employees, customers, suppliers,
and creditors of the corporation and its subsidiaries, the communities in which
offices or other establishments of the corporation and its subsidiaries are
located, and all other factors such directors consider pertinent; provided,
however, that this Article shall be deemed solely to grant discretionary
authority to the directors and shall not be deemed to provide to any
constituency any right to be considered.
-3-
<PAGE>
ARTICLE SEVEN
-------------
Shareholder Action Without a Meeting
------------------------------------
Except as may be otherwise provided by the terms of any Preferred Stock,
action required or permitted to be taken at a meeting of shareholders may be
taken without a meeting if the action is taken by all shareholders entitled to
vote on the action. The action must be evidenced by one or more written consents
describing the action taken, signed by all shareholders and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
ARTICLE EIGHT
-------------
Amendment of Bylaws
-------------------
The Bylaws may be altered, amended or repealed, and new Bylaws may be
adopted, by (a) the affirmative vote of the holders of a majority of the voting
power of all the shares of capital stock of the corporation then entitled to
vote generally in the election of directors, voting together as a single class,
or (b) the Board of Directors of the corporation, but any bylaws adopted by the
Board of Directors may be altered, amended or repealed, or new bylaws may be
adopted, by the affirmative vote of the holders of a majority of the voting
power of all of the shares of capital stock of the corporation then entitled to
vote generally in the election of directors, voting together as a single class.
The shareholders may prescribe, by so expressing in the action they take in
amending or adopting any Bylaw or Bylaws, that the Bylaw or Bylaws so amended or
adopted by them shall not be altered, amended or repealed by the Board of
Directors.
ARTICLE NINE
------------
Severability
------------
In the event that any of the provisions of these Articles of Incorporation
are held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
-4-
<PAGE>
Annex A
-------
Series D Convertible Preferred Stock
------------------------------------
1. Designation and Number of Shares. There shall be hereby established
--------------------------------
the series of Preferred Stock designated and known as "Series D Convertible
--------------------
Preferred Stock." The authorized number of shares of Series D Convertible
- ---------------
Preferred Stock shall be 225,000 shares.
2. Voting. Except as may be otherwise provided in these terms of the
------
Series D Convertible Preferred Stock or by law, the Series D Convertible
Preferred Stock shall vote together with all other classes and series of stock
of the Corporation as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Series D Convertible Preferred
Stock shall entitle the holder thereof to such number of votes per share on each
such action as shall equal the number of shares of Common Stock (including
fractions of a share) into which each share of Series D Convertible Preferred
Stock is then convertible.
3. Dividends. The holders of the Series D Convertible Preferred Stock
---------
shall be entitled to receive, out of funds legally available therefor, dividends
at the same rate as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each share of
Series D Convertible Preferred Stock as being equal to the number of shares of
Common Stock (including fractions of a share) into which each share of Series D
Convertible Preferred Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, the holders of the shares of
Series D Convertible Preferred Stock shall be entitled, before any distribution
or payment is made upon any stock ranking on liquidation junior to the Series D
Convertible Preferred Stock, to be paid an amount equal to the greater of (i)
$100 per share plus, in the case of each share, an amount equal to any dividends
declared but unpaid thereon, through the date payment thereof is made available,
or (ii) such amount per share as would have been payable had each such share
been converted to Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of Series D Convertible
Preferred Stock shall not be entitled to any further payment (such amount
payable with respect to one share of Series D Convertible Preferred Stock being
sometimes referred to as the "Liquidation Payment" and with respect to all
-------------------
shares of Series D Convertible Preferred Stock being sometimes referred to as
the "Liquidation Payments"). If upon such liquidation, dissolution or winding
--------------------
up of the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series D Convertible Preferred Stock shall be
insufficient to permit payment to the holders of Series D Convertible Preferred
Stock of the amount distributable as aforesaid, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Series D Convertible Preferred Stock. Upon any such liquidation, dissolution
or winding up of the Corporation, after the holders of Series D Convertible
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled, the remaining net assets of the Corporation may be distributed to the
holders of stock ranking on liquidation junior to the Series D Convertible
Preferred Stock. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Liquidation Payments and the place
where said Liquidation Payments shall be payable, shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, not less than 10 days prior to the payment date stated
therein, to the holders of record of Series D Convertible Preferred Stock, such
notice to be addressed to each such holder at its address as shown by the
records of the Corporation. For purposes hereof, the Common Stock shall rank on
liquidation junior to the Series D Convertible Preferred Stock.
A-1
<PAGE>
For purposes of this paragraph 4, a liquidation, dissolution or winding up
of the Corporation shall be deemed to include (i) the Corporation's sale of all
or substantially all of its assets or (ii)(x) the merger or consolidation of the
Corporation into or with any other corporation, or (y) the merger of any other
corporation into or with the Corporation, if the stockholders of the Corporation
prior to such merger or consolidation do not retain at least a majority of the
voting power of the surviving corporation. Nothing in this paragraph 4 shall
limit the rights of the holders of the Series D Convertible Preferred Stock to
convert their shares of Series D Convertible Preferred Stock in accordance with
the terms hereof.
The Series D Convertible Preferred Stock shall, with respect to
distribution of assets and rights upon the liquidation, dissolution or winding
up of the Corporation, rank on a parity with any class or series of capital
stock of the Corporation hereafter created which expressly provides that it
ranks on a parity with the Series D Convertible Preferred Stock with respect to
distribution of assets and rights upon the liquidation, dissolution or winding
up of the Corporation. The Series D Convertible Preferred Stock shall, with
respect to distribution of assets and rights upon the liquidation, dissolution
or winding up of the Corporation, rank senior to each class or series of capital
stock of the Corporation hereafter created which do not expressly provide that
it ranks on a parity with or senior to the Series D Convertible Preferred Stock
with respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation.
5. Restrictions. At any time when shares of Series D Convertible
------------
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the articles of organization, and in addition to any other vote required by
law or the articles of organization, without the approval of the holders of at
least a majority of the then outstanding shares of Series D Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, the Corporation will not:
(a) Create, issue or authorize the creation or issuance of any
additional class or series of shares of stock unless the same ranks junior to
the Series D Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation, or increase the
authorized amount of the Series D Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Series D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or create, issue or authorize the creation or issuance of any
obligation or security convertible into shares of Series D Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Series D Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation, whether
any such creation, issuance, authorization or increase shall be by means of
amendment to the articles of organization or by merger, consolidation or
otherwise; or
(b) Amend, alter or repeal its articles of organization to adversely
affect the rights of the holders of the Series D Convertible Preferred Stock.
6. Conversions. The holders of shares of Series D Convertible Preferred
-----------
Stock shall have the following conversion rights:
(a) Right to Convert. Subject to the terms and conditions of this
----------------
paragraph 6, the holder of any share or shares of Series D Convertible Preferred
Stock shall have the right, at its
A-2
<PAGE>
option at any time, to convert any such shares (or fractions thereof) of Series
D Convertible Preferred Stock (except that upon any liquidation of the
Corporation the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount distributable on the Series D
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series D Convertible Preferred Stock so to be converted by $100 and (ii)
dividing the result by the conversion price of $10 per share or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Series D Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Conversion Price"). Such rights of conversion shall be
----------------
exercised by the holder thereof by giving written notice that the holder elects
to convert a stated number of shares of Series D Convertible Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Series D Convertible Preferred Stock) at
any time during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued.
(b) Issuance of Certificates; Time Conversion Effected. Promptly
--------------------------------------------------
after the receipt of the written notice referred to in subparagraph 6(a) and
surrender of the certificate or certificates for the share or shares of Series D
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series D Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid, and at such time the rights of the holder of such share or shares of
Series D Convertible Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(c) Fractional Shares; Dividends; Partial Conversion. No fractional
------------------------------------------------
shares of Common Stock shall be issued upon conversion of Series D Convertible
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends (other than dividends paid in
additional shares of Common Stock) declared but unpaid on the shares of Series D
Convertible Preferred Stock surrendered for conversion to the date upon which
such conversion is deemed to take place as provided in subparagraph 6(b). If the
number of shares of Series D Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6(a) exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares (or fractions thereof) of
Series D Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6(c), be delivered upon such conversion, the Corporation, in lieu
of delivering such fractional share, shall pay to the holder surrendering the
Series D Convertible Preferred Stock for
A-3
<PAGE>
conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors of the
Corporation.
(d) Subdivision or Combination of Common Stock. In case the
------------------------------------------
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(e) Reorganization or Reclassification. If any capital reorganization
----------------------------------
or reclassification of the capital stock of the Corporation (other than a merger
or consolidation of the Corporation in which the Corporation is the surviving
corporation and which does not result in a reclassification or change of
outstanding shares of Common Stock or a merger or consolidation which is deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
paragraph 4) shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Series D Convertible Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Series D Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
(f) Notice of Adjustment. Upon any adjustment of the Conversion
--------------------
Price, then and in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or registered mail, return receipt
requested, telecopier or telex, addressed to each holder of shares of Series D
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
(g) Other Notices. In case at any time:
-------------
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
--- ----
holders of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into another entity or entities, or a sale,
lease, abandonment, transfer or other disposition of all or substantially all
its assets; or
A-4
<PAGE>
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Series D Convertible Preferred
Stock at the address of such holder as shown on the books of the Corporation,
(i) at least 10 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (ii) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 10 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (ii) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(h) Stock to be Reserved. The Corporation will at all times reserve
--------------------
and keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the conversion of Series D Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series D Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Series D Convertible Preferred Stock would exceed the total
number of shares of Common Stock then authorized by the articles of
organization.
(i) No Reissuance of Series D Convertible Preferred Stock. Shares of
-----------------------------------------------------
Series D Convertible Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued as shares of Series D Convertible
Preferred Stock.
(j) Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon conversion of Series D Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series D Convertible
Preferred Stock which is being converted.
(k) Closing of Books. The Corporation will at no time close its
----------------
transfer books against the transfer of any Series D Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series D Convertible Preferred Stock in
A-5
<PAGE>
any manner which interferes with the timely conversion of such Series D
Convertible Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
(l) Mandatory Conversion. If, at any time after September 30, 1998,
--------------------
for a period of not less than thirty (30) consecutive trading days, the market
value of shares of Common Stock on the principal securities exchange or market
on which such shares are then traded exceeds $30.14 per share (appropriately
adjusted to reflect the occurrence of any event referred to in paragraph 6(d)),
then the Corporation may elect that all then outstanding shares of Series D
Convertible Preferred Stock be mandatorily converted into shares of Common Stock
in accordance with this paragraph 6 by providing written notice thereof, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of shares of Series D Convertible
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state that the Corporation has made such
election and shall specify a date not more than 10 days nor less than 20 days
after the date of such notice on which all then outstanding shares of Series D
Convertible Preferred Stock shall be mandatorily converted into shares of Common
Stock in accordance with this paragraph 6. Effective at the close of business on
the date specified in such notice, all outstanding shares of Series D
Convertible Preferred Stock shall automatically convert to shares of Common
Stock on the basis set forth in this paragraph 6. Holders of shares of Series D
Convertible Preferred Stock so converted may deliver to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to such holders) during its usual
business hours, the certificate or certificates for the shares so converted. As
promptly as practicable thereafter, the Corporation shall issue and deliver to
such holder a certificate or certificates for the number of whole shares of
Common Stock to which such holder is entitled, together with any cash dividends
and payment in lieu of fractional shares to which such holder may be entitled
pursuant to subparagraph 6(c). Until such time as a holder of shares of Series D
Convertible Preferred Stock shall surrender his or its certificates therefor as
provided above, such certificates shall be deemed to represent the shares of
Common Stock to which such holder shall be entitled upon the surrender thereof.
A-6
<PAGE>
Annex B
-------
Series E Convertible Preferred Stock
------------------------------------
1. Designation and Number of Shares. There shall be hereby established
--------------------------------
the series of Preferred Stock designated and known as "Series E Convertible
--------------------
Preferred Stock." The authorized number of shares of Series E Convertible
- ---------------
Preferred Stock shall be 100,000 shares.
2. Voting. Except as may be otherwise provided in these terms of the
------
Series E Convertible Preferred Stock or by law, the Series E Convertible
Preferred Stock shall vote together with all other classes and series of stock
of the Corporation as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Series E Convertible Preferred
Stock shall entitle the holder thereof to such number of votes per share on each
such action as shall equal the number of shares of Common Stock (including
fractions of a share) into which each share of Series E Convertible Preferred
Stock is then convertible.
3. Dividends. The holders of the Series E Convertible Preferred Stock
---------
shall be entitled to receive, out of funds legally available therefor, dividends
at the same rate as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each share of
Series E Convertible Preferred Stock as being equal to the number of shares of
Common Stock (including fractions of a share) into which each share of Series E
Convertible Preferred Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, the holders of the shares of
Series E Convertible Preferred Stock shall be entitled, before any distribution
or payment is made upon any stock ranking on liquidation junior to the Series E
Convertible Preferred Stock, to be paid an amount equal to the greater of (i)
$100 per share plus, in the case of each share, an amount equal to any dividends
declared but unpaid thereon, through the date payment thereof is made available,
or (ii) such amount per share as would have been payable had each such share
been converted to Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of Series E Convertible
Preferred Stock shall not be entitled to any further payment (such amount
payable with respect to one share of Series E Convertible Preferred Stock being
sometimes referred to as the "Liquidation Payment" and with respect to all
-------------------
shares of Series E Convertible Preferred Stock being sometimes referred to as
the "Liquidation Payments"). If upon such liquidation, dissolution or winding
--------------------
up of the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series E Convertible Preferred Stock shall be
insufficient to permit payment to the holders of Series E Convertible Preferred
Stock of the amount distributable as aforesaid, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Series E Convertible Preferred Stock. Upon any such liquidation, dissolution
or winding up of the Corporation, after the holders of Series E Convertible
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled, the remaining net assets of the Corporation may be distributed to the
holders of stock ranking on liquidation junior to the Series E Convertible
Preferred Stock. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Liquidation Payments and the place
where said Liquidation Payments shall be payable, shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, not less than 10 days prior to the payment date stated
therein, to the holders of record of Series E Convertible Preferred Stock, such
notice to be addressed to each such holder at its address as shown by the
records of the Corporation. For purposes hereof, the Common Stock shall rank on
liquidation junior to the Series E Convertible Preferred Stock.
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For purposes of this paragraph 4, a liquidation, dissolution or winding up
of the Corporation shall be deemed to include (i) the Corporation's sale of all
or substantially all of its assets or (ii)(x) the merger or consolidation of the
Corporation into or with any other corporation, or (y) the merger of any other
corporation into or with the Corporation, if the stockholders of the Corporation
prior to such merger or consolidation do not retain at least a majority of the
voting power of the surviving corporation. Nothing in this paragraph 4 shall
limit the rights of the holders of the Series E Convertible Preferred Stock to
convert their shares of Series E Convertible Preferred Stock in accordance with
the terms hereof.
The Series E Convertible Preferred Stock shall, with respect to
distribution of assets and rights upon the liquidation, dissolution or winding
up of the Corporation, rank on a parity with (i) the Corporation's Series D
Convertible Preferred Stock, $1.00 par value per share, and (ii) any class or
series of capital stock of the Corporation hereafter created which expressly
provides that it ranks on a parity with the Series E Convertible Preferred Stock
with respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation. The Series E Convertible Preferred
Stock shall, with respect to distribution of assets and rights upon the
liquidation, dissolution or winding up of the Corporation, rank senior to each
class or series of capital stock of the Corporation hereafter created which does
not expressly provide that it ranks on a parity with or senior to the Series E
Convertible Preferred Stock with respect to distribution of assets and rights
upon the liquidation, dissolution or winding up of the Corporation.
5. Restrictions. At any time when shares of Series E Convertible
------------
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the articles of organization, and in addition to any other vote required by
law or the articles of organization, without the approval of the holders of at
least a majority of the then outstanding shares of Series E Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, the Corporation will not:
(a) Create, issue or authorize the creation or issuance of any
additional class or series of shares of stock unless the same ranks junior to
the Series E Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation, or increase the
authorized amount of the Series E Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Series E Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or create, issue or authorize the creation or issuance of any
obligation or security convertible into shares of Series E Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Series E Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation, whether
any such creation, issuance, authorization or increase shall be by means of
amendment to the articles of organization or by merger, consolidation or
otherwise; or
(b) Amend, alter or repeal its articles of organization to adversely
affect the rights of the holders of the Series E Convertible Preferred Stock.
6. Conversions. The holders of shares of Series E Convertible Preferred
-----------
Stock shall have the following conversion rights:
(a) Right to Convert. Subject to the terms and conditions of this
----------------
paragraph 6, the holder of any share or shares of Series E Convertible Preferred
Stock shall have the right, at its
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option at any time, to convert any such shares (or fractions thereof) of Series
E Convertible Preferred Stock (except that upon any liquidation of the
Corporation the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount distributable on the Series E
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series E Convertible Preferred Stock so to be converted by $100 and (ii)
dividing the result by the conversion price of $10 per share or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Series E Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Conversion Price"). Such rights of conversion shall be
----------------
exercised by the holder thereof by giving written notice that the holder elects
to convert a stated number of shares of Series E Convertible Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Series E Convertible Preferred Stock) at
any time during its usual business hours on the date set forth in such notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued.
(b) Issuance of Certificates; Time Conversion Effected. Promptly
--------------------------------------------------
after the receipt of the written notice referred to in subparagraph 6(a) and
surrender of the certificate or certificates for the share or shares of Series E
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series E Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid, and at such time the rights of the holder of such share or shares of
Series E Convertible Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(c) Fractional Shares; Dividends; Partial Conversion. No fractional
------------------------------------------------
shares of Common Stock shall be issued upon conversion of Series E Convertible
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends (other than dividends paid in
additional shares of Common Stock) declared but unpaid on the shares of Series E
Convertible Preferred Stock surrendered for conversion to the date upon which
such conversion is deemed to take place as provided in subparagraph 6(b). If the
number of shares of Series E Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6(a) exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares (or fractions thereof) of
Series E Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6(c), be delivered upon such conversion, the Corporation, in lieu
of delivering such fractional share, shall pay to the holder surrendering the
Series E Convertible Preferred Stock for
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<PAGE>
conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors of the
Corporation.
(d) Subdivision or Combination of Common Stock. In case the
------------------------------------------
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a small number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(e) Reorganization or Reclassification. If any capital reorganization
----------------------------------
or reclassification of the capital stock of the Corporation (other than a merger
or consolidation of the Corporation in which the Corporation is the surviving
corporation and which does not result in a reclassification or change of
outstanding shares of Common Stock or a merger or consolidation which is deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
paragraph 4) shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Series E Convertible Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Series E Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
(f) Notice of Adjustment. Upon any adjustment of the Conversion
--------------------
Price, then and in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or registered mail, return receipt
requested, telecopier or telex, addressed to each holder of shares of Series E
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
(g) Other Notices. In case at any time:
-------------
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
--- ----
holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all its
assets; or
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<PAGE>
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Series E Convertible Preferred
Stock at the address of such holder as shown on the books of the Corporation,
(i) at least 10 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (ii) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 10 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (ii) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
(h) Stock to be Reserved. The Corporation will at all times reserve
--------------------
and keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the conversion of Series E Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series E Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Series E Convertible Preferred Stock would exceed the total
number of shares of Common Stock then authorized by the articles of
organization.
(i) No Reissuance of Series E Convertible Preferred Stock. Shares of
-----------------------------------------------------
Series E Convertible Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued as shares of Series E Convertible
Preferred Stock.
(j) Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon conversion of Series E Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series E Convertible
Preferred Stock which is being converted.
(k) Closing of Books. The corporation will at no time close its
----------------
transfer books against the transfer of any Series E Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series E Convertible Preferred Stock in
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<PAGE>
any manner which interferes with the timely conversion of such Series E
Convertible Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
(l) Mandatory Conversion. If, at any time after July 23, 1999, for a
--------------------
period of not less than thirty (30) consecutive trading days, the market value
of shares of Common Stock on the principal securities exchange or market on
which such shares are then traded exceeds $30.14 per share (appropriately
adjusted to reflect the occurrence of any event referred to in paragraph 6(d)),
then the Corporation may elect that all then outstanding shares of Series E
Convertible Preferred Stock be mandatorily converted into shares of Common Stock
in accordance with this paragraph 6 by providing written notice thereof, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of shares of Series E Convertible
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state that the Corporation has made such
election and shall specify a date not more than 10 days nor less than 20 days
after the date of such notice on which all then outstanding shares of Series E
Convertible Preferred Stock shall be mandatorily converted into shares of Common
Stock in accordance with this paragraph 6. Effective at the close of business on
the date specified in such notice, all outstanding shares of Series E
Convertible Preferred Stock shall automatically convert to shares of Common
Stock on the basis set forth in this paragraph 6. Holders of shares of Series E
Convertible Preferred Stock so converted may deliver to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to such holders) during its usual
business hours, the certificate or certificates for the shares so converted. As
promptly as practicable thereafter, the Corporation shall issue and deliver to
such holder a certificate or certificates for the number of whole shares of
Common Stock to which such holder is entitled, together with any cash dividends
and payment in lieu of fractional shares to which such holder may be entitled
pursuant to subparagraph 6(c). Until such time as a holder of shares of Series E
Convertible Preferred Stock shall surrender his or its certificates therefor as
provided above, such certificates shall be deemed to represent the shares of
Common Stock to which such holder shall be entitled upon the surrender thereof.
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Annex C
-------
Series F Junior Participating Preferred Stock
---------------------------------------------
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series F Junior Participating Preferred Stock" and the number of
---------------------------------------------
shares constituting such series shall be 30,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the shares of Series F
Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series F Junior Participating Preferred Stock, in preference to the
holders of Common Stock, $.01 par value per share (the "Common Stock"), of the
------------
Corporation, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds of the Corporation
legally available for the payment of dividends, quarterly dividends payable in
cash on March 31, June 30, September 30 and December 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
-------------------------------
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series F Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series F Junior Participating Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision, combination or
consolidation of the outstanding Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series F Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series F Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series F Junior Participating
Preferred Stock before the dividend or distribution declared on the Common Stock
is paid or set apart; provided, however, that, in the event no dividend or
-------- -------
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series F Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
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<PAGE>
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series F Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series F Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series F Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series F Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series F Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series F Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series F Junior Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock or
effect a subdivision, combination or consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series F Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, by law, or in any other
Certificate of Vote of Directors establishing a series of Preferred Stock or any
similar stock, the holders of shares of Series F Junior Participating Preferred
Stock, the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series F Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
--------------
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Series F Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Series F Junior
Participating Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.
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<PAGE>
(ii) During any default period, such voting right of the
holders of Series F Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the right
of the holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series F Junior
---- -----
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors shall within twenty (20) Business Days after
such default amend the Corporation's by-laws to make provision for the election
of directors consistent with the provisions of this Section 3 and call a special
meeting of the holders of shares of the Series F Junior Participating Preferred
Stock and all other holders of Preferred Stock who are then entitled to
participate in the election of such Directors for the purpose of electing the
additional Directors provided by this Section 3. Notice of such meeting and of
any annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C)(iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than 10 days and not later than 60 days after such order
or request. Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
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<PAGE>
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the Corporation's by-laws irrespective of any increase
made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such
number being subject, however, to change thereafter in any manner provided by
law or in the Corporation's articles of organization or by-laws). Any vacancies
in the Board of Directors effected by the provisions of clauses (y) and (z) in
the preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series F Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series F Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
F Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on or make any other
distributions on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series F Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series F Junior
Participating Preferred Stock, except dividends paid ratably on the Series F
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series F Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series F Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series F Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series F Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
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(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series F Junior Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of undesignated Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on issuance set
forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series F Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series F Junior Participating
Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series F Liquidation Preference"). Following
-------------------------------
the payment of the full amount of the Series F Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series F
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
------
Adjustment") equal to the quotient obtained by dividing (i) the Series F
- ----------
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
-----------------
Series F Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series F Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series F Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series F Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series F Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit payment
in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the
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numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(D) Neither the consolidation, merger or other business combination
of the Corporation with or into any other corporation nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or business of
the Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series F Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series F Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series F Junior Participating
-------------
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series F Junior Participating Preferred Stock
-------
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets upon liquidation,
dissolution, winding up or otherwise, unless the terms of any such series shall
provide otherwise.
Section 10. Amendment. The articles of organization of the Corporation
---------
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series F Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least seventy-five percent of the
outstanding shares of Series F Junior Participating Preferred Stock, voting
together as a single class.
Section 11. Fractional Shares. Series F Junior Participating Preferred
-----------------
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series F Junior Participating Preferred Stock.
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Exhibit 10.1
MAPICS, INC.
AMENDED AND RESTATED 1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the MAPICS, Inc. Amended and Restated 1998
-------
Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of MAPICS, Inc. (the "Corporation"), by linking the personal interests of
its employees, officers, consultants and directors to those of Corporation
stockholders and by providing such persons with an incentive for outstanding
performance. The Plan is further intended to provide flexibility to the
Corporation in its ability to motivate, attract, and retain the services of
employees, officers, consultants and directors upon whose judgment, interest,
and special effort the successful conduct of the Corporation's operation is
largely dependent. Accordingly, the Plan permits the grant of incentive awards
from time to time to selected employees, officers, consultants and directors.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan first became effective as of November 13,
--------------
1997, the date upon which was originally approved by the Board, and the Plan, as
originally adopted, was approved by the stockholders of the Corporation on
February 3, 1998. The Plan was amended by the Compensation Committee of the
Board of Directors pursuant to Section 15.1 on May 5, 1998 and again on November
4, 1998, and the Plan, as so amended and restated, was approved by the
stockholders on February 10, 1999. The Plan was further amended by the
Compensation Committee of the Board of Directors pursuant to Section 15.1 on
November 2, 1999 and December 1, 1999, and the Plan, as so amended and restated,
was submitted for approval by the stockholders on February 10, 2000.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
-----------
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Unit Award, Dividend Equivalent Award, or Other
<PAGE>
Stock-Based Award, or any other right or interest relating to Stock or
cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 25% or more of the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is
on the Effective Date the beneficial owner of 25% or more of the
Outstanding Company Voting Securities, (ii) any acquisition directly
from the Company, (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company, or (v) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(3) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners of the
Outstanding Company
-2-
<PAGE>
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Voting
Securities, and (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 25%
or more of the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the committee of the Board described in Article
4.
(g) "Corporation" means MAPICS, Inc.
(h) "Covered Employee" means a covered employee as defined in Code
Section 162(m)(3).
(i) "Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in the
judgment of the Committee, is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary
to judge the nature and permanency of the Participant's condition.
Notwithstanding the above, with respect to an Incentive Stock Option,
Disability shall mean Permanent and Total Disability as defined in Section
22(e)(3) of the Code.
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<PAGE>
(j) "Dividend Equivalent" means a right granted to a Participant under
Article 11.
(k) "Effective Date" has the meaning assigned such term in Section
2.1.
(l) "Fair Market Value", on any date, means (i) if the Stock is listed
on a securities exchange or is traded over the Nasdaq National Market, the
closing sales price on such exchange or over such system on such date or,
in the absence of reported sales on such date, the closing sales price on
the immediately preceding date on which sales were reported, or (ii) if the
Stock is not listed on a securities exchange or traded over the Nasdaq
National Market, the mean between the bid and offered prices as quoted by
Nasdaq for such date, provided that if it is determined that the fair
market value is not properly reflected by such Nasdaq quotations, Fair
Market Value will be determined by such other method as the Committee
determines in good faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(n) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(o) "Option" means a right granted to a Participant under Article 7
of the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Non-
Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a Participant
under Article 12, that relates to or is valued by reference to Stock or
other Awards relating to Stock.
(q) "Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(r) "Participant" means a person who, as an employee, officer,
consultant or director of the Corporation or any Subsidiary, has been
granted an Award under the Plan.
(s) "Performance Unit" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
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<PAGE>
(t) "Plan" means the MAPICS, Inc. Amended and Restated 1998 Long-Term
Incentive Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(v) "Retirement" means a Participant's voluntary termination of
employment with the Corporation, Parent or Subsidiary after attaining age
55.
(w) "Stock" means the $.01 par value common stock of the Corporation
and such other securities of the Corporation as may be substituted for
Stock pursuant to Article 14.
(x) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of the SAR over the grant price of the SAR, all as determined
pursuant to Article 8.
(y) "Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Corporation. For Incentive Stock Options, the term shall have the meaning
set forth in Code Section 424(f).
(z) "1933 Act" means the Securities Act of 1933, as amended from time
to time.
(z) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation
---------
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board.
During any time that the Board is acting as administrator of the Plan, it shall
have all the powers of the Committee hereunder, and any reference herein to the
Committee (other than in this Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the
-----------------------
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by
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<PAGE>
the members of the Committee in lieu of a meeting, shall be deemed the acts of
the Committee. Each member of the Committee is entitled to, in good faith, rely
or act upon any report or other information furnished to that member by any
officer or other employee of the Corporation or any Parent or Subsidiary, the
Corporation's independent certified public accountants, or any executive
compensation consultant or other professional retained by the Corporation to
assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. Except as provided below, the Committee has
----------------------
the exclusive power, authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances
an Award may be settled in, or the exercise price of an Award may be paid
in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
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<PAGE>
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
Not withstanding the above, the Board or the Committee may expressly
delegate to a special committee consisting of one or more directors who are also
officers of the Company some or all of the Committee's authority under
subsections (a) through (g) above with respect to those eligible Participants
who, at the time of grant are not, and are not anticipated to be become, either
(i) Covered Employees or (ii) persons subject to the insider trading
restrictions of Section 16 of the 1934 Act.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
-----------------
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1,
----------------
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Unit
Award) shall be 3,500,000, of which not more than 20% may be granted as Awards
of Restricted Stock or unrestricted Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates,
-------------
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
-----------------
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
--------------------
the contrary (but subject to adjustment as provided in Section 14.1), the
maximum number of shares of Stock with respect to one or more Options and/or
SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 300,000. The maximum fair market value (measured as of the
date of grant) of any Awards other than Options and SARs that may be received by
any one Participant (less any consideration paid by the Participant for such
Award) during any one calendar year under the Plan shall be $2,000,000.
ARTICLE 6
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<PAGE>
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are employees,
-------
officers, consultants or directors of the Corporation or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to Participants
-------
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
--------------
Option shall be determined by the Committee, provided that the exercise
price for any Option shall not be less than the Fair Market Value as of the
date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
-------------------------------
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised. The Committee may waive any exercise provisions at any time in
whole or in part based upon factors as the Committee may determine in its
sole discretion so that the Option becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which the
-------
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants; provided that
if shares of Stock surrendered in payment of the exercise price were
themselves acquired otherwise than on the open market, such shares shall
have been held by the Participant for at least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
-----------------
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions, not inconsistent with the Plan, as
may be specified by the Committee; provided that no Option shall be
exercisable for more than ten years from the date of its grant.
(e) ADDITIONAL OPTIONS UPON EXERCISE. The Committee may, in its sole
--------------------------------
discretion, provide in an Award Agreement, or in an amendment thereto, for
the automatic grant of a new Option to any Participant who delivers shares
of Stock as full or partial payment of the exercise price of the original
Option. Any new Option granted in such a case (i) shall be for the same
number of shares of Stock as the Participant delivered in exercising the
original Option,
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<PAGE>
(ii) shall have an exercise price of 100% of the Fair Market Value of the
surrendered shares of Stock on the date of exercise of the original Option
(the grant date for the new Option), and (iii) shall have a term equal to
the unexpired term of the original Option.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
-----------------------
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
--------------
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date of
the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
--------
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
---------------
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if Option is
exercised after the dates specified in paragraphs (3), (4) and (5) below,
it will automatically become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason
other than as provided in paragraph (4) or (5) below, the Incentive
Stock Option shall lapse, unless it is previously exercised, three
months after the Participant's termination of employment; provided,
however, that if the Participant's employment is terminated by the
Company for cause (as determined by the Company) or by the Participant
without the consent of the Company, the Incentive Stock Option shall
(to the extent not previously exercised) lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall continue to vest, and
shall lapse at the time it would otherwise lapse, in accordance with
the terms of the Plan or the applicable Award Agreement; provided,
however, the to the extent that an Incentive Stock Option is not
exercised prior to the expiration of one year after the Participant's
termination of employment, such Option shall be deemed to be a Non-
Qualified Stock Option.
