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UNITED STATES
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 June 30,
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 0-21980
CFI PROSERVICES, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0704365
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 SW Sixth Avenue, Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-274-7280
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock without par value 5,157,615
(Class) (Outstanding at July 31, 1999)
The index to exhibits appears on page 23 of this document.
================================================================================
<PAGE>
CFI PROSERVICES, INC.
d/b/a
CONCENTREX INCORPORATED
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 2
Consolidated Statements of Operations - Three Months and Six Months
Ended June 30, 1999 and 1998 3
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
1
<PAGE>
CFI PROSERVICES, INC
dba CONCENTREX INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,370 $ 3,589
Investments 206 206
Receivables, net of allowances of $2,784 and $2,600 31,225 29,701
Inventory 264 249
Deferred tax asset 1,918 1,341
Prepaid expenses and other current assets 3,799 1,604
------------------- -----------------
Total Current Assets 41,782 36,690
Property and equipment, net of accumulated
depreciation of $11,233 and $9,947 4,642 4,534
Software development costs, net of accumulated
amortization of $4,932 and $3,368 6,713 8,277
Purchased software costs, net of accumulated
amortization of $220 and $19 2,291 211
Other intangibles, net of accumulated amortization
of $5,838 and $4,763 10,153 6,190
Deferred tax asset 9,666 -
Other assets 3,095 879
=================== =================
Total Assets $ 78,342 $ 56,781
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 2,744 1,986
Accrued expenses 12,959 8,017
Deferred revenues 8,725 5,300
Customer deposits 4,284 3,681
Current portion of long-term debt 448 261
Income taxes payable - 473
------------------- -----------------
Total Current Liabilities 29,160 19,718
Commitments and Contingencies
Long-term Debt, less current portion 16,707 5,693
Other long-term liabilities 312 -
------------------- -----------------
Total Liabilities 46,179 25,411
Mandatory Redeemable Class A Preferred Stock 733 738
Shareholders' Equity:
Series preferred stock, 5,000,000 shares authorized,
none issued and outstanding - -
Common stock, no par value, 10,000,000 shares authorized,
5,135,552 and 5,032,977 shares issued and outstanding 20,667 19,689
Retained earnings 10,763 10,943
------------------- -----------------
Total Shareholders' Equity 31,430 30,632
------------------- -----------------
Total Liabilities and Shareholders' Equity $ 78,342 $ 56,781
=================== =================
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
2
<PAGE>
CFI PROSERVICES, INC
dba CONCENTREX INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue
Software license fees $ 16,062 $ 10,125 $ 24,927 $ 20,451
Service and support 9,595 7,414 18,849 14,507
Other 2,172 1,463 4,106 3,095
---------- ----------- ---------- ----------
Total Revenue 27,829 19,002 47,882 38,053
Cost of Revenue 10,259 7,167 18,006 13,915
---------- ----------- ---------- ----------
Gross Profit 17,570 11,835 29,876 24,138
Operating Expenses
Sales and marketing 4,814 4,476 8,546 8,851
Product development 5,988 3,156 10,267 6,338
General and administrative 4,306 2,093 6,742 4,636
Amortization of intangibles 406 297 816 593
Acquired in-process research and development 3,800 - 3,800 -
---------- ----------- ---------- ----------
Total Operating Expenses 19,314 10,022 30,171 20,418
---------- ----------- ---------- ----------
Income (Loss) from Operations (1,744) 1,813 (295) 3,720
Non-operating Income (Expense)
Interest expense (211) (117) (315) (219)
Interest income 49 78 144 129
Other, net 24 (76) 27 (104)
---------- ----------- ---------- ----------
Total Non-operating Expense (138) (115) (144) (194)
---------- ----------- ---------- ----------
Income (Loss) before Income Taxes (1,882) 1,698 (439) 3,526
Provision for (Benefit from) Income Taxes (926) 747 (305) 1,551
---------- ----------- ---------- ----------
Net Income (Loss) (956) 951 (134) 1,975
Preferred Stock Dividend 23 24 46 48
---------- ----------- ---------- ----------
Net Income (Loss) Applicable to Common Shareholders $ (979) $ 927 $ (180) $ 1,927
========== =========== ========== ==========
Basic Net Income (Loss) Per Share $ (0.19) $ 0.19 $ (0.04) $ 0.39
========== =========== ========== ==========
Diluted Net Income (Loss) Per Share $ (0.19) $ 0.18 $ (0.04) $ 0.37
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
CFI PROSERVICES, INC
dba CONCENTREX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) applicable to common shareholders $ (180) $ 1,927
Adjustments to reconcile net income (loss) applicable to common
shareholders to cash provided by operating activities:
Depreciation and amortization 4,126 3,065
Interest accreted on mandatory redeemable preferred stock 46 48
Interest accreted on note payable 48 47
Equity in losses attributable to joint venture - 169
Write off of in process research and development 3,800 -
(Increase) decrease in assets, net of effects from purchase of businesses:
Receivables, net 1,909 8,946
Inventories, net 93 1
Prepaid expenses and other assets (1,675) (35)
Increase (decrease) in liabilities, net of effects from purchase of
businesses:
Accounts payable 94 117
Accrued expenses (3,155) (2,867)
Deferred revenues 2,063 (4,079)
Customer deposits (1,471) (76)
Other current liabilities 387 -
Income taxes payable (473) (967)
-------------- --------------
Net cash provided by operating activities 5,612 6,296
Cash flows from investing activities:
Expenditures for property and equipment (1,299) (973)
Software development costs capitalized - (1,054)
Purchase of short-term investments - (200)
Investment in joint venture - (258)
Investment in Ultradata stock (2,658) -
Proceeds from long-term note receivable 76 100
Cash paid for acquisition of Modern Computer Systems, Inc.
net of cash received (5,520) -
Cash received in acquisition of MECA Software, LLC 1,595 -
-------------- --------------
Net cash used in investing activity (7,806) (2,385)
Cash flows from financing activities:
Net proceeds from (payments on) line of credit 11,093 (1,310)
Payments on long-term debt (7,827) (483)
Payments on mandatory redeemable preferred stock (51) (52)
Proceeds from issuance of common stock 905 537
Repurchase of common stock (1,145) -
-------------- --------------
Net cash provided by (used in) financing activities 2,975 (1,308)
-------------- --------------
Increase in cash and cash equivalents 781 2,603
Cash and cash equivalents:
Beginning of period 3,589 20
-------------- --------------
End of period $ 4,370 $ 2,623
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
CFI PROSERVICES, INC.
d/b/a CONCENTREX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts
or as otherwise indicated)
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the six month period ended June
30, 1999 and 1998 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
financial information as of December 31, 1998 is derived from the audited
financial statements contained in the 1998 Annual Report on Form 10-K as filed
by CFI ProServices, Inc., d/b/a Concentrex Incorporated (the "Company"). The
interim consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's 1998 Annual Report on Form 10-K. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1999 1998
----------------- -------------------
<S> <C> <C>
Cash paid during the period for income taxes $ 1,647 $ 2,518
Cash paid during the period for interest and dividends 171 227
</TABLE>
Noncash investing and financing activities were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1999 1998
----------------- -------------------
<S> <C> <C>
Tax benefit from exercise of nonqualified stock
options $ -- $ 56
Increase in goodwill for accrued acquisition related
contingent royalties 227 196
Reclassification of bank line of credit to long-term debt -- 4,000
Issuance of common stock in connection with
acquisition of MCS 650 --
Issuance of common stock in connection with
acquisition of MECA Software, LLC 569 --
Assumption of debt in connection with acquisition of
MECA Software, LLC 7,500 --
</TABLE>
5
<PAGE>
NOTE 3. EARNINGS PER SHARE
Following is a reconciliation of basic earnings per share ("EPS") and diluted
EPS:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999 1998
--------------------------------------- --------- -------- ---------- --------- --------- ---------
Per Per
Share Share
Basic EPS Loss Shares Amount Income Shares Amount
--------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) applicable to common
shareholders $ (979) 5,068 $ (0.19) $ 927 5,007 $ 0.19
========== =========
Effect of dilutive securities:
Stock options -- 241
--------- -------- --------- ---------
Diluted EPS
Net income (loss) applicable to
common shareholders $ (979) 5,068 $ (0.19) $ 927 5,248 $ 0.18
========== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 1998
--------------------------------------- --------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Per
Share Share
Basic EPS Loss Shares Amount Income Shares Amount
--------- -------- ---------- --------- --------- ---------
Net income (loss) applicable to common
shareholders $ (180) 5,054 $ (0.04) $ 1,927 4,999 $ 0.39
========== =========
Effect of dilutive securities:
Stock options -- 202
--------- -------- --------- ---------
Diluted EPS
Net income (loss) applicable to
common shareholders $ (180) 5,054 $ (0.04) $ 1,927 5,201 $ 0.37
========== =========
</TABLE>
The number of options to purchase shares of common stock that were excluded from
the table above (as the effect would have been anti-dilutive) were 1,103,079 and
99,700 for the three months ended June 30, 1999 and 1998, respectively, and
1,103,079 and 158,850 for the six months ended June 30, 1999 and 1998,
respectively.
NOTE 4. STOCK REPURCHASE
During January 1999 the Company's Board of Directors authorized a repurchase of
up to $5.0 million of the Company's Common Stock. During the quarter ended March
31, 1999 the Company repurchased 88,200 shares of its Common Stock for $1.1
million. The Company did not repurchase any shares during the quarter ended June
30, 1999.
NOTE 5. LICENSE REVENUES
License revenues from lending, retail delivery, connectivity and host processing
products were $9.9 million, $4.8 million, $1.3 million and $0.1 million for the
three months ended June 30, 1999, respectively, and $5.7 million, $4.0 million,
$0.4 million and $0.0, respectively, for the same period in 1998. License
revenues from lending, retail delivery, connectivity and host processing
products were $14.9 million, $8.0 million, $1.9 million and $0.2 million,
respectively, for the six months ended June 30, 1999, and $12.8 million, $6.9
million, $0.8 million and $0.0, respectively, for the same period in 1998.
6
<PAGE>
NOTE 6. ACQUISITIONS
Effective January 1, 1999 the Company acquired substantially all of the assets
of Modern Computer Systems, Inc. and certain related corporations (collectively,
MCS). MCS offers hardware and software solutions for the back office accounting
needs of community banks and credit unions. The acquisition was accounted for as
a purchase, resulting in approximately $7.0 million of goodwill, intangibles and
purchased software. The purchase price was $6.0 million in cash and $650,000 of
common stock. The Company is still obtaining certain data related to the
acquisition, and, accordingly, the purchase price allocation remains open. The
operations of MCS have been included in the Company's results of operations
since January 1, 1999. The 1998 pro forma results reflecting the MCS acquisition
are not materially different from the Company's reported results for the six
months ended June 30, 1998.
Effective May 17, 1999 the Company and Moneyscape Holdings, Inc. (a wholly owned
subsidiary of Concentrex) acquired 99% and 1%, respectively, of the equity in
MECA Software, L.L.C. ("MECA") in exchange for 50,000 shares of Concentrex
common stock. The acquisition was accounted for as a purchase. The net purchase
price approximated $12.3 million and consisted of the common stock issued,
assumption of net liabilities and accrued acquisition costs. The liabilities
assumed included $7.5 million of debt owed to certain former members of MECA and
was repaid by the Company from proceeds from bank borrowings. The purchase price
was allocated to the estimated fair value of the assets acquired, which included
the expensing of $3.8 million of in-process research and development and the
recognition of approximately a $9.9 million deferred tax asset. The excess of
the fair value of the assets acquired over cost (negative goodwill) was
allocated to reduce acquired non-current assets. The Company is still obtaining
certain data related to the acquisition, and accordingly, the purchase price
allocation remains open. The operations of MECA have been included in the
Company's results of operations since May 17, 1999.
Unaudited pro forma results of operations, including results of MECA (MCS
results are not considered significant and are therefore, to the extent that
they are not already included in the actual results, not included in the
unaudited pro forma information) for the three month and six month periods ended
June 30, 1999 and 1998, assuming such acquisition occurred at the beginning of
the periods and includes in process research and development charge related to
the MECA acquisition in the periods when incurred.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
1999 1998 1999 1998
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Total revenues $ 29,720 $ 25,209 $ 56,930 $ 49,906
Net loss applicable to common
shareholders $ (798) $ (438) $ (153) $ (912)
Loss per share - Basic $ (0.16) $ (0.09) $ (0.03) $ (0.18)
Loss per share - Diluted $ (0.16) $ (0.09) $ (0.03) $ (0.18)
</TABLE>
7
<PAGE>
NOTE 7. SUBSEQUENT EVENT -- ULTRADATA ACQUISITION
Effective August 13, 1999 the Company acquired all of the outstanding common
stock of ULTRADATA Corporation ("Ultradata"). Ultradata provides information
management software and solutions for relationship-oriented financial
institutions. The acquisition will be accounted for as a purchase. The purchase
price was approximately $63.5 million in cash.
NOTE 8. FINANCING EVENTS
On May 14, 1999 the Company sold 90,000 shares of its common stock to one
investor for gross proceeds of $900,000. The proceeds of the issuance were used
to repay liabilities acquired in the MECA acquisition.
On May 17, 1999 the Company entered into two lending agreements (the "USNB
Lending Agreements") with U.S. Bank National Association ("USNB"). On August 13,
1999 the USNB Lending Agreements were terminated, and all amounts outstanding
were repaid, upon completion of the financing described in the following
paragraphs. The first USNB Lending Agreement was for a revolving line of credit
in an amount not to exceed $5.0 million (the "Revolving Line") to be used for
working capital. The Company drew $4.0 million on the Revolving Line on May 17,
1999 and used the proceeds to pay off all amounts owing on a previous line of
credit with Bank of America; the Bank of America credit facility with the
Company was simultaneously terminated. The annual interest rate on the Revolving
Line as of June 30, 1999 was 5.81%. The second USNB Lending Agreement was for a
revolving line of credit in an amount not to exceed $15.0 million (the
"Acquisition Line") to be used for acquisitions. The Company drew $8.3 million
on the Acquisition Line on May 17, 1999 and used the proceeds to pay off certain
liabilities assumed in connection with the acquisition of MECA on that date. The
Company drew an additional $2.7 million on the Acquisition Line to purchase
shares of Ultradata common stock in open market transactions during the quarter
ended June 30, 1999. The annual interest rate on the Acquisition Line as of June
30, 1999 was 6.39%.
On August 13, 1999 the Company and its subsidiaries entered into a financing
agreement (the "Financing Agreement") with Foothill Capital Corporation
("Foothill") and certain other parties (collectively, the "Lenders") for three
credit facilities aggregating $80 million. The credit facilities provided under
the Financing Agreement terminate on August 13, 2002.
The first credit facility under the Financing Agreement is a revolving credit
facility (the "Foothill Revolver") for up to $15 million, subject to borrowing
base restrictions related to accounts receivable of the Company and its
subsidiaries. The Foothill Revolver bears interest at an annual rate equal to
the prime rate plus 1%. On August 13, 1999 the Company drew $1.7 million under
the Foothill Revolver in connection with the Ultradata acquisition and had $7.5
million of availability under that facility. The interest rate on the Foothill
Revolver at August 13, 1999 was 9.0%.
The second credit facility under the Financing Agreement is a term loan for $35
million (the "Term A Loan") that bears interest at an annual rate equal to the
prime rate plus 2%. The
8
<PAGE>
Term A Loan has scheduled quarterly prepayments of principal beginning in the
second quarter of 2000 that are expected to aggregate $19 million over the term
of the loan; the expected remaining principal of $16 million is due on August
13, 2002. On August 13, 1999 the Company drew $35 million under the Term A Loan
in connection with the Ultradata acquisition. The interest rate on the Term A
Loan at August 13, 1999 was 10.0%.
The third credit facility under the Financing Agreement is a term loan for $30
million (the "Term B Loan") that bears interest at an annual rate equal to the
prime rate plus 5%. The Term B Loan has no scheduled prepayments of principal.
The Term B Loan is due in full on August 13, 2002. On August 13, 1999 the
Company drew $30 million under the Term B Loan in connection with the Ultradata
acquisition. The interest rate on the Term B Loan at August 13, 1999 was 13.0%.
In connection with the credit facilities provided under the Financing Agreement,
the Company issued to the Lenders warrants (the "Lender Warrants") to purchase
up to 381,822 shares of the common stock of the Company, which represents 5.0%
of the fully diluted common stock of the Company. The exercise price of the
Lender Warrants is $12.34 per share. The Company has agreed to register for
resale the shares of common stock issuable upon exercise of the Lender Warrants.
The Lender Warrants are exercisable through August 13, 2004.
On August 13, 1999 the Company also issued to the Lenders and certain other
entities 10% Convertible Subordinated Discount Notes (the "Subordinated Notes")
in the aggregate original face amount of $7.4 million (with original issue
discount of $1.9 million). The Subordinated Notes are generally non-callable by
the Company through August 13, 2002. Interest at 10% per annum accretes on the
Subordinated Notes through August 13, 2002 and then becomes payable in cash by
the Company if the Subordinated Notes are not redeemed or converted by that
date. The Subordinated Notes are convertible into a maximum of 602,534 shares of
the Company's common stock at the election of the holders. The actual number of
shares into which the Subordinated Notes are convertible depends upon the date
of conversion and the amount of interest accreted on the Subordinated Notes
through the date of conversion. The Subordinated Notes are due on August 13,
2004 if not previously converted by that date. The Company received gross
proceeds of $5.5 million upon issuance of the Subordinated Notes, all of which
was used in connection the Ultradata acquisition.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO SHOULD BE READ IN
CONJUNCTION WITH THE FOLLOWING DISCUSSION. THIS DISCUSSION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE
CAUTIONARY STATEMENTS MADE IN THIS DISCUSSION SHOULD BE READ AS BEING APPLICABLE
TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS FILING.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE
DISCUSSED IN THIS FILING, AS WELL AS IN THE COMPANY'S REPORTS ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998 AND IN OTHER FILINGS BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
OVERVIEW
CFI ProServices, Inc., d/b/a Concentrex Incorporated ("Concentrex" or the
"Company") is a leading provider of integrated, PC-based software for financial
institutions, including solutions for branch automation, loan origination, new
account operations, call centers, cross selling of products and electronic
banking. Beginning in January 1999 with the Company's acquisition of Modern
Computer Systems, Inc. (MCS), and continuing with the acquisition of ULTRADATA
Corporation ("Ultradata") on August 13, 1999, the Company offers hardware and
software solutions for the back office accounting needs of community banks and
credit unions. The Company combines its technology, banking and legal expertise
to deliver knowledge-based software solutions that enable institutions to
simplify key business processes such as sales and service, improve productivity,
strengthen customer relationships and maintain compliance with both internal
business policies and external government regulations. More than 5,000 financial
institutions have licensed one or more of the Company's products.
During 1993 substantially all of the Company's revenue was derived from its
Laser Pro and Deposit Pro products. Today, the Company licenses more than 20
products organized into four product groups: lending, retail delivery,
connectivity software and host processing. Due to its product diversification
efforts, the Company is now less reliant on the Laser Pro and Deposit Pro
products. For the year ended 1998 approximately 48% of the Company's revenue
came from products other than Laser Pro and Deposit Pro.
Concentrex generates recurring revenue from software maintenance agreements. In
1998 service and support fees, primarily for Laser Pro and Deposit Pro,
accounted for approximately 35% of total revenue. Substantially all software
customers subscribe to the Company's service and support programs, which provide
ongoing product enhancements and, where applicable, updates to facilitate
compliance with changing regulations.
The Company's cost structure is relatively fixed over short periods of time and
the cost of generating revenue, in aggregate, does not vary significantly with
changes in revenue. As a result, the Company typically generates greater profit
margins from incremental sales once fixed costs are covered. Conversely, any
failure to achieve revenue targets in a particular period would adversely affect
profit margins for that period.
10
<PAGE>
The Company believes that sales to larger financial institutions will constitute
a higher percentage of total revenue in future periods. Transactions with these
larger financial institutions are typically of greater scope, usually involve a
greater sales effort over a longer period of time, and require more
customization and prolonged acceptance testing. This project oriented business
tends to cause growth in unbilled accounts receivable resulting from the use of
percentage of completion contracts and deferred payment terms, and also results
in increased collection times for billed accounts receivable. These factors, in
turn, result in higher days sales outstanding (DSO's) in accounts receivable.
The Company's backlog as of June 30, 1999, was approximately $15.9 million, as
compared to approximately $14.0 million as of June 30, 1998. Concentrex's
backlog consists of firm signed orders taken and not yet converted to revenue,
but expected to be converted to revenue within the next 12 months. Orders
constituting the Company's backlog are subject to changes in delivery schedules
or to cancellation at the option of the purchaser without significant penalty.
The stated backlog is not necessarily indicative of the Company's revenue for
any future period.
RESULTS OF OPERATIONS
The following table sets forth statements of income data of the Company
expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------- -----------------------------
1999 1998 1999 1998
---------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue
Software license fees 57.7 % 53.3 % 52.0 % 53.8 %
Service and support 34.5 39.0 39.4 38.1
Other 7.8 7.7 8.6 8.1
---------------- ------------- ------------- ------------
Total revenue 100.0 100.0 100.0 100.0
Gross profit 63.1 62.3 62.4 63.4
Operating expenses
Sales and marketing 17.3 23.6 17.8 23.2
Product development 21.5 16.6 21.4 16.6
General and administrative 15.5 11.0 14.2 12.2
Amortization of intangibles 1.5 1.6 1.7 1.6
In process research and
development 13.6 -- 7.9 --
---------------- ------------- ------------- ------------
Total operating expenses 69.4 52.8 63.0 53.6
---------------- ------------- ------------- ------------
Income (loss) from operations* (6.3) 9.5 (0.6) 9.8
Non-operating expense (0.5) (0.6) (0.3) (0.5)
---------------- ------------- ------------- ------------
Income (loss) before income taxes (6.8) 8.9 (0.9) 9.3
Provision for (benefit from) income
taxes (3.4) 3.9 (0.6) 4.1
Preferred stock dividend 0.1 0.1 0.1 0.1
---------------- ------------- ------------- ------------
Net income (loss) applicable to
common shareholders* (3.5) % 4.9 % (0.4) % 5.1 %
================ ============= ============= ============
<FN>
* Excluding the impact of acquired in-process research and development, income
from operations as a percentage of revenue for the three and six month periods
ending June 30, 1999 would have been 7.4% and 7.3%, respectively, and net income
applicable to common shareholders would have been 3.8% and 3.9% for the same
respective periods.
</FN>
</TABLE>
11
<PAGE>
The following table sets forth percentage changes period over period in the
statements of income data of the Company:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30,1999 over June 30, 1999 over
June 30, 1998 June 30, 1998
------------ ------------
<S> <C> <C>
Revenue
Software license fees 58.6 % 21.9 %
Service and support 29.4 29.9
Other 48.5 32.7
------------ ------------
Total revenue 46.5 25.8
Gross profit 48.5 23.8
Operating expenses
Sales and marketing 7.6 (3.4)
Product development 89.7 62.0
General and administrative 105.7 45.4
Amortization of intangibles 37.0 37.6
In-process research and development 100.0 100.0
------------ ------------
Total operating expenses 92.7 47.8
------------ ------------
Income (loss) from operations* (196.2) (107.9)
Non-operating expense 19.0 (25.8)
------------ ------------
Income (loss) before income taxes (210.8) (112.4)
Provision for income taxes 224.0 119.7
Preferred stock dividend (4.2) (4.2)
============ ============
Net income (loss) applicable to common
shareholders* (205.6) % (109.3) %
============ ============
<FN>
* Excluding the impact of acquired in-process research and development charges,
income from operations for the three and six month periods ending June 30, 1999
would have increased 13.4% and decreased 5.8%, respectively, and net income
applicable to common shareholders would have increased 15.5% and decreased 3.0%
compared to the same respective periods in 1998.