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<PAGE>
(5) If the Participant dies while employed, or during the three-
month period described in paragraph (3) or during the one-year period
described in paragraph (4) and before the Option otherwise lapses, the
Option shall vest immediately pursuant to Section 13.8 of the Plan and
shall lapse at the time it would otherwise lapse in accordance with
the terms of the Plan or the applicable Award Agreement. Upon the
Participant's death, any exercisable Incentive Stock Options may be
exercised by the Participant's beneficiary, determined in accordance
with Section 13.6.
Unless the exercisability of the Incentive Stock Option is accelerated
as provided in Article 13, if a Participant exercises an Option after
termination of employment, the Option may be exercised only with respect to
the shares that were otherwise vested on the Participant's termination of
employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
----------------------------
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to
------------------
any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
the Corporation or any Parent or Subsidiary unless the exercise price per
share of such Option is at least 110% of the Fair Market Value per share of
Stock at the date of grant and the Option expires no later than five years
after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
-------------------------------------
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
-----------------
Stock Option may be exercised only by the Participant or, in the case of
the Participant's Disability, by the Participant's guardian or legal
representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock Option
---------
to a non-employee director. The Committee may grant an Incentive Stock
Option to a director who is also an employee of the Corporation or Parent
or Subsidiary but only in that individual's position as an employee and not
as a director.
-10-
<PAGE>
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
-------------
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
----------------
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
-----------
evidenced by an Award Agreement. The terms, methods of exercise, methods
of settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE UNITS
9.1. GRANT OF PERFORMANCE UNITS. The Committee is authorized to grant
--------------------------
Performance Units to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Units granted to each Participant. All
Awards of Performance Units shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Units gives the Participant
----------------
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Units are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Units in its discretion which, depending on the extent to which they
are met, will determine the number and value of Performance Units that will be
paid to the Participant.
9.3. OTHER TERMS. Performance Units may be payable in cash, Stock, or
-----------
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
-11-
<PAGE>
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
-------------------------
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
-------------------------
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter. Notwithstanding the foregoing, if at any time the
aggregate number of shares of Stock granted as Restricted Stock Awards under the
Plan exceeds 10% percent of the total Stock authorized to be granted under the
Plan, any Awards of Restricted Stock over such 10% threshold shall be subject to
the following minimum vesting provisions: (a) one year from the date of grant
if vesting is based on the grantee meeting performance criteria, or (b) three
years from the date of grant if vesting is not related to performance.
10.3. FORFEITURE. Except as otherwise determined by the Committee at the
----------
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
---------------------------------
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11 DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
-----------------------------
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Award, as determined by
the Committee. The Committee
-12-
<PAGE>
may provide that Dividend Equivalents be paid or distributed when accrued or be
deemed to have been reinvested in additional shares of Stock, or otherwise
reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
---------------------------------
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
------------------------------------------
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
-------------------
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made, and after taking into account the tax, securities and accounting
effects of such an exchange.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
-------------
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
--------------------------
any applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without
-13-
<PAGE>
limitation, cash, Stock, other Awards, or other property, or any combination,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case determined in accordance with rules adopted by, and
at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
------------------
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation or a Parent or Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Corporation or a Parent or Subsidiary. No
unexercised or restricted Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant to a domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, any state or federal tax or securities laws or regulations
applicable to transferable Awards.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
-------------
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan
------------------
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
13.8 ACCELERATION UPON DEATH. Notwithstanding any other provision in the
-----------------------
Plan or any Participant's Award Agreement to the contrary, upon the
Participant's death during his employment or service as a consultant or
director, all outstanding Options, Stock Appreciation Rights, and other Awards
in the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse. Any Option or Stock
Appreciation Rights Awards shall thereafter continue or
-14-
<PAGE>
lapse in accordance with the other provisions of the Plan and the Award
Agreement. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise provided
-------------------------------------
in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Company's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
-------------------------------------------------------------
CONTROL. In the event of the occurrence of any circumstance, transaction or
- -------
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.11. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
---------------------------------
has occurred as described in Section 13.9 or 13.10 above, the Committee may in
its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.11.
13.12 EFFECT OF ACCELERATION. If an Award is accelerated under Section
----------------------
13.9 or 13.10, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award
-15-
<PAGE>
will be assumed by another party to the transaction giving rise to the
acceleration or otherwise be equitably converted in connection with such
transaction, or (iv) any combination of the foregoing. The Committee's
determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.13. PERFORMANCE GOALS. The Committee may determine that any Award
-----------------
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Parent or Subsidiary of a
specified target return, or target growth in return, on equity or assets, (b)
the Corporation's, Parent's or Subsidiary's stock price, (c) the achievement by
an individual or a business unit of the Corporation, Parent or Subsidiary of a
specified target, or target growth in, revenues, net income or earnings per
share, (d) the achievement of objectively determinable goals with respect to
product delivery, product quality, customer satisfaction, meeting budgets and/or
retention of employees or (e) any combination of the goals set forth in (a)
through (d) above. If an Award is made on such basis, the Committee shall
establish goals prior to the beginning of the period for which such performance
goal relates (or such later date as may be permitted under Code Section 162(m)
or the regulations thereunder) and the Committee may for any reason reduce (but
not increase) any Award, notwithstanding the achievement of a specified goal.
Any payment of an Award granted with performance goals shall be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied.
13.14. TERMINATION OF EMPLOYMENT. Whether military, government or other
-------------------------
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur (i) in a circumstance in which a Participant
transfers from the Corporation to one of its Parents or Subsidiaries, transfers
from a Parent or Subsidiary to the Corporation, or transfers from one Parent or
Subsidiary to another Parent or Subsidiary, or (ii) in the discretion of the
Committee as specified at or prior to such occurrence, in the case of a spin-off
of the Participant's employer from the Corporation or any Parent or Subsidiary.
To the extent that this provision causes Incentive Stock Options to extend
beyond three months from the date a Participant is deemed to be an employee of
the Corporation, a Parent or Subsidiary for purposes of Section 424(f) of the
Code, the Options held by such Participant shall be deemed to be Non-Qualified
Stock Options.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event of a corporate transaction involving the
-------
Corporation (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
authorization limits under Section 5.1 and 5.4
-16-
<PAGE>
shall be adjusted proportionately, and the Committee may adjust Awards to
preserve the benefits or potential benefits of the Awards. Action by the
Committee may include: (i) adjustment of the number and kind of shares which may
be delivered under the Plan; (ii) adjustment of the number and kind of shares
subject to outstanding Awards; (iii) adjustment of the exercise price of
outstanding Awards; and (iv) any other adjustments that the Committee determines
to be equitable. Without limiting the foregoing, in the event a stock dividend
or stock split is declared upon the Stock, the authorization limits under
Section 5.1 and 5.4 shall be increased proportionately, and the shares of Stock
then subject to each Award shall be increased proportionately without any change
in the aggregate purchase price therefor.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
---------------------------------------
may, at any time and from time to time, amend, modify or terminate the Plan
without stockholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of stockholders of the
Company if such approval is necessary or deemed advisable with respect to tax,
securities or other applicable laws, policies or regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
-------------------------
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination; and provided
further that, except as otherwise permitted in the Plan, the exercise price of
any Option may not be reduced and the original term of any Option may not be
extended. No termination, amendment, or modification of the Plan shall
adversely affect any Award previously granted under the Plan, without the
written consent of the Participant.
-17-
<PAGE>
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or employee, officer,
-------------------
consultant or director shall have any claim to be granted any Award under the
Plan, and neither the Corporation nor the Committee is obligated to treat
Participants and employees, officers, consultants or directors uniformly.
16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
---------------------
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have
-----------
the authority and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan.
With respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require or permit
that any such withholding requirement be satisfied, in whole or in part, by
withholding from the Award shares of Stock having a Fair Market Value on the
date of withholding equal to the minimum amount (and not any greater amount)
required to be withheld for tax purposes, all in accordance with such procedures
as the Committee establishes.
16.4. NO RIGHT TO EMPLOYMENT OR OTHER STATUS. Nothing in the Plan or any
--------------------------------------
Award Agreement shall interfere with or limit in any way the right of the
Corporation or any Parent or Subsidiary to terminate any Participant's
employment or status as a consultant or director at any time, nor confer upon
any Participant any right to continue as an employee, officer, consultant or
director of the Corporation or any Parent or Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
-------------------------
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation or any Parent or Subsidiary.
16.6. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
------------------------------
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.7. EXPENSES. The expenses of administering the Plan shall be borne by
--------
the Corporation and its Parents or Subsidiaries.
-18-
<PAGE>
16.8. TITLES AND HEADINGS. The titles and headings of the Sections in the
-------------------
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.9. GENDER AND NUMBER. Except where otherwise indicated by the context,
-----------------
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
16.10. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
-----------------
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.11. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
--------------------------------
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock issued in connection with the Plan. The shares issued in connection with
the Plan may in certain circumstances be exempt from registration under the 1933
Act, and the Corporation may restrict the transfer of such shares in such manner
as it deems advisable to ensure the availability of any such exemption.
16.12. GOVERNING LAW. To the extent not governed by federal law, the Plan
--------------
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Georgia.
16.13 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
---------------------
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
The foregoing is hereby acknowledged as being the MAPICS, Inc. Amended and
Restated 1998 Long-Term Incentive Plan, as was submitted for approval by the
stockholders on February 10, 2000.
MAPICS, INC.
By: /s/ Martin D. Avallone
---------------------------
Its: Corporate Secretary
-19-
<PAGE>
Exhibit 10.2
MAPICS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
Article 1 - Purpose
- -------------------
The MAPICS, Inc. 2000 Employee Stock Purchase Plan (hereinafter the "Plan")
is intended as an incentive to, and to encourage stock ownership by, all
eligible employees of MAPICS, Inc. (the "Company"), and its participating
subsidiaries (as defined in Article 17) so that they may share in the growth of
the Company by acquiring or increasing their proprietary interest in the
Company. The Plan is designed to encourage eligible employees to remain in the
employ of the Company. It is intended that options issued pursuant to this Plan
will constitute options issued pursuant to an "employee stock purchase plan"
within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
Article 2 - Administration of the Plan.
- --------------------------------------
The Plan may be administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee"). Any action which may be taken by
the Committee hereunder may be taken instead by the full Board of Directors and,
in such event, the word "Committee" wherever used herein shall be deemed to mean
the full Board.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it. In the event the Board
of Directors fails to appoint or refrains from appointing a Committee, the Board
of Directors shall have all power and authority to administer the Plan. In such
event, the word "Committee" wherever used herein shall be deemed to mean the
Board of Directors.
Article 3 - Eligible Employees.
- ------------------------------
All employees of the Company or any of its participating subsidiaries shall
be eligible to receive options under this Plan to purchase the Company's Common
Stock, and all eligible employees shall have the same rights and privileges
hereunder. Persons who are employed on the first day of any Payment Period (as
defined in Article 5) shall receive their options as of such day. Persons who
are employed after any date on which options are granted under this Plan shall
be granted options on the first date of the next succeeding Payment Period on
which options are granted to all eligible employees. Directors who are not
employees of the Company shall not be eligible to receive options
<PAGE>
under this Plan. In no event may an employee be granted an option if such
employee, immediately after the option is granted, owns stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of its parent corporation or subsidiary corporations,
as the terms, "parent corporation" and "subsidiary corporation" are defined in
Section 424(e) and (f) of the Code. For purposes of determining stock ownership
under this paragraph, the rules of Section 424(d) of the Code shall apply, and
stock which the employee may purchase under outstanding options shall be treated
as stock owned by the employee.
For purposes of this Article 3, the term "employee" shall not include an
employee whose customary employment is twenty (20) hours or less per week or
whose customary employment is for not more than five (5) months in any calendar
year.
Article 4 - Stock Subject to the Plan.
- -------------------------------------
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued Common Stock, par value $.01 per share, or
shares of such Common Stock reacquired by the Company, including shares
purchased in the open market. The aggregate number of shares which may be
purchased pursuant to the Plan is 500,000, subject to adjustment as provided in
Article 12. In the event any option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the unpurchased shares
subject thereto shall again be available under the Plan.
Article 5 - Payment Periods and Stock Options.
- ---------------------------------------------
The Payment Periods during which payroll deductions will be accumulated
under the Plan will be the six-month periods from January 1 through June 30 and
from July 1 through December 31 of each year, respectively. Payroll deductions
made from bonus and commission payments will be deemed accumulated under the
Plan during the Payment Period during which such payments are made. All other
payroll deductions will be deemed accumulated under the Plan during the Payment
Period during which the regular payroll period to which it relates ends.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of Five Hundred (500) shares, on
-------
condition that such employee remains eligible to participate in the Plan
throughout such Payment Period. The participant shall be entitled to exercise
such option so granted only to the extent of the participant's accumulated
payroll deductions on the last day of such Payment Period. In the event that
the participant's accumulated payroll deductions on the last day of the Payment
Period would enable the participant to purchase more than 500 shares except for
the 500-share limitation, the excess of the amount of the accumulated payroll
deductions over the aggregate purchase price of the 500 shares shall be promptly
refunded to the participant
-2-
<PAGE>
by the Company, without interest. The Option Price for each Payment Period shall
be the lesser of (i) 85% of the fair market value of the Company's Common Stock
on the first business day of the Payment Period, or (ii) 85% of the fair market
value of the Company's Common Stock on the last business day of the Payment
Period, in either event, rounded up to avoid fractions of a dollar other than
1/4, 1/2 and 3/4. The foregoing limitation on the number of shares which may be
granted in any Payment Period and the Option Price per share shall be subject to
adjustment as provided in Article 12.
For purposes of this Plan, the term "fair market value" on any date means
(i) the average (on that date) of the high and low prices of the Company's
Common Stock on the principal national securities exchange on which the Common
Stock is traded if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the average of the closing bid and asked
prices last quoted (on that date) by an established quotation service for over-
the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market. If the Company's Common Stock is not publicly traded at the
time an option is granted under this Plan, "fair market value" shall mean the
fair market value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of this Plans the term "business day" means a day on which
there is trading on the Nasdaq National Market or on the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph.
No employee shall be granted an option which permits the employee's right
to purchase common Stock under this Plan, and under all other Section 423(b)
employee stock purchase plans of the Company or any parent or subsidiary
corporations, to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time. The purpose of the
limitation in the preceding sentence is to comply with Section 423(b)(8) of the
Code.
Article 6 - Exercise of Option.
- ------------------------------
Each eligible employee who continues to be a participant in the Plan on the
last business day of a Payment Period shall be deemed to have exercised his/her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
his/her accumulated payroll deductions on such date will pay for at the Option
Price, subject to the 500-share limit of the option. If a participant is not an
employee on the last business day of a Payment Period, he/she shall not be
entitled to exercise his/her option. Only full shares of Common Stock may be
purchased under the Plan. Unused payroll deductions remaining
-3-
<PAGE>
in an employee's account at the end of a Payment Period (other than amounts
refunded to the employee pursuant to Article 5) will be carried forward to the
succeeding Payment Period.
Article 7 - Authorization for Entering the Plan.
- -----------------------------------------------
An employee may enter the Plan by filling out, signing and delivering to
the Company an authorization:
A. Stating the percentage to be deducted regularly from the employee's
pay; and
B. Authorizing the purchase of stock for the employee in each Payment
Period in accordance with the terms of the Plan.
Such authorization must be received by the Company at least ten (10) days
before the beginning date of the next succeeding Payment Period.
Unless an employee files a new authorization or withdraws from the Plan,
the deductions and purchases under the authorization the employee has on file
under the Plan will continue from one Payment Period to succeeding Payment
Periods as long as the Plan remains in effect.
The Company will accumulate and hold for the employee's account the amounts
deducted from his/her pay. No interest will be paid on these amounts.
Article 8 - Maximum Amount
- --------------------------
An employee may authorize payroll deductions in an amount (expressed as a
percentage) not less than one percent (1%) but not more than ten percent (10%)
of the employee's total compensation, including base pay or salary and any
bonuses or commissions.
Article 9 - Change in Payroll Deductions.
- ----------------------------------------
Deductions may not be increased or decreased during a Payment Period.
However, an employee may withdraw in full from the Plan.
Article 10 - Withdrawal from the Plan
- -------------------------------------
An eligible employee may withdraw from the Plan in whole but not in part,
at any time prior to the last business day of each Payment Period by delivering
a withdrawal notice to the Company, in which event the Company will promptly
refund the entire balance of the employee's deductions not previously used to
purchase stock under the Plan.
-4-
<PAGE>
To re-enter the Plan, an eligible employee who has previously withdrawn
must file a new authorization at least ten (10) days before the beginning date
of the next Payment Period. The employee's re-entry into the Plan cannot,
however, become effective before the beginning of the next Payment Period
following his/her withdrawal.
Article 11 - Issuance of Stock.
- ------------------------------
As soon as practical after each Payment Period, the Company shall in its
discretion either (a) have the Company's transfer agent deliver a certificate
for stock issued to participants, or (b) transfer the stock in book form to a
broker retained by the Company. Stock purchased under the Plan will be issued
only in the name of the employee participant.
Article 12 - Adjustments.
- ------------------------
Upon the happening of any of the following described events, an optionee's
rights under options granted under the Plan shall be adjusted as hereinafter
provided.
A. In the event shares of Common Stock of the Company shall be subdivided
or combined into a greater or smaller number of shares or if, upon a
reorganization, split-up, liquidation, recapitalization or the like of the
Company, the shares of the Company's Common Stock shall be exchanged for other
securities of the Company, each optionee shall be entitled, subject to the
conditions herein stated, to purchase such number of shares of Common Stock or
amount of other securities of the Company as were exchangeable for the number of
shares of Common Stock of the Company which such optionee would have been
entitled to purchase except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision, combination
or exchange; and
B. In the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class which shall at
the time be subject to option hereunder, each optionee upon exercising such an
option shall be entitled to receive (for the purchase price paid upon such
exercise) the shares as to which he/she is exercising his/her option and, in
addition thereto (at no additional cost), such number of shares of the class or
classes in which such stock dividend or dividends were declared or paid, and
such amount of cash in lieu of fractional shares, as is equal to the number of
shares thereof and the amount of cash in lieu of fractional shares,
respectively, which he/she would have received if he/she had been the holder of
the shares as to which he/she is exercising his/her option at all times between
the date of the granting of such option and the date of its exercise.
Upon the happening of any of the events specified in paragraph A or B
above, the class and aggregate number of shares set forth in Article 4 hereof
which are subject to options which have been or may be granted under the Plan
and the limitations set forth in the second paragraph of Article 5 shall also be
appropriately adjusted to reflect the events
-5-
<PAGE>
specified in paragraph A or B above. Notwithstanding the foregoing, any
adjustments made pursuant to paragraph A or B shall be made only to the extent
that the Committee, based on advice of counsel for the Company, determines that
such adjustments will not constitute a change requiring shareholder approval
under Section 423(b)(2) of the Code.
If the Company is to be consolidated with or acquired by another entity in
a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee shall, with respect to options then
outstanding under this Plan, either (i) make appropriate provision for the
continuation of such options by arranging for the substitution on an equitable
basis for the shares then subject to such options the consideration payable with
respect to the outstanding shares of the Company's Common Stock in connection
with the Acquisition or (ii) terminate all outstanding options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to the options (determined as of the date of the Acquisition) over the Option
Price thereof (determined with reference only to the first business day of the
applicable Payment Period).
The Committee or Board of Directors shall determine the adjustments to be
made under this Article 12, and its determination shall be conclusive.
Article 13 - No Transfer or Assignment of Employee's Rights.
- -----------------------------------------------------------
An employee's rights under the Plan are the employee's alone and may not be
transferred or assigned to, or availed of by, any other person other than by
will or the laws of descent and distribution. Any option granted under the Plan
to an employee may be exercised, during the employee's lifetime, only by the
employee.
Article 14 - Termination of Employee's Rights.
- ---------------------------------------------
An employee's rights under the Plan will terminate when he/she ceases to be
an employee because of retirement, voluntary or involuntary termination,
resignation, lay-off, discharge, death, change of status or for any other
reason, except that if an employee is on a leave of absence from work during the
last three months of any Payment Period, he/she shall be deemed to be a
participant in the Plan on the last day of that Payment Period. A withdrawal
notice will be considered as having been received from the employee on the day
his/her employment ceases, and all payroll deductions not used to purchase stock
will be refunded without interest.
If an employee's payroll deductions are interrupted by any legal process, a
withdrawal notice will be considered as having been received from the employee
on the day the interruption occurs.
-6-
<PAGE>
Article 15 - Termination and Amendments to Plan.
- -----------------------------------------------
Unless terminated sooner as provided below, the Plan shall terminate on
December 31, 2007. The Plan may be terminated at any time by the Company's
Board of Directors but such termination shall not affect options then
outstanding under the Plan. It will terminate in any case when all or
substantially all of the unissued shares of stock reserved for the purposes of
the Plan have been purchased. If at any time shares of stock reserved for the
purpose of the Plan remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available shares shall
be apportioned among participants in proportion to their options and the Plan
shall terminate. Upon such termination or any other termination of the Plan,
all payroll deductions not used to purchase stock will be refunded without
interest. The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the shareholders
of the company, no amendment may (i) increase the number of shares that may be
issued under the Plan or change the class of employees eligible to receive
options under the Plan or (ii) cause Rule 16b-3 under the Securities and
Exchange Act of 1934 to become inapplicable to the Plan.
Article 16 - Limits on Sale of Stock Purchased Under the Plan.
- -------------------------------------------------------------
The Plan is intended to provide shares of Common stock for investment and
not for resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his/her own affairs. An employee may, therefore,
sell stock purchased under the Plan at any time the employee chooses, subject to
compliance with any applicable Federal or state securities laws; provided,
however, that because of certain Federal tax requirements, each employee agrees
by entering the Plan, promptly to give the Company notice of any such stock
disposed of within two years after the date of grant of the applicable option
showing the number of such shares disposed of. THE EMPLOYEE ASSUMES THE RISK OF
ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
Article 17 - Participating Subsidiaries.
- ---------------------------------------
The term "participating subsidiary" shall mean any subsidiary of the
Company, as that term is defined in Section 424(f) of the Code, which is
designated from time to time by the Board of Directors to participate in the
Plan. The Board of Directors shall have the power to make such designation
before or after the Plan is approved by the shareholders.
Article 18 - Optionees Not Shareholders.
- ---------------------------------------
Neither the granting of an option to an employee nor the deductions from
his/her pay shall constitute such employee a shareholder of the shares covered
by an option until such shares have been actually purchased by the employee.
-7-
<PAGE>
Article 19 - Application of Funds.
- ---------------------------------
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
Article 20 - Governmental Regulations.
- -------------------------------------
The Company's obligation to sell and deliver shares of the Company's Common
Stock under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such shares,
including the Securities and Exchange Commission and the Internal Revenue
Service.
Article 21 - Approval of Shareholders; Effectiveness.
- ----------------------------------------------------
The Plan, as amended and restated, shall be subject to approval by the
holders of a majority of the shares of the Common Stock of the Company present
or represented by proxy at a duly called meeting of shareholders, which approval
must occur by December 1, 2000.
Date Plan adopted by Board of Directors: November 3, 1999
Date Plan approved by Shareholders: February 10, 2000
-8-
<PAGE>
EXHIBIT 10.3
MAPICS, INC. 1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(f/k/a Marcam Corporation 1991 Non-Employee Director Stock Option Plan,
as amended and restated as of February 10, 2000)
1. Purpose. The MAPICS, Inc. 1998 Non-Employee Director Stock Option Plan
-------
(hereinafter, the "Plan") is intended to promote the interests of MAPICS, Inc.
(the "Company") by providing an inducement to obtain and retain the services of
qualified persons who are neither employees nor officers of the Company to serve
as members of its Board of Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par
----------------
value $.01 per share, of the Company (the "Common Stock"), for which options may
be granted under the Plan shall not exceed 310,000 shares, subject to adjustment
in accordance with Section 10 of the Plan. Shares subject to the Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are
surrendered before exercise or lapse without exercise, in whole or in part, the
shares reserved therefor shall continue to be available under the Plan.
3. Administration. This Plan shall be administered by the Compensation
--------------
Committee of the Board of Directors of the Company (the "Committee"). Any
action which may be taken by the Committee hereunder may be taken instead by the
full Board of Directors and in such event, the word "Committee" wherever used
herein shall be deemed to mean the Board. The Committee shall, subject to the
provisions of the Plan, have the power to construe the Plan, to determine all
questions hereunder, and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. No member of the Board or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
4. Automatic Grant of Options. Subject to the availability of shares
--------------------------
under the Plan, (a) as of the date that a person either (i) is first elected to
the board and is neither an employee nor an officer of the Company at such time,
or (ii) while continuing to serve on the Board, ceases to serve as an employee
or officer of the Company, such person shall be automatically granted on such
date, without further action by the Board, an option to purchase twenty thousand
(20,000) shares of the Common Stock, and (b) each person who is a member of the
Board on January 1 of each year, commencing with January 1, 1996 and ending with
January 1, 2000, and who is neither an employee nor an officer of the Company on
such date shall be automatically granted on each such date, without further
action of the Board, an option to purchase three thousand (3,000) shares of the
Common Stock, and (c) each person who is a member of the Board on January 1 of
each year thereafter, commencing with January 1, 2001, and who is neither an
employee nor an officer of the Company on such date shall be automatically
granted on each such date, without further action of the Board, an option to
purchase five thousand (5,000) shares of the Common Stock; provided, however,
--------
that no such option shall be granted under clause (a), (b) or (c) of this
sentence if prohibited pursuant to the terms of any agreement,
<PAGE>
whether existing at the time of grant or thereafter, between the Company and any
member of the Board of Directors or any affiliate of such member. The options to
be granted under this Section 4 shall be the only options ever to be granted at
any time to such member under the Plan.
If on any grant date, shares of Common Stock are not available under the
Plan to grant to non-employee directors the full amount of a grant contemplated
by the immediately preceding paragraph, then each such director shall receive an
award (a "Reduced Grant") equal to the number of shares of Common Stock then
available under the Plan divided by the number of non-employee directors as of
the applicable grant date. Fractional shares shall be ignored and not granted.
If a Reduced Grant has been made and, thereafter, during the term of the Plan,
additional shares of Common Stock become available for grant (e.g., because of
the forfeiture or lapse of an option), then each person who was a non-employee
director both on the date on which the Reduced Grant was made and on the date
additional shares of Common Stock become available (a "Continuing Non-Employee
Director") shall receive an additional option to purchase shares of Common
Stock. The number of newly available shares shall be divided equally among the
options granted to the Continuing Non-Employee Directors; provided, however,
that the aggregate number of shares of Common Stock subject to a Continuing
Outside Director's additional option plus any prior Reduced Grant to the
Continuing non-Employee Director on the applicable grant date shall not exceed
the number of shares to which he or she is otherwise entitled under the
preceding paragraph. If more than one Reduced Grant has been made, available
options shall be granted beginning with the earliest such grant date.
Anything in the Plan to the contrary notwithstanding, the effectiveness of
this amended and restated Plan and of the grant of all options hereunder is in
all respects subject to, and the Plan and options granted under it after April
29, 2001 shall be of no force and effect unless and until, the approval of this
amended and restated Plan by the affirmative vote of the holders of a majority
of the shares of the Common Stock present in person or by proxy and entitled to
vote at a meeting of stockholders at which this amended and restated Plan is
presented for approval. Except for the specific options referred to above, no
other options shall be granted under the Plan.
5. Option Price. The purchase price of the stock covered by an option
------------
granted pursuant to the Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of Section 10 of the Plan. For
purposes of the Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (1) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the
-2-
<PAGE>
Common Stock is not then traded on a national securities exchange; or (iii) the
closing bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common
Stock is not traded on the Nasdaq National Market.
6. Period of Option. Unless sooner terminated in accordance with the
----------------
provisions of Section 8 of the Plan, an option granted hereunder shall expire on
the date which is ten (10) years after the date of grant of the option.
7. Vesting of Shares and Transferability of Options.
------------------------------------------------
(a) Vesting. Options granted under the Plan shall not become exercisable
until they become vested. Options granted under clause (a) of the first
sentence of paragraph 4 of the Plan shall vest in the optionee and thus become
exercisable, in accordance with the following schedule provided that the
optionee has continuously served as a member of the Board through such vesting
date:
Cumulative Number
of Shares for which
Option Will be Exercisable Date of Vesting
- -------------------------- ---------------
5,000 shares One year after date of grant
10,000 shares Two years after date of grant
15,000 shares Three years after date of grant
20,000 shares Four years after date of grant
Options granted under clause (b) of the first sentence of Section 4 of the
Plan shall vest in the optionee and thus become exercisable, in accordance with
the following schedule provided that the optionee has continuously served as a
member of the Board through such vesting date:
Cumulative Number
of Shares for which
Option Will be Exercisable Date of Vesting
- -------------------------- ---------------
750 shares One year after date of grant
1,500 shares Two years after date of grant
2,250 shares Three years after date of grant
3,000 shares Four years after date of grant
Options granted under clause (c) of the first sentence of Section 4 of the
Plan shall vest in the optionee and thus become exercisable, one year after the
date of grant,
-3-
<PAGE>
provided that the optionee has continuously served as a member of the Board
through such vesting date.
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in the Plan.
(b) In the event of a Change in Control (as hereinafter defined) of the
Company, the date on which all outstanding options and all installments of such
options may be exercised shall be accelerated to immediately prior to the time
of the Change in Control.
(c) For purposes of the Plan and any options granted hereunder, a "Change
in Control" means and includes each of the following:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of 25% or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition by a Person who is on January 1, 1998 the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (2) any acquisition directly from the Company, (3) any
acquisition by the Company, (4) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (5) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1),
(2) and (3) of subsection (iii) of this definition; or
(ii) Individuals who, as of January 1, 1998, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to January 1, 1998 whose election, or nomination
for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
-4-
<PAGE>
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (1) all or substantially all of
the individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of
the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Voting
Securities, and (2) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 25%
or more of the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (3) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(d) Legend on Certificates. The certificates representing such shares shall
----------------------
carry such appropriate legend, and such written instructions shall be given to
the Company's transfer agent, as may be deemed necessary or advisable by counsel
to the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
(e) Transferability. Any option granted pursuant to the Plan shall be
transferable by the optionee to any of the following permitted transferees, upon
such reasonable terms and conditions as the Committee may establish: (i) one or
more of the following family members of the optionee: spouse, former spouse,
child (whether natural or adopted), stepchild, any other lineal descendent of
the optionee; (ii) a trust, partnership or other entity established and existing
for the sole benefit of, or under the sole control of, one or more of the above
family members of the optionee, or (iii) any other transferee specifically
approved by the Committee after taking into account any state or federal tax,
securities or other laws applicable to transferable options.
-5-
<PAGE>
8. Termination of Option Rights.
(a) In the event an optionee ceases to be a member of the Board for
any reason other than death, permanent disability or voluntary resignation from
the Board after age 55 ("Retirement"), any then unexercised portion of options
granted to such optionee shall, to the extent not then vested, immediately
terminate and become void; any portion of an option which is then vested but has
not been exercised at the time the optionee so ceases to be a member of the
Board may be exercised, to the extent it is then vested, by the optionee within
90 days of the date the optionee ceased to be a member of the Board; and all
options shall terminate after such 90 days have expired.
(b) In the event an optionee ceases to be a member of the Board by
reason of Retirement, all vested installments of such optionee's options shall
terminate on their respective expiration dates pursuant to Section 6 of the
Plan. All installments of such optionee's options not vested as of the
effective date of the optionee's retirement shall continue to vest in accordance
with Section 7 and thereafter shall terminate on their respective expiration
dates in accordance with Section 6.
(c) In the event that an optionee ceases to be a member of the Board
by reason of his or her death or permanent disability, any option granted to
such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option.
(d) For purposes of this Section 8, from and after the Distribution
Date (as defined in that certain Distribution Agreement, by and between the
Company and Marcam Solutions, Inc., dated as of July 17, 1997), the service by
the holder of an option that was outstanding on the Distribution Date as a
director of any of the Company, Marcam Solutions, Inc. or their respective
subsidiaries or successors shall be treated as the service by such holder as a
member of the Board of Directors of the Company.
9. Exercise of Option. Subject to the terms and conditions of the
------------------
Plan and the option agreements, an option granted hereunder shall, to the extent
then exercisable, be exercisable in whole or in part by giving written notice to
the Company by mail or in person addressed to Martin D. Avallone, General
Counsel, MAPICS, Inc., at its principal executive offices, stating the number of
shares with respect to which the option is being exercised; provided, however,
--------
that there shall be no such exercise at any one time as to fewer than one
hundred (100) shares or all of the remaining shares then purchasable by the
person or persons exercising the option, if fewer than one hundred (100) shares.
The exercise price shall be payable in United States dollars upon the exercise
of the option and may be paid in cash, by check, or in shares of Common Stock
having a total fair market value on the date of exercise equal to the exercise
price; provided that if the shares surrendered in payment of the exercise price
were themselves acquired pursuant to the exercise of a stock option, such shares
shall have been held by the optionee for at least six months. The Committee may
permit optionees to use any cashless exercise methods that
-6-
<PAGE>
are permitted by law. The Company's transfer agent shall, on behalf of the
Company, prepare a certificate or certificates representing such shares acquired
pursuant to exercise of the option, shall register the optionee (or the
permitted transferee exercising such option) as the owner of such shares on the
books of the Company and shall cause the fully executed certificate(s)
representing such shares to be delivered to the optionee (or the permitted
transferee exercising such option) as soon as practicable after payment of the
option price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Matters.
------------------------------------------------------------
Upon the occurrence of any of the following events, an optionee's rights with
respect to options granted to him or her hereunder shall be adjusted as
hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
--------------------------------
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) Consolidations or Mergers. In the event of a Change in Control of
-------------------------
the Company, each option granted under the Plan which is outstanding but
unvested as of the effective date of the Change in Control shall become
exercisable pursuant to Section 7(b) hereof. In addition, the Committee shall
make appropriate provision in order to preserve but not exceed the value of
outstanding options, for the continuation of all outstanding options by
substituting on an equitable basis for the shares then subject to such options
the consideration payable with respect to the outstanding shares of Common Stock
in connection with the Change in Control.
(c) Recapitalization or Reorganization. If the Company is merged,
----------------------------------
consolidated or reorganized into or with another corporation or other legal
person, or if the Company sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person, pursuant to which
securities of the Company or of another corporation, cash or other property are
issued with respect to the outstanding shares of Common Stock, and such
transaction does not constitute a Change in Control, a holder of an option upon
exercising an option shall be entitled to receive for the purchase price paid
upon such exercise the securities, cash or other property he would have received
if he had exercised his option prior to such merger, consolidation,
reorganization or sale.
(d) Issuances of Securities. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of
-7-
<PAGE>
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares subject to options. No
adjustments shall be made for dividends paid in cash or in property other than
securities of the Company.
(e) Adjustments. Upon the happening of any of the foregoing events,
-----------
the class and aggregate number of shares set forth in Sections 2, 4 and 7 of the
Plan that are subject to options which previously have been or subsequently may
be granted under the Plan shall also be appropriately adjusted to reflect such
events. The Board shall determine the specific adjustments to be made under
this Section 10 and its determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the
----------------------------------
provisions of Sections 4 and 9 of the Plan, the Company shall have no obligation
to deliver any certificate or certificates upon exercise of an option until one
of the following conditions shall be satisfied: (i) the shares with respect to
which the option has been exercised are at the time of the issue of such shares
effectively registered under applicable Federal and state securities laws as now
in force or hereafter amended, or (ii) counsel for the Company shall have given
an opinion that such shares are exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the Company has
compiled with all applicable laws and regulations with respect thereto,
including without limitation all regulations required by any stock exchange upon
which the Company's outstanding Common Stock is then listed.
12. Representation of Optionee. If requested by the Company, the
--------------------------
optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with Federal
and state securities laws, including to the effect that a purchase of shares
under the option is made for investment and not with a view to their
distribution (as that term is used in the Securities Act of 1933, as amended,
and the regulations thereunder).
13. Option Agreement. Each option granted under the provisions of
----------------
the Plan shall be evidenced by a written agreement, contract, or other
instrument or document evidencing the option ("Option Agreement") in such form
as may be approved by the Board, which Option Agreement shall be duly executed
and delivered on behalf of the Company. The Option Agreement shall contain such
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board.
14. Termination and Amendment of Plan. Options may no longer be
---------------------------------
granted under the Plan after March 30, 2007, and the Plan shall terminate when
all options granted or to be granted hereunder are no longer outstanding. The
Board may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
--------
without approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and entitled to vote at the
meeting, (a) increase the maximum number of shares for which options may be
granted under the Plan or the number of shares for
-8-
<PAGE>
which an option may be granted to any participating director hereunder, (b)
change the provisions of the Plan regarding the termination of the options or
the times when they may be exercised, (c) change the period during which any
options may be granted or remain outstanding or the date on which the Plan shall
terminate, or (d) change the designation of the class of persons eligible to
receive options, or otherwise change Section 4. Termination or any modification
or amendment of the Plan shall not, without consent of a participant, affect his
or her rights under an option previously granted to him or her.
15. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing options shall be governed by the laws of the State of
Georgia, without giving effect to the principles of conflicts of law thereof.
Date Approved by Board of Directors: April 30, 1991
Date Approved by Stockholders: February 13, 1992
Dates Amended by Board of Directors: November 6, 1991
November 14, 1995
September 18, 1996
November 13, 1997
November 3, 1999
Dates Amendments Approved by Stockholders: February 13, 1996
February 12, 1997
February 3, 1998
February 10, 2000
-9-
<PAGE>
EXHIBIT 10.4
- --------------------------------------------------------------------------------
REVOLVING CREDIT
----------------
AND
---
TERM LOAN AGREEMENT
-------------------
Dated as of January 12, 2000
among
MAPICS, INC.
BANKBOSTON, N.A.
and the other lending institutions
set forth on Schedule 1 hereto
----------
and
BANKBOSTON, N.A. as Agent
FLEETBOSTON ROBERTSON STEPHENS INC.,
as Arranger
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION............................................. 1
1.1. Definitions.................................................................. 1
1.2. Rules of Interpretation...................................................... 22
2. THE REVOLVING CREDIT FACILITY....................................................... 23
2.1. Commitment to Lend........................................................... 23
2.2. Commitment Fee............................................................... 23
2.3. Reduction of Total Commitment................................................ 24
2.4. The Revolving Credit Notes................................................... 24
2.5. Interest on Revolving Credit Loans........................................... 24
2.6. Requests for Revolving Credit Loans.......................................... 25
2.7. Conversion Options........................................................... 25
2.7.1. Conversion to Different Type of Revolving Credit Loan................. 25
2.7.2. Continuation of Type of Revolving Credit Loan......................... 26
2.7.3. Eurodollar Rate Loans................................................. 26
2.8. Funds for Revolving Credit Loan.............................................. 26
2.8.1. Funding Procedures.................................................... 26
2.8.2. Advances by Agent..................................................... 27
2.9. Change in Borrowing Base..................................................... 27
3. REPAYMENT OF THE REVOLVING CREDIT LOANS............................................. 27
3.1. Maturity..................................................................... 27
3.2. Mandatory Repayments of Revolving Credit Loans............................... 28
3.3. Optional Repayments of Revolving Credit Loans................................ 28
4. THE TERM LOAN....................................................................... 28
4.1. Commitment to Lend........................................................... 28
4.2. The Term Notes............................................................... 29
4.3. Repayments of the Term Loan.................................................. 29
4.3.1. Schedule of Installment Payments of Principal of Term Loan............ 29
4.3.2. Proceeds.............................................................. 30
4.3.3. Annual Excess Cash Flow Recapture..................................... 30
4.4. Optional Prepayment of Term Loan............................................. 30
4.5. Interest on Term Loan........................................................ 31
4.5.1. Interest Rates........................................................ 31
4.5.2. Notification by Borrower.............................................. 31
4.5.3. Amounts, etc.......................................................... 31
5. LETTERS OF CREDIT................................................................... 32
5.1. Letter of Credit Commitments................................................. 32
5.1.1. Commitment to Issue Letters of Credit................................. 32
5.1.2. Letter of Credit Applications......................................... 32
5.1.3. Terms of Letters of Credit............................................ 32
5.1.4. Reimbursement Obligations of Banks.................................... 33
5.1.5. Participations of Banks............................................... 33
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
5.2. Reimbursement Obligation of the Borrower....................................... 33
5.3. Letter of Credit Payments...................................................... 34
5.4. Obligations Absolute........................................................... 34
5.5. Reliance by Issuer............................................................. 35
5.6. Letter of Credit Fee........................................................... 35
6. CERTAIN GENERAL PROVISIONS............................................................. 36
6.1. Closing Fee and Funding Fee.................................................... 36
6.2. Agent's Fee.................................................................... 36
6.3. Funds for Payments............................................................. 36
6.3.1. Payments to Agent....................................................... 36
6.3.2. No Offset, etc.......................................................... 36
6.4. Computations................................................................... 37
6.5. Inability to Determine Eurodollar Rate......................................... 37
6.6. Illegality..................................................................... 37
6.7. Additional Costs, etc.......................................................... 38
6.8. Capital Adequacy............................................................... 39
6.9. Certificate.................................................................... 39
6.10. Indemnity...................................................................... 39
6.11. Interest After Default......................................................... 40
6.11.1. Overdue Amounts........................................................ 40
6.11.2. Amounts Not Overdue.................................................... 40
7. COLLATERAL SECURITY AND GUARANTIES..................................................... 40
7.1. Security of Borrower........................................................... 40
7.2. Guaranties and Security of Guarantors.......................................... 40
8. REPRESENTATIONS AND WARRANTIES......................................................... 41
8.1. Corporate Authority............................................................ 41
8.1.1. Incorporation; Good Standing............................................ 41
8.1.2. Authorization........................................................... 41
8.1.3. Enforceability.......................................................... 41
8.2. Governmental Approvals......................................................... 42
8.3. Title to Properties; Leases.................................................... 42
8.4. Financial Statements and Projections........................................... 42
8.4.1. Fiscal Year............................................................. 42
8.4.2. Financial Statements.................................................... 42
8.4.3. Projections............................................................. 42
8.4.4. Solvency................................................................ 43
8.5. No Material Changes, etc....................................................... 43
8.6. Franchises, Patents, Copyrights, etc........................................... 43
8.7. Litigation..................................................................... 43
8.8. No Materially Adverse Contracts, etc........................................... 44
8.9. Compliance with Other Instruments, Laws, etc................................... 44
8.10. Tax Status..................................................................... 44
8.11. No Event of Default............................................................ 44
8.12. Holding Company and Investment Company Acts.................................... 44
8.13. Absence of Financing Statements, etc........................................... 44
8.14. Perfection of Security Interest................................................ 45
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C>
8.15. Certain Transactions.......................................................... 45
8.16. Employee Benefit Plans........................................................ 45
8.16.1. In General............................................................ 45
8.16.2. Terminability of Welfare Plans........................................ 45
8.16.3. Guaranteed Pension Plans.............................................. 45
8.16.4. Multiemployer Plans................................................... 46
8.17. Use of Proceeds............................................................... 46
8.17.1. General............................................................... 46
8.17.2. Regulations U and X................................................... 46
8.17.3. Ineligible Securities................................................. 46
8.18. Environmental Compliance...................................................... 47
8.19. Subsidiaries, etc............................................................. 48
8.20. Bank Accounts................................................................. 48
8.21. Capitalization and Transaction Documents...................................... 48
8.22. Chief Executive Office........................................................ 49
8.23. Disclosure.................................................................... 49
9. AFFIRMATIVE COVENANTS OF THE BORROWER................................................. 49
9.1. Punctual Payment.............................................................. 49
9.2. Maintenance of Office......................................................... 49
9.3. Records and Accounts.......................................................... 49
9.4. Financial Statements, Certificates and Information............................ 50
9.5. Notices....................................................................... 51
9.5.1. Defaults............................................................... 51
9.5.2. Environmental Events................................................... 52
9.5.3. Notification of Claim against Collateral............................... 52
9.5.4. Notice of Litigation and Judgments..................................... 52
9.6 Corporporate Existence; Maintenance of Properties............................. 52
9.7 Insurance..................................................................... 53
9.8 Taxes......................................................................... 53
9.9 Inspection of Properties and Books, etc....................................... 53
9.9.1. General................................................................ 53
9.9.2. Collateral Reports..................................................... 53
9.9.3. Environmental Assessments.............................................. 54
9.9.4. Communications with Accountants........................................ 54
9.10. Compliance with Laws, Contracts, Licenses, and Permits........................ 55
9.11. Employee Benefit Plans........................................................ 55
9.12. Use of Proceeds............................................................... 55
9.13. New Guarantors................................................................ 55
9.14. Copyright Registration........................................................ 55
9.15. Interest Rate Protection...................................................... 56
9.16. Cash Management............................................................... 56
9.17. Additional Subsidiaries....................................................... 56
9.18. Further Assurances............................................................ 56
10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER........................................... 56
10.1. Restrictions on Indebtedness.................................................. 56
10.2. Restrictions on Liens......................................................... 58
</TABLE>
<PAGE>
-iv-
<TABLE>
<S> <C>
10.3. Restrictions on Investments................................................. 59
10.4. Restricted Payments......................................................... 61
10.5. Merger, Consolidation and Disposition of Assets............................. 62
10.5.1. Mergers and Acquisitions............................................ 62
10.5.2. Disposition of Assets............................................... 62
10.6. Sale and Leaseback.......................................................... 62
10.7. Compliance with Environmental Laws.......................................... 62
10.8. Subordinated Debt........................................................... 63
10.9. Employee Benefit Plans...................................................... 63
10.10. Business Activities........................................................ 63
10.11. Fiscal Year................................................................ 63
10.12. Transactions with Affiliates............................................... 63
10.13. Upstream Limitations....................................................... 64
10.14. Inconsistent Agreements.................................................... 64
10.15. Modification of Documents and Charter Documents............................ 64
11. FINANCIAL COVENANTS OF THE BORROWER................................................ 64
11.1. Leverage Ratio.............................................................. 64
11.2. Consolidated Operating Cash Flow to Debt Service............................ 65
11.3. Profitable Operations....................................................... 65
11.4. Quick Ratio................................................................. 65
11.5. Operating Leases............................................................ 65
12. CLOSING CONDITIONS.................................................................. 66
12.1. Loan Documents etc.......................................................... 66
12.1.1. Loan Documents...................................................... 66
12.1.2. Transaction Documents............................................... 66
12.2. Certified Copies of Charter Documents....................................... 66
12.3. Corporate Action............................................................ 66
12.4. Incumbency Certificate...................................................... 66
12.5. Validity of Liens........................................................... 67
12.6. Perfection Certificates and UCC Search Results.............................. 67
12.7. Certificates of Insurance................................................... 67
12.8. Opinion of Counsel.......................................................... 67
12.9. Satisfaction of Conditions of Merger Agreement.............................. 67
12.10. Completion of Transaction, etc.............................................. 67
12.11. Completion of Successful Financial Inquiry.................................. 68
12.12. Consents and Approvals...................................................... 68
12.13. Capital Structure........................................................... 68
12.14. Payment of Fees............................................................. 68
12.15. Payoff of Existing Obligations.............................................. 68
12.16. Disbursement Instructions................................................... 68
13. CONDITIONS TO ALL BORROWINGS........................................................ 68
13.1. Representations True; No Event of Default................................... 68
13.2. No Legal Impediment......................................................... 69
13.3. Governmental Regulation..................................................... 69
13.4. Proceedings and Documents................................................... 69
13.5. Borrowing Base Report....................................................... 69
</TABLE>
<PAGE>
-v-
<TABLE>
<S> <C>
14. EVENTS OF DEFAULT; ACCELERATION; ETC.......................................... 69
14.1. Events of Default and Acceleration.................................... 69
14.2. Termination of Commitments............................................ 73
14.3. Remedies.............................................................. 73
14.4. Distribution of Collateral Proceeds................................... 74
15. SETOFF........................................................................ 75
16. THE AGENT..................................................................... 75
16.1. Authorization......................................................... 75
16.2. Employees and Agents.................................................. 76
16.3. No Liability.......................................................... 76
16.4. No Representations.................................................... 76
16.4.1. General....................................................... 76
16.4.2. Closing Documentation, etc.................................... 77
16.5. Payments.............................................................. 77
16.5.1. Payments to Agent............................................. 77
16.5.2. Distribution by Agent......................................... 77
16.5.3. Delinquent Banks.............................................. 78
16.6. Holders of Notes...................................................... 78
16.7. Indemnity............................................................. 79
16.8. Agent as Bank......................................................... 79
16.9. Resignation........................................................... 79
16.10. Notification of Defaults and Events of Default........................ 79
16.11. Duties in the Case of Enforcement..................................... 79
17. EXPENSES AND INDEMNIFICATION.................................................. 80
17.1. Expenses.............................................................. 80
17.2. Indemnification....................................................... 81
17.3. Survival.............................................................. 81
18. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION................................. 81
18.1. Sharing of Information with Section 20 Subsidiary..................... 81
18.2. Confidentiality....................................................... 82
18.3. Prior Notification.................................................... 82
18.4. Other................................................................. 82
19. SURVIVAL OF COVENANTS, ETC.................................................... 82
20. ASSIGNMENT, ACCESSION AND PARTICIPATION....................................... 83
20.1. Condition to Assignment and Accession................................. 83
20.1.1. Conditions to Assignment by Banks............................. 83
20.1.2. Accession..................................................... 83
20.2. Certain Representations and Warranties; Limitations; Covenants........ 84
20.3. Register.............................................................. 85
20.4. New Notes............................................................. 85
20.5. Participations........................................................ 86
20.6. Disclosure............................................................ 86
20.7. Assignee or Participant Affiliated with the Borrower.................. 86
20.8. Miscellaneous Assignment Provisions................................... 87
20.9. Assignment by Borrower................................................ 87
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
21. NOTICES, ETC................................................................... 87
22. GOVERNING LAW.................................................................. 88
23. HEADINGS....................................................................... 89
24. COUNTERPARTS................................................................... 89
25. ENTIRE AGREEMENT, ETC.......................................................... 89
26. WAIVER OF JURY TRIAL........................................................... 89
27. CONSENTS, AMENDMENTS, WAIVERS, ETC............................................. 89
28. SEVERABILITY................................................................... 91
</TABLE>
<PAGE>
SCHEDULES
---------
Schedule 1 Banks; Commitments
Schedule 8.7 Litigation
Schedule 8.10 Taxes
Schedule 8.18 Environmental Compliance
Schedule 8.19(a) Subsidiaries
Schedule 8.19(b) Joint Ventures
Schedule 10.1 Existing Indebtedness
Schedule 10.2 Existing Liens
Schedule 10.3 Existing Investments
EXHIBITS
--------
Exhibit A Form of Borrowing Base Report
---------
Exhibit B Form of Revolving Credit Note
---------
Exhibit C Form of Loan Request
---------
Exhibit D Form of Term Note
---------
Exhibit E Form of Compliance Certificate
---------
Exhibit F Form of Assignment and Acceptance
---------
Exhibit G Form of Instrument of Accession
---------
Exhibit H Form of Consolidating Reports
---------
<PAGE>
REVOLVING CREDIT
----------------
AND
---
TERM LOAN AGREEMENT
-------------------
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of January 12,
2000, by and among MAPICS, INC. (the "Borrower"), a Georgia corporation having
its principal place of business at 1000 Windward Concourse Parkway, Suite 100,
Alpharetta, Georgia 30005, BANKBOSTON, N.A. and the other lending institutions
listed on Schedule 1 hereto, and BANKBOSTON, N.A. as agent for itself and such
-------- -
other lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. Definitions. The following terms shall have the meanings set forth in
-----------
this (S)1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Accounts Receivable. All rights of the Borrower or any of the Guarantors
-------------------
to payment for goods sold, leased, licensed or otherwise marketed in the
ordinary course of business or services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, except for that portion of the sum of money
or other proceeds due thereon that relate to sales, use or property taxes in
conjunction with such transactions, recorded on books of account in accordance
with generally accepted accounting principles.
Adjusted EBITDA. With respect to any fiscal period, an amount equal to the
----------------
sum of (a) Consolidated Net Income (or Loss) of the Borrower and its
Subsidiaries for such fiscal period, plus (b) in each case to the extent
----
deducted in the calculation of such Person's Consolidated Net Income (or Loss)
and without duplication (i) amortization and depreciation for such period, plus
----
(ii) tax expense for such period, plus (iii) Consolidated Total Interest Expense
----
paid or accrued during such period, plus (iv) noncash losses (or minus noncash
---- -----
gains) on any Asset Sale outside the ordinary course of business for such
period, plus (v) the noncash effect of accounting changes for such period, plus
---- ----
(vi) noncash losses (or minus noncash gains) arising from any non-cash one time
-----
write-up or write-down in the book value of any assets for such period, but only
to the extent such a write-up or write-down in the book value of such asset
would otherwise have been treated as amortization and/or depreciation of such
asset on the profit and loss statement of the Borrower, all as determined in
accordance with generally accepted accounting principles, minus (c) the portion
-----
of the costs of software development required to be capitalized pursuant to FASB
Statement No. 86 for such period, plus (d) non-recurring non-cash charges
----
associated with the Transaction for such period in an amount not to exceed
$10,000,000 in the aggregate, plus (e) non-recurring cash
----
<PAGE>
-2-
charges associated with the Transaction for such period in an amount not to
exceed $4,000,000 in the aggregate.
Adjustment Date. The first day of the month immediately following the
---------------
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to (S)9.4(d).
Affiliate. Any Person that would be considered to be an affiliate of the
---------
Borrower or any Subsidiary under Rule 144(a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof, if the
Borrower or such Subsidiary were issuing securities.
Agent's Head Office. The Agent's head office located at 100 Federal
-------------------
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Banks.
-----
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may be
-----------------------
approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date
-----------------
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for the
fiscal period ending on the fiscal quarter ended immediately preceding the
applicable Rate Adjustment Period.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Base Rate LIBOR Commitment
Tier Leverage Ratio Loans Rate Fee
Loans
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Greater than or equal to 1.75% 3.00% 0.50%
1.75:1.00
---------------------------------------------------------------------------
2 Greater than or equal to 1.50% 2.75% 0.50%
1.25:1.00 but less than
1.75:1.00
---------------------------------------------------------------------------
3 Less than 1.25:1.00 1.25% 2.50% 0.375%
---------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, (a) for Loans outstanding and the Commitment
Fee payable during the period commencing on the Closing Date through the date
immediately preceding the first Adjustment Date to occur after June 30, 2000,
the Applicable Margin shall be the Applicable Margin set forth in Tier 1 above;
provided, however that if at the time of the delivery of the Compliance
- -------- -------
Certificate for the fiscal quarter ending June 30, 2000 such Compliance
Certificate evidences that the Borrower is entitled to a lower pricing level
than Tier 1, then
<PAGE>
-3-
such decrease in the pricing shall be retroactive to July 1, 2000, and (b) if
the Borrower fails to deliver any Compliance Certificate pursuant to (S)9.4(d)
hereof then, for the period commencing on the Adjustment Date to occur
subsequent to such failure through the date immediately following the date on
which such Compliance Certificate is delivered, the Applicable Margin shall be
the highest Applicable Margin set forth above.
Asset Sale. Any one or series of related transactions on which any Person
----------
conveys, sells, transfers or otherwise disposes of, directly or indirectly, any
of its properties, businesses or assets (including the sale or issuance of
capital stock of any Subsidiary other than to the Borrower or any Subsidiary)
whether owned on the Closing Date or thereafter acquired.
Assignment and Acceptance. See (S)20.1.1.
-------------------------
Assumption Agreement. That certain Assumption Agreement, dated on the date
--------------------
Pivotpoint becomes a Subsidiary of the Borrower between Pivotpoint and the Agent
and in form and substance satisfactory to the Agent and the Banks.
Balance Sheet Date. September 30, 1999.
------------------
Banks. BKB and the other lending institutions listed on Schedule 1 hereto
----- -------- -
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to (S)20.
Base Rate. The higher of (a) the annual rate of interest announced from
---------
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" or "prime rate" and (b) one-half of one percent (1/2%) above the Federal
Funds Effective Rate. For the purposes of this definition, "Federal Funds
Effective Rate" shall mean for any day, the rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three funds brokers of
recognized standing selected by the Agent.
Base Rate Loans. All or any portion of the Revolving Credit Loans and the
---------------
Term Loan bearing interest calculated by reference to the Base Rate.
BKB. BankBoston, N.A. a national banking association, in its individual
---
capacity.
Borrower. As defined in the preamble hereto.
--------
Borrowing Base. At the relevant time of reference thereto, an amount
--------------
determined by the Agent by reference to the most recent Borrowing Base Report
<PAGE>
-4-
delivered to the Banks and the Agent pursuant to (S)9.4(f), as adjusted pursuant
to the provisions below, which is equal to eighty percent (80%) of Eligible
Accounts Receivable for which invoices have been issued and are payable.
The Agent may, in accordance with its standard commercial practices, from time
to time, upon five (5) days' prior notice to the Borrower, reduce the lending
formula with respect to Eligible Accounts Receivable to the extent that the
Agent determines that: (a) the dilution with respect of the Accounts Receivable
for any period has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (b)
the general creditworthiness of account debtors or other obligors of the
Borrower has declined in any material respect. In determining whether to reduce
the lending formula, the Agent may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts Receivable.
Borrowing Base Report. A Borrowing Base Report signed by the chief
---------------------
financial officer of the Borrower and in substantially the form of Exhibit A
------- -
hereto or in such other form as is agreed to by the Agent and the Borrower.
Business Day. Any day other than a Saturday or Sunday on which banking
------------
institutions in Boston, Massachusetts, are open for the transaction of
commercial banking business and, in the case of Eurodollar Rate Loans, also a
day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
--------------------
Borrower or any of its Subsidiaries in connection with (a) the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles or (b) the lease of any
assets by the Borrower or any of its Subsidiaries as lessee under any Synthetic
Lease referred to in clause (f) of the definition of the term "Indebtedness" to
the extent that such assets would have been Capital Assets had the Synthetic
Lease been treated for accounting purposes as a Capitalized Lease.
Capitalization Documents. Collectively, the formation documents (including
------------------------
without limitation any certificate of incorporation and by-laws) of the Borrower
and its Subsidiaries.
Capitalized Leases. Leases under which the Borrower or any of its
------------------
Subsidiaries is the lessee or obligor, the discounted future rental payment
<PAGE>
-5-
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
Cash Equivalents. As to the Borrower and its Subsidiaries, (a) securities
----------------
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six (6) months from the date of acquisition; (b) certificates of
deposit and eurodollar time deposits with maturities of six (6) months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six (6) months and overnight bank deposits, in each case (i) with any Bank, or
(ii) with any domestic commercial bank having capital and surplus in excess of
$300,000,000; (c) repurchase obligations with a term of not more than seven (7)
days for underlying securities of the types described in clauses (a) and (b)
entered into with any financial institution meeting the qualifications specified
in clause (b) above, (d) any commercial paper issued by any Bank, the parent
corporation of any Bank or any Subsidiary of such Bank's parent corporation and
which matures within six (6) months after the date of acquisition thereof, and
(e) any commercial paper or other security which constitutes an Investment
permitted under (S)10.3(c) and which matures within six (6) months after the
date of acquisition thereof.
CERCLA. See (S)8.18(a).
------
Closing Date. The first date on which the conditions set forth in (S)12
------------
have been satisfied and any Revolving Credit Loans and the Term Loan are to be
made or any Letter of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Borrower and
----------
its Subsidiaries that are or are intended to be subject to the security
interests created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
---------- -------- -
hereto as the amount of such Bank's commitment to make Revolving Credit Loans
to, and to participate in the issuance, extension and renewal of Letters of
Credit for the account of, the Borrower, as the same may be modified pursuant to
(S)20.1.2 hereof, and as the same may be reduced from time to time; or if such
commitment is terminated pursuant to the provisions hereof, zero.
Commitment Fee. See (S)2.2.
--------------
Commitment Percentage. With respect to each Bank, the percentage set forth
---------------------
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
-------- -
all of the Banks, and with respect to the Term Loan, the percentage amount set
forth on Schedule 1 of such Bank's commitment to make the Term Loan.
----------
Compliance Certificate. A certificate delivered pursuant to (S)9.4(d).
----------------------
<PAGE>
-6-
Consolidated or consolidated. With reference to any term defined herein,
----------------------------
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Current Liabilities. All liabilities and other Indebtedness
--------------------------------
of the Borrower and its Subsidiaries, excluding deferred revenue, on a
consolidated basis maturing on demand or within one (1) year from the date as of
which Consolidated Current Liabilities are to be determined, including the
principal amount of Revolving Credit Loans outstanding on any date of
determination; and such other liabilities as may properly be classified as
current liabilities in accordance with generally accepted accounting principles.
Consolidated Excess Cash Flow. With respect to the Borrower and its
-----------------------------
Subsidiaries and any particular fiscal period, an amount equal to (a)
Consolidated Operating Excess Cash Flow for such period less (b) the sum of (i)
----
Consolidated Total Interest Expense for such period, plus (ii) any mandatory
----
repayments (whether scheduled or otherwise) of principal and voluntary permanent
prepayments of principal on any Indebtedness of the Borrower or any of its
Subsidiaries paid or due and payable during such period (other than payments
made in respect of the prior fiscal year's Consolidated Excess Cash Flow).
Consolidated Financial Obligations. With respect to any fiscal quarter, an
----------------------------------
amount equal to the sum of all payments of principal on Indebtedness that become
due and payable or that are to become due and payable during the such fiscal
quarter pursuant to any agreement or instrument to which the Borrower or any
Subsidiary is a party relating to Total Funded Indebtedness. For purposes of
this definition, any obligations in respect of Total Funded Indebtedness which
are on a demand basis shall be deemed to be due and payable during any fiscal
quarter during which such obligations are outstanding. In addition, for the
avoidance of doubt, Consolidated Financial Obligations do not include (a) trade
accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue or which are being contested in good faith; (b)
voluntary repayments of any amounts outstanding under the Credit Agreement; and
(c) mandatory repayments of principal on the Term Loan required under (S)4.3.3
of the Credit Agreement.
Consolidated Net Income (or Loss). The consolidated net income (or loss)
---------------------------------
of the Borrower and its Subsidiaries, after deduction of all expenses, taxes,
and other proper charges, determined in accordance with generally accepted
accounting principles, after eliminating therefrom all extraordinary items of
income and all extraordinary noncash items of loss.