</FN>
</TABLE>
REVENUE
Total revenue increased $8.8 million, or 46.5%, to $27.8 million for the three
months ended June 30, 1999 compared to $19.0 million in the comparable period in
1998. Total revenue increased $9.8 million, or 25.8%, to $47.9 million for the
six months ended June 30, 1999 compared to $38.1 million in the comparable
period in 1998.
Software License Fees. Software license fees include sales of software to
customers, fees for software customization and fees related to implementing
software and systems at customer sites. Software license fees increased $5.9
million, or 58.6%, to $16.1 million and $4.5 million, or 21.9%, to $24.9 million
for the three month and six month periods ended June 30, 1999, respectively,
from $10.1 million and $20.5 million for the respective comparable periods in
1998. The increase resulted from increased sales in Lending Products. The
Company also recorded revenue of $0.1 million and $0.2 million, respectively,
from its Host Processing products for the three months and six months ended June
30, 1999.
12
<PAGE>
PERCENTAGE OF SOFTWARE LICENSE FEES
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Lending Products 62 % 57 % 60 % 62 %
Retail Delivery Products 30 40 32 34
Connectivity Products 8 3 8 4
Host Processing 0 N/A 1 N/A
----------------- ---------------- ----------------- ----------------
Total 100 100 100 100
</TABLE>
LENDING PRODUCTS. Lending products license revenue increased $4.2
million, or 73.2%, to $9.9 million for the three months ended June 30, 1999, and
$2.1 million, or 16.6%, to $14.9 million for the six months ended June 30, 1999
over the respective comparable periods in 1998. The increases were primarily due
to Laser Pro Lending in Windows and Laser Pro Mortgage.
RETAIL DELIVERY PRODUCTS. Retail delivery product license revenue
increased $0.8 million, or 20.0%, to $4.8 million for the three months ended
June 30, 1999, and $1.1 million, or 15.6%, to $8.0 million for the six months
ended June 30, 1999, from the respective comparable periods in 1998. The
increases were primarily due to revenues from MECA electronic banking products
and professional services, and increased revenues from the Company's home
banking product, Encore! Personal Branch
CONNECTIVITY PRODUCTS. Connectivity products license fee revenue
increased $0.9 million, or 259.4%, to $1.3 million for the three months ended
June 30, 1999, and $1.1 million, or 145.7%, to $1.9 million for the six months
ended June 30, 1999, from the respective comparable periods in 1998. The
increases resulted from higher sales of the Company's Stargate middleware
product.
HOST PROCESSING PRODUCTS. In January 1999 Concentrex acquired
substantially all of the assets of Modern Computer Systems, Inc. and certain
related corporations (collectively, MCS). MCS provides back office ("host") data
processing and related services to community banks and credit unions. Host
Processing products license revenues were $0.1 million and $0.2 million,
respectively, for the three and six month periods ended June 30, 1999. No
revenues from host processor products are attributable to 1998.
Effective August 13, 1999, Concentrex acquired all of the outstanding
common stock of ULTRADATA Corporation ("Ultradata"). Ultradata provides
information management software and solutions for relationship-oriented
financial institutions such as credit unions. See Note 7 of Notes to
Consolidated Financial Statements. Concentrex intends to combine its application
software and electronic commerce products with Ultradata's and MCS's
technologies and services to offer commercial banks, credit unions and thrifts
of all sizes an integrated real-time information management solution.
SERVICE AND SUPPORT FEES. Service and support fees consist primarily of
recurring software support charges and revenue from training customers in the
use of the Company's products. Substantially all of the Company's software
customers subscribe to its support services, which provide for the payment of
annual or quarterly maintenance fees. Service and support fees increased $2.2
million, or 29.4%, to $9.6 million and $4.3 million, or 29.9%, to $18.8 million
for
13
<PAGE>
the three and six month periods ended June 30, 1999, respectively, compared to
the same periods in 1998. The increase is primarily attributable to higher
maintenance revenue from a larger base of installed products, revenue from
MECA's technical support operations acquired in May 1999 and revenue from Host
Processing products acquired in January 1999. Service and support fees accounted
for 35% and 39% of total revenue, respectively, in the three and six month
periods ended June 30, 1999 compared to 39% and 38% for the same periods in
1998.
OTHER REVENUE. Other revenue includes Vendor Payment Systems (VPS) bill payment
processing fees, sales of MCS hardware, preprinted forms and supplies, MECA's
fulfillment operations and certain consulting revenue. Other revenue increased
$0.7 million, or 48.5%, to $2.2 million and $1.0 million, or 32.7%, to $4.1
million for the three month and six month periods ended June 30, 1999,
respectively, compared to the same periods in 1998. The increases were led by
higher VPS processing fees, MECA's fulfillment operations revenue and higher
sales of MCS hardware. Other revenue increased to 8% and 9% of total revenue for
the three and six month periods of 1999, respectively, compared to 8% for the
comparable periods in 1998.
COST OF REVENUE
Cost of revenue primarily consists of amortization of software development
costs, royalty payments, compliance warranty insurance premiums, software
production costs, costs of product support, training and implementation, costs
of software customization, materials costs for forms and supplies and bill
payment processing costs.
Cost of revenue increased $3.1 million, or 43.1%, to $10.3 million and $4.1
million, or 29.4%, to $18.0 million for the three and six month periods ended
June 30, 1999, respectively, compared to $7.2 million and $13.9 million in the
same periods in 1998. The increases are primarily attributable to increased
amortization of software development costs and to additional personnel required
to support the increased installed base of customers, higher implementation
costs associated with the increased number of large financial institution
projects, and increased royalties and materials costs associated with increased
revenues. As the breadth of the Company's product offerings has expanded, the
complexity and cost of providing high quality customer service and support has
increased.
Amortization of software development costs increased $0.3 million, to $0.8
million, for the three month period ended June 30, 1999 and $0.5 million, to
$1.6 million, for the first six months of 1999 from $0.5 million and $1.1
million for the respective comparable periods in 1998. The Company capitalized
no software development costs in the three and six month periods ended June 30,
1999 as compared to $0.5 million and $1.1 million for the comparable periods in
1998. Capitalized software development costs net of accumulated amortization
were $6.7 million at June 30, 1999.
As a result of Concentrex's acquisitions, costs resulting from royalty payments
are expected to increase in future periods. The Company is obligated to pay
royalties ranging from 3% to 18% of revenue related to certain products acquired
in various acquisitions since June 1994. In addition, the Company is obligated
to pay MicroBilt Corporation a fixed amount per OnLine Branch Automation
customer converted to the Company's products. The royalty obligations generally
extend three to five years from the acquisition date.
14
<PAGE>
Gross margin was 63.1% and 62.4%, respectively, for the three and six month
periods ended June 30, 1999 compared to 62.3% and 63.4% in the same periods in
1998. Operating margin declined to (6.3%) and (0.6%) for the three and six month
periods ended June 30, 1999 compared to 9.5% and 9.8%, respectively, in 1998.
The decrease in operating margin is primarily due to the in-process research and
development charge incurred during the second quarter of 1999 in connection with
the MECA acquisition.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses increased to $4.8 million, or
17.3% of revenue, for the three month period and decreased to $8.5 million, or
17.8% of revenue, for the six month period ended June 30, 1999 compared to $4.5
million, or 23.6% of revenue, and $8.9 million, or 23.2% of revenue, in the
respective comparable periods of 1998. The percentage decreases resulted
primarily from the MECA acquisition in May 1999, which contributed revenue
without commensurate sales and marketing costs.
PRODUCT DEVELOPMENT. Product development expenses include costs of maintaining
and enhancing existing products and developing new products. Product development
expenses were $6.0 million, or 21.5% of revenue, and $10.3 million, or 21.4% of
revenue, respectively, for the three month and six month periods ended June 30,
1999, compared to $3.2 million, or 16.6% of revenue, and $6.3 million, or 16.6%
of revenue, respectively, in the same periods in 1998. The increases in dollar
amount were principally the result of not capitalizing software development
costs in the 1999 period and of increased staffing in the development areas of
the Company, particularly related to the MECA acquisition.
The Company believes that the current development cycle for its
compliance-related products, which typically have relatively long lives, was
completed in the second quarter of 1998 and, accordingly, there should be a
significant reduction in the capitalization of software development costs in
future periods. The Company will continue to commit significant resources to
product development efforts. The Company anticipates that with the completion of
the current development cycle of its compliance-related products, and the
consequent reduction in capitalization of costs, product development costs will
have a material adverse effect in future periods on operating margin and net
income.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $4.3
million, or 15.5% of revenue, for the quarter ended June 30, 1999 and $6.8
million, or 14.2% of revenue, for the first six months of 1999 compared to $2.1
million, or 11.0% of revenue, and $4.6 million, or 12.2% of revenue,
respectively, for the same periods in 1998. The increases in dollar amount and
in percentages are principally due to the MECA and MCS acquisitions.
AMORTIZATION OF INTANGIBLES. Intangibles include acquisition payments assigned
to goodwill, non-competition agreements and customer lists. Amortization of
intangibles was $0.4 million and $0.8 million, respectively, for the three and
six month periods ended June 30, 1999 compared to $0.3 million and $0.6 million
for the comparable periods in 1998.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. In connection with the acquisition
of MECA in May of 1999, the Company recorded expense of $3.8 million in the
second quarter of 1999 for in-process research and development efforts in
process at the date of acquisition. The values assigned to the in-process
research and development efforts were determined by independent appraisal and
represent those efforts in process at the date of
15
<PAGE>
acquisition that had not yet reached the point where technological feasibility
had been established and that had no alternative future uses. Accounting rules
require these costs be expensed as incurred. The Company believes these research
and development efforts will result in commercially viable products within the
next six months, at an additional cost of approximately $500,000 million.
PROVISION FOR INCOME TAXES
The effective tax rate for the three and six month periods ended June 30, 1999
was 49% and 69%, respectively, compared to 44% for the same periods in 1998. The
increase in the effective tax rates for the 1999 periods resulted from the $3.8
million in-process research and development charge incurred in the second
quarter of 1999.
QUARTERLY RESULTS
The Company has experienced, and expects in the future to experience,
significant quarterly fluctuations in its results of operations. These
fluctuations may be caused by various factors, including, among others: the size
and timing of product orders and shipments; the timing and market acceptance of
new products and product enhancements introduced by the Company and its
competitors; the Company's product mix, including expenses of implementation and
royalties related to certain products; the timing of the Company's completion of
work under contracts accounted for under the percentage of completion method;
customer order deferrals in anticipation of new products; aspects of the
customers' purchasing process, including the evaluation, decision-making and
acceptance of products within the customers' organizations; the sales process
for the Company's products, including the complexity of customer implementation
of the Company's products; the number of working days in a quarter; federal and
state regulatory events, including regulatory requirements for financial
institutions with respect to the Year 2000; competitive pricing pressures;
technological changes in hardware platform, networking or communication
technology; changes in Company personnel; the timing of the Company's operating
expenditures; specific economic conditions in the financial services industry
and general economic conditions.
The Company's business has experienced, and is expected to continue to
experience, some degree of seasonality due to its customers' budgeting and
buying cycles. The Company's strongest revenue quarter in any year is typically
its fourth quarter and its weakest revenue quarter is typically its second
quarter. Customers' purchases are tied closely to their internal budget
processes. For some of the Company's customers, budgets are approved at the
beginning of the year and budgeted amounts often must be utilized by the end of
the year. In addition, the Company's incentive sales compensation plan provides
for increases in commission percentages as sales people approach or exceed their
annual sales quotas. As a result of these two factors, the Company usually
experiences increased sales orders in the last quarter. This pattern may be
altered in 1999 as Year 2000 issues, including regulatory requirements and
internal business process decisions, affect customers' buying decisions.
16
<PAGE>
YEAR 2000
The Year 2000 issue identifies problems that may arise in computer equipment and
software, as well as embedded electronic systems, because of the way these
systems are programmed to interpret certain dates that will occur around the
change in century. In the computer industry this is primarily the result of
computer programs being designed and developed using or reserving only two
digits in date fields (rather than four digits) to identify the century, without
considering the ability of the program to properly distinguish the upcoming
century change in the Year 2000. In addition, the Year 2000 is a special-case
leap year, and some programs may drop February 29th from their internal
calendars. Likewise, other dates may present problems because of the way the
digits are interpreted. Because the Company's business is based on the licensing
of applications software, the Company's business would be impacted if its
products or its internal systems experience problems associated with the century
change. This issue also potentially affects the internal software systems used
by the Company in its operations.
The Company has completed its survey of internal computer systems, as well as
critical third party software and systems used by the Company, regarding Year
2000 compliance status. The scope of the Year 2000 readiness effort included
addressing (i) information technology such as software and hardware, (ii)
non-information systems or embedded technology contained in various equipment,
safety systems, facilities and utilities and (iii) readiness of mission critical
third-party suppliers. The Company has communicated with its significant
suppliers and vendors to understand their ability to continue providing services
and products through the millenium change and to determine the extent to which
the Company may be vulnerable in the event of a failure by them or their
services and products. With respect to mission critical systems, the Company
sought statements of compliance from each vendor either through direct response
or by reference to information posted on an electronic bulletin board or in a
government database.
INTERNAL SYSTEMS. Some of the computer programs and systems used by the Company
require date-sensitive information to accurately and adequately process
information critical to the Company's business. Inaccuracies or other errors in
this information could have a material, adverse effect on the Company's
business. Furthermore, non-compliance in these programs could cause a system
failure or interruption, either of which could also materially adversely affect
the Company. In addition to computer software, some machines and devices used by
the Company and others may contain embedded technology that is not Year 2000
compliant, which could result in a malfunction or failure of such devices.
The review and assessment of the Company's internal systems is complete. The
Company's internal accounting system, including those components used for the
Company's invoicing and bill payment, has been evaluated by the vendor and has
been represented to be Year 2000 compliant. The Company plans to routinely
backup its financial data through the end of 1999 and will develop a contingency
plan with respect to the accounting system in the second half of 1999. The
Company anticipates that its customer support and call tracking system will be
Year 2000 compliant after installation of an update scheduled to occur in the
third quarter of 1999. The cost of the update is estimated to be immaterial.
17
<PAGE>
The Company completed the survey of its software vendors in the fourth quarter
of 1998. The bulk of the Company's vendors have already provided compliant
versions of their software. The Company continues to monitor all material third
party software not indicated to be Year 2000 compliant and believes that few
vendors, if any, will not provide compliant versions by the middle of 1999.
The Company has received representations that its phone and voice mail systems
became Year 2000 compliant through upgrades completed during the second quarter
of 1999. As to its phone service providers, the Company has offices located at
12 disparate geographical locations all served by different local phone service
providers and the Company contracts with two long distance carriers.
Consequently, the Company can shift telecommunications through any of these
locations should any other location be down. Further, neither the Company's base
software nor updates are provided exclusively via downloading. Virtually all of
the Company's base software and updates are provided to customers through
magnetic media.
Based on information gathered to date, the Company is not presently aware of any
Year 2000 issue that could materially affect the Company's operations, either
self-originated or caused by third-party service vendors or providers.
Management believes that all mission critical systems will be compliant by the
Year 2000. Nevertheless, there can be no assurance that the Company will not
experience some operating difficulties as a result of Year 2000 issues. If they
occur, these difficulties could require the Company to incur unanticipated costs
to remedy the problems and, either individually or collectively, have a material
adverse effect on the Company's business operations and financial results. The
Company has not yet determined the cost of completing its investigation or the
cost of any modification or remediation that may be required to correct Year
2000 issues. Costs incurred to date to assess Year 2000 issues have not been
significant and have been funded through operating cash flows. The Company
intends to develop contingency plans for its significant systems that can be
implemented on or after January 1, 2000 in the event of a system failure
resulting from the century change.
COMPANY DEVELOPED SOFTWARE. The Company develops software programs for use by
financial institutions to automate various transactions and processes. These
programs often are highly dependent upon historical or dynamic financial and
other data that, if the programs are not able to distinguish between the Year
2000 and other century-end years, could be misreported or misinterpreted and
cause significant resulting calculation errors. This data is often acquired from
other systems that may or may not be Year 2000 compliant, further exacerbating
the problem. The Company's financial institution customers are subject to
regulatory scrutiny; any such errors could subject them to civil or regulatory
action, or both, resulting in large fines, penalties or other costs.
Additional consequences of the Year 2000 issue for the Company's financial
institution customers may include systems failures and business process
interruption, including, among other things, a temporary inability to process
transactions, satisfy regulatory obligations, or engage in similar normal
business activities. In addition, the impact of Year 2000 issues may severely
impair the ability of the Company's customers to purchase the Company's
products, or to make payments on software or services previously purchased.
18
<PAGE>
Concern over Year 2000 issues is permeating the financial services industry, and
management expects that the resolution of these concerns will likely absorb a
substantial portion of financial institution information technology budgets and
attention in the near term (with an associated decreased focus on other business
initiatives, including purchase decisions with respect to the Company's
software). Year 2000 issues faced by its customers could materially and
adversely affect the Company's operations and financial results through the Year
2000.
The Federal Financial Institutions Examination Council (the "FFIEC") has issued
a series of Statements beginning in June 1996 requiring that the various
financial institutions regulated by FFIEC member agencies provide assurance that
they will be capable of conducting business as usual in 2000 and into the 21st
century. To this end, and among other obligations, each institution is required
to survey its systems and operations (including software and vendor supplied
services), determine any deficiencies, remediate to correct deficiencies, test
mission critical third party software and services to confirm their Year 2000
readiness after remediation, and develop contingency plans against the event
that a mission critical item, service or process fails to be Year 2000
compliant. Further information on the FFIEC mandate and related matters can be
found at the FFIEC's website, www.ffiec.gov/y2k. In support of its customers'
obligations resulting from the FFEIC's Statements, the Company has made the Year
2000 issue a significant priority and assigned a task force with responsibility
for an ongoing effort to minimize Year 2000-related risks relative to the
Company's products.
The Company has completed its review of all of its software products for Year
2000 compliance, and has determined that most of the Company's standard software
products are Year 2000 compliant. The Company has not undertaken, and does not
intend to undertake, a review of the many customized versions of software
products that it has provided customers. The Company has developed a plan to
discontinue some of its standard products prior to December 31, 1999, and the
Year 2000 issue has been one of the factors considered in those decisions. For
those products that will not continue to be offered, generally a Year 2000
compliant replacement product currently exists.
For standard products that will continue to be offered, but are not currently
Year 2000 compliant, the Company has developed and executed a plan for resolving
such compliance-related issues. A matrix describing the Company's product
compliance (including a comprehensive definition to determine such compliance)
has been communicated to the Company's customers and is available for review on
the Company's website. The financial impact of making the required changes to
the software programs is not expected to be material to the Company's
consolidated financial position, results of operations or cash flows. The
Company acquired all of the equity interests in MECA in May 1999 and in
Ultradata in August 1999. Although the products of both organizations are
represented as being Year 2000 compliant, none of the products of MECA or
Ultradata are included in the foregoing discussion. The Company intends to
complete its Year 2000 review of the MECA and Ultradata products during the
third quarter of 1999 consistent with the standards established for the
Company's other products.
Information on the Company's website is provided to customers for the sole
purpose of assisting them in planning for the transition to the Year 2000 and
includes the Company's definition of Year 2000 compliance, product compliance
status, and, in the case of the Laser
19
<PAGE>
Pro Closing/Lending product, includes test guides. This information is updated
at least quarterly so that the Company's customers can access current
information on the Year 2000 compliance status of the Company's products. The
matrix does not provide certification of Year 2000 compliance and customers are
cautioned that they should independently confirm Year 2000 compliance of the
Company's products.
The Company has developed a standard Year 2000 compliance warranty and is
offering it to customers with respect to those products that will continue to be
offered into the next century. This warranty is consistent with the Company's
standard product warranties, extends no indemnities, and maintains the liability
cap applying otherwise in its licenses.
Financial institutions, financial institution regulators, and the many vendors
supplying the financial services industry have not developed a consistent and
comprehensive definition of what constitutes "compliance" with the Year 2000.
This, coupled with the different combinations of software, firmware, and
hardware used by customers may lead to disputes against the Company regarding
the operation of its software. The outcome of such disputes and the impact on
the Company are not estimable at this time.
MARKET RISK
The Company has not entered into derivative financial instruments. The Company
may be exposed to future interest rate changes on its debt. The Company does not
believe that a hypothetical 10 percent change in interest rates would have a
material effect on the Company's cashflow.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $5.6 million for the six months ended June
30, 1999 compared to $6.3 million for the same period in 1998. Working capital
decreased $4.4 million to $12.6 million at June 30, 1999 from $17.0 million at
December 31, 1998. The decrease resulted primarily from liabilities assumed in
the MECA acquisition in May 1999.
Net cash used in investing activities was $7.8 million for the six months ended
June 30, 1999 compared to $2.4 million for the same period in 1998. The increase
in cash used in investing activities is due principally to cash used in the MCS
acquisition and investments in Ultradata stock. See Note 8 of Notes to
Consolidated Financial Statements.
Net cash provided by financing activities of $3.0 million during the six months
ended June 30, 1999 was principally attributable to net proceeds from the
Company's lines of credit and from the sale of common stock, offset in part by
payments on long term debt assumed in the MECA acquisition and cash used for the
repurchase of common stock. Net cash used in financing activities of $1.3
million for the same period in 1998 was primarily attributable to payments on
the Company's line of credit.
Days sales outstanding (DSO's) in accounts receivable, including both billed and
unbilled accounts receivable, was 100 days at June 30, 1999 compared to 108 days
June 30, 1998. The Company's project-oriented business often requires unbilled
accounts receivable and milestone billings, both of which often have longer
collection cycles. Unbilled accounts receivable were
20
<PAGE>
$7.1 million, or 22.9% of total accounts receivable, at June 30, 1999 compared
to $5.2 million, or 22.3% of total accounts receivable, at June 30, 1998.
Future cash requirements could include, among other things, purchases of
companies, products or technologies, expenditures for internal software
development, capital expenditures necessary to the expansion of the business,
and installment payments on debt related to acquisitions. Available cash
resources include cash generated by the Company's operations plus a revolving
line of credit up to $15.0 million, of which $7.5 million was available at
August 13, 1999. See Note 8 of Notes to Consolidated Financial Statements for a
description of the Company's current credit facilities.
The Company may require additional funds to support its working capital
requirements, future acquisitions or for other purposes and may seek to raise
such additional funds through one or more public or private financings of debt
or equity, or from other sources. No assurance can be given that additional
financing will be available or, if available, that such financing will be
obtainable on terms favorable to the Company or its shareholders.
From time to time the Company receives contract claims from its customers and
other parties, including requests for full or partial refunds of moneys paid,
and initiates contract claims against its customers and other parties, including
claims for payment of unpaid invoices. Although there can be no assurance that
such claims, either alone or in the aggregate, will not have a material adverse
effect on the Company's results of operations or financial position, the Company
believes that as of the date of this filing no such claims will have such an
effect.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 4 . SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on May 14, 1999
at which the following actions were taken:
1. The shareholders elected three nominees for Class 3 Director to the Board of
Directors of the Company. The three Class 3 Directors elected, along with the
voting results, are as follows:
No. of No. of
Name Shares Voting For Shares Withheld Voting
- ---- ----------------- -----------------------
J. Kenneth Brody 4,341,171 232,132
Robert T. Jett 4,341,371 231,932
Lorraine O. Legg 4,326,471 246,832
2. The shareholders approved an amendment to the Company's 1995 Consolidated and
Restated Stock Option Plan to increase the aggregate number of shares of Common
Stock that may be issued thereunder by 500,000 shares (2,281,131 shares were
voted affirmatively, 1,522,950 shares were voted negatively, 7,007 shares
abstained from voting and there were 762,215 broker non-votes).