Consolidated Operating Cash Flow. For any period, an amount equal to (a)
--------------------------------
Adjusted EBITDA for such period, less (b) the sum of (i) cash payments for all
----
taxes paid during such period, plus (ii) Capital Expenditures made during such
----
period.
<PAGE>
-7-
Consolidated Operating Excess Cash Flow. For any period, an amount equal
---------------------------------------
to (a) the sum of (i) Adjusted EBITDA for such period, plus (ii) if applicable,
----
in-flows resulting from Net Working Capital Changes for such period, less (b)
----
the sum of (i) cash payments for all taxes paid during such period, plus (ii)
----
Capital Expenditures made during such period, plus (iii) if applicable, out-
----
flows resulting from Net Working Capital Changes for such period.
Consolidated Quick Assets. All cash, Cash Equivalents and Accounts
-------------------------
Receivable of the Borrower and its Subsidiaries on a consolidated basis that, in
accordance with generally accepted accounting principles, are properly
classified as current assets, provided that accounts receivable shall be
--------
included only if good and collectible as determined by the Borrower in
accordance with established practice consistently applied; and such accounts
receivable shall be taken at their face value less reserves determined to be
sufficient in accordance with generally accepted accounting principles.
Consolidated Total Assets. All assets ("consolidated balance sheet
-------------------------
assets") of the Borrower and its Subsidiaries determined on a consolidated basis
in accordance with generally accepted accounting principles.
Consolidated Total Interest Expense. For any period, the aggregate amount
-----------------------------------
of interest required to be paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the Borrower and its Subsidiaries
outstanding during all or any part of such period, whether such interest was or
is required to be reflected as an item of expense or capitalized, including
payments consisting of interest in respect of any Capitalized Lease, or any
Synthetic Lease referred to in clause (f) of the definition of the term
"Indebtedness," and including commitment fees, agency fees, facility fees
(excluding the closing fees to be paid pursuant to the Fee Letter), balance
deficiency fees and similar fees or expenses in connection with the borrowing of
money.
Consolidated Total Liabilities. All liabilities of the Borrower and its
------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Borrower and its Subsidiaries, and all other Indebtedness
of the Borrower and its Subsidiaries whether or not so classified, provided,
---------
however, for purposes of the Credit Agreement, Consolidated Total Liabilities
- -------
shall not include any amounts relating to the deferred revenues of the Borrower
or any Subsidiary.
Consolidating. With reference to any term defined herein, shall mean that
-------------
term as applied to the accounts or financial statements, as applicable, of the
Consolidating Entities presented in the format set forth on Exhibit H hereto,
---------
which format may be modified with the written consent of the Agent and the
Borrower.
Consolidating Entities. The Borrower and its Subsidiaries presented in the
----------------------
following geographical groups: (a) the United States business of the Borrower
(excluding the corporate division of the Borrower), all Domestic Subsidiaries of
the
<PAGE>
-8-
Borrower and all Foreign Subsidiaries organized in Canada, taken together; (b)
the Latin American division of the Borrower and all Foreign Subsidiaries
organized in Latin American countries, taken together; (c) the Asian Pacific
division of the Borrower and all Foreign Subsidiaries organized in Asian Pacific
countries, taken together; (d) the European division of the Borrower and all
Foreign Subsidiaries organized in European countries, taken together; and (e)
the corporate division of the Borrower. The definition of Consolidating Entities
may be modified with the written consent of the Agent and the Borrower.
Continuing Director. As of any date of determination, any member of the
-------------------
board of directors of the Borrower (a) who was a member of such board of
directors on the Closing Date, or (b) was nominated for election or elected to
such board of directors with the approval of a majority of directors who were
members of such board of directors at the time of such nomination or election.
Conversion Request. A notice given by the Borrower to the Agent of the
------------------
Borrower's election to convert or continue a Loan in accordance with (S)2.7.
Copyright Mortgages. The several Copyright Mortgage and Security
-------------------
Agreements, dated or to be dated on or prior to the Closing Date, made by the
Borrower and the Guarantors, if any, in favor of the Agent and in form and
substance satisfactory to the Banks and the Agent.
Credit Agreement. This Revolving Credit and Term Loan Agreement, including
----------------
the Schedules and Exhibits hereto.
Default. See (S)14.1.
-------
Delinquent Bank. See (S)16.5.3.
---------------
Deminimis Subsidiary. See (S)14.1(g) hereof.
--------------------
Distribution. The declaration or payment of any dividend on or in respect
------------
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
------- -
Domestic Lending Office. Initially, the office of each Bank designated as
-----------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
located within the United States that will be making or maintaining Base Rate
Loans.
<PAGE>
-9-
Domestic Subsidiary. Any Subsidiary which is not a Foreign Subsidiary.
-------------------
Drawdown Date. The date on which any Revolving Credit Loan or the Term
-------------
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or continued in accordance with (S)2.7 or all or any portion of the
Term Loan is converted or continued in accordance with (S)4.5.2.
Eligible Accounts Receivable. The aggregate of the unpaid portions of
----------------------------
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments or commissions payable to third parties that are adjustments to such
Accounts Receivable) (a) that the Borrower reasonably and in good faith
determines to be collectible; (b) that are with account debtors or other
obligors that (i) are not Affiliates of the Borrower, (ii) purchased or licensed
the goods or services giving rise to the relevant Account Receivable in an arm's
length transaction, (iii) are not insolvent or involved in any case or
proceeding, whether voluntary or involuntary, under any bankruptcy,
reorganization, arrangement, insolvency, adjustment of debt, dissolution,
liquidation or similar law of any jurisdiction and (iv) are, in the Agent's
reasonable judgment in accordance with standard commercial practices,
creditworthy; (c) that are in payment of obligations that have been fully
performed, do not consist of progress billings or bill and hold invoices and are
not subject to dispute or any other similar claims that would reduce the cash
amount payable therefor; (d) that are not subject to any pledge, restriction,
security interest or other lien or encumbrance other than those created by the
Loan Documents; (e) in which the Agent has a valid and perfected first priority
security interest; (f) that are not outstanding for more than ninety (90) days
past the earlier to occur of (i) the date of the respective invoices therefor
and (ii) the date of shipment thereof in the case of goods or the end of the
calendar month following the provision thereof in the case of services, unless
the Agent in its discretion approves an extension of such time period; (g) that
are not due from an account debtor or other obligor located in Minnesota unless
the Borrower (i) has received a certificate of authority to do business and is
in good standing in such state or (ii) has filed a notice of business activities
report with the appropriate office or agency of such state for the current year;
(h) that are not due from any single account debtor or other obligor if more
than twenty percent (20%) of the aggregate amount of all Accounts Receivable
owing from such account debtor or other obligor would otherwise not be Eligible
Accounts Receivable; (i) that are payable in Dollars; (j) that are not payable
from an office outside of the United States, Puerto Rico or Canada unless the
Agent in its reasonable discretion approves the inclusion of such foreign
receivables; and (k) that are not secured by a letter of credit unless the Agent
has a prior, perfected security interest in such letter of credit. General
criteria for Eligible Accounts Receivable may be established and revised from
time to time by the Agent.
Eligible Assignee. Any of (a) a commercial bank or finance company
-----------------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any
<PAGE>
-10-
State thereof or the District of Columbia, and having a net worth of at least
$100,000,000, calculated in accordance with generally accepted accounting
principles; (c) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, provided that such bank is acting through a
--------
branch or agency located in the country in which it is organized or another
country which is also a member of the OECD; (d) the central bank of any country
which is a member of the OECD; (e) any investment company, investment fund or
other institutional lender (other than a commercial bank, finance company or
savings and loan association or savings bank) approved by the Agent which is an
"accredited investor" (as defined in Regulation D of the federal Securities and
Exchange Commission) engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of business; and (vi) if, but only if,
any Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
---------------------
(S)3(3) of ERISA maintained of contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See (S)8.18(a).
------------------
EPA. See (S)8.18(b).
---
Equity Issuance. The sale or issuance by the Borrower or any of its
---------------
Subsidiaries of any of its Capital Stock or equity interests or any warrants,
rights or options to acquire its Capital Stock or equity interests.
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
---------------
Borrower under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
----------------------
Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
-------------------------
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
<PAGE>
-11-
Eurodollar Business Day. Any day on which commercial banks are open for
-----------------------
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated
-------------------------
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
-------- -
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
---------------
Loan, the rate of interest equal to (a) the rate determined by the Agent at
which Dollar deposits for such Interest Period are offered based on information
presented on Telerate Page 3750 as of 11:00 a.m. London time on the second
Eurodollar Business Day prior to the first day of such Interest Period, divided
by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if
applicable.
Eurodollar Rate Loans. Revolving Credit Loans and all or any portion of
---------------------
the Term Loan bearing interest calculated by reference to the Eurodollar Rate.
Event of Default. See (S)14.1.
----------------
Existing Credit Facility. The Revolving Credit and Term Loan Agreement,
------------------------
dated as of August 4, 1997 among the Borrower, BankBoston, N.A., and the other
lending institutions party thereto and BankBoston, N.A., as agent, as amended
and in effect from time to time.
Fee Letter. The fee letter agreement among the Borrower, FRS and the Agent
----------
dated on or prior to the Closing Date.
Foreign Subsidiary. Any Subsidiary (direct or indirect, existing on the
------------------
date hereof or acquired or formed hereafter in accordance with the provisions
hereof) of the Borrower which is organized under the laws of a jurisdiction
other than the United States of America or a state or other subdivision of the
United States of America.
FRS. FleetBoston Robertson Stephens Inc., as arranger.
---
generally accepted accounting principles. (a) When used in (S)11, whether
----------------------------------------
directly or indirectly through reference to a capitalized term used therein,
means (i) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal periods ended on the Balance Sheet Date, and (ii) to the
extent consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the fiscal period ended on the Balance
Sheet Date, and b) when used in general, other than as provided above, means
principles that are (i) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (ii) consistently
<PAGE>
-12-
applied with past financial statements of the Borrower adopting the same
principles, provided that in each case referred to in this definition of
"generally accepted accounting principles" a certified public accountant would,
insofar as the use of such accounting principles is pertinent, be in a position
to deliver an unqualified opinion (other than a qualification regarding changes
in generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantors. Collectively, each Domestic Subsidiary of the Borrower
----------
existing on the Closing Date and each other Person which is required to be or
become a guarantor from time to time pursuant to (S)9.13 hereof. Each such
Person shall be a party to a Guaranty.
Guaranty. The Guaranty, dated or to be dated on or prior to the Closing
--------
Date (or such later date as is required by (S)9.13), made by each Guarantor in
favor of the Banks and the Agent pursuant to which each Guarantor guarantees to
the Banks and the Agent the payment and performance of the Obligations, and in
form and substance satisfactory to the Banks and the Agent.
Hazardous Substances. See (S)8.18(b).
--------------------
Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses,
(c) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
(d) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
are being contested in good faith),
(e) every obligation of such Person under any Capitalized Lease,
<PAGE>
-13-
(f) every obligation of such Person under any lease (a "Synthetic
Lease") treated as an operating lease under generally accepted accounting
principles and as a loan or financing for U.S. income tax purposes,
(g) all sales by such Person of (A) accounts or general intangibles
for money due or to become due, (B) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (C) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith,
(h) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights; provided,
--------
however, solely for purposes of compliance with the financial covenants
-------
contained in (S)11 hereof, only that portion of the aggregate amount of all
equity related purchase obligations of the Borrower under its stock option
plan or in respect of any executive compensation plans in excess of
$5,000,000 shall constitute Indebtedness for purposes of calculating such
financial covenants,
(i) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices,
(j) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(k) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(i) through (j) (the "primary obligation") of another Person (the "primary
obligor"), in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (A) to purchase or pay
(or advance or supply funds for the purchase of) any security for the
payment of
<PAGE>
-14-
such primary obligation, (B) to purchase property, securities or services
for the purpose of assuring the payment of such primary obligation, or (C)
to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (y) any Synthetic Lease shall be the
stipulated loss value, termination value or other equivalent amount and (z) any
equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt
---------------------
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. (S)24, Seventh), as amended.
Instrument of Accession. See (S)20.1.2.
-----------------------
Interest Payment Date. (a) As to any Base Rate Loan, the last day of the
---------------------
calendar quarter with respect to interest accrued during such calendar quarter,
including, without limitation, the calendar quarter which includes the Drawdown
Date of such Base Rate Loan; and (b) as to any Eurodollar Rate Loan in respect
of which the Interest Period is (i) three (3) months or less, the last day of
such Interest Period and (ii) more than three (3) months, the date that is three
(3) months from the first day of such Interest Period and, in addition, the last
day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan or all or any
---------------
relevant portion of the Term Loan, (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods set
forth below, as selected by the Borrower in a Loan Request or as otherwise
required by the terms of this Credit Agreement (i) for any Base Rate Loan, the
last day of the calendar quarter; and (ii) for any Eurodollar Rate Loan, 1, 2,
3, or 6 months; and (b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Revolving Credit Loan or
all or such portion of the Term Loan and ending on the last day of one of the
periods set forth above, as selected by
<PAGE>
-15-
the Borrower in a Conversion Request; provided that all of the foregoing
--------
provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7,
the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base
Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date (if comprising a Revolving Credit Loan)
or the Term Loan Maturity Date (if comprising the Term Loan or a portion
thereof) shall end on the Revolving Credit Loan Maturity Date or (as the
case may be) the Term Loan Maturity Date.
International Standby Practices. With respect to any standby Letter of
-------------------------------
Credit, International Standby Practices (ISP98) as promulgated by the Institute
of International Banking Law & Practice, Inc., or any successor code of standby
letter of credit practices among banks adopted by the Agent in the ordinary
course of business as a standby letter of credit issuer and in effect at the
time of issuance of such Letter of Credit.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with
<PAGE>
16
respect to Indebtedness constituting an Investment unless and until such
interest is paid; (c) there shall be deducted in respect of each such Investment
any amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (d)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise, except
that accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof. Notwithstanding
anything to the contrary contained in this definition, for purposes of this
Credit Agreement, Investments shall exclude any prepaid royalties or advanced
commissions paid by the Borrower to any Person.
Letter of Credit. See (S)5.1.1.
----------------
Letter of Credit Application. See (S)5.1.1.
----------------------------
Letter of Credit Fee. See (S)5.6.
--------------------
Letter of Credit Participation. See (S)5.1.4.
------------------------------
Leverage Ratio. As at any date of determination, the ratio of (a) Total
--------------
Funded Indebtedness of the Borrower and its Subsidiaries outstanding on such
date to (b) Adjusted EBITDA of the Borrower and its Subsidiaries for the
Reference Period ending on such date.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
--------------
Applications, the Letters of Credit, the Fee Letter, the Assumption Agreement
and the Security Documents.
Loan Request. See (S)2.6.
------------
Loans. The Revolving Credit Loans and the Term Loan.
-----
Majority Banks. As of any date, (a) if there are less than three (3) Banks
--------------
on such date, all Banks, and (b) if there are three (3) or more Banks on such
date, no less than two (2) Banks holding at least fifty-one percent (51%) of the
outstanding principal amount of the Loans, plus the unused portion of the
----
Commitments on such date, plus the Maximum Drawing Amount of all issued and
----
outstanding Letters of Credit on such date; and if no such Loans and Letter of
Credit are outstanding, the Banks whose aggregate Commitments constitutes at
least fifty-one percent (51%) of the Total Commitment.
MAPICS Business Solutions. Collectively, those transactions by which the
-------------------------
Borrower intends to consolidate some or all of its North American sales
affiliate channels into a lesser number of organizations and acquire an equity
interest in such organizations through a contribution of cash or capital stock,
all on such terms
<PAGE>
-17-
and conditions as may be mutually agreed upon by the parties thereto, all such
terms and conditions to be reasonably satisfactory to the Agent.
MAPICS University. The transaction by which the Borrower intends to
-----------------
acquire all of the ownership interests of the services business named "MAPICS
University" in exchange for shares of the common stock of the Borrower and such
other terms and conditions as may be mutually agreed upon by the parties
thereto, all such terms and conditions to be reasonably satisfactory to the
Agent.
Material Adverse Effect. A material adverse effect on (a) the business,
-----------------------
condition (financial or otherwise), operations, performance, properties or
prospects of the Borrower, individually, or the Borrower and the Guarantors,
taken as a whole, or the Collateral, (b) the rights and remedies of the Agent or
any Bank under any Loan Document, or (c) the validity or enforceability of any
of the Loan Documents.
Maximum Drawing Amount. The maximum aggregate amount that the
----------------------
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Merger. The merger of Merger Subsidiary with and into Pivotpoint, Inc., a
------
Massachusetts corporation, pursuant to the terms of the Merger Agreement.
Merger Agreement. The Merger Agreement, dated as of December 15 1999,
----------------
among the Borrower, the Merger Subsidiary and Pivotpoint, Inc., together with
all schedules and exhibits thereto in form and substance acceptable to the Agent
and the Banks.
Merger Subsidiary. Mapics Merger Corp., a Massachusetts corporation.
-----------------
Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37)
------------------
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
Net Cash Proceeds. With respect to any Equity Issuances, the excess of the
-----------------
gross cash proceeds received by such Person for such Equity Issuance after
deduction of all reasonable and customary transaction expenses (including
without limitation, underwriting discounts and commissions) actually incurred in
connection with such a sale or other issuance.
Net Cash Sale Proceeds. The net cash proceeds received by a Person in
----------------------
respect of any Asset Sale, less the sum of (a) all reasonable out-of-pocket
fees, commissions and other reasonably and customary expenses actually incurred
in connection with such Asset Sale, including the amount of income, franchise,
sales and other applicable taxes required to be paid by such Person in
connection with such Asset Sale, and (b) the aggregate amount of cash so
received by such Person which is required to be used to retire (in whole or in
part) any Indebtedness (other
<PAGE>
-18-
than under the Loan Documents) of such Person permitted by this Credit Agreement
that was secured by a lien or security interest permitted by this Credit
Agreement having priority over the liens and security interests (if any) of the
Agent (for the benefit of the Agent and the Banks) with respect to such assets
transferred and which is required to be repaid in whole or in part (which
repayment, in the case of any other revolving credit arrangement or multiple
advance arrangement, reduces the commitment thereunder) in connection with such
Asset Sale.
Net Working Capital Changes. For any fiscal period, the net change from
---------------------------
the immediately preceding like fiscal period in (a) both billed and unbilled
Accounts Receivable, (b) current accounts payable of the Borrower and its
Subsidiaries, (c) current accruals and accretions (exclusive of interest
accruals and accretions) of the Borrower and its Subsidiaries, and (d) inventory
of the Borrower and its Subsidiaries, as determined in accordance with generally
accepted accounting principles.
Non-Material Subsidiary. At the relevant time of determination, any
-----------------------
Subsidiary (other than a Guarantor) with a Consolidated Net Worth of less than
$500,000.
Notes. The Term Notes and the Revolving Credit Notes.
-----
Obligations. All indebtedness, obligations and liabilities of any of the
-----------
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of
Credit Application, Letter of Credit or other instruments at any time evidencing
any thereof or under any interest rate swap, cap or other hedging agreements
between the Borrower and any of the Banks.
outstanding. With respect to the Loans, the aggregate unpaid principal
-----------
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
----
and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
-----------------------
Security Agreements.
Permitted Liens. Liens, security interests and other encumbrances
---------------
permitted by (S)10.2.
<PAGE>
-19-
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pivotpoint. Pivotpoint, Inc., a Massachusetts corporation and the survivor
----------
of the Merger.
Rate Adjustment Period. See the definition of Applicable Margin.
----------------------
RCRA. See (S)8.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee or
-----------
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Note, or the continuation of such grid, or
------
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Bank. BKB.
--------------
Reference Period. As of any date of determination, the period of four (4)
----------------
consecutive fiscal quarters of the Borrower and its Subsidiaries ending on such
date, or if such date is not a fiscal quarter end date, the period of four (4)
consecutive fiscal quarters most recently ended.
Register. See (S)20.3.
--------
Reimbursement Obligation. The Borrower's obligation to reimburse the Agent
------------------------
and the Banks on account of any drawing under any Letter of Credit as provided
in (S)5.2.
Rental Obligations. All present or future obligations of the Borrower or
------------------
any of its Subsidiaries under any rental agreements or leases of real or
personal property, other than (a) obligations that can be terminated by the
giving of notice without liability to the Borrower or such Subsidiary in excess
of the liability for rent due as of the date on which such notice is given and
under which no penalty or premium is paid as a result of any such termination,
and (b) obligations in respect of any Capitalized Leases or any Synthetic Leases
referred to in clause (f) of the definition of the term "Indebtedness".
Restricted Payment. In relation to the Borrower and its Subsidiaries, any
------------------
(a) Distribution or (b) payment or prepayment by the Borrower or its
Subsidiaries to the Borrower's shareholders or to any Affiliate of the Borrower
or the Borrower's shareholders in their capacity as a shareholder.
Revolving Credit Loan Maturity Date. January 12, 2004.
-----------------------------------
<PAGE>
-20-
Revolving Credit Loans. Revolving credit loans made or to be made by the
----------------------
Banks to the Borrower pursuant to (S)2.
Revolving Credit Note Record. A Record with respect to a Revolving Credit
----------------------------
Note.
Revolving Credit Notes. See (S)2.4.
----------------------
SARA. See (S)8.18(a).
----
Section 20 Subsidiary. A Subsidiary of the bank holding company
---------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreements. The several Security Agreements, dated or to be dated
-------------------
on or prior to the Closing Date, between the Borrower and the Guarantors and the
Agent, and in form and substance satisfactory to the Banks and the Agent.
Security Documents. The Security Agreements, the Trademark Assignments,
------------------
the Copyright Mortgages, the Guaranty, the Stock Pledge Agreements and all other
instruments and documents, including without limitation Uniform Commercial Code
financing statements, required to be executed or delivered pursuant to any
Security Document.
Stock Pledge Agreements. The several Stock Pledge Agreements, dated or to
-----------------------
be dated on or prior to the Closing Date, between the Borrower and the
Guarantors and the Agent, and in form and substance satisfactory to the Banks
and the Agent.
Subordinated Debt. Unsecured Indebtedness of the Borrower or any of its
-----------------
Subsidiaries that is expressly subordinated and made junior to the payment and
performance in full of the Obligations, and evidenced as such by a written
instrument containing subordination provisions in form and substance approved by
the Agent and the Majority Banks in writing.
Subsidiary. Any corporation, association, trust, or other business entity
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Synthetic Lease. As defined in paragraph (f) of the definition of
---------------
"Indebtedness."
Term Loan. The term loan made or to be made by the Banks to the Borrower
---------
on the Closing Date in the aggregate principal amount of $40,000,000 pursuant to
(S)4.1.
Term Loan Maturity Date. December 31, 2002.
-----------------------
<PAGE>
-21-
Term Notes. See (S)4.2.
----------
Term Note Record. A Record with respect to a Term Note.
----------------
Total Assets. As at any date of determination, an amount equal to
------------
Consolidated Total Assets of the Borrower and its Subsidiaries on such date,
minus the outstanding amount of the Revolving Credit Loans on such date.
- -----
Total Commitment. The sum of the Commitments of the Banks, as in effect
----------------
from time to time.
Total Funded Indebtedness. All Indebtedness of the Borrower and its
-------------------------
Subsidiaries for borrowed money, purchase money Indebtedness and with respect to
Capitalized Leases and Synthetic Leases, determined on a consolidated basis in
accordance with generally accepted accounting principles.
Trademark Assignments. The several Trademark Assignments, dated or to be
---------------------
dated on or prior to the Closing Date, made by the Borrower and the Guarantors,
in favor of the Agent and in form and substance satisfactory to the Banks and
the Agent.
Transaction. The series of related transactions occurring on or prior to
-----------
the Closing Date in which (a) the Borrower forms Merger Subsidiary, a wholly-
owned Subsidiary of the Borrower; (b) Merger Subsidiary merges with and into
Pivotpoint, Inc. pursuant to the terms of the Merger Agreement; and (c)
Pivotpoint, Inc. is the survivor of such Merger and becomes a wholly-owned
Subsidiary of the Borrower and assumes all of Merger Subsidiary's Obligations
under the Loan Documents.
Transaction Documents. The Merger Agreement, the Capitalization Documents
---------------------
and all agreements and documents required to be entered into or delivered in
connection with the Transaction, each in the form delivered to the Agent on or
before the Closing Date.
Type. As to any Revolving Credit Loan or all or any portion of the Term
----
Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
---------------
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
-------------------------------
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, (S)5.2.
<PAGE>
-22-
Voting Stock. Stock or similar interests, of any class or classes (however
------------
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. Rules of Interpretation.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term "instrument" being that
defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "(S)" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and "until" each mean "to
but excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same
or
<PAGE>
-23-
similar matters. All such limitations, tests and measurements are, however,
cumulative and are to be performed in accordance with the terms thereof.
(l) This Credit Agreement and the other Loan Documents are the
result of negotiation among, and have been reviewed by counsel to, among
others, the Agent and the Borrower and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the
other Loan Documents are not intended to be construed against the Agent or
any of the Banks merely on account of the Agent's or any Bank's involvement
in the preparation of such documents.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. Commitment to Lend. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Revolving Credit Loan Maturity Date
upon notice by the Borrower to the Agent given in accordance with (S)2.6, such
sums as are requested by the Borrower up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of
-----
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided
--------
that the sum of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) plus the Maximum Drawing Amount and all
----
Unpaid Reimbursement Obligations shall not at any time exceed the lesser of (a)
the Total Commitment and (b) the Borrowing Base. The Revolving Credit Loans
shall be made pro rata in accordance with each Bank's Commitment Percentage.
--- ----
Each request for a Revolving Credit Loan hereunder shall constitute a
representation and warranty by the Borrower that the conditions set forth in
(S)12 and (S)13, in the case of the initial Revolving Credit Loans to be made on
the Closing Date, and (S)13, in the case of all other Revolving Credit Loans,
have been satisfied on the date of such request.
2.2. Commitment Fee. The Borrower agrees to pay to the Agent for the
--------------
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee (the "Commitment Fee") calculated in accordance with the
pricing grid contained in the definition of "Applicable Margin" for the
Commitment Fee on a per annum basis on the average daily amount during each
calendar quarter or portion thereof from the Closing Date to the Revolving
Credit Loan Maturity Date by which the Total Commitment minus the sum of the
-----
Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the
outstanding amount of Revolving Credit Loans during such calendar quarter. The
commitment fee shall be payable quarterly in arrears on the last Business Day of
each calendar quarter for the then ending calendar quarter commencing on the
first such date following the date hereof, with a final payment on the Revolving
Credit Maturity Date or any earlier date on which the Commitments shall
terminate.
<PAGE>
-24-
2.3. Reduction of Total Commitment. The Borrower shall have the right at
-----------------------------
any time and from time to time upon five (5) Business Days prior written notice
to the Agent to reduce by $2,500,000 or an integral multiple of $500,000 in
excess thereof or terminate entirely the Total Commitment, whereupon the
Commitments of the Banks shall be reduced pro rata in accordance with their
--- ----
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this (S)2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any commitment fee then accrued on the amount of the reduction.
No reduction or termination of the Commitments may be reinstated.
2.4. The Revolving Credit Notes. The Revolving Credit Loans shall be
--------------------------
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit B hereto (each a "Revolving Credit Note"), dated as of the Closing
--------- ---------------------
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record reflecting the
making of such Revolving Credit Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Revolving Credit Loans set forth on such
Bank's Revolving Credit Note Record shall be prima facie evidence of the
----- -----
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Revolving
Credit Note Record shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. Interest on Revolving Credit Loans. Except as otherwise provided in
----------------------------------
(S)6.11,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
Base Rate plus the Applicable Margin.
----
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
Eurodollar Rate determined for such Interest Period plus the Applicable
----
Margin.
<PAGE>
-25-
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect thereto.
2.6. Requests for Revolving Credit Loans. The Borrower shall give to the
-----------------------------------
Agent written notice in the form of Exhibit C hereto (or telephonic notice
------- -
confirmed in a writing in the form of Exhibit C hereto) of each Revolving Credit
------- -
Loan requested hereunder (a "Loan Request") no less than (a) one (1) Business
Day prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan; provided, however, the Borrower shall not request any Eurodollar
-------- -------
Rate Loans with an Interest Period of more than one month until the date on
which the Agent notifies the Borrower that the Loans hereunder have been
syndicated to the satisfaction of the Agent, and all Interest Periods during
such period shall end on the same date. The term "syndicated to the satisfaction
of the Agent" as used in this (S)2.6 means a syndication satisfactory to the
Agent and FRS and after which BKB's Commitment plus its portion of the Term Loan
----
does not exceed $20,000,000. Each such notice shall specify (i) the principal
amount of the Revolving Credit Loan requested, (ii) the proposed Drawdown Date
of such Revolving Credit Loan, (iii) the Interest Period for such Revolving
Credit Loan and (iv) the Type of such Revolving Credit Loan. Promptly upon
receipt of any such notice, the Agent shall notify each of the Banks thereof.
Each Loan Request shall be irrevocable and binding on the Borrower and shall
obligate the Borrower to accept the Revolving Credit Loan requested from the
Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum
aggregate amount of $500,000 or an integral multiple thereof.
2.7. Conversion Options.
------------------
2.7.1. Conversion to Different Type of Revolving Credit Loan. The
-----------------------------------------------------
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, provided that (a)
--------
with respect to any such conversion of a Revolving Credit Loan to a Base
Rate Loan, the Borrower shall give the Agent at least one (1) Business Day
prior written notice of such election; (b) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent at least three (3) Eurodollar Business Days prior
written notice of such election; (c) with respect to any such conversion of
a Eurodollar Rate Loan into a Revolving Credit Loan of another Type, such
conversion shall only be made on the last day of the Interest Period with
respect thereto; (d) no Loan may be converted into a Eurodollar Rate Loan
when any Default or Event of Default has occurred and is continuing; and
(e) no Loan may be converted into a Eurodollar Rate Loan with an Interest
Period of greater than one month until the Agent notifies the Borrower that
the Loans hereunder have been syndicated to the satisfaction of the Agent
(as such term is defined in (S)2.6 hereof). On the date on which such
conversion is being made each Bank shall take such action as is necessary
to transfer its Commitment Percentage of such Revolving Credit Loans to its
Domestic Lending Office or its
<PAGE>
-26-
Eurodollar Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided that any
--------
partial conversion shall be in an aggregate principal amount of $500,000 or
a whole multiple thereof. Each Conversion Request relating to the
conversion of a Revolving Credit Loan to a Eurodollar Rate Loan shall be
irrevocable by the Borrower.
2.7.2. Continuation of Type of Revolving Credit Loan. Any
---------------------------------------------
Revolving Credit Loan of any Type may be continued as a Revolving Credit
Loan of the same Type upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice provisions
contained in (S)2.7.1; provided that no Eurodollar Rate Loan may be
--------
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto. The Agent shall notify
the Banks promptly when any such automatic conversion contemplated by this
(S)2.7 is scheduled to occur.
2.7.3. Eurodollar Rate Loans. Any conversion to or from
---------------------
Eurodollar Rate Loans shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal
amount of all Eurodollar Rate Loans having the same Interest Period shall
not be less than $500,000 or a whole multiple of $500,000 in excess
thereof. In addition, there shall not be more than ten (10) Eurodollar Rate
Loans outstanding at any one time.
2.8. Funds for Revolving Credit Loan.
-------------------------------
2.8.1. Funding Procedures. Not later than 11:00 a.m. (Boston
------------------
time) on the proposed Drawdown Date of any Revolving Credit Loans, each of
the Banks will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
Percentage of the amount of the requested Revolving Credit Loans. Upon
receipt from each Bank of such amount, and upon receipt of the documents
required by (S)(S)12 and 13 and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make available
to the Borrower the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks. The failure or refusal of any Bank to
make available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Commitment Percentage of the requested
<PAGE>
-27-
Revolving Credit Loans shall not relieve any other Bank from its several
obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Revolving Credit Loans.
2.8.2. Advances by Agent. The Agent may, unless notified to the
-----------------
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, times (ii) the amount of such Bank's
-----
Commitment Percentage of such Revolving Credit Loans, times (iii) a
-----
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
----- -----
and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such Drawdown Date.
2.9. Change in Borrowing Base. The Borrowing Base shall be determined
------------------------
monthly (or at such other interval as may be specified pursuant to (S)9.4(f)) by
the Agent by reference to the Borrowing Base Report delivered to the Banks and
the Agent pursuant to (S)9.4(f). The Agent shall give to the Borrower written
notice of any change in the Borrowing Base determined by the Agent. In the case
of a reduction in the lending formula with respect to Eligible Accounts
Receivable, such notice shall be effective five (5) Business Days after its
receipt by the Borrower, and in the case of any change in the general criteria
for Eligible Accounts Receivable, such notice shall be effective upon its
receipt by the Borrower. Prior to the time that such notice becomes effective
the Borrowing Base shall be computed as it would have been computed in the
absence of such notice.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. Maturity. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving
<PAGE>
-28-
Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on such
date, together with any and all accrued and unpaid interest thereon.
3.2. Mandatory Repayments of Revolving Credit Loans. If at any time the
----------------------------------------------
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (a) the
Total Commitment and (b) the Borrowing Base, then the Borrower shall immediately
pay the amount of such excess to the Agent for the respective accounts of the
Banks for application: first, to any Unpaid Reimbursement Obligations; second,
to the Revolving Credit Loans; and third, to provide to the Agent cash
collateral for Reimbursement Obligations as contemplated by (S)5.2(b) and (c).
Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving
Credit Loans shall be allocated among the Banks, in proportion, as nearly as
practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion.
3.3. Optional Repayments of Revolving Credit Loans. The Borrower shall
---------------------------------------------
have the right, at its election, to repay the outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the outstanding amount
--------
of any Eurodollar Rate Loans pursuant to this (S)3.3 may be made only on the
last day of the Interest Period relating thereto. The Borrower shall give the
Agent, no later than 10:00 a.m., Boston time, at least one (1) Business Day
prior written notice of any proposed prepayment pursuant to this (S)3.3 of Base
Rate Loans, and three (3) Eurodollar Business Days notice of any proposed
prepayment pursuant to this (S)3.3 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be in an integral multiple of $500,000, shall be accompanied
by the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans, at the Agent's option. Each partial prepayment shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
respective unpaid principal amount of each Bank's Revolving Credit Note, with
adjustments to the extent practicable to equalize any prior repayments not
exactly in proportion.
4. THE TERM LOAN.
-------------
4.1. Commitment to Lend. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each Bank agrees to lend to the Borrower on the Closing
Date the amount of its Commitment Percentage of the principal amount of
$40,000,000.
<PAGE>
-29-
4.2. The Term Notes. The Term Loan shall be evidenced by separate
--------------
promissory notes of the Borrower in substantially the form of Exhibit D hereto
------- -
(each a "Term Note"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment Percentage of the Term Loan and
representing the obligation of the Borrower to pay to such Bank such principal
amount or, if less, the outstanding amount of such Bank's Commitment Percentage
of the Term Loan, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made a notation
on such Bank's Term Note Record reflecting the original principal amount of such
Bank's Commitment Percentage of the Term Loan and, at or about the time of such
Bank's receipt of any principal payment on such Bank's Term Note, an appropriate
notation on such Bank's Term Note Record reflecting such payment. The aggregate
unpaid amount set forth on such Bank's Term Note Record shall be prima facie
----- -----
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Term Note Record shall not affect the obligations of the Borrower hereunder or
under any Term Note to make payments of principal of and interest on any Term
Note when due.
4.3. Repayments of the Term Loan.
---------------------------
4.3.1. Schedule of Installment Payments of Principal of Term Loan.
----------------------------------------------------------
The Borrower promises to pay to the Agent for the account of the Banks the
principal amount of the Term Loan in eleven (11) consecutive quarterly
payments payable on the dates and in the amounts (as the same may be
adjusted pursuant to (S)4.3.2 and (S)4.3.3 hereof) set forth in the table
below commencing on July 1, 2000, with a final payment on the Term Loan
Maturity Date in an amount equal to the unpaid balance of the Term Loan.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Quarter Commencing Amount of Payment
---------------------------------------------------------------------------
<S> <C>
July 1, 2000 $2,500,000
---------------------------------------------------------------------------
October 1, 2000 $3,500,000
---------------------------------------------------------------------------
January 1, 2001 $3,500,000
---------------------------------------------------------------------------
April 1, 2001 $3,500,000
---------------------------------------------------------------------------
July 1, 2001 $3,500,000
---------------------------------------------------------------------------
October 1, 2001 $3,500,000
---------------------------------------------------------------------------
January 1, 2002 $4,000,000
---------------------------------------------------------------------------
April 1, 2002 $4,000,000
---------------------------------------------------------------------------
July 1, 2002 $4,000,000
---------------------------------------------------------------------------
October 1, 2002 $4,000,000
---------------------------------------------------------------------------
Term Loan Maturity Date Remaining Unpaid Balance of Term Loan
---------------------------------------------------------------------------
</TABLE>
<PAGE>
-30-
4.3.2. Proceeds. Concurrently with the receipt by the Borrower or
--------
any of its Subsidiaries of (a) Net Cash Sale Proceeds from Asset Sales
(other than the sale or disposition of assets in the ordinary course of
business consistent with past practices) (i) which exceed in the aggregate
fifteen percent (15%) of Total Assets, and (ii) which, in any event, are
not reinvested by the Borrower or its Subsidiaries in replacement assets in
which the Agent shall have a first priority perfected security interest for
the benefit of the Agent and the Banks within 180 days of receipt by such
Person of such proceeds, (b) net cash proceeds from any Indebtedness
incurred by the Borrower or any Subsidiary, other than Indebtedness
permitted by (S)10.1(a), (b) and (d) - (h), and Net Cash Proceeds from any
Equity Issuances of the Borrower or any of its Subsidiaries or (c) cash
proceeds received from insurance claims received by the Borrower or any of
its Subsidiaries which have not been applied by the Borrower or such
Subsidiary within 180 days of receipt by such Person of such proceeds
(provided, however, if a Default or Event of Default has occurred and is
-------- -------
continuing, such proceeds shall be immediately paid to the Agent), the
Borrower shall pay to the Agent for the respective accounts of the Banks an
amount equal to one hundred percent (100%) of such proceeds, to be applied
against the remaining scheduled installments of principal on the Term Loan
on a pro rata basis, and, if there are no outstanding amounts owed on the
--- ----
Term Loan, then to reduce the outstanding amount of the Revolving Credit
Loans.
4.3.3. Annual Excess Cash Flow Recapture. For (a) the period
---------------------------------
commencing on January 1, 2000 and ending on September 30, 2000, and (b)
each fiscal year thereafter, for which Consolidated Excess Cash Flow
exceeds $1,000,000, the Borrower shall make a prepayment of principal on
the Term Loan in an amount equal to fifty percent (50%) of such
Consolidated Excess Cash Flow, such mandatory prepayment to be due ninety
(90) days after the end of each applicable fiscal year and to be applied
against the remaining scheduled installments of principal due on the Term
Loan on a pro rata basis.
--------
4.4. Optional Prepayment of Term Loan. The Borrower shall have the right
--------------------------------
at any time to prepay the Term Notes on or before the Term Loan Maturity Date,
as a whole, or in part, upon not less than five (5) Business Days prior written
notice to the Agent, without premium or penalty, provided that (a) each partial
--------
prepayment shall be in the principal amount of $500,000 or an integral multiple
thereof, (b) any portion of the Term Loan bearing interest at the Eurodollar
Rate prepaid pursuant to this (S)4.4 except on the last day of the Interest
Period relating thereto shall be subject to the indemnity requirement in
(S)6.10, and (c) each partial prepayment shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective outstanding amount of
each Bank's Term Note, with adjustments to the extent practicable to equalize
any prior prepayments not exactly in proportion. Any prepayment of principal of
the Term Loan shall include all interest accrued to the date of prepayment and
shall be applied against the remaining scheduled installments of principal due
on the Term Loan pro rata; provided, however, that
--- ---- -------- -------
<PAGE>
-31-
any prepayment of principal of the Term Loan made within thirty (30) days of the
due date of any regularly scheduled installment of principal pursuant to
(S)4.3.1 shall be applied directly to such scheduled installment of principal
until paid in full and then applied pro rata to each of the remaining scheduled
--- ----
installments of principal due on the Term Loan. No amount repaid with respect
to the Term Loan may be reborrowed as a Term Loan.
4.5. Interest on Term Loan.
---------------------
4.5.1. Interest Rates. Except as otherwise provided in (S)6.11,
--------------
the Term Loan shall bear interest during each Interest Period relating to
all or any portion of the Term Loan at the following rates:
(a) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Base Rate, the
Term Loan or such portion shall bear interest during such Interest
Period at the rate of per annum equal to the Base Rate plus the
----
Applicable Margin.
(b) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Eurodollar Rate,
the Term Loan or such portion shall bear interest during such
Interest Period at the rate of per annum equal to the Eurodollar
Rate plus the Applicable Margin.
----
The Borrower promises to pay interest on the Term Loan or any portion
thereof outstanding during each Interest Period in arrears on each Interest
Payment Date applicable to such Interest Period.
4.5.2. Notification by Borrower. The Borrower shall notify the
------------------------
Agent, such notice to be irrevocable, at least three (3) Eurodollar
Business Days prior to the Drawdown Date of the Term Loan if all or any
portion of the Term Loan is to bear interest at the Eurodollar Rate. After
the Term Loan has been made, the provisions of (S)2.7 shall apply mutatis
-------
mutandis with respect to all or any portion of the Term Loan so that the
--------
Borrower may have the same interest rate options with respect to all or any
portion of the Term Loan as it would be entitled to with respect to the
Revolving Credit Loans.
4.5.3. Amounts, etc. Any portion of the Term Loan bearing
-------------
interest at the Eurodollar Rate relating to any Interest Period shall be in
the amount of $2,500,000 or an integral multiple of $500,000 in excess
thereof. No Interest Period relating to the Term Loan or any portion
thereof bearing interest at the Eurodollar Rate shall extend beyond the
date on which a regularly scheduled installment payment of the principal of
the Term Loan is to be made unless a portion of the Term Loan at least
equal to such installment payment has an Interest Period ending on such
date or is then bearing interest at the Base Rate.
<PAGE>
-32-
5. LETTERS OF CREDIT.
-----------------
5.1. Letter of Credit Commitments.
----------------------------
5.1.1. Commitment to Issue Letters of Credit. Subject to the
-------------------------------------
terms and conditions hereof and the execution and delivery by the Borrower
of a letter of credit application on the Agent's customary form (a "Letter
of Credit Application"), the Agent on behalf of the Banks and in reliance
upon the agreement of the Banks set forth in (S)5.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested from
time to time by the Borrower and agreed to by the Agent; provided, however,
-------- -------
that, after giving effect to such request, (a) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not
exceed $5,000,000 at any one time and (b) the sum of (i) the Maximum
Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement
Obligations, and (iii) the amount of all Revolving Credit Loans outstanding
shall not exceed the lesser of (A) the Total Commitment and (B) the
Borrowing Base. Notwithstanding the foregoing, the Agent shall have no
obligation to issue any Letter of Credit to support or secure any
Indebtedness of the Borrower or any of its Subsidiaries to the extent that
such Indebtedness was incurred prior to the proposed issuance date of such
Letter of Credit, unless in any such case the Borrower demonstrates to the
satisfaction of the Agent that (x) such prior incurred Indebtedness were
then fully secured by a prior perfected and unavoidable security interest
in collateral provided by the Borrower or such Subsidiary to the proposed
beneficiary of such Letter of Credit or (y) such prior incurred
Indebtedness were then secured or supported by a letter of credit issued
for the account of the Borrower or such Subsidiary and the reimbursement
obligation with respect to such letter of credit was fully secured by a
prior perfected and unavoidable security interest in collateral provided to
the issuer of such letter of credit by the Borrower or such Subsidiary.
5.1.2. Letter of Credit Applications. Each Letter of Credit
-----------------------------
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. Terms of Letters of Credit. Each Letter of Credit issued,
--------------------------
extended or renewed hereunder shall, among other things, (a) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiry date no later than the date which
is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or
<PAGE>
-33-
otherwise provides for one or more nominated persons, forty-five (45) days)
prior to the Revolving Credit Loan Maturity Date. Each Letter of Credit so
issued, extended or renewed shall be subject to the Uniform Customs or, in
the case of a standby Letter of Credit, either the Uniform Customs or the
International Standby Practices.
5.1.4. Reimbursement Obligations of Banks. Each Bank severally
----------------------------------
agrees that it shall be absolutely liable, without regard to the occurrence
of any Default or Event of Default or any other condition precedent
whatsoever, to the extent of such Bank's Commitment Percentage, to
reimburse the Agent on demand for the amount of each draft paid by the
Agent under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrower pursuant to (S)5.2 (such agreement for a Bank
being called herein the "Letter of Credit Participation" of such Bank).
5.1.5. Participations of Banks. Each such payment made by a Bank
-----------------------
shall be treated as the purchase by such Bank of a participating interest
in the Borrower's Reimbursement Obligation under (S)5.2 in an amount equal
to such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to (S)5.2.
5.2. Reimbursement Obligation of the Borrower. In order to induce the
----------------------------------------
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in (S)5.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored
by the Agent, or the Agent otherwise makes a payment with respect thereto,
(i) the amount paid by the Agent under or with respect to such Letter of
Credit, and (ii) the amount of any taxes, fees, charges or other costs and
expenses whatsoever incurred by the Agent or any Bank in connection with
any payment made by the Agent or any Bank under, or with respect to, such
Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an amount
equal to such difference, which amount shall be held by the Agent for the
benefit of the Banks and the Agent as cash collateral for all Reimbursement
Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Letters
of Credit in accordance with (S)14, an amount equal to the then Maximum
Drawing Amount on all Letters of Credit, which amount shall be held by the
<PAGE>
-34-
Agent for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this (S)5.2 at any time from the date such amounts become
due and payable (whether as stated in this (S)5.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in (S)6.11 for overdue principal on the
Revolving Credit Loans.
5.3. Letter of Credit Payments. If any draft shall be presented or other
-------------------------
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
(S)5.2 on or before the date that such draft is paid or other payment is made by
the Agent, the Agent may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (a) the average,
computed for the period referred to in clause (c) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (b) the amount equal to such Bank's
-----
Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a
-----
fraction, the numerator of which is the number of days that elapse from and
including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrower and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
5.4. Obligations Absolute. The Borrower's obligations under this (S)5
--------------------
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit except, as to an obligation to the Agent or
any Bank, if such claim or defense against the Agent or any Bank is a result of
the bad faith, gross negligence or willful misconduct of the Agent or such Bank.
The Borrower further agrees with the Agent and the Banks that the Agent and the
Banks shall not be responsible for, and the Borrower's Reimbursement Obligations
under (S)5.2 shall not be affected by, among
<PAGE>
-35-
other things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, or any dispute between or among the
Borrower, the beneficiary of any Letter of Credit or any financing institution
or other party to which any Letter of Credit may be transferred or any claims or
defenses whatsoever of the Borrower against the beneficiary of any Letter of
Credit or any such transferee. The Agent and the Banks shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit, except if such error was the direct result of the Agent or any Bank's
gross negligence or willful misconduct. The Borrower agrees that any action
taken or omitted by the Agent or any Bank under or in connection with each
Letter of Credit and the related drafts and documents, if done in good faith and
absent the Agent's or such Bank's gross negligence and willful misconduct, shall
be binding upon the Borrower and shall not result in any liability on the part
of the Agent or any Bank to the Borrower.
5.5. Reliance by Issuer. To the extent not inconsistent with (S)5.4, the
------------------
Agent shall be entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed in good faith by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel, independent accountants
and other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Credit Agreement unless it
shall first have received such advice or concurrence of the Majority Banks as it
reasonably deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Credit Agreement in accordance with a request of the Majority
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon the Banks and all future holders of the Revolving Credit
Notes or of a Letter of Credit Participation.
5.6. Letter of Credit Fee. The Borrower shall, on the date of issuance or
--------------------
any extension or renewal of any Letter of Credit pay a fee (in each case, a
"Letter of Credit Fee") to the Agent (a) in respect of each standby Letter of
Credit calculated at the Applicable Margin per annum for Eurodollar Rate Loans
of the face amount of such standby Letter of Credit, plus a fee equal to one-
----
quarter of one percent (1/4%) per annum of the face amount of such standby
Letter of Credit for the account of the Agent, as a fronting fee, and the
balance of which Letter of Credit Fee shall be for the accounts of the Banks in
accordance with their respective Commitment Percentages and (b) in respect of
each documentary Letter of Credit calculated at the rate of the Applicable
Margin per annum for Eurodollar Rate Loans on the face amount of such
documentary Letter of Credit, plus a fee equal to one-quarter of one percent
----
(1/4%) per annum of the face amount of such documentary Letter of Credit
<PAGE>
-36-
for the account of the Agent, as a fronting fee, and the balance of which Letter
of Credit Fee shall be for the accounts of the Banks in accordance with their
respective Commitment Percentages. In respect of each Letter of Credit, the
Borrower shall also pay to the Agent for the Agent's own account, at such other
time or times as such charges are customarily made by the Agent, the Agent's
customary issuance, amendment, negotiation or document examination and other
administrative fees as in effect from time to time.
6. CERTAIN GENERAL PROVISIONS.
--------------------------
6.1. Closing Fee and Funding Fee. The Borrower shall pay to the Agent and
---------------------------
FRS the closing fee and the funding fee in the amounts and at the times set
forth in the Fee Letter.
6.2. Agent's Fee. The Borrower shall pay to the Agent, for the Agent's
-----------
own account an Agent's Fee in the amount and at the times set forth in the Fee
Letter.
6.3. Funds for Payments.
------------------
6.3.1. Payments to Agent. All payments of principal, interest,
-----------------
Reimbursement Obligations, Commitment Fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made on the due date thereof to the Agent in Dollars, for the respective
accounts of the Banks and the Agent, at the Agent's Head Office or at such
place that the Agent may from time to time designate, in each case at or
about 11:00 a.m. (Boston, Massachusetts time or other local time at the
place of payment) and in immediately available funds.
6.3.2. No Offset, etc. All payments by the Borrower hereunder and
---------------
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
<PAGE>
-37-
6.4. Computations. All computations of interest on the Loans and of
------------
Commitment Fees, Letter of Credit Fees or other fees shall, be based on a 360-
day year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Loans as
reflected on the Revolving Credit Note Records and the Term Note Records from
time to time shall be considered correct and binding on the Borrower unless
within five (5) Business Days after receipt of any notice by the Borrower of
such outstanding amount, the Borrower shall notify the Agent or any Bank to the
contrary.
6.5. Inability to Determine Eurodollar Rate. In the event, prior to the
--------------------------------------
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine in accordance with its standard commercial practice that
adequate and reasonable methods do not exist for ascertaining the Eurodollar
Rate that would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Agent shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower and the Banks) to the Borrower and the Banks. In such event (a) any
Loan Request or Conversion Request with respect to Eurodollar Rate Loans shall
be automatically withdrawn and shall be deemed a request for Base Rate Loans,
(b) each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan, and (c) the
obligations of the Banks to make Eurodollar Rate Loans shall be suspended until
the Agent determines in accordance with its standard commercial practice that
the circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Banks.
6.6. Illegality. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this (S)6.6, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder.
<PAGE>
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6.7. Additional Costs, etc. If any present or future applicable law,
---------------------
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Loans (other than taxes based upon or measured by
the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any
class of loans, letters of credit or commitments of which any of the Loans
or such Bank's Commitment forms a part, and the result of any of the
foregoing is
(i) to materially increase the cost to any Bank of
making, funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank or
the Agent hereunder on account of such Bank's Commitment, any
Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement Obligation or
other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is
calculated by reference
<PAGE>
-39-
to the gross amount of any sum receivable or deemed received by such
Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time within one hundred eighty (180) days
of the event giving rise thereto and from time to time and as often as the
occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum.
6.8. Capital Adequacy. If after the date hereof any Bank or the Agent
----------------
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount reasonably deemed by such Bank or (as the case may be) the Agent in
accordance with its standard commercial practices to be material, then such Bank
or the Agent may notify the Borrower of such fact within one hundred eighty
(180) days of the event giving rise thereto. To the extent that the amount of
such reduction in the return on capital is not reflected in the Base Rate, the
Borrower agrees to pay such Bank or (as the case may be) the Agent for the
amount of such reduction in the return on capital as and when such reduction is
determined upon presentation by such Bank or (as the case may be) the Agent of a
certificate in accordance with (S)6.9 hereof. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
6.9. Certificate. A certificate setting forth any additional amounts
-----------
payable pursuant to (S)(S)6.7 or 6.8 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
6.10. Indemnity. The Borrower agrees to indemnify each Bank and to hold
---------
each Bank harmless from and against any loss, cost or expense (excluding loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (b) default
by the Borrower in making a borrowing or conversion after the Borrower has given
(or is
<PAGE>
-40-
deemed to have given) a Loan Request, notice (in the case of all or any portion
of the Term Loans pursuant to (S)4.5.2) or a Conversion Request relating thereto
in accordance with (S)2.6 or (S)2.7 or (S)4.5 or (c) the making of any payment
of a Eurodollar Rate Loan or the making of any conversion of any such Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain any such Loans.
6.11. Interest After Default.
----------------------
6.11.1. Overdue Amounts. Overdue principal and (to the extent
---------------
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per annum
equal to two percent (2%) above the rate of interest otherwise applicable
to such Revolving Credit Loans pursuant to (S)2.5 and the Term Loan
pursuant to (S)4.5 until such amount shall be paid in full (after as well
as before judgment).
6.11.2. Amounts Not Overdue. During the continuance of a Default or
-------------------
an Event of Default the principal of the Revolving Credit Loans and the
Term Loan not overdue shall, until such Default or Event of Default has
been cured or remedied or such Default or Event of Default has been waived
by the Majority Banks pursuant to (S)27, bear interest at a rate per annum
equal to the greater of (a) two percent (2%) above the rate of interest
otherwise applicable to such Revolving Credit Loans pursuant to (S)2.5 and
the Term Loan pursuant to (S)4.5 and (b) the rate of interest applicable to
overdue principal pursuant to (S)6.11.1.
7. COLLATERAL SECURITY AND GUARANTIES.
----------------------------------
7.1. Security of Borrower. The Obligations shall be secured by (a) a
--------------------
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the Borrower,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which the Borrower is a party, and (b) a pledge of the Borrower of
(i) one hundred percent (100%) of the capital stock owned by the Borrower of
each of its Domestic Subsidiaries, (ii) sixty-five percent (65%) of the capital
stock owned by the Borrower of each of its Foreign Subsidiaries, and (iii) any
intercompany notes owed the Borrower by any Domestic Subsidiary pursuant to the
terms of the Security Documents to which the Borrower is a party.
7.2. Guaranties and Security of Guarantors. The obligations shall also be
-------------------------------------
guaranteed by each Guarantor pursuant to the terms of the Guaranty. The
obligations of each Guarantor under the Guaranty shall be in turn secured by (a)
a perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of such
Guarantor, whether now
<PAGE>
-41-
owned or hereafter acquired, pursuant to the terms of the Security Documents to
which such Guarantor is a party, and (b) a pledge by such Guarantor of (i) one
hundred percent (100%) of the capital stock owned by such Guarantor of each of
its Domestic Subsidiaries, (ii) sixty-five percent (65%) of the capital stock
owned by such Guarantor of each of its Foreign Subsidiaries, and (iii) any
intercompany notes owed to such Guarantor by the Borrower or any other Domestic
Subsidiary pursuant to the terms of the Security Documents to which such
Guarantor is a party.
8. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agent as
follows:
8.1. Corporate Authority.
-------------------
8.1.1. Incorporation; Good Standing. Each of the Borrower and its
----------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as
now conducted and as presently contemplated, and (c) is in good standing as
a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure
to be so qualified would not have a Material Adverse Effect.
8.1.2. Authorization. The execution, delivery and performance of
-------------
this Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate authority of
such Person, (b) have been duly authorized by all necessary corporate
proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Borrower or any of its Subsidiaries is subject or any judgment, order,
writ, injunction, license or permit applicable to the Borrower or any of
its Subsidiaries and (d) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Borrower or any of its Subsidiaries.
8.1.3. Enforceability. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally
binding obligations of such Person enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be
brought.
<PAGE>
-42-
8.2. Governmental Approvals. The execution, delivery and performance
----------------------
by the Borrower and any of its Subsidiaries of this Credit Agreement and the
other Loan Documents to which the Borrower or any of its Subsidiaries is or is
to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.
8.3. Title to Properties; Leases. The Borrower and its Subsidiaries own all
---------------------------
of the assets reflected in the consolidated balance sheet of the Borrower and
its Subsidiaries as at the Balance Sheet Date or acquired since that date
(except property and assets sold or otherwise disposed of in the ordinary course
of business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
8.4. Financial Statements and Projections.
------------------------------------
8.4.1. Fiscal Year. Borrower and each of its Subsidiaries has a
-----------
fiscal year which is the twelve (12) months ending on September 30 of each
calendar year.
8.4.2. Financial Statements. There has been furnished to each of
--------------------
the Banks a consolidated balance sheet of the Borrower and its Subsidiaries
as at the Balance Sheet Date, and a consolidated statement of income of the
Borrower and its Subsidiaries for the fiscal period then ended, certified
by PricewaterhouseCoopers LLP. There has also been furnished to each of the
Banks the unaudited financials of Pivotpoint, Inc. for Pivotpoint Inc.'s
fiscal years 1997 and 1998 and the unaudited balance sheet and unaudited
income statement of Pivotpoint, Inc. for the last three fiscal quarters of
Pivotpoint, Inc. ending on September 30, 1999. Such balance sheets and
statements of income have been prepared in accordance with generally
accepted accounting principles and fairly present the financial condition
of Pivotpoint, Inc. as at the close of business on the date thereof and the
results of operations for the fiscal period then ended. There are no
contingent liabilities of the Borrower, any of its Subsidiaries or
Pivotpoint, Inc. as of such date involving material amounts, known to the
officers of the Borrower, which were not disclosed in such balance sheet
and the notes related thereto.
8.4.3. Projections. The projections of the Borrower and its
-----------
Subsidiaries (including Pivotpoint, Inc.) on a consolidated basis, balance
sheets and cash flow statements for the 2000 to 2003 fiscal years, copies
of which have been delivered to each Bank, made no materially different
assumptions with respect to general economic, financial and market
conditions used in formulating such projections than have been disclosed to
the Agent. To the knowledge of the Borrower or any of its Subsidiaries, as
of the date hereof no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The
projections are
<PAGE>
-43-
based upon reasonable estimates and assumptions, have been prepared on the
basis of the assumptions stated therein and reflect the reasonable
estimates of the Borrower and its Subsidiaries (as of the date thereof) of
the results of operations and other information projected therein.
8.4.4. Solvency. The Borrower and its Subsidiaries, on a
--------
consolidated and consolidating basis, both before and after giving effect
to the transactions contemplated by this Credit Agreement and the other
Loan Documents (including, without limitation, the Transaction) (a) are
solvent; (b) have assets having a fair value in excess of their
liabilities; (c) have assets having a fair value in excess of the amount
required to pay their liabilities on existing debts as such debts become
due and payable, and (d) have, and expect to continue to have, access to
adequate capital for the conduct of their business and the ability to pay
their debts from time to time incurred in connection with the operation of
their business as such debts mature.
8.5. No Material Changes, etc. Since the Balance Sheet Date there has
------------------------
occurred no materially adverse change in the financial condition or business of
the Borrower and its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date,
or the consolidated statement of income for the fiscal period then ended or
which relate to Pivotpoint, Inc. as shown on the most recent financial
statements delivered to the Borrower by Pivotpoint, Inc., other than changes
contemplated by the Transaction Documents or in the ordinary course of business
that have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Borrower or any of its
Subsidiaries. Since September 30, 1999, there have been no changes in the
business or the assets of Pivotpoint, Inc. which have had, either individually
or in the aggregate, a Material Adverse Effect. Since the Balance Sheet Date,
the Borrower has not made any Distributions, except as expressly permitted by
the terms of this Credit Agreement.
8.6. Franchises, Patents, Copyrights, etc. Each of the Borrower and its
------------------------------------
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
8.7. Litigation. Except as set forth in Schedule 8.7 hereto, there are no
---------- -------- ---
actions, suits, proceedings or investigations of any kind pending or threatened
against the Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined, might, either in
any case or in the aggregate, have a Material Adverse Effect, or materially
impair the right of the Borrower and the Guarantors taken as a whole, to carry
on business substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which
<PAGE>
-44-
question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
8.8. No Materially Adverse Contracts, etc. Neither the Borrower nor any of
------------------------------------
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries is a party to any contract or agreement that has or
is expected, in the judgment of the Borrower's officers, to have any Material
Adverse Effect.
8.9. Compliance with Other Instruments, Laws, etc. Neither the Borrower
--------------------------------------------
nor any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of the Borrower or any of its Subsidiaries.
8.10. Tax Status. Except as set forth on Schedule 8.10, the Borrower and
---------- -------------
its Subsidiaries (a) have made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which any of them is subject, (b) have paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (c) have set aside on their books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Borrower know of no basis for any such claim.
8.11. No Event of Default. No Event of Default has occurred and is
-------------------
continuing.
8.12. Holding Company and Investment Company Acts. Neither the Borrower nor
-------------------------------------------
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
8.13. Absence of Financing Statements, etc. Except with respect to
------------------------------------
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or any
rights relating thereto.
<PAGE>
-45-
8.14. Perfection of Security Interest. All filings, assignments, pledges
-------------------------------
and deposits of documents or instruments have been made and all other actions
have been taken, or arrangements satisfactory to the Agent have been made for
taking, that are necessary or advisable, under applicable law, to establish and
perfect the Agent's security interest in the Collateral. The Collateral and the
Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower or a Subsidiary of the
Borrower party to one of the Security Agreements is the owner of the Collateral
free from any lien, security interest, encumbrance and any other claim or
demand, except for Permitted Liens.
8.15. Certain Transactions. None of the officers, directors, or employees
--------------------
of the Borrower or any of its Subsidiaries is presently a party to any
transaction with the Borrower or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
8.16. Employee Benefit Plans.
----------------------
8.16.1. In General. Each Employee Benefit Plan and each
----------
Guaranteed Pension Plan has been maintained and operated in compliance in
all material respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as required by (S)412 of
ERISA. Upon the request of the Agent, the Borrower will deliver to the
Agent the most recently completed annual report, Form 5500, with all
required attachments, and actuarial statement required to be submitted
under (S)103(d) of ERISA, with respect to each Guaranteed Pension Plan.