3. The shareholders approved an amendment to the Company's Restated Outside
Director Compensation and Stock Option Plan to increase the aggregate number of
shares of Common Stock that may be issued thereunder by 100,000 shares
(2,817,157 shares were voted affirmatively, 983,326 shares were voted
negatively, 10,605 shares abstained from voting and there were 762,215 broker
non-votes).
4. The shareholders approved the appointment of Arthur Andersen LLP as the
independent accountants of the Company for the year ending December 31, 1999
(4,547,282 shares were voted affirmatively, 23,021 shares were voted negatively
and 3,000 shares abstained from voting).
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed as part of this report are listed below:
Exhibit Number and Description
10.1 Financing Agreement dated as of August 13, 1999 among Registrant,
ULTRADATA Corporation, MECA Software, L.L.C., Moneyscape Holdings,
Inc., Foothill Capital Corporation, Ableco Finance L.L.C., Levine
Leichtman Capital Partners II, L.P. and Foothill Partners III, L.P.
10.2 Third Amendment to Office Lease dated August 11, 1999 between
Registrant and John Hancock Mutual Life Insurance Company.
10.3 Employment, Confidentiality and Invention Agreement dated December 12,
1997, as amended May 27, 1999 among Registrant, MECA Software L.L.C.
and Paul D. Harrison (Confidential treatment has been requested with
respect to certain information).
27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed with the Securities and Exchange Commission on June 2, 1999
with respect to the acquisition of MECA Software, L.L.C. by the Registrant.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 16, 1999 CFI PROSERVICES, INC.
By: /s/ MATTHEW W. CHAPMAN
------------------------------------
Matthew W. Chapman
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ KURT W. RUTTUM
------------------------------------
Kurt W. Ruttum
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
24
FINANCING AGREEMENT
Dated as of August 13, 1999
by and among
CFI PROSERVICES, INC. and its Subsidiaries,
the financial institutions or funds identified herein as the "Lenders",
FOOTHILL CAPITAL CORPORATION, as Administrative Agent,
and
ABLECO FINANCE LLC, as Collateral Agent
<PAGE>
FINANCING AGREEMENT
Financing Agreement, dated as of August 13, 1999, by and among
CFI PROSERVICES, INC., an Oregon corporation ("CFI"), ULTRADATA CORPORATION, a
Delaware corporation and successor by merger to UFO Acquisition Co.
("Ultradata"), MECA SOFTWARE, L.L.C., a Delaware limited liability company
("MECA"), MONEYSCAPE HOLDINGS, INC., an Oregon corporation ("MSHI"), each of the
financial institutions or funds that is a signatory to this Agreement (together
with its successors and permitted assigns, individually, "Lender" and,
collectively, "Lenders"), FOOTHILL CAPITAL CORPORATION, a California
corporation, as administrative agent for the Lenders (in such capacity, together
with its successors, if any, in such capacity, "Administrative Agent"), and
ABLECO FINANCE LLC, a Delaware limited liability company, as collateral agent
for the Lender Group (in such capacity, together with its successors, if any, in
such capacity, "Collateral Agent").
RECITALS
The Loan Parties have asked the Lender Group to extend credit
to the Borrower consisting of (a) a term loan designated as "Term Loan A" in the
principal amount of $35,000,000.00, (b) a term loan designated as "Term Loan B"
in the principal amount of $30,000,000.00, and (c) a revolving credit facility
in an aggregate principal amount not to exceed $15,000,000.00 at any time
outstanding. The Lender Group is willing to extend such credit to the Borrower
subject to the terms and conditions hereinafter set forth.
In consideration of the premises and the covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shallhave the respective meanings indicated below, such meanings
to be applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means each debtor, customer or obligor in any
way obligated on or in connection with any Account Receivable.
"Account Receivable" means all currently existing and
hereafter arising accounts, contract rights, and all other forms of obligations
owing to one or more of the Loan Parties arising out of the sale, license, or
lease of goods or general intangibles or the rendition of services by the Loan
Parties, irrespective of whether earned by performance, any and all such rights
or obligations evidenced by chattel paper, instruments or documents, and any and
all credit insurance, guaranties, or security therefor.
"Acquisition" means the acquisition of all of the Capital
Stock of any Person or all or substantially all of the assets of any Person.
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"Acquisition Qualification" means, with respect to any
representation or warranty hereunder that is expressly qualified by the phrase
"subject to the Acquisition Qualification" and solely to the extent such
representation or warranty relates to (a) Ultradata as of the Effective Date, or
(b) property of Ultradata in existence and owned by Ultradata on the Effective
Date, a qualification that such representation or warranty is made to the best
knowledge of the applicable Loan Parties; it being expressly understood and
agreed that the Acquisition Qualification shall not apply to such representation
or warranty relative to (1) Ultradata after the Effective Date, and (2) any
property of Ultradata acquired or arising after the Effective Date.
"Action" has the meaning specified therefor in Section 11.12.
"Administrative Agent" means Foothill Capital Corporation, a
California corporation, solely in its capacity as administrative agent for the
Lenders, and shall include any successor administrative agent.
"Administrative Agent Account" means an account at a bank
designated by Administrative Agent from time to time as the account into which
the Borrower and the other Loan Parties shall make all payments to
Administrative Agent for the benefit of the Lender Group, and into which the
Lender Group shall make all payments to Administrative Agent, under this
Agreement and the other Loan Documents. Initially, until Administrative Agent
notifies Administrative Borrower (for the benefit of the Loan Parties) and the
Lender Group to the contrary, the Administrative Agent Account shall be that
certain deposit account bearing account number 323-266193 and maintained by
Administrative Agent with The Chase Manhattan Bank, 4 New York Plaza, 15th
Floor, New York, New York 10004.
"Administrative Borrower" has the meaning set forth in Section
11.24.
"Affiliate" means, as to any Person, any other Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
either to (i) vote 10% or more of the Capital Stock having ordinary voting power
for the election of directors (or Persons performing similar functions) of such
Person or (ii) direct or cause the direction of the management and policies of
such Person whether by contract or otherwise. Notwithstanding anything herein to
the contrary, in no event shall the Lender Group or any member thereof be
considered an "Affiliate" of any Loan Party, except to the extent that a member
of the Lender Group qualifies under clause (i) hereof. Solely in respect of any
member of the Lender Group, an Affiliate also shall include (y) an investment
fund or managed account managed by such member of the Lender Group or any other
Person referred to in the first sentence of this definition in respect of such
member of the Lender Group, or (z) is an investment manager of such investment
fund or managed account.
"Agent" means Administrative Agent or Collateral Agent, as the
context requires.
"Agent-Related Persons" means Administrative Agent and any
successor agents thereto, and Collateral Agent and any successor agents thereto,
together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
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<PAGE>
"Agreement" means this Financing Agreement, together with all
Exhibits and Schedules hereto.
"Assignment and Acceptance" has the meaning specified therefor
in Section 11.07(g).
"Authorized Person" means, with respect to any Loan Party, any
officer or other employee of such Loan Party.
"Availability" means, as of any date of determination, the
amount of Revolving Loans that the Borrower is entitled to borrow, such amount
being the difference derived when (a) the Revolving Facility Usage (including
any amounts that the Lender Group may have paid for the account of the Borrower
pursuant to any of the Loan Documents and that have not been reimbursed by the
Borrower) is subtracted from (b) the lesser of (i) the Borrowing Base and (ii)
the Maximum Revolving Amount. If the Revolving Facility Usage is equal to or
greater than the Borrowing Base or the Maximum Amount, Availability is zero
(-0-).
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.), as amended, and any successor statute.
"Board" means the Board of Governors of the Federal Reserve
System of the United States.
"Book Value" means, as to any Inventory, the lower of (i) cost
(as reflected in the general ledger of the Borrower before customary (but not
extraordinary) reserves established by the Borrower in good faith and in
accordance with GAAP) and (ii) market value, in each case determined in
accordance with GAAP calculated on a first in first out basis).
"Borrower" means, individually and collectively, and jointly
and severally, CFI, MSHI, MECA, and Ultradata, and any other Subsidiary of
Borrower that in the future executes and delivers a joinder to this Agreement as
a Borrower with the written concurrence of the Required Lenders.
"Borrowing Base" means, as of any date of determination, the
result of: (1) the lesser of (a) the result of (i) the sum of (y) the product of
85% and the Net Amount of Eligible Accounts Receivable (Non-Maintenance) as of
such date, plus (z) the lesser of (I) the product of 85% and the Net Amount of
Eligible Accounts Receivable (Maintenance) as of such date, and (II) $2,000,000,
less (ii) the amount, if any, of the Dilution Reserve, and (b) an amount equal
to Borrower's Collections with respect to Accounts Receivable for the
immediately preceding 60 day period; minus (2) the aggregate amount of reserves,
if any, established by Administrative Agent under the Loan Documents (including
under Section 2.01(b) hereof).
"Borrowing Base Certificate" means a certificate signed by a
Responsible Official of the Borrower and setting forth the calculation of the
Borrowing Base in compliance with Section 6.01(a)(vi), substantially in the form
of Exhibit B-1.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
to close.
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<PAGE>
"Capital Expenditures" means, with respect to any Person for
any period, the sum of (i) the aggregate of all expenditures by such Person and
its Subsidiaries during such period that in accordance with GAAP are or should
be included in "property, plant equipment" or similar fixed asset account on its
balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations paid or payable during such period,
and (ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries to acquire by purchase or
otherwise the business or fixed assets of, or the Capital Stock of, any other
Person. For the purpose of calculating the amount of expenditures in clause (i)
above, any expenditures relating to capitalization of software development costs
shall be excluded if such software development costs are required to be
capitalized in accordance with GAAP.
"Capitalized Lease" means, with respect to any Person, any
lease of real or personal property by such Person as lessee which is required
under GAAP to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means, with respect to any
Person, obligations of such Person and its Subsidiaries under Capitalized
Leases, and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
limited liability company, or other equity interests of such Person.
"Cash and Cash Equivalents" means all cash and any presently
existing or hereafter arising deposit account balances, certificates of deposit
or other financial instruments properly classified as cash equivalents under
GAAP.
"Cash Flow Ratio" means, for any period, the ratio of (i)
Consolidated EBITDA of the Borrower and its Subsidiaries for such period, to
(ii) Consolidated Net Interest Expense of the Borrower and its Subsidiaries, to
the extent paid or required to be paid in cash, for such period. In determining
the Cash Flow Ratio for a particular period (A) pro forma effect will be given
to: (1) the incurrence, repayment or retirement of any Indebtedness by the
Borrower and its Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired on the first day of such period and
(2) the acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any property or assets acquired or
disposed of by any of the Borrower and its Subsidiaries since the first day of
such period, as if such acquisition or disposition occurred on the first day of
such period; (B) interest on Indebtedness bearing a floating interest rate will
be computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period; (C) if such Indebtedness bears, at the
option of the Borrower, a fixed or floating rate of interest, interest thereon
will be computed by applying, at the option of the Borrower, either the fixed or
floating rate; and (D) the amount of Indebtedness under a revolving credit
facility will be computed based upon the average daily balance of such
Indebtedness during such period.
4
<PAGE>
"Certificates" has the meaning specified therefor in Section
2.07.
"CFI" has the meaning specified therefor in the preamble
hereto.
"CFI Class A Preferred Stock" means the Class A Preferred
Stock of CFI, having the rights and preferences set forth in Schedule P-1.
"Change of Control" means each occurrence of any of the
following:
(a) the acquisition, directly or indirectly, by any person or
group (within the meaning of Section 13(d)(3) of the Exchange Act) of beneficial
ownership of more than 25% of the aggregate outstanding voting power of the
Capital Stock of CFI; or
(b) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of CFI
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of CFI was approved by a vote
of at least 66 2/3% of the directors of CFI then still in office who were either
directors at the beginning of such period, or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of CFI then in office; or
(c) (i) any Loan Party consolidates with or merges into
another entity (other than another Loan Party) or conveys, transfers or leases
all or substantially all of its property and assets to any Person, or (ii) any
entity (other than another Loan Party) consolidates with or merges into any Loan
Party, which in either event (i) or (ii) is pursuant to a transaction in which
the outstanding voting Capital Stock of the applicable Loan Party is
reclassified or changed into or exchanged for cash, securities or other
property; or
(d) less than 100% of all of the voting Capital Stock of any
Loan Party (other than CFI) shall be owned and controlled, beneficially,
directly, and of record, by the Loan Parties.
"Collateral" means all of the property and assets and all
interests therein and proceeds thereof now owned or hereafter acquired by any
Person upon which a Lien is granted or purported to be granted by such Person as
security for all or any part of the Obligations.
"Collateral Agent" means ABLECO FINANCE LLC, a Delaware
limited liability company, solely in its capacity as collateral agent for the
Lender Group, and shall include any successor collateral agent.
"Collateral Agent's Account" means an account at a bank
designated by the Collateral Agent from time to time as the account into which
the Borrower and the other Loan Parties, the Administrative Agent, or any other
member of the Lender Group, shall make all payments to Collateral Agent under
this Agreement and the other Loan Documents. Initially, until Collateral Agent
notifies Administrative Borrower (for the benefit of the Loan Parties),
Administrative Agent, and the other members of the Lender Group to the contrary,
the Collateral Agent's Account shall be the Collection Account maintained
pursuant to the Revolving Credit Agreement dated as of February 9, 1999, by and
among Ableco Finance LLC, the "Lenders"
5
<PAGE>
listed therein, The Chase Manhattan Bank, N.A., as "Administrative Agent", and
Chase Bank of Texas, National Association, as "Collateral Agent".
"Collection Rule Overadvance" means, as of any date of
determination, an amount equal to the result (so long as it is a positive
amount) of (a) the aggregate outstanding amount of Obligations, minus (b) the
product of (i) 2.67, multiplied by (ii) an amount equal to Borrower's
Collections with respect to Accounts Receivable for the immediately preceding 13
consecutive week period.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance and condemnation proceeds, cash
proceeds of sales and other voluntary or involuntary dispositions of property,
rental proceeds, and tax refunds).
"Commitment" means the Revolving Credit Commitment, the Term
Loan A Commitment, the Term Loan B Commitment, or the Total Commitment, as the
context requires.
"Commitment Percentage" means, with respect to any Lender, the
ratio of (i) the amount of the Commitment of such Lender to (ii) the aggregate
amount of the Commitments of all of the Lenders.
"CFI" has the meaning specified therefor in the preamble
hereto.
"Confidential Information" means any confidential,
proprietary, or non-public information supplied to it by the Loan Parties
pursuant to this Agreement or the other Loan Documents which is identified in
writing by Administrative Borrower on behalf of the Loan Parties as being
confidential pursuant to this definition or otherwise at, or reasonably
concurrent with, the time the same is delivered to such member of the Lender
Group (and which at the time is not, and does not thereafter become, publicly
available or available to such member of the Lender Group from another source
not known by such member of the Lender Group to be subject to a confidentiality
obligation not to disclose such information). The foregoing provision relative
to timing of Administrative Borrower's identification of such information as
being confidential notwithstanding, the following categories of information that
is confidential, proprietary, or non-public hereby are designated by
Administrative Borrower as confidential for purposes of this definition (subject
to the same not being publicly available or available to such member of the
Lender Group from another source not known by such member of the Lender Group to
be subject to a confidentiality obligation not to disclose such information):
all systems and tools, object and source codes, procedure codes, software
documentation, computer software programs, subroutines, modules, modifications,
upgrades, and interfaces owned or developed by any of the Loan Parties; all
non-public business and marketing plans of the Loan Parties; and all customer
lists, customer agreements, customer specifications, and customer information of
the Loan Parties.
"Consolidated Current Assets" means, with respect to any
Person at any date, all assets that, as of the date of determination thereof and
in accordance with GAAP, should be classified as current assets on a
consolidated balance sheet of such Person and its Subsidiaries at such date.
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<PAGE>
"Consolidated Current Liabilities" means, with respect to any
Person at any date, all liabilities that, as of the date of determination
thereof and in accordance with GAAP, should be classified as current liabilities
on a consolidated balance sheet of such Person and its Subsidiaries at such date
including, without limitation, all Indebtedness (including, without limitation,
the Obligations) payable on demand or within one year after such date (whether
by final maturity, required prepayment or otherwise) without any option on the
part of the obligor to extend or renew beyond such year, but excluding the
current portion of the Term Loans and of other long term debt that is existing
as of the Effective Date and set forth on Schedule 6.02(b).
"Consolidated EBITDA" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period, plus
without duplication, the sum of the following amounts of such Person and its
Subsidiaries for such period and to the extent deducted in determining
Consolidated Net Income of such Person for such period: (A) Consolidated Net
Interest Expense, (B) income tax expense, (C) depreciation expense, (D)
amortization expense (including amortization of goodwill, intangibles, purchased
software costs, software development costs capitalized prior to the Effective
Date, and software development costs capitalized after the Effective Date to the
extent such costs are required to be capitalized in accordance with GAAP), (E)
(i) extraordinary or unusual losses and other losses from sales of assets other
than Inventory sold in the ordinary course of business, less (ii) without
duplication, the sum of (y) extraordinary or unusual gains and other gains from
sales of assets other than Inventory sold in the ordinary course of business and
(z) any capitalized software development costs other than those software
development costs required to be capitalized in accordance with GAAP, and (F)
Permitted Preferred Stock dividends.
"Consolidated Net Income" means, with respect to any Person
for any period, the net income (loss) of such Person and its Subsidiaries for
such period, determined on a consolidated basis and in accordance with GAAP, but
excluding from the determination of Consolidated Net Income (without
duplication) (a) any extraordinary or non-recurring gains or losses or gains or
losses from Dispositions, (b) restructuring charges, (c) effects of discontinued
operations and (d) interest income.
"Consolidated Net Interest Expense" means, with respect to any
Person for any period, gross interest expense of such Person and its
Subsidiaries for such period determined in conformity with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person), less
(i) the sum of (A) interest income for such period and (B) gains for such period
on Hedging Agreements (to the extent not included in interest income above and
to the extent not deducted in the calculation of such gross interest expense),
plus (ii) the sum of (A) losses for such period on Hedging Agreements (to the
extent not included in such gross interest expense) and (B) the upfront costs or
fees for such period associated with Hedging Agreements (to the extent not
included in gross interest expense), each determined on a consolidated basis and
in accordance with GAAP for such Person and its Subsidiaries.
"Consolidated Tangible Net Worth" means, with respect to any
Person at any time, (i) the sum of the following accounts (or their equivalents)
set forth on a consolidated balance sheet of such Person and its Subsidiaries
prepared in accordance with GAAP: the par or stated value of all outstanding
Capital Stock, capital surplus and retained earnings (or less accumulated
deficits), less (ii) all intangibles included on the asset side of such balance
sheet,
7
<PAGE>
including, without limitation, goodwill (including any amounts, however
designated on such balance sheet, representing the excess of the purchase price
paid for assets or stock acquired over the value assigned thereto on the books
of such Person and its Subsidiaries), deferred tax assets, prepaid expenses,
patents, trademarks, trade names, copyrights and similar intangibles.
"Contingent Obligation" means, with respect to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to make
take-or-pay or similar payments, if required, regardless of nonperformance by
any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (B) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, assets, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (D) otherwise to assure or
hold harmless the holder of such primary obligation against loss in respect
thereof, provided, however, that the term "Contingent Obligation" shall not
include any products warranties extended in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation with respect to which
such Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the terms of
the instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder), as determined by such
Person in good faith.
"copyright" shall have the meaning ascribed to such term in
Copyright Act, and includes unregistered copyrights.
"Copyright Act" means the United States Copyright Act of 1976,
as amended, and any successor statute, and the rules promulgated thereunder.
"Copyright Security Agreement" means a Copyright Security
Agreement, by the Loan Parties in favor of Collateral Agent for the benefit of
the Lender Group, in form and substance satisfactory to Collateral Agent.
"Default" means an event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Defaulting Lender" means any Lender with a Revolving Credit
Commitment that fails to make any payment to Administrative Agent that it is
required to make hereunder on any Settlement Date and that has not cured such
failure by making such payment within 1 Business Day after written demand upon
it by Administrative Agent to do so.
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<PAGE>
"Defaulting Lenders Rate" means the Reference Rate for the
first 3 days from and after the date the relevant payment is due and,
thereafter, at the interest rate then applicable to the relevant Revolving Loan.
"Designated Account" means account number 153690959611 of
Administrative Borrower maintained with Administrative Borrower's Designated
Account Bank, or such other deposit account of Administrative Borrower (located
within the United States) for the benefit of Borrower and the other Loan Parties
that has been designated as such, in writing, by Administrative Borrower to
Administrative Agent.
"Designated Account Bank" means U.S. Bank, N.A., whose office
is located at 111 S.W. Fifth Avenue, Suite 400, Portland, Oregon 97208, and
whose ABA number is 123000220.
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rates against the Net Amount of Eligible
Accounts Receivable (Non-Maintenance) and the Net Amount of Eligible Accounts
Receivable (Maintenance) by one percentage point for each percentage point by
which Dilution is in excess of 6%.
"Dilution" means, in each case based upon the experience of
the immediately prior 3 months, the result of dividing the Dollar amount of (a)
bad debt write-downs, discounts, advertising or promotion credits given to
Account Debtors, returns, credits, or other dilution with respect to the
Accounts Receivable, by (b) Borrower's Collections (excluding extraordinary
items) plus the Dollar amount of clause (a).
"Disposition" means any transaction, or series of related
transactions, pursuant to which any Loan Party or any of its Subsidiaries sells,
assigns, transfers or otherwise disposes of any property or assets (whether now
owned or hereafter acquired) to any other Person, in each case whether or not
the consideration therefor consists of cash, securities or other assets owned by
the acquiring Person, excluding (a) any sales, leases, or licenses of Inventory
in the ordinary course of business on ordinary business terms, or (b) sales or
other dispositions of Permitted Investments (other than Permitted Toehold
Dispositions).
"Dollar," "Dollars" and the symbol "$" each means lawful money
of the United States of America.
"Effective Date" means the date, on or before August 13, 1999,
on which all of the conditions precedent set forth in Section 4.01 are satisfied
(or waived by the Lender Group) and the initial Loan is made.
"Eligible Accounts Receivable" means Accounts Receivable
created by the Borrower in the ordinary course of business, that arise out of
the Borrower's sale of goods, rendition of services, or licensing of software,
that comply with the representations and warranties respecting Accounts
Receivable made by the Borrower in the Loan Documents. In general, except as
otherwise determined by Administrative Agent in its reasonable credit judgment,
such Account would be deemed to be eligible if:
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<PAGE>
(i) delivery of the merchandise (including the
licensing of software) or the rendition of the services has been
completed and the Account Debtor receiving such merchandise, software
license, or services has been billed with respect thereto;
(ii) with respect to such Account Receivable, no
return, rejection, repossession or dispute has occurred, the Account
Debtor has not asserted any setoff, defense or counterclaim, and there
has not occurred any extension of the time for payment without the
consent of Administrative Agent, provided that, in the case of any
dispute, setoff, defense or counterclaim with respect to an Account
Receivable, the portion of such Account Receivable not subject to such
dispute, setoff, defense or counterclaim will not be ineligible solely
by reason of this clause (ii);
(iii) such Account Receivable is lawfully owned by
the Borrower free and clear of any Lien other than in favor of the
Lender Group and otherwise continues to be in conformity in all
material respects with all representations and warranties made by the
Borrower to the Lender Group with respect thereto in the Loan
Documents;
(iv) such Account Receivable is unconditionally
payable in Dollars within 120 days from the invoice date and is not
evidenced by a promissory note, chattel paper or any other instrument
or other document;
(v) no more than 90 days have elapsed from the
invoice due date and no more than 120 days have elapsed from the
invoice date with respect to such Account Receivable;
(vi) such Account Receivable is not due from an
Affiliate of any Loan Party;
(vii) such Account Receivable does not constitute an
obligation of the United States or any other Governmental Authority
(unless all steps required by Administrative Agent in connection
therewith, including notice to the United States Government under the
Federal Assignment of Claims Act, have been duly taken in a manner
satisfactory to Administrative Agent);
(viii) (A) the Account Debtor (or the chief executive
office of the Account Debtor) with respect to such Account Receivable
is located in the continental United States and is organized under the
laws of the United States or any State thereof, or (B) such Account
Receivable is supported by a letter of credit or other similar
obligation reasonably satisfactory to Administrative Agent;
(ix) in the case of an Account Debtor with respect to
such Account Receivable that also is a supplier to or creditor of a
Borrower, such Account Debtor has executed and delivered a no-offset
letter satisfactory to Administrative Agent and the same remains in
full force and effect;
(x) not more than 50% of the aggregate amount of all
Accounts Receivable of the Account Debtor with respect to such Account
Receivable have remained unpaid 90 days past the invoice due date or
120 days past the invoice date;
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(xi) the Account Debtor with respect to such Account
Receivable (A) is not subject to an Insolvency Proceeding, (B) has not
failed, suspended business operations, become insolvent or called a
meeting of its creditors for the purpose of obtaining any financial
concession or accommodation, (C) has not had or suffered to be
appointed a receiver or a trustee for all or a significant portion of
its assets or affairs, or (D) in the case of an Account Debtor who is
an individual, is not an employee or agent of any Loan Party or any of
its Affiliates and has not died or been declared incompetent;
(xii) such Accounts Receivable are not with respect
to merchandise (including software) placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the Account Debtor may be
conditional;
(xiii) such Accounts Receivable do not represent
progress payments or other advance billings that are due prior to the
completion of performance by Borrower of the subject contract for
merchandise (including software) or services;
(xiv) Administrative Agent is, and continues to be,
reasonably satisfied with the credit standing of the Account Debtor in
relation to the amount of credit extended and Administrative Agent
believes, in its reasonable discretion, that the prospect of collection
of such Account Receivable is not impaired for any reason;
(xv) such Accounts Receivable are owed by an Account
Debtor, net of any customer deposit received from such Account Debtor
that would be applied to the Accounts Receivable of such Account Debtor
(but without duplication of reserves in respect of customer deposits
under Section 2.01(b));
(xvi) such Accounts Receivable are net of any
commission owed to any Person;
(xvii) such Accounts Receivable have not been
transferred to any law firm, legal department, collection agency, or
collection department of any Loan Party;
(xviii) that portion of the Accounts Receivable with
respect to an Account Debtor that does not exceed 10% of all Eligible
Accounts Receivable; and
(xix) in the case of Accounts Receivable of a Person
that is the subject of an Acquisition by the Loan Parties, such
Acquisition is a Permitted Acquisition and Administrative Agent shall
have completed an audit of the Accounts Receivable of such Person, the
results of which audit shall be reasonably satisfactory to
Administrative Agent.
"Eligible Transferee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States; (c) a finance company,
insurance
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company or other financial institution or fund that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and having total assets in excess of $100,000,000; (d) any
Affiliate (other than individuals) of a Lender; and (e) any other Person
approved in writing by Collateral Agent and Administrative Agent.
"Employee Plan" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of the Borrower or any of its ERISA
Affiliates.
"Environmental Actions" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgment, letter or other communication from any
Governmental Authority involving violations of Environmental Laws or Releases of
Hazardous Materials (i) from any assets, properties or businesses of any Loan
Party or any of its Subsidiaries or any predecessor in interest; (ii) from
adjoining properties or businesses; or (iii) onto any facilities which received
Hazardous Materials generated by any Loan Party or any of its Subsidiaries or
any predecessor in interest.
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601, et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801, et seq.).
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.), the
Federal Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.),the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq. and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) as
such laws may be amended or otherwise modified from time to time, and any other
present or future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or establishing
standards of conduct for protection of the environment.
"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and consultants
and costs of investigations and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any environmental
condition or a Release of Hazardous Materials from or onto (i) any property
presently or formerly owned by any Loan Party or any of its Subsidiaries, or
(ii) any facility which received Hazardous Materials generated by any Loan Party
or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
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"ERISA Affiliate" means, with respect to any Person, any trade
or business (whether or not incorporated) which is a member of a group of which
such Person is a member and which would be deemed to be a "controlled group"
within the meaning of Sections 414(b), (c), (m) and (o) of the Code.
"Event of Default" means any of the events set forth in
Section 8.01.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower in excess of 60 days past due
(or, if the data relative to the age thereof is not readily available, in excess
of their historical turnover) and all book overdrafts in excess of their
historical practices, in each case as determined by Administrative Agent in its
reasonable credit judgment.
"Excess Cash Flow" means, with respect to any Person for any
period, (i) Consolidated EBITDA of such Person and its Subsidiaries for such
period, less (ii) the sum of (A) all interest expenses and taxes of such Person
and its Subsidiaries, (B) all scheduled and mandatory cash principal payments on
the Loans made during such period (but, in the case of the Revolving Loans, only
to the extent that the Revolving Credit Commitment is permanently reduced by the
amount of such payments), (C) all scheduled and mandatory cash principal
payments on other Indebtedness of such Person or any of its Subsidiaries during
such period to the extent such other Indebtedness is permitted to be incurred,
and such payments are permitted to be made, under this Agreement, (D) the cash
portion of Capital Expenditures made by such Person and its Subsidiaries during
such period to the extent permitted to be made under this Agreement, and (E) the
excess, if any, of Working Investment at the end of such period over Working
Investment at the beginning of such period (or minus the excess, if any, of
Working Investment at the beginning of such period over Working Investment at
the end of such period).
"Exempt Copyright" means any Incipient Copyright or any
Obsolete Copyright.
"Existing Credit Agreement" means, collectively, all loan and
security agreements, credit agreements, note purchase agreements, or similar
financing agreements, and all other documents, instruments, and other agreements
related thereto with respect to Indebtedness of any Loan Party to the Existing
Lenders existing as of the Effective Date and prior to giving effect to any of
the transactions contemplated by this Agreement.
"Existing Lenders" means U.S. Bank National Association.
"Expense Deposit" means the expense deposit in the amount of
$200,000 paid by the Borrower to Collateral Agent on or prior to the Effective
Date to pay the reasonable out-of-pocket costs and expenses of the Lender Group
in connection with the performance of due diligence, the appraising and securing
of Collateral and other property and assets of the Loan Parties and their
respective Subsidiaries, and the preparation of agreements, instruments and
other documents in connection with the transactions contemplated hereby and by
the other Loan Documents, and otherwise in connection with the consummation of
such transactions.
"Fee Letter" means that certain letter agreement, dated as of
the date hereof, between Borrower and Collateral Agent, setting forth certain
fees payable to Collateral Agent.
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"FEIN" means Federal Employer Identification Number.
"Final Maturity Date" means the third anniversary of the
Effective Date, or such earlier date on which any Loan shall become due and
payable, in whole or in part, in accordance with the terms of this Agreement and
the other Loan Documents.
"Financial Statements" means (i) the audited consolidated
balance sheet of CFI and its Subsidiaries (other than MECA and Ultradata) at
December 31, 1998 and the related consolidated statement of operations,
shareholders' equity and cash flows for the Fiscal Year then ended, (ii) (y) the
audited consolidated balance sheet of MECA and its Subsidiaries at December 31,
1998 and the related consolidated statement of operations, shareholders' equity
and cash flows for the Fiscal Year then ended, and (z) the audited consolidated
balance sheet of Ultradata and its Subsidiaries at December 31, 1998 and the
related consolidated statement of operations, shareholders' equity and cash
flows for the Fiscal Year then ended, (iii) the unaudited consolidated balance
sheet of CFI and its Subsidiaries (other than Ultradata) at June 30, 1999 and
the related consolidated statement of operations, shareholder's equity and cash
flows at June 30, 1999, and (iv) the unaudited consolidated balance sheet of
Ultradata and its Subsidiaries at June 30, 1999 and the related consolidated
statement of operations, shareholder's equity and cash flows at June 30, 1999.
"Fiscal Year" means the fiscal year of the Borrower and its
Subsidiaries ending on December 31 of each year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio
of (i) Consolidated EBITDA of the Borrower and its Subsidiaries for such period,
to (ii) the sum of (A) all principal of Indebtedness of the Borrower and its
Subsidiaries scheduled to be paid during such period, plus (B) Consolidated Net
Interest Expense of the Borrower and its Subsidiaries, to the extent paid or
required to be paid in cash, for such period, plus (C) cash income taxes paid or
payable by the Borrower and its Subsidiaries during such period, plus (D) cash
dividends or distributions paid by the Borrower or any of its Subsidiaries
(other than dividends or distributions paid to the Borrower) during such period,
plus (E) Capital Expenditures made by the Borrower and its Subsidiaries during
such period, plus (F) all amounts paid or payable by the Borrower or any of its
Subsidiaries on Operating Lease Obligations having a scheduled due date during
such period. In determining the Fixed Charge Coverage Ratio for a particular
period (A) pro forma effect will be given to: (1) the incurrence, repayment or
retirement of any Indebtedness by the Borrower and its Subsidiaries since the
first day of such period as if such Indebtedness was incurred, repaid or retired
on the first day of such period and (2) the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any property or assets acquired or disposed of by any of the Borrower and its
Subsidiaries since the first day of such period, as if such acquisition or
disposition occurred on the first day of such period; (B) interest on
Indebtedness bearing a floating interest rate will be computed as if the rate of
computation had been the applicable rate for the entire period; (C) if such
Indebtedness bears, at the option of the Borrower, a fixed or floating rate of
interest, interest thereon will be computed by applying, at the option of the
Borrower, either the fixed or floating rate; and (D) the amount of Indebtedness
under a revolving credit facility will be computed based upon the average daily
balance of such Indebtedness during such period.
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"FP III" means Foothill Partners III, L.P., a Delaware limited
partnership, in its capacity as a Lender.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States, applied on a consistent basis,
provided that for the purpose of Section 6.03 hereof and the definitions used
therein, "GAAP" shall mean generally accepted accounting principles in effect on
the date hereof and consistent with those used in the preparation of the
Financial Statements; provided, however, that if there occurs after the date of
this Agreement any change in GAAP that affects in any respect the calculation of
any covenant contained in Section 6.03 hereof, the Lender Group and the Borrower
shall negotiate in good faith amendments to the provisions of this Agreement
that relate to the calculation of such covenant with the intent of having the
respective positions of the Lender Group and the Borrower after such change in
GAAP conform as nearly as possible to their respective positions as of the date
of this Agreement and, until any such amendments have been agreed upon, the
covenants in Section 6.03 hereof shall be calculated as if no such change in
GAAP has occurred.
"Governmental Authority" means any nation or government, any
Federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guaranteed Obligations" has the meaning specified therefor in
Section 10.01.
"Guaranties" means, individually and collectively, each of the
guaranties made by a Guarantor in favor of the Lender Group, in respect of the
Obligations, in each case, in form and substance satisfactory to Collateral
Agent and Administrative Agent.
"Guarantor" means, individually and collectively, and jointly
and severally, each Person composing the Borrower and each other Person which
guarantees, pursuant to Section 6.01(b) or otherwise, all or any part of the
Obligations.
"Hazardous Materials" means (a) any element, compound or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic,
including but not limited to, corrosivity, ignitability, toxicity or reactivity
as well as any radioactive or explosive materials; and (e) any raw materials,
building components, or manufactured products containing asbestos or other
hazardous substances.
"Hedging Agreement" means any interest rate, foreign currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement.
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"Holdco" means Ableco Holdings LLC, a Delaware limited
liability company, and representative and designee of Ableco Finance LLC and its
Affiliates for purposes of the Warrants and the Registration Rights Agreement.
"Incipient Copyright" means any copyright that: (a) relates to
software of a Person under development (whether in the form of a new product, a
new version of a pre-existing product, an upgrade, add-on, or modification to a
pre-existing product, or otherwise) that has not yet become a completed product,
version, upgrade, add-on, or modification which is ready to be marketed by or on
behalf of such Person or which in fact is being marketed by or on behalf of such
Person; or (b) is not the subject of licenses thereof or other Dispositions by
such Person giving rise to accounts, contract rights, or other form of
obligation.
"Indebtedness" means, without duplication, with respect to any
Person, (i) all indebtedness of such Person for borrowed money; (ii) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables or other account payables incurred in the
ordinary course of such Person's business and not past due for more than 90 days
after the date such payable was created); (iii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments or upon which
interest payments are customarily made; (iv) all obligations and liabilities of
such Person created or arising under any conditional sales or other title
retention agreement with respect to property used and/or acquired by such
Person, even though the rights and remedies of the lessor, seller and/or lender
thereunder are limited to repossession or sale of such property; (v) all
Capitalized Lease Obligations of such Person; (vi) all obligations and
liabilities, contingent or otherwise, of such Person, in respect of letters of
credit, acceptances and similar facilities; (vii) all obligations and
liabilities, calculated on a basis reasonably satisfactory to the Lender Group
and in accordance with accepted practice, of such Person under Hedging
Agreements; (viii) all Contingent Obligations; (ix) liabilities incurred under
Title IV of ERISA with respect to any plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and maintained for employees of such Person or any
of its ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such
Person or any of its ERISA Affiliates to any Multiemployer Plan; (xi) all other
items which, in accordance with GAAP, would be included as liabilities on the
liability side of the balance sheet of such Person (other than (A) trade
payables or other account payables incurred in the ordinary course of such
Person's business and not past due for more than 90 days after the date such
payable was created, and (B) accrued expenses, deferred revenues, customer
deposits, and income taxes payable incurred in the ordinary course of business);
and (xii) all obligations referred to in clauses (i) through (xi) of this
definition of another Person secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
Lien upon property owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness. The Indebtedness of any
Person shall include the Indebtedness of any partnership of or joint venture in
which such Person is a general partner or a joint venturer.
"Indemnified Matters" has the meaning specified therefor in
Section 11.15.
"Indemnitees" has the meaning specified therefor in Section
11.15.
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"Information Memorandum" means that certain written lender
presentation, prepared and distributed on or about June 1999 on behalf of
Borrower by U.S. Bancorp Libra.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, or
proceedings seeking reorganization, arrangement, liquidation or other similar
relief, or formal or informal moratoria, compositions, or extensions made or
agreed to generally with such Person's creditors.
"Intercompany Subordination Agreement" means a Subordination
Agreement, in form and substance satisfactory to Collateral Agent and
Administrative Agent, by each of the Loan Parties in favor of the Lender Group.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended (or any successor statute thereto) and the regulations
thereunder.
"Inventory" means all present and future inventory in which
any Loan Party has any interest, including goods held for sale, license, or
lease or to be furnished under a contract of service and all of the Loan
Parties' present and future raw materials, work in process, piece goods, trim
and finished goods, and packing and shipping materials, wherever located, and
any documents of title representing any of the above, and all such other
property the sale, license, lease, or other disposition of which would give rise
to an Account Receivable or cash (including intellectual property the license of
which would give rise to an Account Receivable or cash).
"IRS" means the Internal Revenue Service or any successor
federal tax Governmental Authority.
"Lease" means any lease of real property to which any Loan
Party or any of its Subsidiaries is a party as lessor or lessee.
"Lender" and "Lenders" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement as a "Lender" in accordance with the provisions hereof.
"Lender Group" means, individually and collectively, each of
the individual Lenders, Administrative Agent, and Collateral Agent.
"Lender Group Expenses" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by any Loan Party
under any of the Loan Documents that are paid or incurred by the Lender Group,
(b) fees or charges paid or incurred by one or more members of the Lender Group
in connection with one or members of the Lender Group's transactions with any
Loan Party, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic enterprise
valuations and periodic Collateral appraisals), real estate surveys, real estate
title policies and endorsements, and environmental audits, (c) costs and
expenses incurred by one or members of the Lender Group in the disbursement of
funds to Borrower (by
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wire transfer or otherwise), (d) charges paid or incurred by one or more members
of the Lender Group resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by one or members of the Lender Group to correct
any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated, (f) reasonable costs and
expenses paid or incurred by one or members of the Lender Group in examining the
books and records of any Loan Party, (g) reasonable costs and expenses of third
party claims or any other suit paid or incurred by one or more members of the
Lender Group in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or one or members of the
Lender Group's relationship with any Loan Party or any guarantor, and (h)
reasonable fees and expenses (including attorneys fees) incurred by one or more
members of the Lender Group in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including attorneys fees and
expenses, and expenses of third party consultants or advisors, incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Loan Party), defending, or concerning the Loan Documents,
irrespective of whether suit is brought.
"Lender Group Side Letters" means, individually and
collectively, the Revolving Loan/Term Loan A Side Letter and the Term Loan B
Side Letter.
"Lender-Related Persons" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Lender's Affiliates.
"Levine" means Levine Leichtman Capital Partners II, L.P., a
California limited partnership, in its capacity as a Lender.
"Liabilities" has the meaning specified therefor in Section
2.07.
"Lien" means any mortgage, deed of trust, pledge, lien
(statutory or otherwise), security interest, charge or other encumbrance or
security or preferential arrangement of any nature, including, without
limitation, any conditional sale or title retention arrangement, any Capitalized
Lease and any assignment, deposit arrangement or financing lease intended as, or
having the effect of, security.
"Loans" means all of the Term Loans, the Revolving Loans, and
other loans and advances of any kind made by the Lender Group pursuant to the
Agreement.
"Loan Account" means an account maintained hereunder by
Administrative Agent on its books of account, at Administrative Agent's office
and with respect to the Borrower, in which the Borrower will be charged with all
Loans made to, and all other Obligations incurred by, the Borrower.
"Loan Documents" means this Agreement, the Notes, the
Guaranties, the Security Agreement, the Copyright Security Agreement, the Patent
Security Agreement, the Trademark Security Agreement, the Pledge Agreement, the
Warrants, the Registration Rights Agreement, the Suretyship Agreement, the
Intercompany Subordination Agreement, the Lockbox
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Agreement, and all other agreements, instruments, and other documents executed
and delivered pursuant hereto or thereto or otherwise evidencing or securing any
Loan or other Obligation.
"Loan Parties" means the Borrower and each Guarantor.
"Lockbox" has the meaning specified therefor in Section 7.01
(a).
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreement" means, individually and collectively,
those certain lockbox agreements and those certain depository agreements, in
form and substance reasonably satisfactory to Administrative Agent, each of
which is among the Loan Parties, Administrative Agent, and one of the Lockbox
Banks.
"Lockbox Bank" means U.S. Bank, N.A., whose office is located
at 111 S.W. Fifth Avenue, Suite 400, Portland, Oregon 97208, and whose ABA
number is 123000220 (or such other banks as may be agreed to by Administrative
Agent and Administrative Borrower from time to time).
"Maintenance Accounts Receivable" means Accounts Receivable
that arise out of the Borrower's rendition of maintenance or consulting services
that are recurring or continuing in nature.
"Material Adverse Effect" means a material adverse effect on
any of (i) the operations, business, assets, properties, condition (financial or
otherwise) or prospects of the Loan Parties taken as a whole, (ii) the ability
of the Loan Parties, taken as a whole, to perform any of their obligations under
any Loan Document to which any Loan Party is a party, (iii) the legality,
validity or enforceability of this Agreement or any other Loan Document, (iv)
the rights and remedies of the Agents or the Lender Group under any Loan
Document, or (v) the validity, perfection or priority of a Lien in favor of the
Agents or the Lender Group on any of the Collateral (other than portions thereof
that are immaterial individually or in the aggregate).
"Material Contract" means, with respect to any Person, each
contract or agreement to which such Person or its Subsidiary is a party
involving aggregate consideration payable to or by such Person or such
Subsidiary of $100,000 or more (other than purchase orders in the ordinary
course of the business of such Person and other than contracts that by their
terms may be terminated by such Person or Subsidiary in the ordinary course of
its business upon less than 90 days' notice without penalty or premium) or
otherwise material to the business, operations, condition (financial or
otherwise), performance, prospects or properties of such Person or such
Subsidiary.
"Maximum Revolving Amount" means, as of any date of
determination, the lower of (a) $15,000,000.00, and (b) the sum of all Revolving
Credit Commitments of all Revolving Credit Lenders.
"MECA" has the meaning specified therefor in the preamble
hereto.
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"Moody's" means Moody's Investor Service, Inc. and any
successor thereto.
"MSHI" has the meaning specified therefor in the preamble
hereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA for which any Loan Party or any ERISA Affiliate
has contributed to, or has been obligated to contribute to, at any time during
the preceding six (6) years.
"Net Amount of Eligible Accounts Receivable (Non-Maintenance)"
means the aggregate unpaid invoice amount of Eligible Accounts Receivable
consisting of Accounts Receivable other than Maintenance Accounts Receivable
less, without duplication, returns, discounts, chargebacks, claims, advance
payments, credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed.
"Net Amount of Eligible Accounts Receivable (Maintenance)"
means the aggregate unpaid invoice amount of Eligible Accounts Receivable
consisting of Maintenance Accounts Receivable less, without duplication,
returns, discounts, chargebacks, claims, advance payments, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed.
"Net Cash Proceeds" means, (i) with respect to any Disposition
by any Person, the amount of cash received (directly or indirectly) from time to
time (whether as initial consideration or through the payment of deferred
consideration) by or on behalf of such Person or any of its Subsidiaries or
Affiliates, in connection therewith after deducting therefrom only (A) the total
amount of any Indebtedness secured by any Lien permitted by Section 6.02(a) on
any asset (other than Indebtedness assumed by the purchaser of such asset) which
is required to be, and is, repaid in connection with such Disposition (other
than Indebtedness under this Agreement), (B) reasonable expenses related thereto
reasonably incurred by such Person or such Affiliate in connection therewith,
(C) transfer taxes paid by such Person or such Affiliate in connection therewith
and (D) net income taxes to be paid in connection with such Disposition (after
taking into account any tax credits or deductions and any tax sharing
arrangements and (ii) with respect to the issuance or incurrence of any
Indebtedness by any Person, or the sale or issuance by any Person of any shares
of its Capital Stock, the aggregate amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment of deferred consideration) by or on behalf of such Person or any of its
Subsidiaries or Affiliates in connection therewith after deducting therefrom
only reasonable brokerage commissions, underwriting fees and discounts, legal
fees and similar fees and commissions.
"Notes" means the Revolving Credit Notes and the Term Notes.
"Notice of Borrowing" has the meaning specified therefor in
Section 2.02.
"Obligations" means (i) the obligations of the Borrower to
pay, as and when due and payable (by scheduled maturity, required prepayment,
acceleration, demand or otherwise), all amounts from time to time owing by it in
respect of the Loan Documents, whether direct or indirect, absolute or
contingent, now existing or hereafter arising, whether for principal, interest
(including, without limitation, any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), fees (including, without limitation, any
fees that, but for the provisions of
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the Bankruptcy Code, would have accrued), indemnification payments, Lender Group
Expenses (including, without limitation, any costs or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), or otherwise, and (ii)
the obligations of the Borrower and any other Loan Party to perform or observe
all of its obligations from time to time existing under the Loan Documents.