8.16.2. Terminability of Welfare Plans. No Employee Benefit
------------------------------
Plan, which is an employee welfare benefit plan within the meaning of
(S)3(1) or (S)3(2)(B) of ERISA, provides benefit coverage subsequent to
termination of employment, except as required by Title I, Part 6 of ERISA
or the applicable state insurance laws. The Borrower may terminate each
such Plan at any time (or at any time subsequent to the expiration of any
applicable bargaining agreement) in the discretion of the Borrower without
liability to any Person other than for claims arising prior to termination.
8.16.3. Guaranteed Pension Plans. Each contribution required to
------------------------
be made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of (S)302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
<PAGE>
-46-
periods has been received with respect to any Guaranteed Pension Plan, and
neither the Borrower nor any ERISA Affiliate is obligated to or has posted
security in connection with an amendment to a Guaranteed Pension Plan
pursuant to (S)307 of ERISA or (S)401(a)(29) of the Code. No liability to
the PBGC (other than required insurance premiums, all of which have been
paid) has been incurred by the Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any ERISA Reportable
Event (other than an ERISA Reportable Event as to which the requirement of
30 days notice has been waived), or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by
the PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of (S)4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
8.16.4. Multiemployer Plans. Neither the Borrower nor any ERISA
-------------------
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under (S)4201 of ERISA or as a
result of a sale of assets described in (S)4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
(S)4241 or (S)4245 of ERISA or is at risk of entering reorganization or
becoming insolvent, or that any Multiemployer Plan intends to terminate or
has been terminated under (S)4041A of ERISA.
8.17. Use of Proceeds.
---------------
8.17.1. General. The proceeds of the Loans shall be used (a) to
-------
finance all or any portion of the Transaction, (b) to refinance the
Existing Credit Facility and (c) for working capital and general corporate
purposes. The Borrower will obtain Letters of Credit solely for general
corporate purposes.
8.17.2. Regulations U and X. No portion of any Loan is to be
-------------------
used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin stock"
as such terms are used in Regulations U and X of the Board of Governors of
the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
8.17.3. Ineligible Securities. No portion of the proceeds of
---------------------
any Loans is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of knowingly purchasing, or providing credit
support for the
<PAGE>
-47-
purchase of, during the underwriting or placement period or within 30 days
thereafter, any Ineligible Securities underwritten or privately placed.
8.18. Environmental Compliance. To the Borrower's knowledge, and except as
------------------------
set forth on Schedule 8.18 attached hereto:
-------- ----
(a) none of the Borrower, its Subsidiaries or any of their
operations at the Real Estate is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under
the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter "Environmental Laws"), which violation would have a Material
Adverse Effect;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. (S)6903(5), any
hazardous substances as defined by 42 U.S.C. (S)9601(14), any pollutant or
contaminant as defined by 42 U.S.C. (S)9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by
any Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has
ordered that any Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; and no underground tank or
other underground storage receptacle for Hazardous Substances is located on
any portion of the Real Estate; (ii) in the course of any activities
conducted by the Borrower or its Subsidiaries, no Hazardous Substances have
been generated or are being used on the Real Estate except in accordance
with applicable Environmental Laws; (iii) there have been no
<PAGE>
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releases (i.e. any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or
from the properties of the Borrower or its Subsidiaries, which releases
would have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters
and facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental
Laws; and
(d) None of the Borrower and its Subsidiaries or any of the Real
Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby or to the
effectiveness of any other transactions contemplated hereby.
8.19. Subsidiaries, etc. Schedule 8.19(a) sets forth the Subsidiaries
------------------ ----------------
of the Borrower and each Subsidiary. Other than as set forth on Schedule
--------
8.19(b), neither the Borrower nor any Subsidiary of the Borrower is engaged in
- -------
any equity joint venture or partnership with any other Person.
8.20. Bank Accounts. Each Perfection Certificate for the Borrower and
-------------
each Guarantor sets forth the account numbers and location of all domestic
deposit accounts of such Persons.
8.21. Capitalization and Transaction Documents The Borrower has
----------------------------------------
delivered to the Agent true and complete copies of all of the Capitalization
Documents and the Transaction Documents (including any amendments thereto). Each
of the representations and warranties made by the Borrower and its Subsidiaries
in any of the Capitalization Documents and the Transaction Documents was true
and correct in all material respects when made and continue to remain true and
correct in all material respects on the Closing Date, except to the extent that
any of such representations and warranties relate, by the express terms thereof,
solely to a date falling prior to the Closing Date, and except to the extent
that any of such representations and warranties may have been affected by the
consummation of the transactions contemplated and permitted or required by the
Loan Documents.
<PAGE>
-49-
8.22. Chief Executive Office. The Borrower's chief executive office is
----------------------
at 1000 Windward Concourse Parkway, Suite 100, Alpharetta, Georgia 30005, at
which location its books and records are kept. Each of the Guarantors' chief
executive office is as set forth in the Security Agreement to which it is a
party.
8.23. Disclosure. None of this Credit Agreement or any of the other
----------
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact (known to the Borrower or any of its Subsidiaries in the
case of any document or information not furnished by it or any of its
Subsidiaries) necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made not misleading. Except as
otherwise disclosed to the Agent on or prior to the Closing Date, there is no
fact known to the Borrower or any of its Subsidiaries which materially adversely
affects, or which is reasonably likely in the future to have a Material Adverse
Effect, exclusive of effects resulting from changes in general economic
conditions, legal standards or regulatory conditions.
9. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
9.1. Punctual Payment. The Borrower will duly and punctually pay or
----------------
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Commitment Fees, the Agent's fee and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is a party, all in
accordance with the terms of this Credit Agreement and such other Loan
Documents.
9.2. Maintenance of Office. The Borrower will maintain its chief
---------------------
executive office in Alpharetta, Georgia, or at such other place in the United
States of America as the Borrower shall designate upon written notice to the
Agent, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents to which the Borrower is a party may be given or
made.
9.3. Records and Accounts. The Borrower will (a) keep, and cause each
--------------------
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (b) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (c) at all times engage a nationally
recognized independent certified public accounting firm that is currently known
as a "Big Five" accounting firm or another independent certified public
accounting firm satisfactory to the Agent as the independent certified public
accountants of the Borrower and its Subsidiaries and will not permit more than
thirty (30) days to elapse between the cessation of
<PAGE>
-50-
such firm's (or any successor firm's) engagement as the independent certified
public accountants of the Borrower and its Subsidiaries and the appointment in
such capacity of a successor firm as shall be satisfactory to the Agent.
9.4. Financial Statements, Certificates and Information. The Borrower
--------------------------------------------------
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Borrower, (i) the
consolidated balance sheet of the Borrower and its Subsidiaries, as at the
end of such year, and the related consolidated statement of income and
consolidated statement of cash flow for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
consolidated statements to be in reasonable detail, prepared in accordance
with generally accepted accounting principles, certified without
qualification by a nationally recognized independent certified public
accounting firm that is currently known as a "Big Five" accounting firm or
by another independent certified public accounting firm satisfactory to the
Agent, together with a written statement from such accountants to the
effect that they have read a copy of this Credit Agreement, and that, in
making the examination necessary to said certification, they have obtained
no knowledge of any Default or Event of Default, or, if such accountants
shall have obtained knowledge of any then existing Default or Event of
Default they shall disclose in such statement any such Default or Event of
Default; provided that such accountants shall not be liable to the Banks
--------
for failure to obtain knowledge of any Default or Event of Default; and,
provided further that the consolidated information required by this
-------- -------
paragraph may be satisfied by delivery by the Borrower within such ninety
(90) day period of the Borrower's Form 10-K for such fiscal year and (ii)
the unaudited Consolidating balance sheet as at the end of such year and
the related unaudited Consolidating statement of income for such year, each
setting forth in comparative form the figures for the previous fiscal year
and all such unaudited Consolidating statements to be in reasonable detail
and prepared in accordance with generally accepted accounting principles;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Borrower, (i) the unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such quarter and the related unaudited
consolidated statement of income and unaudited consolidated statement of
cash flow for the portion of the Borrower's fiscal year then elapsed, and
(ii) the unaudited Consolidating balance sheet as at the end of such
quarter and the related unaudited Consolidating statement of income for the
portion of the Borrower's fiscal year then elapsed, all in reasonable
detail and prepared in accordance with generally accepted accounting
principles, together with a certification by the principal financial or
accounting officer of the Borrower that the information contained in such
financial statements fairly presents
<PAGE>
-51-
the financial position of the Borrower and its Subsidiaries on the date
thereof (subject to year-end adjustments); provided that the consolidated
--------
information required by this paragraph may be satisfied by the Borrower
within such forty-five (45) day period of the Borrower's Form 10-Q for such
fiscal quarter;
(c) as soon as practicable, but in any event no later than
ninety (90) days after the end of each fiscal year of the Borrower, a
management prepared budget for the next fiscal year of the Borrower.
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the Borrower in substantially
the form of Exhibit E hereto and setting forth in reasonable detail
------- -
computations evidencing compliance with the covenants contained in (S)11
and (if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
(e) as soon as practicable, but in any event not later than
forty-five (45) days after the end of any fiscal quarter, copies of all
publicly available material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of the Borrower during
such fiscal quarter;
(f) if any Revolving Credit Loans are outstanding or requested,
within twenty (20) days after the end of each calendar month or at such
earlier time as the Agent may reasonably request, a Borrowing Base Report
setting forth the Borrowing Base as at the end of such calendar month or
other date so requested by the Agent;
(g) if any Revolving Credit Loans are outstanding or requested,
within twenty (20) days after the end of each calendar month, an Accounts
Receivable aging report; and
(h) from time to time such other financial data and information
(including accountants management letters) as the Agent or any Bank may
reasonably request.
9.5. Notices.
-------
9.5.1. Defaults. The Borrower will promptly notify the Agent
--------
and each of the Banks in writing of the occurrence of any Default or Event
of Default. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal,
<PAGE>
-52-
guarantor, surety or otherwise, the Borrower shall forthwith give written
notice thereof to the Agent and each of the Banks, describing the notice or
action and the nature of the claimed default.
9.5.2. Environmental Events. The Borrower will promptly give notice
--------------------
to the Agent and each of the Banks (a) of any violation of any
Environmental Law that the Borrower or any of its Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any
written report supplemental to any oral report is made) to any federal,
state or local environmental agency and (b) upon becoming aware thereof, of
any inquiry, proceeding, investigation, or other action, including a notice
from any agency of potential environmental liability, of any federal, state
or local environmental agency or board, that has the potential to have a
Material Adverse Effect.
9.5.3. Notification of Claim against Collateral. The Borrower will,
----------------------------------------
immediately upon becoming aware thereof, notify the Agent and each of the
Banks in writing of any setoff, claims (including, with respect to the Real
Estate, environmental claims), withholdings or other defenses to which any
of the Collateral, or the Agent's rights with respect to the Collateral,
are subject.
9.5.4. Notice of Litigation and Judgments. The Borrower will, and
----------------------------------
will cause each of its Subsidiaries to, give notice to the Agent and each
of the Banks in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect and stating the nature and status of such litigation or proceedings.
The Borrower will, and will cause each of its Subsidiaries to, give notice
to the Agent and each of the Banks, in writing, in form and detail
satisfactory to the Agent, within ten (10) days of any judgment not covered
by insurance, final or otherwise, against the Borrower or any of its
Subsidiaries in an amount in excess of $1,000,000.
9.6. Corporate Existence; Maintenance of Properties. The Borrower will do
----------------------------------------------
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times,
<PAGE>
-53-
and (c) will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this (S)9.6 shall prevent the Borrower from
- --------
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Borrower, desirable in the conduct of its or their business and that do not in
the aggregate have a Material Adverse Effect.
9.7. Insurance. The Borrower will, and will cause each of its Subsidiaries
---------
to, maintain with financially sound and reputable insurers insurance with
respect to its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreements.
9.8. Taxes. The Borrower will, and will cause each of its Subsidiaries to,
-----
duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
-------- -------
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
9.9. Inspection of Properties and Books, etc.
---------------------------------------
9.9.1. General. The Borrower shall permit the Banks, through the
-------
Agent or any of the Banks' other designated representatives, to visit and
inspect any of the properties of the Borrower or any of its Subsidiaries,
to examine the books of account of the Borrower and its Subsidiaries (and
to make copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times during regular business hours and intervals as the Agent or any Bank
may reasonably request and, so long as no Event of Default has occurred and
is continuing, upon reasonable prior notice.
9.9.2. Collateral Reports. No more frequently than once during
------------------
each calendar year, or more frequently as determined by the Agent if an
Event of Default shall have occurred and be continuing, upon the request of
the Agent, the Borrower will obtain and deliver to the Agent, or, if the
Agent so elects, will cooperate with the Agent in the Agent's obtaining, a
report of an
<PAGE>
-54-
independent collateral auditor satisfactory to the Agent (which may be
affiliated with one of the Banks) with respect to the Accounts Receivable
included in the Borrowing Base, which report shall indicate whether or not
the information set forth in the Borrowing Base Report most recently
delivered is accurate and complete in all material respects based upon a
review by such auditors of the Accounts Receivable (including verification
with respect to the amount, aging, identity and credit of the respective
account debtors and the billing practices of the Borrower or its applicable
Subsidiary). All such collateral value reports shall be conducted and made
at the expense of the Borrower.
9.9.3. Environmental Assessments. Whether or not an Event of Default
-------------------------
shall have occurred, the Agent may, from time to time, if it reasonably
believes there has been a violation of Environmental Law, obtain one or
more environmental assessments or audits of the Real Estate prepared by a
hydrogeologist, an independent engineer or other qualified consultant or
expert approved by the Agent to evaluate or confirm (a) whether any
Hazardous Materials are present in the soil or water at such property and
(b) whether the use and operation of such property complies with all
Environmental Laws; provided, however, notwithstanding anything to the
-------- -------
contrary contained in this (S)9.9.3, the Agent shall not obtain any
assessment or audit on any leased Real Estate if the Lease pertaining to
such Real Estate prohibits the Borrower from permitting the Agent to obtain
such assessments or audits. Environmental assessments may include without
limitation detailed visual inspections of such property including any and
all storage areas, storage tanks, drains, dry wells and leaching areas, and
the taking of soil samples, surface water samples and ground water samples,
as well as such other investigations or analyses as the Agent deems
appropriate. All such environmental assessments shall be conducted and made
at the expense of the Borrower.
9.9.4. Communications with Accountants. The Borrower authorizes the
-------------------------------
Agent and, if accompanied by the Agent, the Banks to communicate directly
with the Borrower's independent certified public accountants and authorizes
such accountants to disclose to the Agent and the Banks any and all
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 the Borrower or any of its
Subsidiaries, provided, however, that the Agent or such Bank shall be
-------- -------
accompanied by a designated officer or director of the Borrower or such
other Person designated to accompany the Agent or such Bank by an officer
or director, and the Borrower shall make such designated officer, director
or such other designated Person readily available for such communications.
At the request of the Agent, the Borrower shall deliver a letter addressed
to such accountants instructing them to comply with the provisions of this
(S)9.9.4.
<PAGE>
-55-
9.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower
------------------------------------------------------
will, and will cause each of its Subsidiaries to, comply with (a) the applicable
laws and regulations wherever its business is conducted, including all
Environmental Laws, (b) the provisions of its charter documents and by-laws, (c)
all agreements and instruments by which it or any of its properties may be bound
and (d) all applicable decrees, orders, and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Borrower
or any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Subsidiary is a party,
the Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Borrower or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish the Agent and the Banks with evidence thereof.
9.11. Employee Benefit Plans. The Borrower will (a) promptly upon filing
----------------------
the same with the Department of Labor or Internal Revenue Service upon request
of the Agent, furnish to the Agent a copy of the most recent actuarial statement
required to be submitted under (S)103(d) of ERISA and Annual Report, Form 5500,
with all required attachments, in respect of each Guaranteed Pension Plan and
(b) promptly upon receipt or dispatch, furnish to the Agent any notice, report
or demand sent or received in respect of a Guaranteed Pension Plan under
(S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect
of a Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245 of ERISA.
9.12. Use of Proceeds. The Borrower will use the proceeds of the Loans
---------------
solely for the purposes specified in (S)8.17.1. The Borrower will obtain Letters
of Credit solely for general corporate purposes.
9.13. New Guarantors. The Borrower will cause each Domestic Subsidiary
--------------
created, acquired or otherwise existing, on or after the Closing Date to
immediately become a Guarantor and shall cause such Subsidiary to execute and
deliver to the Agent, for the benefit of the Agent and the Banks, (a) a
Guaranty, and (b) further Security Documents or other instruments and documents
as the Agent may require in order to grant to the Agent a first priority
perfected security interest in such Subsidiary's assets, together with legal
opinions in form and substance satisfactory to the Agent to be delivered to the
Agent and the Banks opining as to authorization validity and enforceability of
such Guaranty and Security Documents and (as to the applicable Security
Documents) the perfection of such Security interests.
9.14. Copyright Registration. The Borrower agrees to cause Pivotpoint,
----------------------
Inc. and its Subsidiaries to register copyrights for all software products with
the United States Copyright Office not later than one hundred eighty (180) days
after the Closing Date. In addition, the Borrower hereby agrees to, and to cause
each of its Subsidiaries to, register copyrights for all software products with
the United States Copyright Office within sixty (60) days of marketing any new
product and the Borrower shall, and shall cause each of its Subsidiaries to,
simultaneously with such
<PAGE>
registration, execute and deliver to the Bank for recordation with the United
States Copyright Office an amendment to the Copyright Memorandum covering such
registered copyrights in form and substance satisfactory to the Agent.
9.15. Interest Rate Protection. The Borrower will, not later than ninety
------------------------
(90) days from the Closing Date, purchase an interest rate cap or swap or effect
other interest rate protection arrangements for a minimum period of not less
than two (2) years and in an amount equal to not less than fifty percent (50%)
of the outstanding principal amount of the Term Loans.
9.16. Cash Management. At all times after the occurrence of an Event of
---------------
Default, at the request of the Agent, the Borrower will, and will cause each of
its Subsidiaries to, together with the employees, agents and other Persons
acting on behalf of the Borrower or such Subsidiary, cause all cash receipts and
all payments constituting proceeds of accounts receivable, or other Collateral
to be paid, in the form received, with any appropriate endorsements, into an
account with the Agent or such other account, which shall be subject to an
agency agreement as shall be satisfactory to the Agent.
9.17. Additional Subsidiaries. If, after the Closing Date, the Borrower or
-----------------------
any of its Subsidiaries creates or acquires, either directly or indirectly, any
Subsidiary, it will immediately notify the Agent of such creation or
acquisition, as the case may be, and provide the Agent with an updated Schedule
8.19 and take all other actions required by (S)9.13 hereof.
9.18. Further Assurances. The Borrower will, and will cause each of its
------------------
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligations to issue,
extend or renew any Letters of Credit:
10.1. Restrictions on Indebtedness. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any of
the Loan Documents;
<PAGE>
-57-
(b) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(c) Subordinated Debt in an amount and on terms and conditions
approved by the Majority Banks in writing;
(d) Indebtedness incurred in connection with the acquisition after
the date hereof of any real or personal property by the Borrower or such
Subsidiary or under any Capitalized Lease, provided that the aggregate
--------
principal amount of such Indebtedness of the Borrower and its Subsidiaries
shall not exceed the aggregate amount of $5,000,000 at any one time;
(e) Indebtedness existing on the date hereof and listed and described
on Schedule 10.1 hereto;
-------- ----
(f) Indebtedness of any Guarantor to the Borrower or of the Borrower
to any Guarantor so long as such Guarantor remains a Guarantor hereunder,
has otherwise complied with the provisions of (S)7.1 hereof and remains a
Subsidiary of the Borrower;
(g) Indebtedness of the Borrower consisting of a guaranty by the
Borrower of loans to employees of the Borrower, provided that the aggregate
principal amount of such Indebtedness of the Borrower shall not exceed the
aggregate amount of $1,000,000 at any one time;
(h) Indebtedness of the Borrower in respect of the interest rate
protection arrangements required pursuant to (S)9.15 hereof and any
interest rate swap, cap, collar or similar arrangements or foreign currency
exchange transactions so long as such arrangements are not for speculative
purposes;
(i) unsecured Indebtedness of the Borrower or any Subsidiary
consisting of a guaranty by the Borrower or such Subsidiary of Indebtedness
permitted to be incurred under this (S)10.1;
(j) Indebtedness of the Borrower or any Subsidiary in respect of
performance bond and completion guaranties provided by the Borrower or any
Subsidiary in the ordinary course of business, provided that the aggregate
principal amount of such Indebtedness shall not exceed the aggregate amount
of $2,000,000 at any one time;
(k) Indebtedness of Foreign Subsidiaries to the Borrower in an
aggregate amount not to exceed $2,500,000 at any one time outstanding;
(l) Indebtedness of the Borrower in respect of equity related
purchase obligations arising under its stock option plan or executive
compensation plans; and
<PAGE>
-58-
(m) other unsecured Indebtedness of the Borrower or any Subsidiary
in an aggregate amount not to exceed $1,000,000 at any one time, provided
that such Indebtedness is on terms and conditions (including without
limitation default provisions) which are no more onerous than the terms of
this Credit Agreement.
10.2. Restrictions on Liens. The Borrower will not, and will not permit any
---------------------
of its Subsidiaries to, (a) create or incur or suffer to be created or incurred
or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or
other security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors; (c) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; (d) suffer to exist for a period of more than
thirty (30) days after the same shall have been incurred any Indebtedness or
claim or demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (e) sell, assign, pledge or otherwise transfer any "receivables"
as defined in clause (g) of the definition of the term "Indebtedness," with or
without recourse; or (f) enter into or permit to exist any arrangement or
agreement, enforceable under applicable law, which directly or indirectly
prohibits the Borrower or any of its Subsidiaries from creating or incurring any
lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest other than in favor of the Agent for the benefit of the Banks and the
Agent under the Loan Documents and other than customary anti-assignment
provisions in leases and licensing agreements entered into by the Borrower or
such Subsidiary in the ordinary course of its business, provided that the
--------
Borrower or any of its Subsidiaries may create or incur or suffer to be created
or incurred or to exist:
(i) liens in favor of the Borrower on all or part of the assets of
Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of
the Borrower to the Borrower;
(ii) liens to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties to secure
claims for labor, material or supplies in respect of obligations not
overdue;
(iii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations or deposits made in
connection with performance bonds obtained in the ordinary course of
business;
(iv) liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the
Borrower or
<PAGE>
-59-
such Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(v) liens of carriers, warehousemen, mechanics and materialmen,
and other like liens, in existence less than 120 days from the date of
creation thereof in respect of obligations not overdue;
(vi) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the Borrower is
a party, and other minor liens or encumbrances none of which in the opinion
of the Borrower interferes materially with the use of the property affected
in the ordinary conduct of the business of the Borrower and its
Subsidiaries, which defects do not individually or in the aggregate have a
Material Adverse Effect;
(vii) liens existing on the date hereof and listed on Schedule 10.2
-------- ----
hereto;
(viii) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof to
secure purchase money Indebtedness of the type and amount permitted by
(S)10.1(d), incurred in connection with the acquisition of such property,
which security interests or mortgages cover only the real or personal
property so acquired and liens in favor of lessors under Capitalized Leases
on assets subject to Capitalized Leases permitted by (S)10.1(d) hereof;
(ix) liens in favor of the Agent for the benefit of the Banks and
the Agent under the Loan Documents; and
(x) liens to secure Indebtedness of the type and amount permitted
by (S)10.1(g).
10.3. Restrictions on Investments. The Borrower will not, and will not
---------------------------
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase
by the Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks or banks organized under the laws
of any country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any
such country, provided that such bank is acting through a branch or
<PAGE>
-60-
agency located in the country in which it is organized or another country
which is also a member of the OECD, having in each case total capital and
surplus in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and at least two of the ratings for which are (i) not less than "P 1" if
rated by Moody's Investors Service, Inc. ("Moody's"), (ii) not less than "A
1" if rated by Standard and Poor's Rating Group ("S&P") and (iii) not less
than "F1" if rated by Fitch Investors Service, Inc. ("Fitch");
(d) corporate notes and corporate bonds with maturities of no greater
than one year that at the time of purchase have been rated and at least two
of the ratings for which are (i) not less than "A2" if rated by Moody's,
(ii) not less than "A" if rated by S&P, and (iii) not less than "A" if
rated by Fitch.
(e) taxable and/or tax-exempt municipal notes/bonds with maturities
of no greater than one year that at the time of purchase have been rated at
least "MIG1/VMIG1" by Moody's and "SP1" by S&P, provided that if only long-
term ratings are available, such note/bond must be at least "AAA" rated.
(f) taxable and/or tax-exempt municipal auction rate securities with
reset mechanisms of no greater than one year that at the time of purchase
have been rated and at least two of the long-term credit ratings for which
are (i) not less than "Aaa" if rated by Moody's, (ii) not less than "AAA"
if rated by S&P, and (iii) not less than "AAA" if rated by Fitch.
(g) Investments existing on the date hereof and listed on Schedule
--------
10.3 hereto;
----
(h) Investments with respect to Indebtedness permitted by (S)10.1(f)
so long as such entities remain Subsidiaries of the Borrower and remains a
Guarantor hereunder;
(i) Investments consisting of the Guaranty or Investments by the
Borrower in Guarantors, so long as such Guarantor remains a Guarantor
hereunder and a Subsidiary of the Borrower and the Borrower and such
Guarantor shall have otherwise complied with the provisions of (S)7 hereof;
(j) Investments consisting of promissory notes received as proceeds
of asset dispositions permitted by (S)10.5.2;
(k) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
<PAGE>
-61-
course of business not to exceed $500,000 in the aggregate at any time
outstanding;
(l) Investments consisting of Investments in money-market mutual
funds consisting entirely of (i) United States treasury or agency funds;
(ii) the Boston 1784 Funds and any successor fund thereto; (iii) Fidelity
Investment money-market funds which are open-end investment companies
registered under the Investment Company Act of 1940, as amended; and (iv)
other money market mutual funds acceptable to the Agent;
(m) (i) Investments in the form of stock in MAPICS University in an
aggregate amount not to exceed 150,000 shares of the capital stock of the
Borrower and only to the extent that the consideration provided by the
Borrower for such Investment is solely in the form of capital stock of the
Borrower, (ii) Investments in MAPICS Business Solutions in an aggregate
amount not to exceed $3,250,000, and (iii) so long as on the date of
determination the Leverage Ratio calculated on a pro forma basis to
---------
include, among other things, any Indebtedness incurred or to be incurred to
fund such Investments, is less than or equal to 1.50:1.00, other
Investments which are or are intended to further the business interest of
the Borrower (including, without limitation, joint venture entities),
provided, the principal amount of all such Investments made pursuant to
--------
this (S)10.3(m) shall not exceed $32,000,000 in the aggregate at any time
outstanding and, provided, further that the principal amount of all such
-------- -------
Investments made pursuant to this (S)10.3(m) which are made with any
consideration other than the capital stock of the Borrower shall not exceed
$16,000,000 in the aggregate at any time outstanding;
(n) Investments with respect to Indebtedness permitted by (S)10.1(k)
so long as such entities remain Subsidiaries of the Borrower and equity
Investments of the Borrower in Foreign Subsidiaries, provided, that the
aggregate amount of all such Investments made pursuant to this (S)10.3(n)
does not exceed $2,500,000 at any time outstanding;
provided, however, that, with the exception of demand deposits referred to in
- -------- -------
(S)10.3(b) and loans and advances referred to in (S)10.3(k), such Investments
will be considered Investments permitted by this (S)10.3 only if all actions
have been taken to the satisfaction of the Agent to provide to the Agent, for
the benefit of the Banks and the Agent, a first priority perfected security
interest in all of such Investments free of all encumbrances other than
Permitted Liens.
10.4. Restricted Payments. Neither the Borrower nor any Subsidiary will make
-------------------
any Restricted Payment, provided, however, notwithstanding anything to the
contrary contained in this Credit Agreement, so long as no Default or Event of
Default has occurred a nd is continuing or would exist as a result thereof, (a)
any Subsidiary of the Borrower shall be permitted to make a Restricted Payment
to the Borrower or a Guarantor and (b) the Borrower shall be permitted to make
<PAGE>
-62-
Distributions to employees, officers, consultants and directors of the Borrower
pursuant to the terms of the Borrower's stock option plan and executive
compensation plans in an aggregate amount not to exceed $10,000,000.
10.5. Merger, Consolidation and Disposition of Assets.
-----------------------------------------------
10.5.1. Mergers and Acquisitions. The Borrower will not, and will not
------------------------
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary course of
business consistent with past practices) except (a) the Transaction, (b)
the Investments permitted pursuant to (S)10.3(m)(ii) and (iii), and (c) the
merger or consolidation of one or more of the Subsidiaries of the Borrower
with and into the Borrower.
10.5.2. Disposition of Assets. The Borrower will not, and will not
---------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition of assets, other than (a) the sale of inventory, the
licensing of intellectual property and the disposition of obsolete assets,
in each case in the ordinary course of business consistent with past
practices, and (b) so long as no Default or Event of Default has occurred
and is continuing or would exist as a result thereof, any Asset Sale so
long as the Borrower or the Subsidiary receives fair and reasonable
consideration in cash for any such assets sold or otherwise disposed of in
such Asset Sale and the aggregate value of all such assets sold or
otherwise disposed of by the Borrower and its Subsidiaries in any twelve
(12) consecutive month period does not exceed ten percent (10%) of the
value of the Total Assets of the Borrower and its Subsidiaries in such
twelve (12) month period.
10.6. Sale and Leaseback. The Borrower will not, and will not permit any of
------------------
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property or lease
other property that the Borrower or any Subsidiary of the Borrower intends to
use for substantially the same purpose as the property being sold or
transferred.
10.7. Compliance with Environmental Laws. The Borrower will not, and will
----------------------------------
not permit any of its Subsidiaries to, (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner so
as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Hazardous Substances on, upon or into the Real
Estate or (e) otherwise conduct any activity at any Real Estate or use any Real
Estate in any
<PAGE>
-63-
manner that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law.
10.8. Subordinated Debt. The Borrower will not, and will not permit any of
-----------------
its Subsidiaries to, amend, supplement or otherwise modify the terms of any of
the Subordinated Debt or prepay, redeem or repurchase any of the Subordinated
Debt.
10.9. Employee Benefit Plans. Neither the Borrower nor any ERISA Affiliate
----------------------
will
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, in excess
of $1,000,000, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to (S)302(f) or (S)4068 of
ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans by more than $1,000,000, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess of
benefit liabilities.
10.10. Business Activities. The Borrower will not, and will not permit any
-------------------
of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
10.11. Fiscal Year. The Borrower will not, and will not permit any of it
-----------
Subsidiaries to, without the written consent of the Agent, change the date of
the end of its fiscal year from that set forth in (S)8.4.1.
10.12. Transactions with Affiliates. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, engage in any transaction with any Affiliate
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring
<PAGE>
-64-
payments to or from any such Affiliate or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any such Affiliate has
a substantial interest or is an officer, director, trustee or partner, on terms
more favorable to such Person than would have been obtainable on an arm's-length
basis in the ordinary course of business.
10.13. Upstream Limitations. The Borrower will not, and will not permit
--------------------
any of its Subsidiaries to, enter into any agreement, contract or arrangement
(other than the Credit Agreement and the other Loan Documents) restricting the
ability of any Subsidiary to pay or make dividends or distributions in cash or
kind to the Borrower, to make loans, advances or other payments of whatsoever
nature to the Borrower, or to make transfer or distributions of all or any part
of its assets to the Borrower.