"Obsolete Copyright" means any copyright that relates to
software of a Person that: (a) is no longer sold or marketed by such Person; (b)
is not generating any material amount of Accounts or revenues of such Person; or
(c) does not have a material fair market value.
"Operating Lease Obligations" means all obligations for the
payment of rent for any real or personal property under leases or agreements to
lease, other than Capitalized Lease Obligations.
"Ordinary Course Proceeds" means, collectively, all proceeds
and Collections in respect of (A) Accounts Receivable (or any deposits from
customers or other Collateral securing Accounts Receivable, letters of credit
supporting Accounts Receivable, guarantees with respect thereto or similar
items) and the sale, lease, license, or other disposition of Inventory, whether
in the ordinary course of business, through liquidation, or otherwise, (b) any
identifiable proceeds thereof, (c) all deposit accounts to the extent such
deposit accounts contain such identifiable proceeds, and (d) solely to the
extent necessary for the collection of Accounts Receivable or the sale, lease,
license, or other disposition of Inventory, all books and records, customer
lists, invoices, advertising materials, promotional materials, and other general
intangibles. Anything to the contrary notwithstanding contained in this
definition or otherwise in this Agreement, in the event of the sale of all or
substantially all of the assets of any Loan Party or of the Capital Stock of any
Loan Party, then the portion of the purchase price that shall be deemed to be
Ordinary Course Proceeds shall be limited to that portion of the Net Cash
Proceeds of such sale (the "Net Proceeds") that is fairly and reasonably
allocable to the property described in the foregoing clauses (a) through (d) of
the subject Loan Party (but, in any event, not less than the amount of the
Revolving Facility Usage fairly and reasonably allocable to such property), and
the balance of such Net Proceeds shall not be deemed Ordinary Course Proceeds.
"Overadvance" means the amount, if any, by which the Revolving
Facility Usage exceeds the lesser of (a) the Borrowing Base or (b) the Maximum
Revolving Amount.
"Participant Register" has the meaning specified therefor in
Section 11.07(b)(ii).
"Patent Security Agreement" means a Patent Security Agreement,
by the Loan Parties in favor of Collateral Agent for the benefit of the Lender
Group, in form and substance satisfactory to Collateral Agent.
"Payoff Letter" means, with respect to each Existing Lender, a
letter, in form and substance reasonably satisfactory to Collateral Agent, from
such Existing Lender to Collateral Agent respecting the amount necessary to
repay in full all of the obligations of the Loan Parties owing to such Existing
Lender and obtain a termination or release of all of the Liens existing in favor
of such Existing Lender in respect of the assets of the Loan Parties.
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"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Acquisition" means an Acquisition to be consummated
by any Loan Party if each of the following conditions shall have been satisfied:
(A) after giving effect to the payment of the cash
portion of the total purchase price of such Acquisition, there shall be
Excess Availability of not less than $5,000,000;
(B) the Borrower shall have furnished to the Lender
Group at least 10 Business Days prior to the consummation of such
Acquisition (1) an executed term sheet and/or commitment letter
(setting forth in reasonable detail the terms and conditions of such
Acquisition) and, at the request of Administrative Agent or Collateral
Agent, such other information and documents that Administrative Agent
or Collateral Agent may reasonably request, including, without
limitation, executed counterparts of the respective agreements,
documents or instruments pursuant to which such Acquisition is to be
consummated (including, without limitation, any related management,
non-compete, employment, option or other material agreements), any
schedules to such agreements, documents or instruments and all other
material ancillary agreements, instruments and documents to be executed
or delivered in connection therewith, (2) pro forma financial
statements of CFI and its Subsidiaries after the consummation of such
Acquisition, (3) a certificate of a Responsible Official of CFI,
demonstrating on a pro forma basis compliance with all covenants set
forth in Section 6.03 after the consummation of such Acquisition, and
(4) copies of such other agreements, instruments and other documents
(including, without limitation, the Loan Documents required by Section
6.01(b)) as Administrative Agent or Collateral Agent shall reasonably
request;
(C) the agreements, instruments and other documents
referred to in paragraph (B) above shall provide that (1) neither any
Loan Party nor any of its Subsidiaries shall, in connection with such
Acquisition, assume or remain liable in respect of any Indebtedness of
the Seller or Sellers, or other obligation of the Seller or Sellers
(except for obligations incurred in the ordinary course of business in
operating the property so acquired and necessary and desirable to the
continued operation of such property and except for Indebtedness that
the Lender Group otherwise expressly consents to in writing after its
review of the terms of the proposed Acquisition), and (2) all property
to be so acquired in connection with such Acquisition shall be free and
clear of any and all Liens, except for Permitted Liens (and, if any
such property is subject to any Lien not permitted by this clause (2)
then, concurrently with such Acquisition such Lien shall be released);
(D) the Subsidiary to be acquired or formed as a
result of such Acquisition shall be engaged in the same business as the
Borrower and such Subsidiary will be a direct wholly-owned Subsidiary
of CFI;
(E) such Acquisition shall be effected in such a
manner so that the acquired Capital Stock or assets are owned either by
CFI or a wholly-owned Subsidiary
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of CFI and, if effected by merger involving the Borrower, the Borrower
shall be the surviving Person;
(F) any such Subsidiary (and its equityholders) shall
execute and deliver the agreements, instruments and other documents
required by Section 6.01(b); and
(G) the Required Lenders, Administrative Agent, and
Collateral Agent otherwise shall have consented to the Acquisition;
provided, however, that such consent shall not be unreasonably withheld
if (1) the total purchase price of such Acquisition does not exceed
$1,000,000 in the aggregate, and (2) the total purchase price of such
Acquisition and all other Acquisitions (exclusive of the Ultradata
Acquisition) made in the same fiscal year as such Acquisition does not
exceed $5,000,000 in the aggregate.
"Permitted Indebtedness" means:
(a) any Indebtedness owing to the Lender Group;
(b) any other Indebtedness listed on Schedule 6.02(b), but not
the extension of maturity, refinancing or modification of the terms thereof,
unless (i) such extension, refinancing or modification is pursuant to terms that
are not less favorable to the Borrower than the terms of the Indebtedness being
extended, refinanced or modified, and (ii) after giving effect to the extension,
refinancing or modification, such Indebtedness is not greater than the amount of
Indebtedness outstanding immediately prior to such extension, refinancing or
modification;
(c) Indebtedness evidenced by Capitalized Lease Obligations
entered into in order to finance Capital Expenditures made by the Borrower or
any of its Subsidiaries in accordance with the provisions of Section 6.02(g),
which indebtedness, when aggregated in the principal amount of all indebtedness
incurred under this clause (c) and clause (d) of this definition, does not
exceed $1,000,000 at any time outstanding;
(d) Indebtedness permitted by clause (e) of the definition of
"Permitted Lien";
(e) Permitted Subordinated Indebtedness existing on the
Effective Date, so long as the same remains subject to the subordination
provisions with respect thereto set forth in the Permitted Subordinated
Indebtedness Documents in effect on the Effective Date;
(f) additional unsecured Indebtedness of the Borrower not
expressly permitted by clauses (a) through (d) above, provided that the
aggregate principal amount of the Indebtedness outstanding under this clause (f)
shall not at any time exceed $500,000; and
(g) such other Indebtedness as the Required Lenders may
consent to in writing from time to time (in their sole and absolute discretion).
"Permitted Investments" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within six months from the date of
acquisition thereof, (ii) commercial paper, maturing not more than 270
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days after the date of issue rated P-1 by Moody's or A-1 by Standard & Poor's;
(iii) certificates of deposit maturing not more than 270 days after the date of
issue, issued by commercial banking institutions and money market or demand
deposit accounts maintained at commercial banking institutions, each of which is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $500,000,000; (iv) repurchase agreements
having maturities of not more than 90 days from the date of acquisition which
are entered into with major money center banks included in the commercial
banking institutions described in clause (iii) above and which are secured by
readily marketable direct obligations of the Government of the United States of
America or any agency thereof, (v) money market accounts maintained with mutual
funds having assets in excess of $2,500,000,000, (vi) tax exempt securities
rated A or better by Moody's or A+ or better by Standard & Poor's, and (vii)
Permitted Toehold Investments.
"Permitted Liens" means:
(a) Liens securing the Obligations;
(b) Liens for taxes, assessments and governmental charges the
payment of which is not required under Section 6.01(c);
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and other similar Liens arising (provided they are
subordinate to the Lender Group's Liens on Collateral or they are in respect of
amounts that are immaterial individually or in the aggregate) in the ordinary
course of business and securing obligations (other than Indebtedness for
borrowed money) that are not overdue by more than 30 days or are being contested
in good faith and by appropriate proceedings promptly initiated and diligently
conducted, and a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(d) Liens described on Schedule 6.02(a), but not: (i) the
extension of coverage thereof to other property, (ii) the extension of maturity,
refinancing or other modification of the terms thereof (that is adverse to
Borrower), or (iii) the increase of the Indebtedness secured thereby;
(e) (i) purchase money Liens on equipment acquired or held by
any Loan Party or any of its Subsidiaries in the ordinary course of its business
to secure the purchase price of such equipment or Indebtedness incurred solely
for the purpose of financing the acquisition of such equipment, or (ii) Liens
existing on such equipment at the time of its acquisition; provided, however,
that (A) no such Lien shall extend to or cover any other property of any Loan
Party or any of its Subsidiaries, (B) the principal amount of the Indebtedness
secured by any such Lien shall not exceed 80% of the lesser of the fair market
value or the cost of the property so held or acquired and (C) the aggregate
principal amount of Indebtedness secured by any or all such Liens shall not
exceed at any one time outstanding $1,000,000;
(f) deposits and pledges securing (i) obligations incurred in
respect of workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (ii) the performance of bids, tenders,
leases, contracts (other than for the payment of
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<PAGE>
money) and statutory obligations or (iii) obligations on surety or appeal bonds,
but only to the extent such deposits or pledges are incurred or otherwise arise
in the ordinary course of business and secure obligations not past due;
(g) easements, zoning restrictions and similar encumbrances on
real property and minor irregularities in the title thereto that do not (i)
secure obligations for the payment of money or (ii) materially impair the value
of such property or its use by any Loan Party or any of its Subsidiaries in the
normal conduct of such Person's business; and
(h) such other Liens as the Required Lenders may consent to in
writing from time to time (in their sole and absolute discretion).
"Permitted Preferred Stock" means, collectively, (a) the CFI
Class A Preferred Stock, and (b) any other Preferred Stock issued by CFI that is
not Prohibited Preferred Stock.
"Permitted Subordinated Indebtedness" means (i) unsecured,
subordinated Indebtedness of CFI, in the aggregate original face amount of
$7,437,535 (with original issue discount of $1,887,535), evidenced by those
certain 10% Convertible Subordinated Discount Notes issued by CFI on the
Effective Date, that is incurred pursuant to, and subordinated in favor of the
Obligations in accordance with the subordination provisions set forth in, the
Permitted Subordinated Indebtedness Agreement, and (ii) unsecured, subordinated
guaranties by the other Loan Parties of such Indebtedness pursuant to, and
subordinated in favor of the Obligations in accordance with the subordination
provisions set forth in, the Permitted Subordinated Indebtedness Documents.
"Permitted Subordinated Indebtedness Agreement" means that
certain Note Purchase Agreement, dated as of August 13, 1999, among CFI, the
other Loan Parties, and the purchasers listed therein, in the form of that
attached hereto as Exhibit P-1.
"Permitted Subordinated Indebtedness Documents" means,
collectively, the Permitted Subordinated Indebtedness Agreement, and all
documents and instruments to be executed or delivered in connection therewith,
relative to the Permitted Subordinated Indebtedness.
"Permitted Toehold Investments" means the Acquisition of
Capital Stock of a Person other than a Subsidiary of a Loan Party (but not to
exceed 10% of all of the issued and outstanding Capital Stock of such Person on
a fully diluted basis) so long as (a) no Default or Event of Default shall have
occurred and be continuing or would result from the consummation of the proposed
Acquisition, (b) the Person, whose Capital Stock is being acquired, is engaged
in the same business as that of any Loan Party or any of its Subsidiaries or in
a business reasonably related thereto, (c) the relevant Capital Stock being
acquired in such Person is acquired directly by CFI, (d) CFI shall have executed
and delivered a supplement to the Pledge Agreement, together with (i) any and
all certificates evidencing all of such acquired Capital Stock, and (ii) undated
stock powers executed in blank with signature guaranteed, and Collateral Agent's
Liens on the acquired Capital Stock shall be perfected, and (e) the aggregate
amount expended by Borrower in respect of all such Permitted Toehold Investments
does not exceed $1,000,000.
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"Person" means an individual, corporation, limited liability
company, partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
"Pledge Agreement" means a Pledge Agreement d as of the date
hereof, made by the Loan Parties in favor of Collateral Agent for the benefit of
the Lender Group, in form and substance satisfactory to Collateral Agent.
"Post-Default Rate" means a rate of interest per annum equal
to the rate of interest otherwise in effect from time to time pursuant to the
terms of this Agreement plus 4%.
"Preferred Stock" means, with respect to any Person, any class
or series of Capital Stock of such Person that is entitled, upon distribution of
assets of such Person, whether by dividend or liquidation, to a preference over
another class or series of Capital Stock of such Person.
"Prohibited Preferred Stock" means any Preferred Stock of a
Loan Party the terms and conditions of issuance, and rights and preferences, of
which are not approved in writing by the Required Lenders in their sole and
absolute discretion, including any Preferred Stock of a Loan Party that by its
terms is mandatorily redeemable or subject to any other payment obligation
(including any obligation to pay dividends, other than dividends of Preferred
Stock of the same class and series payable in kind or dividends of common stock)
on or before a date not earlier than 2 years after the Final Maturity Date or,
on or before a date not earlier than 2 years after the Final Maturity Date, is
redeemable at the option of the holder thereof for cash (or assets or securities
other than distributions in kind of Preferred Stock of the same class and series
or of common stock).
"Pro Rata Share means:
(a) with respect to a Lender's obligation to make Revolving
Loans and receive payments relative thereto, the percentage obtained by dividing
(i) such Lender's Revolving Credit Commitment, as set forth on Schedule C-1, by
(ii) the aggregate Revolving Credit Commitments of all Lenders, as set forth on
Schedule C-1;
(b) [intentionally omitted]
(c) with respect to a Lender's obligation to make Term Loan A
and receive payments relative thereto, the percentage obtained by dividing (i)
such Lender's Term Loan A Commitment, as set forth on Schedule C-1, by (ii) the
aggregate Term Loan A Commitments of all Lenders, as set forth on Schedule C- 1.
(d) with respect to a Lender's obligation to make Term Loan B
and receive payments relative thereto, the percentage obtained by dividing (i)
such Lender's Term Loan B Commitment, as set forth on Schedule C-1, by (ii) the
aggregate Term Loan B Commitments of all Lenders, as set forth on Schedule C-1.;
and
(e) with respect to all other matters (including the
indemnification obligations arising under Section 12.05), the percentage
obtained by dividing (i) such Lender's Total
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Commitments to make Loans, as set forth on Schedule C-1, by (ii) the aggregate
Total Commitments of all Lenders, as set forth on Schedule C-1.
"property" means any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Price" means, with respect to any Acquisition, an
amount equal to the sum of (i) the aggregate consideration, whether cash,
property or securities (including, without limitation, the fair market value of
any Capital Stock of CFI issued in connection with such Acquisition), paid or
delivered by CFI in connection with such Acquisition, plus (ii) the aggregate
amount of liabilities of the acquired business (net of current assets of the
acquired business) that would be reflected on a balance sheet (if such were to
be prepared) of the Borrower and its Subsidiaries after giving effect to such
Acquisition.
"Rating Agencies" has the meaning specified therefor in
Section 2.07.
"Reference Bank" means The Chase Manhattan Bank, its
successors or any other commercial bank designated by the Lender Group to
Administrative Borrower for the benefit of the Loan Parties from time to time.
"Reference Rate" means the rate of interest publicly announced
by the Reference Bank in New York, New York from time to time as its prime rate
or base rate. The prime rate or base rate is determined from time to time by the
Reference Bank as a means of pricing some loans to its borrowers and neither is
tied to any external rate of interest or index nor necessarily reflects the
lowest rate of interest actually charged by the Reference Bank to any particular
class or category of customers. Each change in the Reference Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Register" has the meaning specified therefor in Section
11.07(b)(i).
"Registered Loan" has the meaning specified therefor in
Section 2.03(c).
"Registered Note" has the meaning specified therefor in
Section 2.03(c).
"Registration Rights Agreement" means the Registration Rights
Agreement, in form and substance satisfactory to Holdco and each other
Warrantholder, by and among CFI, Holdco, and each other Warrantholder, with
respect to the registration rights of Holdco and each other Warrantholder with
respect to Warrant Shares that Holdco and each other Warrantholder may acquire
and the anti-dilution and other provisions applicable thereto.
"Regulation T", "Regulation U", and "Regulation X" mean,
respectively, Regulations T, U, and X of the Board or any successor, as the same
may be amended or supplemented from time to time.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, seeping,
migrating, dumping or disposing of any Hazardous Material (including the
abandonment or discarding of barrels, containers and other
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closed receptacles containing any Hazardous Material) into the indoor or outdoor
environment, including ambient air, soil, surface or ground water.
"Remedial Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the indoor or outdoor environment; (ii) prevent
or minimize a Release or threatened Release of Hazardous Materials so they do
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
any other actions authorized by 42 U.S.C. 9601.
"Reportable Event" means an event described in Section 4043 of
ERISA (other than an event not subject to the provision for 30-day notice to the
PBGC under the regulations promulgated under such Section).
"Required EBITDA Payment" means, as of any date of
determination, an amount equal to the result (so long as it is a positive
amount) of (a) the aggregate outstanding amount of Obligations, minus (b) the
product of (i) 4, multiplied by (ii) Consolidated EBITDA for the 12 month period
then ended. For purposes of this definition, Consolidated EBITDA shall not
include EBITDA of MECA or Ultradata generated prior to the Effective Date.
"Required Lenders" means, at any time, Lenders whose Pro Rata
Shares aggregate at least 66-2/3% of the Commitments or, if the Commitments
shall have been terminated irrevocably, Lenders holding at least 66-2/3% of the
Obligations then outstanding.
"Required Library" means the set or collection of existing
copyrights of Borrower (other than Exempt Copyrights) relating to software of
Borrower (including Ultradata) that, as of the Effective Date, generated not
less than 90% of the aggregate amount of current sales of Borrower (including
Ultradata) attributable to sales, licensing, or maintenance of software or other
copyrights in existence on or about the Effective Date.
"Responsible Official" means, with respect to any Loan Party,
the Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, or any other officer, of such Loan Party (or, in the case of any Loan
Party that is a partnership or a limited liability company, the managing partner
or the managing member thereof).
"Revolving Credit Commitment" means, for each Lender, the
commitment of such Lender to make Revolving Loans to the Borrower in an
aggregate principal amount at any time outstanding with respect to each such
Lender not to exceed the amount set forth opposite the name of such Lender under
Revolving Credit Commitment on Schedule C-1, as such amount may be terminated or
reduced from time to time in accordance with the terms of this Agreement.
"Revolving Credit Commitment Termination Date" means the Final
Maturity Date, or such earlier date on which the Revolving Credit Commitment is
terminated in full pursuant to Section 2.05 or Section 8.01.
"Revolving Credit Lenders" means, individually and
collectively, each of the Lenders with a Revolving Credit Commitment greater
than zero.
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"Revolving Credit Note" means, individually and collectively,
the promissory notes of the Borrower, substantially in the form of Exhibit R-1,
made payable to the order of each Revolving Credit Lender, evidencing the
Indebtedness resulting from the making by such Revolving Credit Lender to the
Borrower of Revolving Loans and delivered to such Revolving Credit Lender
pursuant to Article IV, as each such promissory note may be amended,
supplemented, restated, modified or extended from time to time, and any
promissory note or notes issued in exchange or replacement therefor. The term
"Revolving Credit Note" shall include any Registered Note evidencing the
Revolving Loans and delivered pursuant to Section 2.03(c).
"Revolving Facility Usage" means as of any date of
determination, the aggregate amount of Revolving Loans outstanding.
"Revolving Loan" means a loan made by a Revolving Credit
Lender to the Borrower pursuant to Section 2.01(b).
"Revolving Loan/Term Loan A Side Letter" means that certain
letter agreement, dated as of the date hereof, among Administrative Agent, the
Revolving Credit Lenders, Collateral Agent, and the Term Loan A Lenders.
"SEC" means the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"Securitization" has the meaning specified therefor in Section
2.07.
"Securitization Party" the meaning specified therefor in
Section 2.07.
"Security Agreement" means the Security Agreement made by the
Loan Parties in favor of Collateral Agent for the benefit of the Lender Group,
in form and substance satisfactory to Collateral Agent.
"Seller" means any Person that sells Capital Stock or other
property or assets to the Borrower or a Subsidiary of the Borrower in a
Permitted Acquisition.
"Solvent" means, with respect to any Person on a particular
date, that on such date (i) the fair value of the property of such Person is not
less than the total amount of its liabilities of such Person, (ii) such Person
is able to pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iii) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (iv) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital, after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at
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the amount that, in light of all the facts and circumstances existing at such
time, represents the amount that reasonably can be expected to become an actual
or matured liability
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc. and any successor thereto.
"Stock Option Plans" means, collectively, CFI's: (a)
Nonqualified Stock Option Agreements effective January 21, 1999; (b) 1995
Consolidated and Restated Stock Option Plan effective January 1, 1995, as
amended by First Amendment effective January 12, 1996, and as further amended by
Second Amendment effective January 21, 1999; (c) 1994 Employee Stock Purchase
Plan (effective March 18, 1994); (d) Restated Outside Director Compensation and
Stock Option Plan effective April 25, 1994, as amended by First Amendment
effective May 14, 1999; (e) Amended and Restated Outside Director Restricted
Stock Plan effective October 15, 1993; and (f) Nonqualified Stock Option Plan
effective October 15, 1993.
"Subsidiary" means, with respect to any Person at any date,
any corporation, limited or general partnership, limited liability company,
trust, association or other entity (i) the accounts of which would be
consolidated with those of such Person in such Person's consolidated financial
statements if such financial statements were prepared in accordance with GAAP or
(ii) of which more than 50% of (A) the outstanding Capital Stock having (in the
absence of contingencies) ordinary voting power to elect a majority of the board
of directors of such corporation, (B) the interest in the capital or profits of
such partnership or limited liability company or (C) the beneficial interest in
such trust or estate is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person.
"Suretyship Agreement" means a suretyship agreement by each of
the Loan Parties in favor of the Lender Group, in form and substance
satisfactory to Collateral Agent and Administrative Agent.
"Term Loan A" means the Loan described in Section 2.01(a) made
by a Term Loan A Lender to the Borrower on the Effective Date pursuant to
Section 2.01(a).
"Term Loan A Commitment" means, for each Lender, the
commitment of such Lender to make Term Loan A, in the principal amount with
respect to each such Lender equal to the amount set forth opposite the name of
such Lender under Term Loan A Commitment on Schedule C-1.
"Term Loan A Lenders" means, individually and collectively,
each of the Lenders with a Term Loan A Commitment greater than zero.
"Term Loan B" means the Loan described in Section 2.01(b) made
by a Term Loan B Lender to the Borrower on the Effective Date pursuant to
Section 2.01(b).
"Term Loan B Commitment" means, for each Lender, the
commitment of such Lender to make Term Loan B, in the principal amount with
respect to each such Lender equal to the amount set forth opposite the name of
such Lender under Term Loan B Commitment on Schedule C-1.
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"Term Loan B Lenders" means, individually and collectively,
each of the Lenders with a Term Loan B Commitment greater than zero.
"Term Loan B Side Letter" means that certain letter agreement,
dated as of the date hereof, among Collateral Agent, Levine, and FP III.
"Term Loan Lenders" means, individually and collectively, each
of the Term Loan A Lenders and the Term Loan B Lenders.
"Term Loans" means, individually and collectively, the Term
Loans A and the Term Loans B.
"Term Note A" means, individually and collectively, the
promissory notes of the Borrower, substantially in the form of Exhibit T-1, made
payable to the order of each Term Loan A Lender, evidencing the Indebtedness
resulting from the making by such Lender to the Borrower of such Lender's Term
Loan A and delivered to such Lender pursuant to Article IV, as each such
promissory note may be amended, supplemented, restated, modified or extended
from time to time, and any promissory note or notes issued in exchange or
replacement therefor. The term "Term Note A" shall include any Registered Note
evidencing a Term Loan A or portion thereof and delivered pursuant to Section
2.03(c).
"Term Note B" means, individually and collectively, the
promissory notes of the Borrower, substantially in the form of Exhibit T-2, made
payable to the order of each Term Loan B Lender, evidencing the Indebtedness
resulting from the making by such Lender to the Borrower of such Lender's Term
Loan B and delivered to such Lender pursuant to Article IV, as each such
promissory note may be amended, supplemented, restated, modified or extended
from time to time, and any promissory note or notes issued in exchange or
replacement therefor. The term "Term Note B" shall include any Registered Note
evidencing a Term Loan B or portion thereof and delivered pursuant to Section
2.03(c).
"Term Notes" means, individually and collectively, the Term
Notes A and the Term Notes B.
"Termination Event" means (i) a Reportable Event with respect
to any Employee Plan, (ii) any event that causes the Borrower or any of its
ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of
the Code, (iii) the filing of a notice of intent to terminate an Employee Plan
or the treatment of an Employee Plan amendment as a termination under Section
4041 of ERISA, (iv) the institution of proceedings by the PBGC to terminate an
Employee Plan, or (v) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Employee Plan.
"Total Commitment" means, for each Lender, the obligation of
such Lender to fund Loans, with respect to each type of Loan in the amount set
forth opposite the name of such Lender under the Commitment relative to such
Loan type on Schedule C-1, and in an aggregate amount will respect to such
Lender equal to the amount set forth opposite the name of such Lender under
Total Commitment on Schedule C-1.
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"Trademark Security Agreement" means a Trademark Security
Agreement, by the Loan Parties in favor of Collateral Agent for the benefit of
the Lender Group, in form and substance satisfactory to Collateral Agent.
"Ultradata" has the meaning specified therefor in the preamble
hereto.
"Ultradata Acquisition" means the Acquisition of Ultradata by
CFI pursuant to the merger of CFI's wholly-owned Subsidiary, UFO Acquisition
Co., with and into Ultradata (with Ultradata as the surviving corporation of
such merger) in accordance with the terms and conditions of the Ultradata
Acquisition Documents.
"Ultradata Acquisition Documents" means, collectively, the
Agreement and Plan of Merger, dated as of May 17, 1999, by and among CFI, UFO
Acquisition Co., and Ultradata, and all documents and instruments to be executed
or delivered in connection therewith, in each case, as in effect on the date
hereof.
"WARN" has the meaning specified therefor in Section 5.01(j).
"Warrants" has the meaning assigned to such term in Section
9.01.
"Warrant Shares" has the meaning assigned to such term in the
Warrants.
"Warrantholder" means any Person that is a holder of any
Warrant.
"Working Investment" means, at any date of determination
thereof, (i) the sum, for the Borrower and its Subsidiaries on a consolidated
basis, of (A) the unpaid face amount of all Accounts Receivable as at such date
of determination plus (B) the aggregate amount of prepaid expenses and other
Consolidated Current Assets as at such date of determination, minus (ii) the
sum, for the Borrower and its Subsidiaries on a consolidated basis, of (A) the
unpaid amount of all accounts payable as at such date of determination, plus (B)
the aggregate amount of all accrued expenses as at such date of determination
(but, excluding from accounts payable and accrued expenses, the current portion
of long-term debt and all accrued interest and taxes).
SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof'" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (c) the words
"asset" and "property" shall be construed to have
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the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.
References in this Agreement to "determination" by the Lender Group or any
member thereof include good faith estimates by the Lender Group or such member
thereof (in the case of quantitative determinations) and good faith beliefs by
the Lender Group or such member thereof (in the case of qualitative
determinations).
SECTION 1.03. Accounting and Other Terms. Unless otherwise expressly provided
herein, each accounting term used herein shall have the meaning given it under
GAAP applied on a basis consistent with those used in preparing the Financial
Statements. All terms used in this Agreement which are defined in Article 8 or
Article 9 of the Uniform Commercial Code in effect in the State of New York on
the date hereof and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 1.04. Time References. Unless otherwise indicated herein, all references
to time of day refer to Eastern standard time or Eastern daylight saving time,
as in effect in New York City on such day. For purposes of the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding"; provided, however, that with respect to a computation of fees or
interest payable to the Lender Group, such period shall in any event consist of
at least one full day.
ARTICLE II
THE LOANS
SECTION 2.01. Commitments.
(a) (i) The Term Loan A Lenders agree, ratably in accordance with their
respective Term Loan A Commitments, and on the terms and conditions hereinafter
set forth (including subject to the satisfaction of the applicable conditions
precedent set forth in Article IV hereof), to make term loans (collectively,
"Term Loan A") to the Borrower on the Effective Date in an aggregate principal
amount of $35,000,000, which Term Loan A shall be repayable in accordance with
the terms hereof and of Term Note A, shall be secured by all of the Collateral,
and shall constitute Obligations. The proceeds of Term Loan A shall be used
solely for the purposes set forth in Section 5.01(v) hereof. Any principal
amount of Term Loan A which is repaid or prepaid by the Borrower may not be
reborrowed.
(ii) The Term Loan B Lenders agree, ratably in accordance with their respective
Term Loan B Commitments, and on the terms and conditions hereinafter set forth
(including subject to the satisfaction of the applicable conditions precedent
set forth in Article IV hereof), to make term loans (collectively, "Term Loan
B") to the Borrower on the Effective Date in an aggregate principal amount of
$30,000,000, which Term Loan B shall be repayable in accordance with the terms
hereof and of Term Note B, shall be secured by all of the Collateral, and shall
constitute Obligations. The proceeds of Term Loan B shall be used solely for the
purposes set forth in Section 5.01(v) hereof. Any principal amount of Term Loan
B which is
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repaid or prepaid by the Borrower may not be reborrowed. It is the understanding
of the Term Loan B Lenders that the Term Loan B of each Term Loan B Lender ranks
pari passu in right of payment and rights upon liquidation with the Term Loan B
of each other Term Loan B Lender.
(b) Each Revolving Credit Lender agrees, ratably in accordance with its
respective Revolving Credit Commitment, and on terms and conditions hereinafter
set forth (including subject to the satisfaction of the applicable conditions
precedent set forth in Article IV hereof), to make loans (collectively, the
"Revolving Loans") to Borrower from time to time on any Business Day during the
period commencing on the date hereof and ending on, but excluding the Revolving
Credit Commitment Termination Date, in an aggregate principal amount at any time
outstanding not to exceed such Lender's Pro Rata Share (in accordance with its
Revolving Credit Commitment) of an amount equal to the lesser of (i) the Maximum
Revolving Amount, or (ii) the amount of the Borrowing Base then in effect. The
Borrowing Base shall be net of the amount of reserves, if any, established by
Administrative Agent under the Loan Documents, including as set forth below.
Administrative Agent shall have the right to establish reserves in such amounts,
and with respect to such matters, as Administrative Agent deem in good faith
reasonably necessary or appropriate, against the amount of Revolving Loans which
Borrower may otherwise request under Section 2.02, including with respect to (A)
price adjustments, damages, unearned discounts, returned products or other
matters for which credit memoranda are issued in the ordinary course of
Borrower's business, (B) (without duplication) unearned or otherwise refundable
customer deposits, (C) [intentionally omitted], (D) sums chargeable against
Borrower's Loan Account as Revolving Loans under any section of this Agreement,
(E) amounts owing by Borrower to any Person to the extent secured by a Lien
(other than Permitted Liens) on, or trust over, any Property of Borrower, and
(F) such other matters, events, conditions, or contingencies as to which
Administrative Agent, in good faith and reasonable credit judgment, determines
reserves should be established from time to time hereunder. The proceeds of
Revolving Loans shall be used solely for the purposes set forth in Section
5.01(v) hereof. Within the limit of the Maximum Revolving Amount and subject to
the conditions contained herein, the Borrower may borrow, prepay and reborrow
Revolving Loans pursuant to this Article II. The Revolving Loans shall be
evidenced hereby and by the Revolving Notes, shall be secured by all of the
Collateral, and shall constitute Obligations.
(c) [intentionally omitted]
SECTION 2.02. Making the Loans.
(a) An Authorized Person of Administrative Borrower on behalf of Borrower shall
give Administrative Agent prior telephone notice (immediately confirmed in
writing, in substantially the form of Exhibit N-1 hereto (a "Notice of
Borrowing")), not later than 1:00 p.m. (New York City time) on the Business Day
of the proposed Loan. Such Notice of Borrowing shall be irrevocable and shall
specify (i) the principal amount of the proposed Loan, (ii) in the case of Loans
requested on the Effective Date, whether such Loan is requested to be a
Revolving Loan or a Term Loan, (iii) the use of the proceeds of such proposed
Loan, and (iv) the proposed borrowing date, which must be a Business Day, and,
with respect to the Term Loan, must be the Effective Date. Any Notice of
Borrowing for any Loan after the Effective Date, the proceeds of which will be
used to finance a Permitted Acquisition, shall include copies of the agreements,
instruments and other documents specified in clause (B) of the definition of
"Permitted
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Acquisition". Administrative Agent may act without liability upon the basis of
written, telecopied or telephonic notice believed by the Administrative Agent in
good faith to be from an Authorized Person of the Administrative Borrower. The
Borrower hereby waives the right to dispute Administrative Agent's record of the
terms of any such telephonic Notice of Borrowing. Each Notice of Borrowing shall
be irrevocable and binding on the Borrower. Administrative Agent on behalf of
the Lender Group will make the proceeds of such Loan available to the Borrower
on the day of the proposed Loan by causing an amount, in immediately available
funds, to be deposited in an account designated by Administrative Borrower on
behalf of the Borrower to Administrative Agent at a commercial bank reasonably
satisfactory to Administrative Agent.
(b) Section 2.02(a) notwithstanding, the becoming due of any amount required to
be paid under this Agreement, the Fee Letter, any Revolving Note or Term Note,
or any other Loan Document, whether of principal or interest or for any other
Obligation, shall be deemed irrevocably to be a request for a Revolving Loan on
the due date in the amount required to pay such principal, interest, or other
Obligation.
(c) Administrative Agent shall from time to time, but no less frequently than
weekly, notify each Revolving Credit Lender of the date such Lender is to fund
its Revolving Loans, and the amount to be made available by it. If and to the
extent that a Revolving Credit Lender and Administrative Agent so agree, at
Administrative Agent's discretion, the amount to be made available by such
Revolving Credit Lender on any date may be netted against any amount owing to
such Lender and otherwise payable by Administrative Agent on account of payments
received by it from Borrower on such date. The amount to be made available by
each Revolving Credit Lender on any date (which date shall be a Business Day)
shall be made available by it on such date to Administrative Agent at the
Administrative Agent Account, in immediately available funds, not later than
2:00 p.m. (New York time). The obligation of each Revolving Credit Lender to
Administrative Agent (as opposed to Borrower) to fund its Revolving Loans on the
date specified by Administrative Agent is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including (i) any set off,
counterclaim, recoupment, defense or other right which such Lender may have
against Administrative Agent, the Borrower or any other Person for any reason
whatsoever, (ii) the financial condition or prospects of the Borrower, (iii) the
failure of any other such Lender to make funds available to Agent with respect
to its Revolving Loans, (iv) the occurrence or continuation of an Event of
Default, whether the same shall occur before or after Administrative Agent shall
have made the Revolving Loans, or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
(d) The Borrower and the Lender Group hereby irrevocably authorize
Administrative Agent to disburse the proceeds of each Revolving Loan requested,
or deemed to be requested, pursuant to this Section 2.02 as follows: (i) the
proceeds of each Revolving Loan requested under Section 2.02(a) hereof shall (if
Administrative Agent so requires, subject to receipt by Administrative Agent of
funds from the Revolving Credit Lenders) be disbursed by Administrative Agent in
lawful money of the United States of America in immediately available funds, in
the case of the initial borrowing, in accordance with the terms of a written
disbursement letter from the Borrower, and in the case of each subsequent
borrowing, by wire transfer to the Designated Account or such other bank account
as may be agreed upon in writing by
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Administrative Borrower and Administrative Agent from time to time, and (ii) the
proceeds of each Revolving Loan requested under Section 2.02(b) hereof shall be
charged to the Loan Account and disbursed by Administrative Agent by way of
direct payment of the relevant interest or other Obligation. Administrative
Agent is authorized to make Revolving Loans under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person of Administrative Borrower, or without instructions if
pursuant to Section 2.02(b). Administrative Borrower agrees to establish and
maintain the Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Revolving Loans requested by Administrative
Borrower and made by Administrative Agent or the Lenders hereunder.
(e) The Borrower and the Lender Group hereby irrevocably authorizes and directs
Administrative Agent to charge to the Borrower's Loan Account hereunder, as a
Revolving Loan deemed made to Borrower, a sum sufficient to pay all principal of
Term Loans due and all interest accrued on the Obligations during the
immediately preceding month and to pay all Lender Group Expenses at any time
owed by any Loan Party to the Lender Group hereunder or under any of the Loan
Documents (including the Fee Letter); provided, however, that Administrative
Agent may, but shall not be required to, so charge the Borrower's Loan Account
during the existence of an Event of Default or if and to the extent such charge
would result in an Overadvance. Amounts so charged pursuant to this Section
2.02(e) shall be deemed Revolving Loans requested by Borrower pursuant to
Section 2.02(b), and the provisions of Section 2.02(c) and Section 2.02(d) shall
be applicable to each such Revolving Loan.
(f) (i) Revolving Loans and payments will be settled among Administrative Agent
and the Revolving Credit Lenders according to such procedures as Administrative
Agent and such Lenders may agree from time to time. These procedures
notwithstanding, each such Lender's obligation to fund its portion of the
Revolving Loans shall commence on the date such Revolving Loans are made by
Administrative Agent. Such payments to Administrative Agent will be made by such
Lenders without set-off, counterclaim or reduction of any kind.
(ii) Administrative Agent may require the Revolving Lenders to settle Revolving
Loans and payments on a daily basis (or such lesser frequency as Administrative
Agent may determine) (each day of settlement being a "Settlement Date").
Administrative Agent will advise each Revolving Credit Lender by telephone or
telecopy of the amount of each such Lender's Pro Rata Share (in accordance with
its Revolving Credit Commitment) of the Revolving Facility Usage as of the close
of business of the Business Day immediately preceding the Settlement Date. In
the event that payments are necessary to adjust such Lender's actual Pro Rata
Share (in accordance with its Revolving Credit Commitment) of the Revolving
Facility Usage as of any Settlement Date to equal the amount of such Lender's
required Pro Rata Share (in accordance with its Revolving Credit Commitment) of
the Revolving Facility Usage, the party from which such payment is due will pay
the other, in same day funds, by wire transfer to the other's account not later
than the applicable time set forth on Section 2.02(c).
(iii) If any such payment is not made to Administrative Agent by any such Lender
on the Settlement Date applicable thereto to the extent required by the terms
hereof, such Lender shall be a Defaulting Lender and Administrative Agent shall
be entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the
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Defaulting Lenders Rate. Administrative Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by Borrower to Administrative Agent for
the Defaulting Lender's benefit on account of its Revolving Loans. Any such
amounts payable to a Defaulting Lender shall instead be paid to or retained by
Administrative Agent. Administrative Agent may hold and, in its discretion,
re-lend to Borrower as Revolving Loans the amount of any or all such payments
received or retained by it for the account of such Defaulting Lender. Solely for
the purposes of voting or consenting to matters with respect to the Loan
Documents and determining Required Lenders, Defaulting Lender shall be deemed
not to be a "Lender" (in respect of its Revolving Loans and Revolving Credit
Commitment) and such Defaulting Lender's Revolving Credit Commitment with
respect to the Revolving Loans shall be deemed to be zero (-0-). This section
shall remain effective with respect to such Lender until (x) the Obligations
under this Agreement shall have been declared or shall have become immediately
due and payable or (y) the Revolving Credit Lenders that are non-Defaulting
Lenders and Administrative Agent shall have waived such Lender's default in
writing. The operation of this section shall not be construed to increase or
otherwise affect the Commitments of any Lender other than such Defaulting
Lender, or relieve or excuse the performance by Borrower of its duties and
obligations hereunder.
SECTION 2.03. Notes; Repayment of Loans and other Obligations.
(a) (i) As to each Term Loan A Lender, the Term Loan A of such
Lender shall be evidenced by a single Term Note A, duly executed on behalf of
the Borrower, dated the Effective Date, and delivered to and made payable to the
order of such Lender in a principal amount equal to the amount of such Lender's
Term Loan A Commitment.
(ii) As to each Term Loan B Lender, the Term Loan B of
such Lender shall be evidenced by a single Term Note B, duly executed on behalf
of the Borrower, dated the Effective Date, and delivered to and made payable to
the order of such Lender in a principal amount equal to the amount of such
Lender's Term Loan B Commitment.
(iii) As to each Revolving Credit Lender, all Revolving
Loans made by such Lender to the Borrower shall be evidenced by a single
Revolving Credit Note, duly executed on behalf of the Borrower, dated the
Effective Date, and delivered to and made payable to the order of such Lender in
a principal amount equal to the amount of such Lender's Revolving Credit
Commitment.
(b) (i) As to each Term Loan A Lender, the Term Loan A of such
Lender shall be repayable in 9 consecutive quarterly installments, on the first
day of each January, April, July, and October, commencing on April 1, 2000 and
ending on April 1, 2002, consisting of (A) 2 installments (payable on April 1,
2000 and July 1, 2000), each in an amount equal to such Lender's Pro Rata Share
(relative to Term Loan A) of $1,000,000.00, followed by (B) 4 installments
(payable on October 1, 2000, January 1, 2001, April 1, 2001, and July 1, 2001),
each in the amount equal to such Lender's Pro Rata Share (relative to Term Loan
A) of $2,000,000.00, followed by (C) 3 installments (payable on October 1, 2001,
January 1, 2002, and April 1, 2002), each in an amount equal to such Lender's
Pro Rata Share (relative to Term Loan A) of $3,000,000.00; provided, however,
that the Term Loan A of each Lender shall be repayable in full on the Final
Maturity Date.
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(ii) As to each Term Loan B Lender, the Term Loan B
of such Lender shall be repayable in full on the Final Maturity Date.
(iii) Principal payable on account of Revolving Loans
shall be repayable in full by Borrower to Administrative Agent for the account
of the Revolving Credit Lenders, in accordance with Section 3.03, immediately
upon the earliest of (a) the receipt by Administrative Agent or Borrower of any
Ordinary Course Proceeds, to the extent of said proceeds, (b) the occurrence of
an Event of Default in consequence of which the Required Lenders elect to
accelerate the maturity and payment of the Obligations, or (c) termination of
this Agreement pursuant to Section 2.05(g) or Section 2.05(h) hereof; provided,
however, that if an Overadvance shall exist, Borrower shall, on demand in
writing by any Lender, repay the Overadvance.
(iv) The outstanding principal of each Loan
(including, without limitation, all Revolving Loans), together with all other
Obligations, shall be due and payable on the Final Maturity Date.
(c) Administrative Borrower agrees to record each Loan on the
Register referred to in Section 11.07(c). Each Loan recorded on the Register
(the "Registered Loan") may not be evidenced by promissory notes other than the
Term Note or the Revolving Credit Note, each of which is a Registered Note (as
defined below). Upon the registration of any Loan, any promissory note (other
than a Registered Note) evidencing the same shall be null and void and shall be
returned to Administrative Borrower. The Borrower agrees, at the request of any
Lender, to execute and deliver to such Lender a promissory note in registered
form to evidence such Registered Loan (i.e. containing the registered note
language set forth in Exhibits R-1, T-1, and T-2 hereto) and registered as
provided in Section 11.07(c) (a "Registered Note"), payable to the order of such
Lender and otherwise duly completed. Once recorded on the Register, the Loan or
Loans evidenced by such Note may not be removed from the Register so long as it
remains outstanding, and a Registered Note may not be exchanged for a promissory
note that is not a Registered Note.
SECTION 2.04. Interest.
(a) Loans. The Term Loans and each Revolving Loan shall bear interest on the
principal amount thereof from time to time outstanding, from the date of such
Loan until such principal amount becomes due, at a rate per annum equal to:
(i) with respect to the Term Loans A, the greater of (A) the Reference Rate plus
2% or (B) 9.75%.
(ii) with respect to the Term Loans B, the greater of (A) the Reference Rate
plus 5% or (B) 12.75%.
(iii) with respect to the Revolving Loans, the greater of (A) the Reference Rate
plus 1% or (B) 8.75%.
(b) Default Interest. To the extent permitted by law, upon the occurrence and
during the continuance of an Event of Default, the principal of, and all accrued
and unpaid
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interest on, all Loans, and all fees, indemnities or any other Obligations of
the Borrower under this Agreement, the Notes and other Loan Documents shall bear
interest, from the date such Event of Default occurred until such Event of
Default is cured or waived in writing in accordance herewith, at a rate per
annum equal to the Post-Default Rate.
(c) Interest Payment. Interest on each Loan shall be payable monthly, in
arrears, on the first day of each month, commencing on the first day of the
month following the month in which such Loan is made, and at maturity (whether
upon demand, by acceleration or otherwise). Interest at the Post-Default Rate,
when and as permitted hereunder, shall be payable on demand. The Borrower hereby
authorizes Administrative Agent to, and Administrative Agent may, from time to
time, charge the Loan Account pursuant to Section 2.02(b) and Section 3.01 with
the amount of any interest payment due hereunder.
(d) General. All interest shall be computed on the basis of a year of 360 days
for the actual number of days, including the first day but excluding the last
day, elapsed.
SECTION 2.05. Reduction of Revolving Credit Commitment; Prepayment of Loans;
Term and Termination.
(a) Reduction of Revolving Credit Commitment.
The aggregate Revolving Credit Commitments, ratably in accordance with the
Revolving Credit Lenders' Pro Rata Shares, shall be reduced automatically and
concurrently with any prepayment of Revolving Loans pursuant to Section 2.05(c)
(exclusive of Section 2.05(c)(i), Section 2.05(c)(iv), Section 2.05(c)(vi),
Section 2.05(c)(vii), Section 2.05(c)(viii), and Section 2.05(c)(x)). Once
reduced, the Revolving Credit Commitment may not be increased. Except pursuant
to Section 2.05(g)(ii), the Revolving Commitments may not be reduced or
terminated by Borrower.
(b) Optional Prepayment of Term Loans.
(i) The unpaid principal balance of Term Loan A may be prepaid, without payment
of any premium or penalty, in whole or in part at any time during the term of
this Agreement upon 30 days prior written notice by Administrative Borrower to
Administrative Agent (a copy of which notice Administrative Agent shall provide
promptly upon its receipt to Collateral Agent and each Lender with a Term Loan A
Commitment); provided, however, that, after giving effect to such prepayment of
all or any portion of Term Loan A, Excess Availability is not less than
$10,000,000.
(ii) The unpaid principal balance of Term Loan B may be prepaid, without payment
of any premium or penalty, in whole or in part at any time during the term of
this Agreement upon 30 days prior written notice by Administrative Borrower to
Administrative Agent (a copy of which notice Administrative Agent shall provide
promptly upon its receipt to Collateral Agent and each Lender with a Term Loan B
Commitment); provided, however, that, no such prepayment of all or any portion
of Term Loan B shall be made unless and to the extent that Term Loan A has been
paid in full in cash and, after giving effect thereto, Excess Availability is
not less than $10,000,000.
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(c) Mandatory Prepayment.
(i) At any time when an Overadvance exists, the Borrower will immediately prepay
the Revolving Loans (ratably in accordance with the Revolving Credit Lenders'
Pro Rata Shares) to the full extent of any Overadvance. On each day that any
Revolving Loans are outstanding and the Borrower is required hereunder to
deliver a Borrowing Base Certificate, the Borrower shall hereby be deemed to
represent and warrant to the Lender Group that the Borrowing Base calculated as
of such day equals or exceeds the Revolving Facility Usage outstanding on such
day.
(ii) [intentionally omitted]
(iii) [intentionally omitted]
(iv) Within ten (10) Business Days of delivery to the Lender Group of audited
annual financial statements pursuant to Section 6.01(a)(ii), commencing with the
delivery to the Lender Group of the financial statements for the Fiscal Year
ended December 31, 1999, or, if such financial statements are not delivered to
the Lender Group on the date such statements are required to be delivered
pursuant to such Section 6.01(a)(ii), within ten (10) Business Days after the
date such statements are required to be delivered to the Lender Group pursuant
to Section 6.01(a)(ii), the Borrower shall prepay the outstanding principal of
the Term Loan A ratably in accordance with the Term Loan A Lenders' Pro Rata
Shares (or, if the Term Loan A has been paid in full, Borrower shall prepay the
outstanding principal of the Term Loan B ratably in accordance with the Term
Loan B Lenders' Pro Rata Shares; or, if the Term Loans have been paid in full,
Borrower shall prepay the Revolving Loans ratably in accordance with the
Revolving Credit Lenders' Pro Rata Shares) in an amount equal to 50% of the
Excess Cash Flow of the Borrower and its Subsidiaries for such Fiscal Year. The
foregoing to the contrary notwithstanding, the amount of such prepayment
required to be made under this Section 2.05(c)(iv) solely in respect of the
Excess Cash Flow of the Borrower and its Subsidiaries for the Fiscal Year ended
December 31, 1999 shall not exceed the lesser of (a) 50% of the Excess Cash Flow
of the Borrower and its Subsidiaries for the period commencing on the Effective
Date and ending on December 31, 1999, and (b) $1,500,000.
(v) [intentionally omitted]
(vi) Immediately upon any Disposition by any Loan Party pursuant to Section
6.02(c)(ii)(C), the Borrower shall, subject to Section 3.03 hereof, prepay the
outstanding principal of the Term Loan A ratably in accordance with the Term
Loan A Lenders' Pro Rata Shares (or, if the Term Loan A has been paid in full,
Borrower shall prepay the outstanding principal of the Term Loan B ratably in
accordance with the Term Loan B Lenders' Pro Rata Shares; or, if the Term Loans
have been paid in full, Borrower shall prepay the Revolving Loans ratably in
accordance with the Revolving Credit Lenders' Pro Rata Shares) in an amount
equal to 100% of the Net Cash Proceeds received by the Loan Parties in
connection with such Disposition.
(vii) Upon the loss, destruction or taking by condemnation of any Collateral,
the Borrower shall, subject to Section 3.03 hereof, prepay the outstanding
principal of
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the Term Loan A ratably in accordance with the Term Loan A Lenders' Pro Rata
Shares (or, if the Term Loan A has been paid in full, Borrower shall prepay the
outstanding principal of the Term Loan B ratably in accordance with the Term
Loan B Lenders' Pro Rata Shares; or, if the Term Loans have been paid in full,
Borrower shall prepay the Revolving Loans ratably in accordance with the
Revolving Credit Lenders' Pro Rata Shares) in an amount equal to 100% of the
proceeds received by the Loan Parties in connection therewith, net of any
reasonable expenses incurred in collecting such net proceeds.
(viii) Upon the issuance or incurrence by any Loan Party of any Indebtedness
except as permitted by Section 6.02(b), or the sale or issuance by any Loan
Party of any shares of its Capital Stock, the Borrower shall, subject to Section
3.03 hereof, prepay the outstanding principal of the Term Loan A ratably in
accordance with the Term Loan A Lenders' Pro Rata Shares (or, if the Term Loan A
has been paid in full, Borrower shall prepay the outstanding principal of the
Term Loan B ratably in accordance with the Term Loan B Lenders' Pro Rata Shares;
or, if the Term Loans have been paid in full, Borrower shall prepay the
Revolving Loans ratably in accordance with the Revolving Credit Lenders' Pro
Rata Shares) in an amount equal to 100% of the Net Cash Proceeds received by the
Loan Parties in connection therewith. The provisions of this subsection
(c)(viii) shall not be deemed to be implied consent to any issuance or
incurrence of Indebtedness, or any sale or issuance of any Capital Stock,
otherwise prohibited by the terms and conditions hereof.
(ix) Within ten (10) Business Days of delivery to the Lender Group of audited
annual financial statements pursuant to Section 6.01(a)(ii), commencing with the
delivery to the Lender Group of the financial statements for the Fiscal Year
ended December 31, 1999, or, if such financial statements are not delivered to
the Lender Group on the date such statements are required to be delivered
pursuant to such Section 6.01(a)(ii), within ten (10) Business Days after the
date such statements are required to be delivered to the Lender Group pursuant
to Section 6.01(a)(ii), the Borrower shall, subject to Section 3.03 hereof,
prepay the outstanding principal of the Term Loan A ratably in accordance with
the Term Loan A Lenders' Pro Rata Shares (or, if the Term Loan A has been paid
in full, Borrower shall prepay the outstanding principal of the Term Loan B
ratably in accordance with the Term Loan B Lenders' Pro Rata Shares; or, if the
Term Loans have been paid in full, Borrower shall prepay the Revolving Loans
ratably in accordance with the Revolving Credit Lenders' Pro Rata Shares) in an
amount equal to the then extant Required EBITDA Payment.
(x) At any time when a Collection Rule Overadvance exists, the Borrower
immediately shall, subject to Section 3.03 hereof, prepay the Revolving Loans
ratably in accordance with the Revolving Credit Lenders' Pro Rata Shares (or, if
the outstanding amount of the Revolving Loans is zero (-0-), Borrower shall
prepay the outstanding principal of the Term Loan A ratably in accordance with
the Term Loan A Lenders' Pro Rata Shares; or, if the Term Loan A has been paid
in full, Borrower shall prepay the outstanding principal of the Term Loan B
ratably in accordance with the Term Loan B Lenders' Pro Rata Shares) in an
amount equal to such excess.
(d) Application of Payments. Each prepayment pursuant to subsection (b) or
subsection (c) above in respect of the Term Loans shall be applied against the
remaining installments of principal of the applicable Term Loans in the inverse
order of maturity.
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(e) Interest and Fees. Any prepayment made pursuant to this Section 2.05 shall
be accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment, and if such prepayment would reduce the amount of the
outstanding Loans to zero at a time when the Revolving Credit Commitments have
been terminated, such prepayment shall be accompanied by the payment of the fees
accrued to such date pursuant to Section 2.06.
(f) Cumulative Prepayments. Except as otherwise expressly provided in this
Section 2.05, payments with respect to any subsection of this Section 2.05 are
in addition to payments made or required to be made under any other subsection
of this Section 2.05.
(g) Term of Agreement; Early Termination by Borrower.
(i) Subject to the right of the Lender Group to cease making Loans to Borrower
upon or after the occurrence of any Default or Event of Default, this Agreement
shall be in effect for the period commencing on the Effective Date and ending on
the Final Maturity Date, unless sooner terminated as provided in Section
2.05(g)(ii) or Section 2.05(h).
(ii) Borrower has the option, at any time upon 30 days prior written notice
(which notice shall be irrevocable) to Administrative Agent and Collateral
Agent, to terminate this Agreement by paying to the Lender Group, in cash, the
Obligations (including the "Success Fee" as such term is defined in the Fee
Letter), in full.
(h) Termination of Agreement by Lender Group. Administrative Agent (acting on
the written instructions of the Required Lenders) or Collateral Agent (acting on
the written instructions of the Required Lenders) may, by notice to
Administrative Borrower for the benefit of the Loan Parties, terminate this
Agreement at any time upon or after the occurrence of an Event of Default.
(i) Effect of Termination. All of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination of this
Agreement. All undertakings, agreements, covenants, warranties, and
representations of the Borrower and the other Loan Parties contained in the Loan
Documents shall survive any such termination, and, notwithstanding such
termination, Collateral Agent shall retain its Liens in the Collateral for the
benefit of the Lender Group, and the Lender Group shall retain all of its rights
and remedies under the Loan Documents, until the Borrower has paid to
Administrative Agent, for the account of the Lender Group, all of Borrower's
Obligations to the Lender Group, in full, in immediately available funds,
together with the applicable termination charge, if any. Notwithstanding the
payment in full of the Obligations, Collateral Agent shall not be required to
terminate its security interests in the Collateral unless, with respect to any
loss or damage the Lender Group may incur as a result of dishonored checks or
other items of payment received by the Lender Group from the Borrower or any
Account Debtor and applied to the Obligations, Administrative Agent shall, at
its option, (a) have received a written agreement, executed by the Borrower and
by any Person whose loans or other advances to the Borrower are used in whole or
in part to satisfy the Obligations, indemnifying the Agents and the Lender Group
from any such loss or damage, or (b) have retained such monetary reserves, and
Collateral Agent shall have retained such Liens on the Collateral, for such
period of time as such Agents, in their reasonable discretion, may deem
necessary to protect the Lender Group from any such loss or damage.
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SECTION 2.06. Fees.
(a) Financial Examination and Appraisal Fees. Borrower shall pay to the
Administrative Agent, for the sole and separate account of Administrative Agent:
(i) Administrative Agent's customary fee of $750 per day per examiner, plus
Administrative Agent's reasonable out-of-pocket expenses for each financial
analysis and examination (i.e., audits) of the Loan Parties performed by
personnel employed by Administrative Agent; and (ii) Administrative Agent's
out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Administrative Agent; and (iii) the actual charges paid or
incurred by Administrative Agent if it elects to employ the services of one or
more third Persons to perform such financial analyses and examinations (i.e.,
audits) of the Loan Parties or to appraise the Collateral or to perform
enterprise valuations in respect of the Loan Parties; provided, however, that,
if during any one-year period ending on each anniversary of the Effective Date
there has not occurred an Event of Default, (y) the amount of charges under this
clause (iii) in respect of third Person appraisals of the Collateral charged to
Borrower in that one-year period will not exceed the total amount of such
charges for 2 such appraisals; and (z) the amount of charges under this clause
(iii) in respect of third Person enterprise valuations in respect of the Loan
Parties charged to Borrower in that one-year period will not exceed the total
amount of such charges for 2 such valuations.
(b) Fee Letter Fees. Borrower shall pay to the Collateral Agent the fees set
forth in the Fee Letter in accordance with the terms thereof, and such fees
constitute Obligations hereunder.
SECTION 2.07. Securitization. The Loan Parties hereby acknowledges that the
Lenders and any of their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
loans to such Lenders or their Affiliates or through the sale of the Loans or
the issuance of direct or indirect interests in the Loans, which loans to such
Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's, Standard & Poor's or one or more other rating agencies (the "Rating
Agencies"). The Loan Parties shall cooperate reasonably with such Lenders and
their Affiliates to effect the Securitization including, without limitation, by
(a) amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by such Lenders, in connection
with the Securitization, provided that (i) any such amendment or additional
documentation does not impose material additional costs on the Loan Parties and
(ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations (including
administrative duties or reporting obligations), of the Loan Parties under the
Loan Documents or change or affect in a manner adverse to the Borrower the
financial terms of the Loans, (b) providing such information as may be
reasonably requested by such Lenders, in connection with the rating of the Loans
or the Securitization, (c) providing in connection with any rating of the Loans,
a certificate (i) agreeing to indemnify such Lenders and any of their
Affiliates, any of the Rating Agencies, or any party providing credit support or
otherwise participating in the Securitization (collectively, the "Securitization
Parties") for any losses, claims, damages or liabilities (the "Liabilities") to
which such Lenders, their Affiliates or such Securitization Parties may become
subject insofar as the Liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any Loan
Document or in any writing delivered by or on behalf of the Loan Parties and
their
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respective Affiliates to the Lender Group in connection with any Loan Document
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and such indemnity shall survive any transfer by such
Lenders or their successors or assigns of the Loans and (ii) agreeing to
reimburse such Lenders and any of their Affiliates and other Securitization
Parties for any legal or other expenses reasonably incurred by such Persons in
connection with defending the Liabilities; and (d) providing such information
regarding the Loan Parties, the Collateral and other property, assets and
business of the Loan Parties (including appraisals and valuations) as may be
reasonably requested by such Lenders or their successors or assignees.
ARTICLE III
PAYMENTS AND OTHER COMPENSATION
SECTION 3.01. Payments; Computations and Statements. The Borrower will make each
payment under this Agreement, the Notes and the other Loan Documents (whether of
principal, interest, fees, Lender Group Expenses, or otherwise) not later than
1:00 p.m. (New York City time) on the day when due, in lawful money of the
United States of America and in immediately available funds, to Administrative
Agent for the benefit of the Lender Group at the Administrative Agent Account.
All such payments received by the Administrative Agent for the benefit of the
Lender Group after 1:00 p.m. (New York City time) on any Business Day will be
credited to the Loan Account on the next succeeding Business Day. All such
payments shall be made by the Borrower to the Lender Group without defense,
set-off or counterclaim. The Borrower hereby authorizes Administrative Agent to,
and Administrative Agent may, from time to time charge the Loan Account with all
Obligations and any other amount due and payable under any Loan Document to
which the Borrower is a party, whether or not any Event of Default or Default
shall have occurred or be continuing or whether any of the conditions precedent
in Section 4.02 have been satisfied. Any amount charged to the Loan Account
shall be deemed a Revolving Loan hereunder made by the Revolving Credit Lenders
to the Borrower. The Borrower confirms that any charges which Administrative
Agent may so make to the Loan Account as herein provided will be made as an
accommodation to the Borrower and solely at Administrative Agent's discretion.
It is expressly understood and agreed by the Borrower that the Lender Group
shall have no responsibility to inquire into the correctness of the
apportionment, allocation or disposition of the Loans made to the Borrower or,
subject to Section 3.05, any fees, costs or Lender Group Expenses for which the
Borrower is obligated under this Agreement. Whenever any payment to be made
under any such Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be, provided that, if any such payment is made
by a charge to the Loan Account, such charge may be made by Administrative Agent
for the benefit of the Lender Group on any day, whether or not a Business Day.
All computations of interest and fees shall be made by the Lender Group on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or fee is payable. Each determination by the
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Lender Group of an interest rate, fees or Lender Group Expenses hereunder shall
be conclusive and binding for all purposes in the absence of manifest error.
SECTION 3.02. Payments to Lender Group, Return of Payments.
(a) Each payment received by Administrative Agent under this Agreement of any
Obligation for the account of any member of the Lender Group shall (subject to
Section 2.02(c)) be paid by Administrative Agent promptly to such member of the
Lender Group, in immediately available funds, to the account of such member of
the Lender Group as specified from time to time by such member of the Lender
Group in a written notice to Administrative Agent (with a copy to Collateral
Agent).
(b) Unless Administrative Agent receives notice from the Borrower prior to the
date on which any payment is due to the Lender Group that the Borrower will not
make such payment in full as and when required, Administrative Agent may assume
that the Borrower has made such payment in full to Administrative Agent on such
date in immediately available funds and Administrative Agent may (but shall not
be so required), in reliance upon such assumption, distribute to the applicable
members of the Lender Group on such due date an amount equal to the amount then
due such member of the Lender Group. If and to the extent the Borrower has not
made such payment in full to Administrative Agent, each member of the Lender
Group shall repay to Administrative Agent on demand such amount distributed to
such member of the Lender Group, together with interest thereon at the Reference
Rate for each day from the date such amount is distributed to such member of the
Lender Group until the date repaid by such member of the Lender Group.
SECTION 3.03. Apportionment and Application of Payments.
(a) Except as otherwise provided with respect to Defaulting
Lenders, aggregate principal payments and interest payments shall be apportioned
ratably among the Lenders (according to their applicable Pro Rata Shares) and
payments of the fees (other than fees designated for Administrative Agent's sole
and separate account, fees designated for Collateral Agent's sole and separate
account, and fees payable in accordance with the Fee Letter) shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to Administrative Agent and all such payments (except, so long as no
Event of Default has occurred and is continuing, for payments designated in
writing by Borrower to Administrative Agent and Collateral Agent as a prepayment
of specific Loans hereunder, which may be so applied) and all Collections and
all proceeds of Collateral received by any Agent, shall be applied as follows:
first, to pay any fees (other than the "Success Fee", as such term is defined in
the Fee Letter), or Lender Group Expenses then due to Administrative Agent or
Collateral Agent from the Loan Parties until paid in full;
second, to pay any fees or Lender Group Expenses then due to the Lenders from
the Loan Parties until paid in full;
third, to pay interest due in respect of all Revolving Loans until paid in full;
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fourth, so long as no Event of Default has occurred and is continuing or, if an
Event of Default has occurred and is continuing and Administrative Agent agrees
in its sole and absolute discretion, to pay interest due in respect of Term Loan
A until paid in full (if an Event of Default has occurred and is continuing and
Administrative Agent has not so agreed, the priority of such amounts is deferred
to item "seventh" below);
fifth, so long as no Event of Default has occurred and is continuing or, if an
Event of Default has occurred and is continuing and Administrative Agent agrees
in its sole and absolute discretion, to pay interest due in respect of Term Loan
B until paid in full (if an Event of Default has occurred and is continuing and
Administrative Agent has not so agreed, the priority of such amounts is deferred
to item "ninth" below);
sixth, to repay the principal of the Revolving Loans until paid in full;
seventh, to pay interest due in respect of Term Loan A until paid in full;
eighth, to pay or prepay principal of Term Loan A, in inverse order of maturity
of the installments thereof, until paid in full;
ninth, to pay interest due in respect of Term Loan B until paid in full;
tenth, to pay or prepay principal of Term Loan B, until paid in full;
eleventh, to pay any other Obligations (other than the "Success Fee", as such
term is defined in the Fee Letter) due to the Lender Group, until paid in full;
and
twelfth, to pay the Success Fee due and payable under the Fee Letter, until paid
in full.
(b) In each instance, so long as no Event of Default has
occurred and is continuing, (i) Section 3.03(a) shall not be deemed to apply to
any payment by the Borrower specified by Administrative Borrower to
Administrative Agent to be for the payment of Obligations relating to Term Loan
A or Term Loan B when due and payable under any provision of this Agreement or
the prepayment of all or part of the principal of Term Loan A or Term Loan B
pursuant to Section 2.05(b) or Section 2.05(c); and (ii) Section 3.03(a) to the
contrary notwithstanding, Ordinary Course Proceeds shall be applied only to the
portion (if any) of the principal amount of any Term Loan then due and payable.
(c) For purposes of the foregoing, "paid in full" with respect
to interest shall include interest that accrues after the commencement of any
Insolvency Proceeding irrespective of whether a claim for such interest is
allowable in such Insolvency Proceeding.
(d) In the event of a direct conflict between the priority
provisions of this Section 3.03 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that both such priority
provisions in such documents shall be read together and
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construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 3.03 shall control and
govern.
SECTION 3.04. All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of the Borrower, and shall be secured by Collateral
Agent's Liens upon all of the Collateral, for the benefit of the Lender Group.
SECTION 3.05. Loan Account; Statements of Account. Administrative Agent shall
enter all Loans as debits to the Loan Account and also shall record in the Loan
Account all payments made by the Borrower on any Obligations and all proceeds of
Collateral which are finally paid to the Lender Group, and may record therein,
in accordance with its customary practices, other debits and credits, including
interest and all Lender Group Expenses properly chargeable to the Borrower.
Administrative Agent will account to the Borrower monthly with a statement of
Loans, charges, and payments made pursuant to this Agreement, and such
accounting rendered by Administrative Agent shall be deemed final, binding and
conclusive upon the Borrower unless Administrative Agent is notified by the
Borrower in writing to the contrary within 30 days of the date each accounting
is mailed to the Borrower. Such notice only shall be deemed an objection to
those items specifically objected to therein.
ARTICLE IV
CONDITIONS TO LOANS
SECTION 4.01. Conditions Precedent to Effectiveness and the Initial Loan. The
obligation of the Lender Group to make the initial Loan is subject to the
fulfillment, in a manner satisfactory to Administrative Agent and Collateral
Agent, of each of the following conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid on or before the
Effective Date all fees, Lender Group Expenses, and taxes then payable pursuant
to Sections 2.06 and 10.04 (it being understood that the Expense Deposit will be
applied to reduce the amount of such fees, Lender Group Expenses and taxes).
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct: (i) the representations and warranties
contained in Article V and in each other Loan Document, certificate or other
writing delivered to the Lender Group pursuant hereto or thereto on or prior to
the Effective Date are true and correct on and as of the Effective Date as
though made on and as of such date and (ii) no Default or Event of Default shall
have occurred and be continuing on the Effective Date or would result from this
Agreement or the other Loan Documents becoming effective in accordance with its
or their respective terms, both immediately before and immediately after giving
effect to the initial Loan.
(c) Legality. The making of the initial Loan shall not contravene any law, rule
or regulation applicable to the Lender Group or the Borrower or any other Loan
Party.
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(d) Delivery of Documents. Administrative Agent and Collateral Agent shall have
received on or before the Effective Date the following, each in form and
substance satisfactory to the Administrative Agent and Collateral Agent and,
unless indicated otherwise, dated as of the Effective Date:
(i) (A) with respect to each Term Loan A Lender, the Term Note A payable to the
order of such Lender, duly executed by the Borrower; and (B) with respect to
each Term Loan B Lender, the Term Note B payable to the order of such Lender,
duly executed by the Borrower;
(ii) with respect to each Revolving Credit Lender, the Revolving Credit Note
payable to the order of the such Lender, duly executed by the Borrower;
(iii) the Security Agreement, the Copyright Security Agreement, the Patent
Security Agreement, the Trademark Security Agreement, and the Intercompany
Subordination Agreement, each duly executed by each of the Loan Parties and
Collateral Agent;
(iv) [intentionally omitted]
(v) [intentionally omitted]
(vi) [intentionally omitted]
(vii) [intentionally omitted]
(viii) [intentionally omitted]
(ix) [intentionally omitted]
(x) the Pledge Agreement, duly executed by each of the Loan Parties, together
with (A) all original stock certificates or other certificated securities or
instruments representing all of the "Pledged Collateral" (as such term is
defined in the Pledge Agreement), (B) undated stock powers executed in blank
(and, if Collateral Agent so requires, with signature guaranteed), (C) such
opinion of counsel and such approving certificate of the issuer of such Pledged
Collateral as Collateral Agent may reasonably request with respect to complying
with any legend on any such certificate or any other matter relating to such
Pledged Collateral, and (D) all promissory notes evidencing Indebtedness owing
to any Loan Party, duly endorsed in blank;
(xi) appropriate financing statements on Form UCC-1, duly executed by each of
the Loan Parties and duly filed in such office or offices as may be necessary
or, in the opinion of Collateral Agent, reasonably desirable to perfect the
security interests purported to be created by the Loan Documents;
(xii) certified copies of request for copies of information on Form UCC-11,
listing all effective financing statements which name as debtor any Loan Party
or any of its Subsidiaries and which are filed in the offices referred to in
paragraph (xi) above, together with copies of such financing statements, none of
which, except as otherwise agreed in writing
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by Collateral Agent (or, in the case of any Existing Lender, that will be
released or terminated by such Existing Lender upon its receipt of the payoff
amount set forth in its Payoff Letter), shall cover any of the Collateral and
the results of searches for any tax Lien and judgment Lien filed against such
Person or its property, which results, except as otherwise agreed to in writing
by Collateral Agent, shall not show any such Liens;
(xiii) a copy of the resolutions of each Loan Party, certified as of the
Effective Date by a Responsible Official thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents to which such
Loan Party is or will be a party, and (B) the execution, delivery and
performance by such Loan Party of each Loan Document and the execution and
delivery of the other documents to be delivered by such Loan Party in connection
herewith and therewith, including, without limitation, in the case of CFI, the
Warrants and the Registration Rights Agreement;
(xiv) a certificate of a Responsible Official of each Loan Party, certifying the
names and true signatures of the representatives of such Loan Party authorized
to sign each Loan Document to which such Loan Party is or will be a party and
the other documents to be executed and delivered by such Loan Party in
connection herewith and therewith, together with evidence of the incumbency of
such authorized representatives;
(xv) certificates, each dated within 15 days of the Effective Date, of the
appropriate officials of the state of organization and each state of foreign
qualification of each Loan Party certifying as to the subsistence in good
standing of, and the payment of taxes by, such Loan Party in such states;
(xvi) a true and complete copy of the charter, certificate of formation,
certificate of limited partnership, or other publicly filed organizational
document of each Loan Party, certified as of a date not more than 30 days prior
to the Effective Date by an appropriate official of the state of organization of
such Loan Party;
(xvii) a copy of the by-laws, limited liability company agreement, operating
agreement, agreement of limited partnership or other non-publicly filed
organizational document of each Loan Party, together with all amendments
thereto, certified as of the Effective Date by a Responsible Official of such
Loan Party;
(xviii) (A) opinions of Farleigh, Wada & Witt, P.C., primary counsel to the Loan
Parties, substantially in the form of Exhibit O-1 and as to such other matters
as Administrative Agent or Collateral Agent may reasonably request, including,
without limitation, the Warrants and the Registration Rights Agreement; and (B)
opinions of Hiscock & Barclay, special New York counsel to the Loan Parties,
substantially in the form of Exhibit O-2 and as to such other matters as
Administrative Agent or Collateral Agent may reasonably request, including,
without limitation, the Warrants and the Registration Rights Agreement;
(xix) a certificate of a Responsible Official of each Loan Party, certifying as
to the matters set forth in subsection (b) of this Section 4.01;
(xx) a copy of the Financial Statements, together with a certificate of a
Responsible Official of CFI setting forth all existing Indebtedness, material
pending or
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threatened litigation or claims, and other material contingent liabilities of
the Loan Parties and their respective Subsidiaries;
(xxi) evidence of the insurance coverage required by the Loan Documents
(including Section 6.01 hereof) and such other insurance coverage with respect
to the business and operations of the Loan Parties as Collateral Agent may
reasonably request, in each case, where requested by Collateral Agent, with such
endorsements as to the named insureds or loss payees thereunder as Collateral
Agent may request and providing that such policy may be terminated or canceled
(by the insurer or the insured thereunder) only upon 30 days' prior written
notice to the Collateral Agent and each such named insured or loss payee,
together with evidence of the payment of all premiums due in respect thereof for
such period as Collateral Agent may reasonably request;
(xxii) a certificate of a Responsible Official of CFI, setting forth in
reasonable detail the calculations required to establish compliance, on a pro
forma basis and after giving effect to the Ultradata Acquisition, with: (A) each
of the financial covenants contained in Section 6.03; (B) the minimum Excess
Availability requirement set forth in Section 4.01(k); and (C) the formula and
other limitations on the amount of Revolving Loans available to be advanced
under Section 2.01(b);
(xxiii) [intentionally omitted];
(xxiv) a landlord waiver, in form and substance reasonably satisfactory to
Collateral Agent and which may be included as a provision contained in the
relevant Lease, executed by each landlord with respect to each of the Leases in
respect of the Loan Parties' locations in or about: (A) Portland, Oregon; (B)
[intentionally omitted]; (C) Trumbull, Connecticut; (D) Pleasanton, California;
(E) Dayton, Ohio; (F) Minneapolis, Minnesota; (G) [intentionally omitted]; and
(H) Houston, Texas;
(xxv) a list of (A) each Loan Party's customers party to software licensing and
maintenance agreements that are Material Contracts, and detailing the amount of
the last 12 months revenue and general categories of revenue in respect of each
such customer, and (B) all other Material Contracts, which list shall be
certified by Administrative Borrower (subject to the Acquisition Qualification)
to be true, correct, and complete in all material respects as of the Effective
Date, together with a certificate of Administrative Borrower stating that
(subject to the Acquisition Qualification) such Material Contracts remain in
full force and effect and the Loan Parties have not, in any material respect,
breached or defaulted in any of their obligations under such Material Contracts;
(xxvi) (A) a Payoff Letter, duly executed by the applicable Loan Parties and
each Existing Lender, with respect to the Existing Credit Agreement and all
related documents of such Existing Lender, together with UCC-3 termination
statements for all UCC-1 financing statements, and releases or reassignments of
other security interest filings, filed by such Existing Lender and covering any
portion of the Collateral; and (B) UCC-3 termination statements and releases or
reassignments of other security interest filings in respect of any other Lien
that does not constitute a Permitted Lien;
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(xxvii) the Warrants required to be delivered on or prior to the Effective Date
pursuant to Section 9.01, duly executed by CFI;
(xxviii) the Registration Rights Agreement, duly executed by CFI, Holdco, and
each other Warrantholder;
(xxix) (A) a certificate of a Responsible Official of CFI, certifying that
attached thereto are true, correct, and complete copies of the Ultradata
Acquisition Documents; and (B) a copy of the opinion of counsel to Ultradata in
respect of the Ultradata Acquisition, in form and substance reasonably
satisfactory to Administrative Agent and Collateral Agent, that either (I) is
addressed to Administrative Agent and Collateral Agent for the benefit of the
Lender Group or (II) is accompanied by a letter from such counsel in favor of
the Lender Group, in form and substance reasonably satisfactory to
Administrative Agent and Collateral Agent, permitting the Lender Group to rely
on such opinion;
(xxx) [intentionally omitted]
(xxxi) the Suretyship Agreement, duly executed by each of the Loan Parties;
(xxxii) the Lockbox Agreement, duly executed by each of the parties thereto
other than Administrative Agent;
(xxxiii) such other agreements, instruments, approvals, opinions and other
documents, each reasonably satisfactory to Administrative Agent and Collateral
Agent in form and substance, as Administrative Agent or Collateral Agent may
reasonably request.
(e) Material Adverse Change. Administrative Agent and Collateral Agent shall
have determined, in their sole judgment, that no material adverse change shall
have occurred in the business, operations, condition (financial or otherwise),
properties or prospects of any Loan Party since June 30, 1999.
(f) Consummation of Ultradata Acquisition.
(i) Concurrently with the making of the initial Loan, Administrative Agent and
Collateral Agent shall have received a copy of the Certificate of Merger
relative to the merger of UFO Acquisition Co. and Ultradata, duly filed with the
Secretary of State of the State of Delaware; and
(ii) Concurrently with the making of the initial Loan, (i) CFI shall have
acquired Ultradata pursuant to the merger of CFI's wholly-owned Subsidiary, UFO
Acquisition Co., with and into Ultradata (with Ultradata as the surviving
corporation of such merger) in accordance with the terms and conditions of the
Ultradata Acquisition Documents (no provision of which shall have been amended
or otherwise modified or waived without the prior written consent of
Administrative Agent and Collateral Agent, which consent shall not be
unreasonably withheld), and shall have become the owner, free and clear of all
Liens other than Permitted Liens, of all of the Capital Stock of Ultradata, (ii)
the proceeds of the initial Loan (together with the proceeds of the required
equity investment and unrestricted cash described in Section 4.01(l))
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shall have been applied in full to pay to Chase Mellon Shareholder Services,
L.L.C. (or such other bank or trust company designated in writing as the "Paying
Agent" under the Ultradata Acquisition Documents, and CFI promptly shall deliver
to Administrative Agent in writing confirmation of any such designation) the
purchase price payable for the Acquisition of Ultradata pursuant to the
Ultradata Acquisition Documents and the closing and other costs relating thereto
and (iii) each of the Persons party to the Ultradata Acquisition Documents shall
have fully performed all of the obligations to be performed by it under the
Ultradata Acquisition Documents as of the effective date of such Acquisition.
(iii) Administrative Agent and Collateral Agent shall have received evidence
reasonably satisfactory to Administrative Agent and Collateral Agent that, as of
the Effective Date, the number of "Dissenting Shares" (as such term is defined
in the Ultradata Acquisition Documents) does not constitute more than 5% of the
Capital Stock of Ultradata issued and outstanding immediately prior to the
consummation of the Ultradata Acquisition.
(iv) Administrative Agent and Collateral Agent shall have received evidence,
reasonably satisfactory to Administrative Agent and Collateral Agent, that the
Ultradata Acquisition has been consummated substantially in accordance with the
terms of the Ultradata Acquisition Documents and with all applicable laws,
including laws respecting bulk transfer of assets and the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended.
(g) Proceedings, Receipt of Documents. All proceedings in connection with the
making of the initial Loan and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be reasonably satisfactory to Administrative Agent, Collateral
Agent, and their respective counsel, and Administrative Agent, Collateral Agent,
and such counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as Administrative
Agent, Collateral Agent, or such counsel may reasonably request.
(h) Management Reference Checks. Administrative Agent and Collateral Agent shall
have received reasonably satisfactory reference checks for key management of the
Borrower.
(i) Due Diligence. The Lender Group shall have completed its due diligence with
respect to each Loan Party and the results thereof shall be acceptable to the
Lender Group, in its sole and absolute discretion. Without limiting the
foregoing, the Lender Group shall have received: (1) an appraisal of the
Collateral and an enterprise valuation of the Loan Parties, dated not earlier
than 30 days prior to the Effective Date, from one or more such appraisers as
selected by Collateral Agent, and such appraisal and enterprise valuation, and
the results thereof shall be acceptable to Collateral Agent and Administrative
Agent, in their sole and absolute discretion; (2) an analysis and evaluation,
satisfactory to Administrative Agent and Collateral Agent in their sole and
absolute discretion, of the financial information and projections presented in
the Information Memorandum, including with respect to projected Consolidated
EBITDA of CFI and its Subsidiaries of not less than $21,300,000 for the 12 month
period ending December 31, 1999; and (3) evidence satisfactory to Administrative
Agent and Collateral Agent that (x) Consolidated EBITDA of CFI and its
Subsidiaries (other than MECA and Ultradata) for the 12 month period ended
December 31, 1998 was not less than $16,600,000, (y) EBITDA of MECA
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for the 12 month period ended December 31, 1998 was not less than ($6,500,000),
and (z) EBITDA of Ultradata for the 12 month period ended December 31, 1998 was
not less than $2,700,000.
(j) Rating. The Rating Agencies shall have completed their preliminary review of
the Loans, and the preliminary rating estimate therefor shall be satisfactory to
the Lenders that are engaged in the Securitization in their sole and absolute
discretion.
(k) Minimum Excess Availability. Administrative Agent and Collateral Agent shall
have determined that, after giving effect to the making of the initial Loans
contemplated hereby, the payment by Borrower of all closing costs incurred in
connection with the transactions contemplated hereby, and the payment of the
cash portion of the purchase price under the Ultradata Acquisition Documents,
Excess Availability shall not be less than $7,500,000.
(l) Required Additional Funds. Collateral Agent and Administrative Agent shall
have received: (i) evidence, reasonably satisfactory to Collateral Agent and
Administrative Agent, that Borrower (including Ultradata) has, on the Effective
Date, unrestricted and unencumbered cash of not less than $9,000,000, of which
not less than $5,500,000 shall constitute Net Cash Proceeds from the issuance by
CFI of the Permitted Subordinated Indebtedness; and (ii) evidence reasonably
satisfactory to Collateral Agent and Administrative Agent that, concurrently
with the funding of the initial Loan, CFI has used the $9,000,000 of cash funds
described in clause (i) above to fund in part the cash portion of the purchase
price for the Ultradata Acquisition payable pursuant to the Ultradata
Acquisition Documents.
(m) Required Library. Collateral Agent and Administrative Agent shall have
received evidence, reasonably satisfactory to Collateral Agent and
Administrative Agent, that (i) not less than the Required Library of all
existing copyrights of Borrower (other than Exempt Copyrights) required to be
registered under Section 6(a) of the Copyright Security Agreement either (A)
have been registered with the United States Copyright Office or (b) are the
subject of duly filed applications for registration with the United States
Copyright Office, and (ii) all such registrations, or such applications
therefor, in respect of all such copyrights (other than Exempt Copyrights) and
any proceeds thereof are specifically encumbered by the Copyright Security
Agreement. (n) Cash Management System. Administrative Agent and Collateral Agent
shall be satisfied with the Loan Parties' cash management system.
(o) Lender Group Side Letters. With respect to each Lender Group Side Letter,
each party thereto shall have received duly executed counterparts thereof from
all other parties thereto and such Lender Group Side Letter shall be in full
force and effect.
(p) Permitted Subordinated Indebtedness. Administrative Agent and Collateral
Agent shall have: (i) received true, correct, and complete copies of the
Permitted Subordinated Indebtedness Documents, in form and substance reasonably
satisfactory to Administrative Agent and Collateral Agent; and (ii) received
evidence, reasonably satisfactory to Administrative Agent and Collateral Agent,
of the receipt by CFI of all Net Cash Proceeds from the issuance of the
Permitted Subordinated Indebtedness.
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SECTION 4.02. Conditions Precedent to Subsequent Loans. The obligation of the
Lender Group to make any Loan (subsequent to the initial Loan) is subject to the
fulfillment, in a manner reasonably satisfactory to Administrative Agent and
Collateral Agent, of each of the following conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, Lender Group
Expenses, and taxes then payable by the Borrower pursuant to this Agreement and
the other Loan Documents, including, without limitation, Sections 2.06 and 10.04
hereof.
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct, and the submission by the Borrower to
Administrative Agent of a Notice of Borrowing with respect to such Loan, and the
Borrower's acceptance of the proceeds of such Loan, shall each be deemed to be a
representation and warranty by the Borrower on the date of such Loan that: (i)
the representations and warranties contained in Article V and in each other Loan
Document, certificate or other writing delivered to the Lender Group pursuant
hereto or thereto on or prior to the date of such Loan are true and correct in
all material respects on and as of such date as though made on and as of such
date, (ii) at the time of and after giving effect to the making of such Loan and
the application of proceeds thereof, no Default or Event of Default has occurred
and is continuing or would result from the making of the Loan to be made on such
date and (iii) the conditions set forth in this Section 4.02 have been satisfied
as of the date of such request.
(c) Legality. The making of such Loan shall not contravene any law, rule or
regulation applicable to the Lender Group, the Borrower, or any other Loan
Party.
(d) [intentionally omitted]
(e) [intentionally omitted]
(f) [intentionally omitted]
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. Each of the Loan Parties hereby
represents and warrants to the Lender Group as follows:
(a) Organization, Good Standing, Etc. Each of the Loan Parties (i) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the state of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as presently contemplated and, in the case of the Borrower,
to make (or, in the case of a Guarantor, to guaranty) the borrowings hereunder,
and to execute and deliver each Loan Document to which it is a party, and to
consummate the transactions contemplated thereby, and (iii) is duly qualified to
do business and is in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary.
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(b) Authorization, Etc. The execution, delivery and performance by each of the
Loan Parties of each Loan Document to which it is or will be a party, (i) have
been (or, with respect to Subsidiaries of CFI formed or acquired hereafter, will
be) duly authorized by all necessary action, (ii) do not and will not contravene
its charter or by-laws, its limited liability company or operating agreement or
its certificate of partnership or partnership agreement, as applicable, or any
applicable law or any material contractual restriction binding on or otherwise
affecting it or any of its properties (other than immaterial property), (iii) do
not and will not result in or require the creation of any Lien (other than
pursuant to any Loan Document) upon or with respect to any of its properties,
and (iv) do not and will not result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by any Loan Party of
any Loan Document to which it is or will be a party, except for exemption
notices in respect of the Warrants to be filed with the Securities and Exchange
Commission and under applicable state securities laws promptly after the
Effective Date.
(d) Enforceability of Loan Documents. As to each Loan Party, this Agreement is,
and each other Loan Document to which such Loan Party is or will be a party,
when delivered hereunder, will be, a legal, valid and binding obligation of such
Loan Party, enforceable against such Loan Party in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws and by general principles of equity.
(e) Capitalization. On the Effective Date, after giving effect to the
transactions contemplated hereby to occur on the Effective Date, the authorized
Capital Stock of CFI and the issued and outstanding Capital Stock of CFI are as
set forth on Schedule 5.01(e). All of the issued and outstanding shares of
Capital Stock of CFI have been validly issued and are fully paid and
nonassessable, and the holders thereof are not entitled to any preemptive, first
refusal or other similar rights. As of the Effective Date, 1,664,091 shares of
common stock of CFI have been reserved for issuance under the terms of the Stock
Option Plans, copies of which plans have been delivered to Lender Group in the
form and on the terms in effect on the Effective Date. Except for the
transactions contemplated hereby and except as described on Schedule 5.01(e), as
of the Effective Date, (i) the Stock Option Plans are the only plans or
arrangements in existence relating to the issuance of shares of Capital Stock of
CFI, and (ii) there are no outstanding debt or equity securities of CFI and no
outstanding obligations of any Loan Party convertible into or exchangeable for,
or warrants, options or other rights for the purchase or acquisition from any
Loan Party, or other obligations of any Loan Party to issue, directly or
indirectly, any shares of Capital Stock of CFI.
(f) Subsidiaries. Schedule 5.01(f) is a true, correct, and complete description
of the name, jurisdiction of incorporation and ownership of the outstanding
Capital Stock of each of the Loan Parties' Subsidiaries in existence on the date
hereof. All of the issued and outstanding shares of Capital Stock of such
Subsidiaries have been validly issued and are fully paid and nonassessable, and
the holders thereof are not entitled to any preemptive, first refusal or other
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similar rights. Except as indicated on such Schedule, all such Capital Stock is
owned by CFI or one or more of its wholly-owned Subsidiaries, free and clear of
all Liens. There are no outstanding debt or equity securities of any such
Subsidiary and no outstanding obligations of any such Subsidiary convertible
into or exchangeable for, or warrants, options or other rights for the purchase
or acquisition from any Loan Party, or other obligations of any Loan Party to
issue, directly or indirectly, any shares of Capital Stock of any such
Subsidiary.
(g) Litigation. Except as set forth in Schedule 5.01(g), and subject to the
Acquisition Qualification, there is no pending or, to the best knowledge of any
Loan Party, threatened action, suit or proceeding affecting any one or more Loan
Parties before any court or other Governmental Authority or any arbitrator that
(i) if adversely determined, could have a Material Adverse Effect or (ii)
relates to this Agreement, the Notes or any other Loan Document or any
transaction contemplated hereby or thereby.
(h) Financial Condition.
(i) The Financial Statements, copies of which have been delivered to the Lender
Group, fairly present, in all material respects, the consolidated financial
condition of the applicable Loan Party and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations of the applicable Loan
Party and its Subsidiaries for the fiscal periods ended on such respective
dates, all in accordance with GAAP (and, in the case of any unaudited Financial
Statements, subject to normal year-end adjustments and the lack of complete
footnotes), and since June 30, 1999, no event or development has occurred that
has had or could reasonably be expected to have a Material Adverse Effect.
(ii) The Borrower has heretofore furnished to the Lender Group (y) projected
monthly balance sheets, income statements and statements of cash flows of the
Borrower and its Subsidiaries, on a consolidated basis, for the period from
September 1, 1999, through December 31, 2002, and (z) projected annual balance
sheets, income statements and statements of cash flows of the Borrower and its
Subsidiaries, on a consolidated basis, for the Fiscal Years ending in 1999
through 2002, in each case, after giving effect to the Ultradata Acquisition and
the financing therefor, and as updated from time to time pursuant to Section
6.01(a)(vii). Such projections, as so updated, are believed by the Borrower at
the time furnished to be reasonable, have been prepared on a reasonable basis
and in good faith by the Borrower, and have been based on assumptions believed
by the Borrower to be reasonable at the time made and upon the best information
then reasonably available to the Borrower, and the Borrower is not aware of any
facts or information that would lead it to believe that such projections, as so
updated, are incorrect or misleading in any material respect.
(i) Compliance with Law, Etc. Neither CFI nor any of its Subsidiaries is
(subject to the Acquisition Qualification) in violation of its organizational
documents, or in violation, in any material respect, of any law, rule,
regulation, judgment or order of any Governmental Authority applicable to it or
any of its property or assets, or any material term of any Material Contract,
and no Default or Event of Default has occurred and is continuing.
(j) ERISA. Subject to the Acquisition Qualification:
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(i) Except as set forth on Schedule 5.01(j), (A) each Employee Plan is in
substantial compliance with ERISA and the Code, (B) no Termination Event has
occurred nor is reasonably expected to occur with respect to any Employee Plan,
(C) the most recent annual report (Form 5500 Series) with respect to each
Employee Plan, including any required Schedule B (Actuarial Information)
thereto, copies of which have been filed with the Internal Revenue Service and
delivered to the Lender Group, is true, correct, and complete and fairly
presents the funding status of such Employee Plan, and since the date of such
report there has been no material adverse change in such funding status, (D) no
Employee Plan had an accumulated or waived funding deficiency or permitted
decreases which would create a deficiency in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code at any time during the 5 year period immediately
preceding the Effective Date, and (E) no Lien imposed under the Code or ERISA
exists or is likely to arise on account of any Employee Plan within the meaning
of Section 412 of the Code at any time during the 5 year period immediately
preceding the Effective Date.
(ii) Except as set forth on Schedule 5.01(j), none of the Loan Parties or any of
their ERISA Affiliates have incurred any withdrawal liability under ERISA with
respect to any Multiemployer Plan, or are aware of any facts indicating that any
Loan Party or any of its ERISA Affiliates may in the future incur any such
withdrawal liability.
(iii) Except as required by Section 4980B of the Code, none of the Loan Parties
or any of their ERISA Affiliates maintains an employee welfare benefit plan (as
defined in Section 3(l) of ERISA) which provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of any Loan Party or any of its ERISA Affiliates or coverage after a
participant's termination of employment.
(iv) None of the Loan Parties or any of its their Affiliates has incurred any
liability or obligation under the Worker Adjustment and Retraining Notification
Act ("WARN") or similar state law, which remains unpaid or unsatisfied.
(k) Taxes, Etc. All Federal, state and local tax returns and other reports
required by applicable law to be filed by each Loan Party and each of its
Subsidiaries have been filed, or extensions have been obtained, and all taxes,
assessments and other governmental charges imposed upon such Loan Party or any
of its Subsidiaries or any property of such Loan Party or any of its
Subsidiaries and which have become due and payable on or prior to the date
hereof have been paid, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof.
(l) Regulations T, U, and X. Neither any Loan Party nor any of its Subsidiaries
is nor will be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T, U or
X), and no proceeds of any