10.14. Inconsistent Agreements. The Borrower will not, and will not permit
-----------------------
any of its Subsidiaries to, enter into any agreement containing any provision
which would be violated or breached by the performance by the Borrower or any of
its Subsidiaries of their respective obligations hereunder or under any of the
Loan Documents.
10.15. Modification of Documents and Charter Documents. The Borrower will
-----------------------------------------------
not, nor will it permit any of its Subsidiaries to, consent to or agree to any
amendment, supplement or other modification to the Transaction Documents or the
Capitalization Documents without the prior written consent of the Agent unless
such amendment, supplement or modification would not have any material adverse
effect on the Agent's or the Bank's rights under the Loan Documents or the
Borrower's or any of its Subsidiaries' obligations under the Loan Documents.
11. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
11.1. Leverage Ratio. The Borrower will not, at any time during any period
--------------
described in the table set forth below permit the Leverage Ratio for such period
to exceed the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Period Rate
-----------------------------------------------------------------
<S> <C>
Closing Date - June 30, 2000 2.25:1.00
-----------------------------------------------------------------
July 1, 2000 - September 30, 2000 2.00:1.00
-----------------------------------------------------------------
October 1, 2000 - March 31, 2001 1.75:1.00
-----------------------------------------------------------------
At any time thereafter 1.50:1.00
-----------------------------------------------------------------
</TABLE>
<PAGE>
-65-
11.2. Consolidated Operating Cash Flow to Debt Service. The Borrower will
------------------------------------------------
not, as of the end of any fiscal quarter ending during any period described in
the table set forth below, permit the ratio of (a) Consolidated Operating Cash
Flow for the Reference Period ending on such date to (b) the sum of (i)
Consolidated Financial Obligations plus (ii) Consolidated Total Interest Expense
----
for such Reference Period to be less than the ratio set forth opposite such
period in such table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Period Rate
-----------------------------------------------------------------
<S> <C>
March 31 - September 30, 2000 2.00:1.00
-----------------------------------------------------------------
December 31, 2000 - September 30, 2001 1.35:1.00
-----------------------------------------------------------------
Each fiscal quarter ending thereafter 1.50:1.00
-----------------------------------------------------------------
</TABLE>
11.3. Profitable Operations. The Borrower will not, as of the end of any
---------------------
fiscal quarter ending during any period described in the table set forth below,
permit Adjusted EBITDA at the end of such quarter to be less than the amount set
forth opposite such period in such table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Period Amount
-----------------------------------------------------------------
<S> <C>
March 31, 2000 $ 7,000,000
-----------------------------------------------------------------
June 30, 2000 $ 9,750,000
-----------------------------------------------------------------
September 30, 2000 $14,000,000
-----------------------------------------------------------------
December 31, 2000 $10,500,000
-----------------------------------------------------------------
March 31, 2001 $10,000,000
-----------------------------------------------------------------
June 30, 2001 $11,500,000
-----------------------------------------------------------------
Any time thereafter $12,000,000
-----------------------------------------------------------------
</TABLE>
11.4. Quick Ratio. The Borrower will not, at any time during any period
-----------
described in the table set forth below, permit the ratio of Consolidated Quick
Assets to Consolidated Current Liabilities to be less than the ratio set forth
opposite such period in such table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Period Rate
-----------------------------------------------------------------
<S> <C>
Closing Date - March 31, 2002 0.80:1.00
-----------------------------------------------------------------
At any time thereafter 1.10:1.00
-----------------------------------------------------------------
</TABLE>
11.5. Operating Leases. The Borrower will not, nor will it permit any of
----------------
its Subsidiaries to, as lessee, enter into, permit to exist, or renew any
agreements to rent or lease any real or personal property if the aggregate
annual amount of payments made or to be made in respect of Rental Obligations
under all such
<PAGE>
-66-
agreements will exceed $10,000,000 in any fiscal year. Compliance with this
(S)11.5 shall be measured at the end of each fiscal quarter, and shall be
determined by calculating the actual Rental Obligations of the Borrower and its
Subsidiaries for the period of the first day of the fiscal year in which such
calculation is being determined through the date of determination plus the
----
projected Rental Obligations of the Borrower and its Subsidiaries which are to
be made for the remainder of such fiscal year.
12. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit Loans and
the Term Loan and of the Agent to issue any Letters of Credit shall be subject
to the satisfaction of the following conditions precedent on or prior to the
Closing Date:
12.1. Loan Documents etc.
------------------
12.1.1. Loan Documents. Each of the Loan Documents shall have been
--------------
duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to
each of the Banks. Each Bank shall have received a fully executed copy of
each such document.
12.1.2. Transaction Documents. Each of the Transaction Documents
---------------------
shall have been duly executed and delivered by the respective parties
thereto, shall be in full force and effect and shall be in form and
substance satisfactory to each of the Banks. Each Bank shall have received
a fully executed copy of each such document.
12.2. Certified Copies of Charter Documents. Each of the Banks shall have
-------------------------------------
received from the Borrower and each Guarantor, a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing Date,
of each of (a) its charter or other incorporation documents as in effect on such
date of certification, and (b) its by-laws as in effect on such date.
12.3. Corporate Action. All corporate action necessary for the valid
----------------
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
12.4. Incumbency Certificate. Each of the Banks shall have received from
----------------------
the Borrower and each Guarantor, an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of the Borrower or such
Subsidiary, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of the Borrower or such Subsidiary, each of the Loan Documents to which the
Borrower or such Subsidiary is or is to become a party; (b) in the case of the
Borrower, to make Loan Requests
<PAGE>
-67-
and Conversion Requests and to apply for Letters of Credit; and (c) to give
notices and to take other action on its behalf under the Loan Documents.
12.5. Validity of Liens. The Security Documents shall be effective to
-----------------
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
and lien upon the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to the
Agent.
12.6. Perfection Certificates and UCC Search Results. The Agent shall have
----------------------------------------------
received from the Borrower and each Guarantor a completed and fully executed
Perfection Certificate and the results of UCC searches with respect to the
Collateral, indicating no liens other than Permitted Liens and otherwise in form
and substance satisfactory to the Agent.
12.7. Certificates of Insurance. The Agent shall have received (a) a
-------------------------
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained and naming the
Agent as loss payee and additional insured in accordance with the provisions of
the Security Agreements and (b) certified copies of all policies evidencing such
insurance (or certificates therefore signed by the insurer or an agent
authorized to bind the insurer).
12.8. Opinion of Counsel. Each of the Banks and the Agent shall have
------------------
received a favorable legal opinion addressed to the Banks and the Agent, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from Alston & Bird LLP, counsel to the Borrower and its Subsidiaries.
12.9. Satisfaction of Conditions of Merger Agreement. The Agent shall have
----------------------------------------------
received evidence that all of the closing conditions in the Merger Agreement
have been satisfied without recourse to any provision permitting the waiver by
any party thereto of any condition, obligation, covenant or other requirement
and the Merger has occurred.
12.10. Completion of Transaction, etc. The Transaction shall have been
------------------------------
completed pursuant to the Transaction Documents and otherwise on terms and
conditions that are satisfactory to the Agent in all respects including (a) the
purchase price paid in connection with the Merger shall not exceed $48,000,000
in the aggregate; (b) the working capital shall not be less than the amount set
forth in the Merger Agreement; (c) the assumption of certain transaction
expenses of Pivotpoint, Inc. shall not exceed $500,000 in the aggregate; (d) the
assumption of certain other liabilities of Pivotpoint, Inc. acceptable to the
Agent in an amount not to exceed $2,750,000 in the aggregate; and (e) the
assumption of senior secured
<PAGE>
-68-
funded indebtedness of Pivotpoint, Inc. in an amount not to exceed $2,800,000,
such indebtedness to be immediately repaid on the Closing Date.
12.11. Completion of Successful Financial Inquiry. The Agent and the Banks
------------------------------------------
shall be satisfied that all information provided to the Agent prior to the
Closing Date accurately sets for the cash flow for such period attributable to
the assets and business to be acquired in the Transaction.
12.12. Consents and Approvals. The Agent shall have received evidence that
----------------------
all consents and approvals necessary to complete the Transaction and the
transactions contemplated hereby have been obtained.
12.13. Capital Structure. The Agent shall have received a certificate from
-----------------
the Borrower demonstrating that on the Closing Date, on a pro forma basis after
---------
giving effect to the Transaction and after giving effect to the borrowings
hereunder (a) the Leverage Ratio, does not exceed 2.15:1.00, (b) Adjusted EBITDA
is not less than $18,600,000, and (c) outstanding Revolving Credit Loans do not
exceed $0.
12.14. Payment of Fees. The Borrower shall have paid to the Banks or the
----------------
Agent, as appropriate, the closing fee and the Agent's fee provided for in, and
shall have complied with all other arrangements set forth in, the Fee Letter.
12.15. Payoff of Existing Obligations. The Agent shall have received
------------------------------
evidence that all loans and obligations outstanding under the Existing Credit
Agreement have been repaid and all commitments to lend thereunder have been
terminated.
12.16. Disbursement Instructions. The Agent shall have received
-------------------------
disbursement instructions from the Borrower, indicating that a portion of the
proceeds of the Loans are paid to satisfy the obligations described in
(S)8.17.1.
13. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Loan, including the Revolving
Credit Loan and the Term Loan, and of the Agent to issue, extend or renew any
Letter of Credit, in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:
13.1. Representations True; No Event of Default. Each of the
-----------------------------------------
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted or not prohibited by this Credit Agreement and the
other Loan Documents and changes occurring in the
<PAGE>
-69-
ordinary course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
13.2. No Legal Impediment. No change shall have occurred in any law or
-------------------
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
13.3. Governmental Regulation. Each Bank shall have received such
-----------------------
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
13.4. Proceedings and Documents. All proceedings in connection with the
-------------------------
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
13.5. Borrowing Base Report. Prior to the making of any Revolving Credit
---------------------
Loan, Agent shall have received the most recent Borrowing Base Report required
to be delivered to the Agent in accordance with (S)9.4(f) and, if requested by
the Agent, a Borrowing Base Report dated within three (3) days of the Drawdown
Date of such Loan or of the date of issuance, extension or renewal of such
Letter of Credit.
14. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
14.1. Events of Default and Acceleration. If any of the following events
----------------------------------
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Borrower or any of its Subsidiaries shall fail to pay any
interest on the Loans, the commitment fee, any Letter of Credit Fee, the
Agent's fee, or other sums due hereunder or under any of the other Loan
Documents, when the same shall become due and payable, whether at the
<PAGE>
-70-
stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in (S)(S)9.1, 9.2, 9.4, 9.5.1, 9.6, 9.9, and 9.12 - 9.17, (S)10
or (S)11;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this (S)14.1) for
fifteen (15) days after written notice of such failure has been given to
the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or
in any other document or instrument delivered pursuant to or in connection
with this Credit Agreement shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated,
provided, if any good faith representation made by the Borrower on the
--------
Closing Date as to Pivotpoint, Inc. shall prove to have been false in any
material respect on such date, such an event shall not constitute a default
hereunder if all consequences, liabilities and claims associated with such
false representation are in an amount which does not exceed $10,000,000 in
the aggregate;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases
in an aggregate amount in excess of $250,000, or fail to observe or perform
any material term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing borrowed money or credit received
or in respect of any Capitalized Leases in an aggregate amount in excess of
$250,000 for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries (other than a Non-
Material Subsidiary unless the Borrower or any other Subsidiary has been
adversely effected by the occurrence of such event (such a Non-Material
Subsidiary causing no adverse effect being hereinafter referred to as a
"Deminimis Subsidiary")) shall make an assignment for the benefit of
creditors, or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition or apply for
the appointment of a trustee or other custodian, liquidator or receiver of
the Borrower or any of its Subsidiaries (other than a Deminimis Subsidiary)
or of any substantial part of the assets of the Borrower or any of its
Subsidiaries (other than a Deminimis Subsidiary) or shall commence any case
or other proceeding relating to the Borrower or any of its Subsidiaries
(other than a Deminimis
<PAGE>
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Subsidiary) under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other proceeding
shall be commenced against the Borrower or any of its Subsidiaries (other
than a Deminimis Subsidiary) and the Borrower or any of its Subsidiaries
(other than a Deminimis Subsidiary) shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition or application
shall not have been dismissed within forty-five (45) days following the
filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of
its Subsidiaries (other than a Deminimis Subsidiary) bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree
or order for relief is entered in respect of the Borrower or any Subsidiary
(other than a Deminimis Subsidiary) of the Borrower in an involuntary case
under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower or any of its Subsidiaries (other than a
Deminimis Subsidiary) that, with other outstanding final judgments,
undischarged, against the Borrower or any of its Subsidiaries (other than a
Deminimis Subsidiary) exceeds in the aggregate $1,000,000;
(j) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of the Borrower or any of its Subsidiaries party thereto or any of
their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(k) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA, or the
Borrower or any ERISA Affiliate is assessed withdrawal liability pursuant
to Title IV of ERISA by a Multiemployer Plan, or any of the following
occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable
Event, or a failure to make a required installment or other payment (within
the
<PAGE>
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meaning of (S)302(f)(1) of ERISA), provided that the Agent determines in
--------
its reasonable discretion that such event (A) could be expected to result
in liability of the Borrower or any of its Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and (B)
could constitute grounds for the termination of such Guaranteed Pension
Plan by the PBGC, for the appointment by the appropriate United States
District Court of a trustee to administer such Guaranteed Pension Plan or
for the imposition of a lien in favor of such Guaranteed Pension Plan; or
(ii) the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by the
PBGC of proceedings to terminate such Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries (other than a Deminimis
Subsidiary) shall be enjoined, restrained or in any way prevented by the
order of any court or any administrative or regulatory agency from
conducting any material part of its business and such order shall continue
in effect for more than thirty (30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a Material Adverse Effect;
(n) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a Material Adverse Effect;
(o) the Borrower or any of its Subsidiaries shall be indicted for a
state or federal crime, or any civil or criminal action shall otherwise
have been brought or threatened against the Borrower or any of its
Subsidiaries, a punishment for which in any such case could include the
forfeiture of any assets of the Borrower or such Subsidiary included in the
Borrowing Base or any assets of the Borrower or such Subsidiary not
included in the Borrowing Base but having a fair market value in excess of
$1,000,000; or
(p) the Borrower shall at any time fail to own one hundred percent
(100%) of the Capital Stock of any Guarantor which is a direct Subsidiary
(other than any Subsidiary formed in connection with Mapics Business
Solutions), and any Guarantor shall fail to own one hundred percent (100%)
of the Capital Stock of any Guarantor which is its direct Subsidiary,
provided, however, to the extent the Borrower or any Guarantor, as the case
-------- -------
may be, owns less than one hundred percent (100%) of the capital stock of
<PAGE>
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any Guarantor at the time such Subsidiary becomes a Guarantor hereunder,
then it shall only constitute an Event of Default if the Borrower or the
Guarantor, as the case may be, shall at any time own less than one hundred
percent (100%) of the amount of the capital stock (in terms of percentages)
of such Subsidiary than the Borrower or Guarantor, as the case may be,
owned on the date such Person became a Subsidiary of the Borrower or such
Guarantor, or any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of thirty percent
(30%) or more of the outstanding shares of common stock of the Borrower;
or, the first day on which the majority of the directors of the Borrower
are not Continuing Directors;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
--------
of Default specified in (S)(S)14.1(g) or 14.1(h), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from the Agent or any Bank.
14.2. Termination of Commitments. If any one or more of the Events of
--------------------------
Default specified in (S)14.1(g) or (S)14.1(h) shall occur, any unused portion of
the credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all further obligations to make Loans to the Borrower and the Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. If any other Event of Default shall have occurred and be continuing,
the Agent may and, upon the request of the Majority Banks, shall, by notice to
the Borrower, terminate the unused portion of the credit hereunder, and upon
such notice being given such unused portion of the credit hereunder shall
terminate immediately and each of the Banks shall be relieved of all further
obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve the Borrower or any of its Subsidiaries of any of
the Obligations.
14.3. Remedies. In case any one or more of the Events of Default shall
--------
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to (S)14.1, each Bank, if owed
any amount with respect to the Loans or the Reimbursement Obligations, may, with
the consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit
<PAGE>
-74-
Agreement and the other Loan Documents or any instrument pursuant to which the
Obligations to such Bank are evidenced, including as permitted by applicable law
the obtaining of the ex parte appointment of a receiver, and, if such amount
-- -----
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of such Bank. No remedy
herein conferred upon any Bank or the Agent or the holder of any Note or
purchaser of any Letter of Credit Participation is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
14.4. Distribution of Collateral Proceeds. In the event that, following
-----------------------------------
the occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that (i) distributions
-------- -------
shall be made (A) pari passu among Obligations with respect to the Agent's
---- -----
fee payable pursuant to (S)6.2 and all other Obligations and (B) with
respect to each type of Obligation owing to the Banks, such as interest,
principal, fees and expenses, among the Banks pro rata, and (ii) the Agent
--- ----
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the Agent of
all of the Obligations, to the payment of any obligations required to be
paid pursuant to (S)9-504(1)(c) of the Uniform Commercial Code of the
Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower
or to such other Persons as are entitled thereto.
<PAGE>
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15. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities then due, direct,
or indirect, absolute or contingent, now existing or hereafter arising, of the
Borrower to such Bank. Each of the Banks agrees with each other Bank that (a)
if an amount to be set off is to be applied to Indebtedness of the Borrower to
such Bank, other than Indebtedness evidenced by the Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Notes held by such Bank or constituting Reimbursement Obligations owed
to such Bank, and (b) if such Bank shall receive from the Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Bank by proceedings against the Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
--- -----
otherwise as shall result in each Bank receiving in respect of the Notes held by
it or Reimbursement obligations owed it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part of such
--------
excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
16. THE AGENT.
---------
16.1. Authorization.
-------------
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that
--------
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing
<PAGE>
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contained in this Credit Agreement nor the other Loan Documents shall be
construed to create an agency, trust or other fiduciary relationship
between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation
of the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
16.2. Employees and Agents. The Agent may exercise its powers and execute
--------------------
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
16.3. No Liability. Neither the Agent nor any of its shareholders,
------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
16.4. No Representations.
------------------
16.4.1. General. The Agent shall not be responsible for the
-------
execution or validity or enforceability of this Credit Agreement, the
Notes, the Letters of Credit, any of the other Loan Documents or any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral security or
for the validity, enforceability or collectability of any such amounts
owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan
Documents or in any certificate or instrument hereafter furnished to it by
or on behalf of the Borrower or any of its Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any
<PAGE>
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of the terms, conditions, covenants or agreements herein or in any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or
records of the Borrower or any of its Subsidiaries. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request delivered
to it by the Borrower or any holder of any of the Notes shall have been
duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis
and decision to enter into this Credit Agreement.
16.4.2. Closing Documentation, etc. For purposes of determining
--------------------------
compliance with the conditions set forth in (S)12, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or FRS, as arranger to such
Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be to be consent to or approved by or acceptable or
satisfactory to such Bank, unless an officer of the Agent or FRS active
upon the Borrower's account shall have received notice from such Bank not
less than two (2) days prior to the Closing Date specifying such Bank's
objection thereto and such objection shall not have been withdrawn by
notice to the Agent or FRS to such effect on or prior to the Closing Date.
16.5. Payments.
--------
16.5.1. Payments to Agent. A payment by the Borrower to the Agent
-----------------
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
--- ----
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
16.5.2. Distribution by Agent. If in the opinion of the Agent the
---------------------
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over
<PAGE>
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the same in such manner and to such Persons as shall be determined by such
court.
16.5.3. Delinquent Banks. Notwithstanding anything to the contrary
----------------
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (a) to make available to the Agent its pro rata share of
--- ----
any Loan or to purchase any Letter of Credit Participation or (b) to comply
with the provisions of (S)15 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata
--- ----
share of such payments due and payable to all of the Banks, in each case
as, when and to the full extent required by the provisions of this Credit
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied.
A Delinquent Bank shall be deemed to have assigned any and all payments due
to it from the Borrower, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. The Delinquent Bank hereby authorizes the Agent to distribute
such payments to the nondelinquent Banks in proportion to their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned
payments to all outstanding Loans and Unpaid Reimbursement Obligations of
the nondelinquent Banks, the Banks' respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations have returned to
those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency.
16.6. Holders of Notes. The Agent may deem and treat the payee of any
----------------
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
16.7. Indemnity. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by (S)17), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
<PAGE>
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16.8. Agent as Bank. In its individual capacity, BKB shall have the same
-------------
obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
16.9. Resignation. The Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
16.10. Notification of Defaults and Events of Default. Each Bank hereby
----------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this (S)16.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
16.11. Duties in the Case of Enforcement. In case one of more Events of
---------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
--------
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
<PAGE>
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17. EXPENSES AND INDEMNIFICATION.
----------------------------
17.1. Expenses. The Borrower agrees to pay (a) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (b) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (c) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel or any local counsel to the Agent reasonably incurred in
connection with the preparation, syndication, administration or interpretation
of the Loan Documents and other instruments mentioned herein, each closing
hereunder, any amendments, modifications, approvals, consents or waivers hereto
or hereunder, or the cancellation of any Loan Document upon payment in full in
cash of all of the Obligations or pursuant to any terms of such Loan Document
for providing for such cancellation, (d) the fees, expenses and disbursements of
the Agent or any of its affiliates reasonably incurred by the Agent or such
affiliate in connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and surveyor, engineering and appraisal
charges, (e) any fees, costs, expenses and bank charges, including bank charges
for returned checks reasonably incurred by the Agent in establishing,
maintaining or handling agency accounts, lock box accounts and other accounts
for the collection of any of the Collateral; (f) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys' fees and costs,
which attorneys may be employees of any Bank or the Agent, and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) reasonably incurred by any Bank or the Agent in connection
with (i) the enforcement of or preservation of rights under any of the Loan
Documents against the Borrower or any of its Subsidiaries or the administration
thereof after the occurrence of a Default or Event of Default and (ii) any
litigation, proceeding or dispute whether arising hereunder or otherwise, in any
way related to any Bank's or the Agent's relationship with the Borrower or any
of its Subsidiaries and (g) all reasonable fees, expenses and disbursements of
any Bank or the Agent reasonably incurred in connection with UCC searches, UCC
filings, other collateral filings or mortgage recordings.
17.2. Indemnification. The Borrower agrees to indemnify and hold harmless
---------------
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Loans or Letters of Credit, (b) the reversal or withdrawal of any
provisional credits granted by the Agent upon the transfer of funds from lock
box, bank agency or
<PAGE>
-81-
concentration accounts or in connection with the provisional honoring of checks
or other items, (c) any actual or alleged infringement of any patent, copyright,
trademark, service mark or similar right of the Borrower or any of its
Subsidiaries comprised in the Collateral, (d) the Borrower or any of its
Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (e) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding except to the extent that any of
the foregoing are directly caused by the gross negligence or willful misconduct
of the otherwise indemnified party. In litigation, or the preparation therefor,
the Agent, on behalf of the Banks, and the Agent and its affiliates, shall be
entitled to select its own counsel and, in addition to the foregoing indemnity,
the Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel, provided, the Borrower shall only be required to pay the reasonable
--------
fees and expenses of one such counsel so selected by the Agent, unless the Agent
or any Bank reasonably believes a conflict exists or could arise as a result of
the Agent and/or the Banks using one counsel, in which case each of the Banks
making such a determination and the Agent shall be entitled to select their own
counsel, and in addition to the foregoing indemnity, the Borrower agrees to pay
promptly the reasonable fees and expenses of such counsel. If, and to the
extent that the obligations of the Borrower under this (S)17.2 are unenforceable
for any reason, the Borrower hereby agrees to make the maximum contribution to
the payment in satisfaction of such obligations which is permissible under
applicable law.
17.3. Survival. The covenants contained in this (S)17 shall survive
--------
payment or satisfaction in full of all other Obligations.
18. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
18.1. Sharing of Information with Section 20 Subsidiary. The Borrower
-------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in connection with the decision of such Bank to enter into this
Credit Agreement; it being understood, in
<PAGE>
-82-
each case, that any such Section 20 Subsidiary receiving such information shall
be bound by the confidentiality provisions of this Credit Agreement. Such
authorization shall survive the payment and satisfaction in full of all of
Obligations.
18.2. Confidentiality. Each of the Banks and the Agent agrees, on behalf
---------------
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(a) after such information shall have become public other than through a
violation of this (S)18, (b) to the extent required by statute, rule, regulation
or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to
bank examiners or any other regulatory authority having jurisdiction over any
Bank or the Agent, or to auditors or accountants, (e) to the Agent, any Bank or
any Section 20 Subsidiary, (f) in connection with any litigation to which any
one or more of the Banks, the Agent or any Section 20 Subsidiary is a party, or
in connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (g) to a Subsidiary or affiliate of such Bank as provided
in (S)18.1 or (h) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant agrees to be bound by the
provisions of (S)20.6.
18.3. Prior Notification. Unless specifically prohibited by applicable
------------------
law or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such non-
public information by any governmental agency or representative thereof (other
than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
18.4. Other. In no event shall any Bank or the Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
(S)18 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Loans or Reimbursement Obligations from any Bank.
19. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any of
them, and
<PAGE>
-83-
shall survive the making by the Banks of any of the Loans and the issuance,
extension or renewal of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any Letter of Credit or any amount
due under this Credit Agreement or the Notes or any of the other Loan Documents
remains outstanding or any Bank has any obligation to make any Loans or the
Agent has any obligation to issue, extend or renew any Letter of Credit, and for
such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
20. ASSIGNMENT, ACCESSION AND PARTICIPATION.
---------------------------------------
20.1. Condition to Assignment and Accession.
-------------------------------------
20.1.1. Conditions to Assignment by Banks. Except as provided
---------------------------------
herein, each Bank may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Credit
Agreement (including all or a portion of its Commitment Percentage and
Commitment and the same portion of the Loans at the time owing to it, the
Notes held by it and its participating interest in the risk relating to any
Letters of Credit); provided that (a) each of the Agent and, unless a
--------
Default or Event of Default shall have occurred and be continuing, the
Borrower shall have given its prior written consent to such assignment,
which consent, in the case of the Borrower, will not be unreasonably
withheld, (b) if such assignment is to an Eligible Assignee which is not an
existing bank, then such assignment shall be either such Bank's entire
interest or be in an amount that is $2,500,000 or a multiple of $1,000,000
in excess thereof, and (c) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter
defined), an Assignment and Acceptance, substantially in the form of
Exhibit F hereto (an "Assignment and Acceptance"), together with any Notes
------- -
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five (5) Business
Days after the execution thereof, (i) the assignee thereunder shall be a
party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Bank hereunder, and (ii) the assigning
Bank shall, to the extent provided in such assignment and upon payment to
the Agent of the registration fee referred to in (S)20.3, be released from
its obligations under this Credit Agreement.
20.1.2. Accession. Except as otherwise provided herein, Eligible
---------
Assignees (each such Eligible Assignee, an "Acceding Bank") may, at the
request of the Borrower and with the consent of the Agent and the Borrower,
become party to this Credit Agreement by entering into an Instrument of
<PAGE>
-84-
Accession in substantially the form of Exhibit G hereto (an "Instrument of
---------
Accession") with the Borrower and the Agent and assuming thereunder a
Commitment, in an amount to be agreed upon by the Borrower, such Acceding
Bank and the Agent, to make Revolving Credit Loans and participate in the
risk relating to the Letters of Credit pursuant to the terms hereof, and
the Total Commitment shall thereupon be increased by the amount of such
Acceding Bank's Commitment; provided, however, that (a) the Agent shall
--------- -------
have given its prior written consent to such accession, such consent not to
be unreasonably withheld (b) immediately after giving effect to such
accession, not less than $40,000,000 in the aggregate of the sum of the
Term Loans outstanding and the Total Commitment shall be funded by at least
one (1) or more Banks other than BKB, and (c) in no event shall the Total
Commitment be increased under any one or more of such Instruments of
Accession so as to exceed, in the aggregate, $20,000,000. On the effective
date specified in any Instrument of Accession, Schedule 1 hereto shall be
-------- -
deemed to be amended to reflect (a) the name, address, Commitment and
Commitment Percentage of such Acceding Bank, (b) the Total Commitment as
increased by such Acceding Bank's Commitment, and (c) the changes to the
other Banks' respective Commitment Percentages and any changes to the other
Banks' respective Commitments (in the event such Bank is also the Acceding
Bank) resulting from such assumption and such increased Total Commitment.
20.2. Certain Representations and Warranties; Limitations; Covenants. By
--------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or
observance by the Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations of any
of their obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
<PAGE>
-85-
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in (S)8.4 and (S)9.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with
the assigning Bank satisfactory to such assignee with respect to its pro
---
rata share of Letter of Credit Fees in respect of outstanding Letters of
----
Credit.
20.3. Register. The Agent shall maintain a copy of each Assignment and
--------
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $3,500.
20.4. New Notes. Upon its receipt of an Assignment and Acceptance
---------
executed by the parties to such assignment, together with each Note subject to
such
<PAGE>
-86-
assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such in Assignment and Acceptance and shall otherwise be substantially the form
of the assigned Notes. Within five (5) days of issuance of any new Notes
pursuant to this (S)20.4, the Borrower shall deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and binding
effect thereof, in form and substance satisfactory to the Banks. The surrendered
Notes shall be cancelled and returned to the Borrower.
20.5. Participations. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
--------
that (a) each such participation shall be in an amount of not less than
$1,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
20.6. Disclosure. The Borrower agrees that in addition to disclosures made
----------
in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- --------
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
20.7. Assignee or Participant Affiliated with the Borrower. If any
----------------------------------------------------
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no
<PAGE>
-87-
right to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Agent pursuant to (S)14.1 or (S)14.2, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans or Reimbursement Obligations. If any Bank
sells a participating interest in any of the Loans or Reimbursement Obligations
to a participant, and such participant is the Borrower or an Affiliate of the
Borrower, then such transferor Bank shall promptly notify the Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to (S)14.1 or (S)14.2 to the extent that such participation is
beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Loans or Reimbursement Obligations to the extent of
such participation.
20.8. Miscellaneous Assignment Provisions. Any assigning Bank shall
-----------------------------------
retain its rights to be indemnified pursuant to (S)17 with respect to any claims
or actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. If any Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Majority Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this (S)20 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under (S)4 of
the Federal Reserve Act, 12 U.S.C. (S)341. No such pledge or the enforcement
thereof shall release the pledgor Bank from its obligations hereunder or under
any of the other Loan Documents.
20.9. Assignment by Borrower. The Borrower shall not assign or transfer
----------------------
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
21. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and
<PAGE>
-88-
shall be delivered in hand, mailed by United States registered or certified
first class mail, postage prepaid, sent by overnight courier, or sent by
telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or
postal service, addressed as follows:
(a) if to the Borrower, at 1000 Windward Concourse Parkway, Suite
100, Alpharetta, Georgia 30005, Attention: William J. Gilmour, Chief
Financial Officer and Vice President of Finance, or at such other address
for notice as the Borrower shall last have furnished in writing to the
Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Jay L. Massimo, Director, or such other address for
notice as the Agent shall last have furnished in writing to the Person
giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
-------- -
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
22. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN (S)21. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
<PAGE>
-89-
23. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
24. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
25. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)27.
26. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of which rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or
<PAGE>
-90-
prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing, a
decrease in the rate of interest on the Notes (other than interest accruing
pursuant to (S)6.11.2 following the effective date of any waiver by the Majority
Banks of the Default or Event of Default relating thereto), the amount of the
Commitments of the Banks (other than increases which are contemplated by
(S)20.1.2 hereof), and the amount of the Commitment Fee or Letter of Credit Fees
hereunder may not be reduced without the written consent of the Borrower and the
written consent of each Bank affected thereby; the Revolving Credit Loan
Maturity Date and the Term Loan Maturity Date may not be postponed, no date
fixed for payment may be postponed and the amount of any scheduled payment may
not be reduced without the written consent of each Bank affected thereby; this
(S)27 and the definition of Majority Banks may not be amended, without the
written consent of all of the Banks; all or substantially all of the Collateral
(except if the release or disposition of such Collateral is permitted or
provided for in the provisions of (S)10.5.2 hereof) may not be released without
the written consent of all of the Banks; and the amount of the Agent's Fee or
any Letter of Credit Fees payable for the Agent's account and (S)16 may not be
amended without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
<PAGE>
-91-
28. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
-92-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
MAPICS, INC.
By: /s/ William J. Gilmour
-----------------------------------
William J. Gilmour
Chief Financial Officer
BANKBOSTON, N.A., individually and as
Agent
By: /s/ Jay L. Massimo
-----------------------------------
Jay L. Massimo
Director
<PAGE>
SCHEDULE 1
----------
Banks and Commitments
---------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Revolving
Revolving Credit Loan Term Loan
Credit Loan Commitment Term Loan Commitment
Bank Commitment Percentage Commitment Percentage
----
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BankBoston, N.A. $ 5,000,000.00 25.0000000000% $10,000,000.00 25.0000000000%
Domestic and Eurodollar Lending Office:
100 Federal Street
Boston, Massachusetts 02110
Attn: Jay L. Massimo
- --------------------------------------------------------------------------------------------------------------------
Suntrust Bank $ 4,333,333.33 21.6666666667% $ 8,666,666.67 21.6666666667%
303 Peachtree Road, NE
2/nd/ Floor
Atlanta, Georgia 30308
Attn: Brian Peters
- --------------------------------------------------------------------------------------------------------------------
Bank Austria Creditanstalt Corporate $ 4,000,000.00 20.0000000000% $ 8,000,000.00 20.0000000000%
Finance, Inc.
Two Ravinia Drive
Suite 1680
Atlanta, Georgia 30345
Attn: Stephen Hipp
- --------------------------------------------------------------------------------------------------------------------
National City Bank of Kentucky $ 3,333,333.33 16.6666666667% $ 6,666,666.67 16.6666666667%
101 South 5/th/ Street
Louisville, Kentucky 40202
Attn: Glenn Nord
- --------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A. $ 3,333,333.33 16.6666666667% $ 6,666,666.67 16.6666666667%
South East Corporate Division
3333 Riverwood Parkway
Atlanta, Georgia 30339
Attn: Tannie Fabbrini
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Total: $20,000,000.00 100.0000000000% $40,000,000.00 100.0000000000%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
15th day of December, 1999 by and between MAPICS, Inc., a Georgia corporation
(hereinafter, the "Company"), and Stephen C. Haley (hereinafter, "Executive"),
to be effective as of the date hereof (the "Effective Date").
BACKGROUND
----------
The Company and Pivotpoint, Inc. have entered into that certain Agreement
and Plan of Merger dated as of the date hereof (the "Merger Agreement"),
pursuant to which Pivotpoint will be acquired by the Company (the "Merger").
Following the Merger, Executive will be the Chief Operating Officer of the
Company. In order to facilitate an integrated business transition, the Company
deems it to be in its best interests to engage Executive as a part-time employee
prior to the Merger, and thereafter in a full-time capacity, all in accordance
with the terms of this Agreement. Executive is willing to serve as an employee
of the Company, in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment. Executive is hereby employed on the Effective Date as an
----------
employee of the Company. Until such time as the effective time of the Merger
occurs (the "Merger Date"), Executive shall work on a part-time basis for the
Company not to exceed 15 hours per week. In such capacity, Executive shall
report to and perform services for the Company as assigned to him by the Chief
Executive Officer, with a view to facilitating an integrated business transition
by becoming oriented to the policies and practices of the Company and providing
information and assistance to Company personnel on Pivotpoint policies and
practices. On the Merger Date, Executive shall become a full-time employee of
the Company and shall be promoted to the office of Chief Operating Officer of
the Company. Executive shall be located at the Company's headquarters in
Alpharetta, Georgia. In his capacity as Chief Operating Officer of the Company,
Executive shall have the responsibilities outlined on Exhibit A to this
Agreement and such other responsibilities commensurate with such position as
shall be assigned to him by the Board of Directors of the Company. Executive
will report directly to the Chief Executive Officer.
2. Employment Period. Unless earlier terminated herein in accordance with
-----------------
Section 6 hereof, Executive's employment shall be for a three year term (the
"Employment Period"), beginning on the Effective Date. Beginning on the third
anniversary of the Effective Date and on each anniversary of the Effective Date,
the
<PAGE>
Employment Period shall, without further action by Executive or the Company, be
extended by an additional one-year period; provided, however, that either party
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may, by notice to the other, cause the Employment Period to cease to extend
automatically. Upon such notice, the Employment Period shall terminate upon the
expiration of the then-current term, including any prior extensions.
3. Extent of Service. During the Employment Period, and except as
-----------------
provided below, Executive agrees to devote his business time, attention, skill
and efforts exclusively to the faithful performance of his duties hereunder;
provided, however, that it shall not be a violation of this Agreement for
- -------- -------
Executive to (i) devote an equal or greater amount of his business time,
attention, skill and efforts to the business of Pivotpoint prior to the Merger
Date, (ii) devote reasonable periods of time to charitable and community
activities and, with the approval of the Company, industry or professional
activities, and/or (ii) manage personal business interests and investments, so
long as such activities do not materially interfere with the performance of
Executive's responsibilities under this Agreement.
4. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Employment Period, the Company will pay
-----------
to Executive a base salary in the amount of U.S. $225,000 per year ("Base
Salary"), less normal withholdings, payable in equal monthly or more frequent
installments as are customary under the Company's payroll practices from time to
time. The Compensation Committee of the Board of Directors of the Company shall
review Executive's Base Salary annually and in its sole discretion, may adjust
Executive's Base Salary from year to year. The annual review of Executive's
salary by the Committee will consider, among other things, Executive's own
performance and the Company's performance.
(b) Initial Grant of Stock Options. On the Effective Date, Executive
------------------------------
shall be granted options to acquire 200,000 shares of the common stock of the
Company (the "Options"), which Options will have a per-share exercise price
equal to the fair market value of such stock on the Effective Date and a term of
ten years, unless terminated earlier in certain circumstances set forth in the
Plan or the Award Certificate. The Options will become fully vested and
exercisable as to 25% of the option shares on the first, second, third and forth
anniversaries of the Effective Date; provided, however that if, prior to the
first anniversary of the Effective Date, Executive meets certain integration
objectives to be established by the Compensation Committee, then the Options
will become vested and exercisable as to 50% of the option shares on the first
anniversary of the Effective Date and as to 25% on the second and third
anniversaries of the Effective Date. The Options, which will be granted under
and pursuant to the term of the Company's Amended and Restated 1998 Long-Term
Incentive Plan and an Award Certificate, are intended to be incentive stock
options to the extent permitted by law.
(c) Incentive, Savings and Retirement Plans. After the Merger Date
---------------------------------------
and during the remainder of the Employment Period, Executive shall be entitled
to participate in
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all incentive, savings and retirement plans, practices, policies and programs
applicable generally to senior executive officers of the Company ("Peer
Executives"), and on the same basis as such Peer Executives. Without limiting
the foregoing, Executive will be entitled to the following special incentives
from and after the Merger Date:
(i) Retention Bonus. Executive will receive special retention
---------------
bonuses (each a "Retention Bonus") of $500,000, payable within 30 days following
the Merger Date, $250,000 payable on the first anniversary of the Merger Date,
and $250,000 payable on the second anniversary of the Merger Date, provided that
Executive is still employed by the Company on such dates or such Retention
Bonuses become payable pursuant to Section 7(b)(i)(C) hereof.
(ii) Annual Bonus. Executive will have a target annual bonus of
------------
$225,000 (the "Annual Bonus"), to be earned based on the achievement of
individual and group performance objectives established from year to year by the
Chief Executive Officer. The Annual Bonus for fiscal year 2000 will be prorated
from the Effective Date to the end of the Company's fiscal year 2000.
(d) Welfare Benefit Plans. After the Merger Date and during the
---------------------
remainder of the Employment Period, Executive and Executive's family shall be
eligible for participation in, and shall receive all benefits under, the welfare
benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) ("Welfare Plans") to the extent applicable generally to Peer
Executives.
(e) Expenses. During the Employment Period, Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of the
Company to the extent applicable generally to Peer Executives. Without limiting
the foregoing, the Company shall pay Executive's reasonable moving costs and
expenses in connection with his family's relocation from Massachusetts to
Atlanta, Georgia.
5. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
25% or more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition by a Person who is
on the date of this Agreement the beneficial
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<PAGE>
owner of 25% or more of the Outstanding Company Voting Securities, (ii) any
acquisition directly from the Company, (iii) any acquisition by the
Company, (iv) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (v) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 5; or
(b) Individuals who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then
outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
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<PAGE>
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
6. Termination of Employment.
-------------------------
(a) Death or Disability. Executive's employment shall terminate
-------------------
automatically upon Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of Executive has occurred
during the Employment Period (pursuant to the definition of Disability set forth
below), it may give to Executive written notice in accordance with Section 13(b)
of this Agreement of its intention to terminate Executive's employment. In such
event, Executive's employment with the Company shall terminate effective on the
30th day after receipt of such notice by Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, Executive shall
not have returned to full-time performance of Executive's duties. For purposes
of this Agreement, "Disability" shall mean the absence of Executive from
Executive's duties with the Company on a full-time basis for 180 consecutive
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to Executive or Executive's legal representative.
(b) Cause. The Company may terminate Executive's employment during
-----
the Employment Period with or without Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of Executive to perform
substantially Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that Executive has not substantially performed Executive's duties, or
(ii) the willful engaging by Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or a senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. The cessation of employment of
Executive shall not be deemed to be for Cause unless and until there shall have
been
-5-
<PAGE>
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
is provided to Executive and Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Executive is guilty of the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. Executive's employment may be terminated by
-----------
Executive for Good Reason or for no reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to Executive of any duties materially
inconsistent with Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 1 of this Agreement, or any other action by the Company which results
in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4 of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Executive;
(iii) any purported termination by the Company of Executive's
employment otherwise than as expressly permitted by this Agreement; or
(iv) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement.
For purposes of this Section 6(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by Executive for any reason during
the 30-day period immediately following the first anniversary of a Change in
Control of the Company shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 13(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
-6-
<PAGE>
30 days after the giving of such notice). The failure by Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
Executive or the Company, respectively, hereunder or preclude Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
-------------------
Executive's employment is terminated by the Company for Cause, or by Executive
for Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies Executive of such
termination or any later date specified in such notice, (iii) if Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of Executive or the Disability Effective
Date, as the case may be.
7. Obligations of the Company upon Termination.
-------------------------------------------
(a) Termination Prior to the Merger Date. If Executive's employment
------------------------------------
shall be terminated for any reason whatsoever prior to the Merger Date, this
Agreement shall terminate without further obligations whatsoever to Executive,
other than the obligation to pay to Executive his Base Salary through the Date
of Termination; provided, however, that the Company's obligation to pay such
Base Salary shall be conditional upon Executive's execution of a Release in
substantially the form attached hereto as Exhibit B.
(b) Good Reason; Other Than for Cause, Death or Disability. If,
------------------------------------------------------
after the Merger Date, the Company shall terminate Executive's employment other
than for Cause or Disability, or Executive shall terminate employment for Good
Reason, then in consideration of Executive's services rendered prior to such
termination and of Executive's covenants contained in Section 11 hereof:
(i) the Company shall pay to Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) Executive's Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of (x)
Executive's annual bonus paid or payable, including any bonus or portion thereof
which has been earned but deferred, for the most recently completed fiscal year
during the Employment Period, if any, but specifically excluding any Retention
Bonus (such amount being referred to as the "Most Recent Annual Bonus") and (y)
a fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by Executive (together with any accrued
interest or earnings thereon and subject to any prior election by Executive to
receive such deferred amounts in installments) and any accrued vacation pay, in
each case
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<PAGE>
to the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to one-half (.5) times (or 2.5 times,
if the Date of Termination occurs after a Change in Control) the sum of (1)
Executive's Base Salary and (2) the Most Recent Annual Bonus; and
C. any unpaid Retention Bonus(es); and
(ii) for six months after the Date of Termination (or two and
one-half years, if the Date of Termination occurs after a Change in Control), or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to Executive
and/or Executive's family at least equal to those which would have been provided
to them in accordance with the Welfare Plans described in Section 4(d) of this
Agreement if Executive's employment had not been terminated or, if more
favorable to Executive, as in effect generally at any time thereafter with
respect to other Peer Executives, provided, however, that if Executive becomes
re-employed with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided under
such other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of
Executive for retiree benefits pursuant to such plans, practices, programs and
policies, Executive shall be considered to have remained employed until three
years after the Date of Termination and to have retired on the last day of such
period;
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to Executive any other amounts or benefits required
to be paid or provided or which Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(iv) notwithstanding any provision of this Agreement to the
contrary, Executive shall forfeit his right to receive, or, to the extent such
amounts have previously been paid to Executive, shall repay in full to the
Company within thirty (30) days of a final determination of Executive's
liability therefor as set forth below, the amount described in Section
7(b)(i)(B) of this Agreement if at any time during the period of two years after
the Date of Termination he violates the Restrictive Covenants set forth in
Section 11 hereof.
(c) Death. If Executive's employment is terminated by reason of
-----
Executive's death after the Merger Date, this Agreement shall terminate without
further obligations to Executive's legal representatives under this Agreement,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to Executive's
estate or beneficiary, as applicable, in a
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<PAGE>
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
7(c) shall include without limitation, and Executive's estate and/or
beneficiaries shall be entitled to receive, benefits under such plans, programs,
practices and policies relating to death benefits, if any, as are applicable to
Executive on the date of his death.
(d) Disability. If Executive's employment is terminated by reason of
----------
Executive's Disability after the Merger Date, this Agreement shall terminate
without further obligations to Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other Benefits, the
term Other Benefits as utilized in this Section 6(c) shall include, and
Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits under such plans, programs, practices and policies
relating to disability, if any, as are applicable to Executive and his family on
the Date of Termination.
(e) Cause; Other than for Good Reason. If Executive's employment
---------------------------------
shall be terminated for Cause after the Merger Date, this Agreement shall
terminate without further obligations to Executive other than the obligation to
pay to Executive (x) his Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by Executive, and (z) Other
Benefits, in each case to the extent theretofore unpaid. If Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to Executive in a lump sum in cash within 30 days of the Date of
Termination.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which Executive may qualify, nor, subject to Section 13(f), shall
anything herein limit or otherwise affect such rights as Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
9. Full Settlement. Except as explicitly provided herein, the Company's
---------------
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take any
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<PAGE>
other action by way of mitigation of the amounts payable to Executive under any
of the provisions of this Agreement and, except as explicitly provided herein,
such amounts shall not be reduced whether or not Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company,
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
10. Limitation of Benefits.
----------------------
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any benefit, payment or distribution by
the Company to or for the benefit of Executive (whether payable or distributable
pursuant to the terms of this Agreement or otherwise) (a "Payment") would, if
paid, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then the Payment shall be reduced to the extent necessary of
avoid the imposition of the Excise Tax. Executive may select the Payments to be
limited or reduced.
(b) All determinations required to be made under this Section 10,
including whether an Excise Tax would otherwise be imposed and the assumptions
to be utilized in arriving at such determination, shall be made by Coopers &
Lybrand L.L.P. or such other certified public accounting firm as may be
designated by Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from Executive that a Payment is due to be made,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Payments hereunder will
have been unnecessarily limited by this Section 10 ("Underpayment"), consistent
with the calculations required to be made hereunder. The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.
11. Restrictions on Conduct of Executive. Executive and the Company
------------------------------------
understand and agree that the purpose of the provisions of this Section 11 is to
protect legitimate business interests of the Company, as more fully described
below, and is not
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<PAGE>
intended to eliminate Executive's post-employment competition with the Company
per se, nor is it intended to impair or infringe upon Executive's right to work,
earn a living, or acquire and possess property from the fruits of his labor.
Executive hereby acknowledges that the post-employment restrictions set forth in
this Section 10 are reasonable and that they do not, and will not, unduly impair
his ability to earn a living after the termination of this Agreement. Therefore,
subject to the limitations of reasonableness imposed by law upon the
restrictions set forth herein by the time and geographical area described below,
Executive shall be subject to the restrictions set forth in this Section 11.
(a) Definitions. The following capitalized terms used in this
-----------
Section 11 shall have the meanings assigned to them below, which definitions
shall apply to both the singular and the plural forms of such terms:
"Competitive Services" means providing enterprise resource
planning software applications for discrete and batch-process mid-size
manufacturing enterprises (i.e., enterprises having annual revenue of $20
million to $500 million).
"Confidential Information" means any confidential or
proprietary information possessed by the Company or its affiliated entities or
relating to its or their business, including without limitation, any
confidential customer lists, details of client or consultant contracts, current
and anticipated customer requirements, pricing policies, price lists, market
studies, business plans, operational methods, marketing plans or strategies,
product development techniques or plans, unannounced computer software programs,
computer software program source code, data and documentation, data base
technologies, computer program structures and architectures, inventions and
ideas, past, current and planned research and development, compilations,
devices, methods, techniques, processes, financial information and data,
business acquisition plans, new personnel acquisition plans and any other
information that would constitute a "trade secret(s)" under the common law or
statutory law of the State of Georgia.
"Determination Date" means the date of termination of
Executive's employment with the Company for any reason whatsoever or any earlier
date (during the Employment Period) of an alleged breach of the Restrictive
Covenants by Executive.
"Person" means any individual or any corporation,
partnership, joint venture, association or other entity or enterprise.
"Principal or Representative" means a principal, owner,
partner, shareholder, joint venturer, investor, member, trustee, director,
officer, manager, employee, agent, representative or consultant.
"Protected Customers" means customers of the Company that
purchased Competitive Services from the Company within one (1) year prior to the
Determination Date.
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"Protected Employees" means employees of the Company who were
employed by the Company at any time within six (6) months prior to the
Determination Date.
"Restricted Period" means the period extending two (2) years from
the termination of Executive's employment with the Company for any reason
whatsoever.
"Restricted Territory" means the following territory, in which
Executive engages in the provision of Competitive Services on behalf of the
Company on the Merger Date: metropolitan Atlanta, Georgia.
"Restrictive Covenants" means the restrictive covenants contained
in Section 11 hereof.
(b) Restrictive Covenants.
---------------------
(i) Restriction on Disclosure and Use of Confidential
-------------------------------------------------
Information. Executive understands and agrees that the Confidential Information
- -----------
constitutes a valuable asset of the Company and its affiliated entities, and may
not be converted to Executive's own use. Accordingly, Executive hereby agrees
that Executive shall not, directly or indirectly, at any time during the
Restricted Period reveal, divulge, or disclose to any Person not expressly
authorized by the Company any Confidential Information, and Executive shall not,
directly or indirectly, at any time during the Restricted Period use or make use
of any Confidential Information in connection with any business activity other
than that of the Company. The parties acknowledge and agree that this Agreement
is not intended to, and does not, alter either the Company's rights or
Executive's obligations under any state or federal statutory or common law
regarding trade secrets and unfair trade practices.
(ii) Nonsolicitation of Protected Employees. Executive
--------------------------------------
understands and agrees that the relationship between the Company and each of its
Protected Employees constitutes a valuable asset of the Company and may not be
converted to Executive's own use. Accordingly, Executive hereby agrees that
during the Restricted Period Executive shall not directly or indirectly on
Executive's own behalf or as a Principal or Representative of any Person or
otherwise solicit or induce any Protected Employee to terminate his or her
employment relationship with the Company or to enter into employment with any
other Person.
(iii) Nonsolicitation of Protected Customers. Executive
--------------------------------------
understands and agrees that the relationship between the Company and each of its
Protected Customers constitutes a valuable asset of the Company and may not be
converted to Executive's own use. Accordingly, Executive hereby agrees that,
during the Restricted Period, Executive shall not, without the prior written
consent of the Company, directly or indirectly, on Executive's own behalf or as
a Principal or Representative of any Person or otherwise, solicit a Protected
Customer for the purpose of providing or selling
-12-
<PAGE>
Competitive Services; provided, however, that the prohibition of this covenant
shall apply only to Protected Customers with whom Executive had Material Contact
on the Company's behalf during the twelve (12) months immediately preceding the
Date of Termination. For purposes of this Agreement, Executive had "Material
Contact" with a Protected Customer if (a) he had business dealings with the
Protected Customer on the Company's behalf; (b) he was responsible for
supervising or coordinating the dealings between the Company and the Protected
Customer; or (c) he obtained Confidential Information about the customer as a
result of his association with the Company.
(iv) Noncompetition with the Company. Executive understands and
-------------------------------
agrees that, during the Restricted Period and within the Restricted Territory,
he shall not, directly or indirectly, on his own or on behalf of any Person, be
affiliated with as a Principal or Representative any Person engaged, in whole or
in part, in the provision of Competitive Services in a capacity where
Executive's duties or responsibilities for such Person will include strategic
planning, policymaking or management; provided, however, that the provisions of
Section 11 shall not be deemed to prohibit (i) Executive's provision of services
to Pivotpoint prior to the Merger Date, or (ii) the ownership by Executive of
any securities of the Company or its affiliated entities or not more than five
percent (5%) of any class of securities of any corporation having a class of
securities registered pursuant to the Exchange Act.
(c) Exceptions from Disclosure Restrictions. Anything herein to the
---------------------------------------
contrary notwithstanding, Executive shall not be restricted from disclosing or
using Confidential Information that: (a) is or becomes generally available to
the public other than as a result of an unauthorized disclosure by Executive or
his agent; (b) becomes available to Executive in a manner that is not in
contravention of applicable law from a source (other than the Company or its
affiliated entities or one of its or their officers, employees, agents or
representatives) that is not bound by a confidential relationship with the
Company or its affiliated entities or by a confidentiality or other similar
agreement; (c) was known to Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Executive by the Company or its affiliated entities or
one of its or their officers, employees, agents or representatives; or (d) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, Executive shall
provide the Company with prompt notice of such requirement so that the Company
may seek an appropriate protective order prior to any such required disclosure
by Executive.
(d) Enforcement of Restrictive Covenants.
------------------------------------
(i) Rights and Remedies Upon Breach. In the event Executive
-------------------------------
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the following rights and remedies,
which shall be independent of any others and severally enforceable, and shall be
in addition to, and not in lieu of, any other rights and remedies available to
the Company at law or in equity:
-13-
<PAGE>
(A) the right and remedy to enjoin, preliminarily and
permanently, Executive from violating or threatening to violate the Restrictive
Covenants and to have the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that any breach or threatened
breach of the Restrictive Covenants would cause irreparable injury to the
Company and that money damages would not provide an adequate remedy to the
Company; and
(B) the right and remedy to require Executive to account
for and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits derived or received by Executive as the result of
any transactions constituting a breach of the Restrictive Covenants.
(ii) Severability of Covenants. Executive acknowledges and
-------------------------
agrees that the Restrictive Covenants are reasonable and valid in time and scope
and in all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full
effect, without regard to the invalid portions.
(iii) Attorneys' Fees. In any action relating to the enforcement
---------------
of the Restrictive Covenants, the prevailing party in such action shall be
entitled to be paid any and all costs and expenses incurred by him or it in
enforcing or establishing his or its rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in trial, bankruptcy or appellate proceedings.
12. Successors.
----------
(a) This Agreement is personal to Executive and without the prior
written consent of the Company shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
-14-
<PAGE>
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than-by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive:
Mr. Stephen C. Haley
______________________
______________________
If to the Company:
MAPICS, Inc.
1000 Windward Concourse Parkway
Suite 100
Alpharetta, Georgia 30005
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right Executive or the Company may have hereunder, including, without
limitation, the right of Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
-15-
<PAGE>
(f) Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between Executive and
the Company, the employment of Executive by the Company is "at will" and,
subject to Section 1 hereof, prior to the Merger Date, Executive's employment
may be terminated by either Executive or the Company at any time prior to the
Merger Date, in which case Executive shall have no further rights under this
Agreement. From and after the Effective Date, this Agreement shall supersede any
other agreement between the parties with respect to the subject matter hereof,
including without limitation any then-current employment agreement between the
Company and Executive.
IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
/s/ Stephen C. Haley
-----------------------------
Stephen C. Haley
MAPICS, INC.
By: /s/ Richard C. Cook
--------------------------
Richard C. Cook, Chief Executive Officer
-16-
<PAGE>
EXHIBIT A
Description of Responsibilities
-------------------------------
<PAGE>
EXHIBIT B
Form of Release
---------------
THIS RELEASE ("Release") is granted effective as of the ____ day of _____,
_____, by Stephen C. Haley ("Executive") in favor of MAPICS, Inc. (the
"Company"). This is the Release referred to that certain Employment Agreement
dated as of December ___, 1999 by and between the Company and Executive (the
"Employment Agreement"). Executive gives this Release in consideration of the
Company's promises and covenants as recited in the Employment Agreement, with
respect to which this Release is an integral part.
1. Release of the Company. Executive, for himself, his successors,
----------------------
assigns, attorneys, and all those entitled to assert his rights, now and forever
hereby releases and discharges the Company and its respective officers,
directors, stockholders, trustees, employees, agents, parent corporations,
subsidiaries, affiliates, estates, successors, assigns and attorneys ("the
Released Parties"), from any and all claims, actions, causes of action, sums of
money due, suits, debts, liens, covenants, contracts, obligations, costs,
expenses, damages, judgments, agreements, promises, demands, claims for
attorney's fees and costs, or liabilities whatsoever, in law or in equity, which
Executive ever had or now has against the Released Parties, including any claims
arising by reason of or in any way connected with any employment relationship,
including the Employment Agreement, which existed between the Company or any of
its parents, subsidiaries, affiliates, or predecessors, and Executive. It is
understood and agreed that this Release is intended to cover all actions, causes
of action, claims or demands for any damage, loss or injury, which may be traced
either directly or indirectly to the aforesaid employment relationship, or the
termination of that relationship, that Executive has, had or purports to have,
from the beginning of time to the date of this Release, whether known or
unknown, that now exists, no matter how remotely they may be related to the
aforesaid employment relationship including but not limited to claims for
employment discrimination under federal or state law, except as provided in
Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C.
(S) 2000(e), et seq. or the Americans With Disabilities Act, 42 U.S.C. (S) 12101
-- ----
et seq.; claims for statutory or common law wrongful discharge, including any
- -- ----
claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.;
-- ----
claims for attorney's fees, expenses and costs; claims for defamation; claims
for wages or vacation pay; claims for benefits, including any claims arising
under Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.
-- ---
2. Release of Claims Under Age Discrimination in Employment Act. Without
------------------------------------------------------------
limiting the generality of the foregoing, Executive agrees that by executing
this Release, he has released and waived any and all claims he has or may have
as of the date of this Release for age discrimination under the Age
Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood
-- ---
that Executive is advised to consult with an attorney prior to executing this
Release; that he in fact has consulted a knowledgeable, competent attorney
regarding this Release; that he may, before executing this Release, consider
this Release for a period of twenty-one (21) calendar days; and that the
<PAGE>
consideration he receives for this Release is in addition to amounts to which he
was already entitled. It is further understood that this Release is not
effective until seven (7) calendar days after the execution of this Release and
that Executive may revoke this Release within seven (7) calendar days from the
date of execution hereof.
Executive agrees that he has carefully read this Release and is signing it
voluntarily. Executive acknowledges that he has had twenty one (21) days from
receipt of this Release to review it prior to signing or that, if Executive is
signing this Release prior to the expiration of such 21-day period, Executive is
waiving his right to review the Release for such full 21-day period prior to
signing it. Executive has the right to revoke this release within seven (7)
days following the date of its execution by him. However, if Executive revokes
this Release within such seven (7) day period, no severance benefit will be
payable to him under the Employment Agreement and he shall return to the Company
any such payment received prior to that date.
EMPLOYEE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT
CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE
CORPORATION UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EMPLOYEE
ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR
OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT
HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE
CORPORATION FROM ALL SUCH CLAIMS.
_______________________________
Stephen C. Haley
Date: _________________________
-2-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of Incorporation Names Under Which
Name of Subsidiary or Organization Subsidiaries Do Business
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
MAPICS Australia Pty. Ltd. Australia MAPICS Australia Pty. Ltd.
MAPICS do Brasil Ltda. Brazil MAPICS do Brasil Ltda.
3566196 Canada, Inc. Canada 3566196 Canada, Inc.
MAPICS EMEA Support Center B.V. Netherlands MAPICS EMEA Support Center B.V.
MAPICS Sweden Sweden MAPICS Sweden
MAPICS Singapore Pte. Ltd. Singapore MAPICS Singapore Pte. Ltd.
MAPICS GmbH Germany MAPICS GmbH
MAPICS KK Japan MAPICS KK
MAPICS UK Ltd. United Kingdom MAPICS UK Ltd.
MAPICS France S.a.r.l. France MAPICS France S.a.r.l.
MAPICS International Corporation Barbados MAPICS International Corporation
MAPICS, Hong Kong Limited Hong Kong MAPICS, Hong Kong Limited
Pivotpoint, Inc. Massachusetts Pivotpoint, Inc.
TPTI Acquisition, Inc. Delaware TPTI Acquisition, Inc.
Minx Software Incorporated California Minx Software Incorporated
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF MAPICS, INC. FOR THE THREE
MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THOSE FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 25,244
<SECURITIES> 0
<RECEIVABLES> 30,873
<ALLOWANCES> 1,785
<INVENTORY> 0
<CURRENT-ASSETS> 65,326
<PP&E> 12,925
<DEPRECIATION> 6,629
<TOTAL-ASSETS> 97,931
<CURRENT-LIABILITIES> 56,169
<BONDS> 0
0
175
<COMMON> 204
<OTHER-SE> 41,383
<TOTAL-LIABILITY-AND-EQUITY> 97,931
<SALES> 14,480
<TOTAL-REVENUES> 30,525
<CGS> 3,335
<TOTAL-COSTS> 9,183
<OTHER-EXPENSES> 4,212
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 4,101
<INCOME-TAX> 1,579
<INCOME-CONTINUING> 2,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,522
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.13
</TABLE>
<PAGE>
EXHIBIT 99
Disclosure Regarding Certain Acquisition Risks
We are subject to risks associated with making acquisitions and may not be able
to grow through acquisitions.
As part of our business strategy, we continually evaluate potential
acquisitions of complementary technologies, products and businesses in the
enterprise application market. In our pursuit of acquisitions, we may be unable
to:
. identify suitable acquisition candidates;
. compete for acquisitions with other companies, many of which have
substantially greater resources than we do;
. obtain sufficient financing on acceptable terms to fund acquisitions;
. complete the acquisitions on terms favorable to us;
. integrate acquired technologies, products and businesses into our
existing operations; and
. profitably manage acquired technologies, products and businesses.
Acquisitions may also involve a number of risks including, among others,
that:
. technologies, products or businesses that we acquire may not perform
as expected;
. technologies, products or businesses that we acquire may not achieve
levels of revenues, profitability or productivity comparable to our
existing technologies, products and operations;
. acquisitions may adversely affect our results of operations;
. acquisitions may divert the attention of management and our resources;
. we may experience difficulty in assimilating the acquired operations
and personnel; and
. we may experience difficulty in retaining, hiring and training key
personnel.
Any or all of these risks could materially and adversely affect our business,
financial condition or results of operations.
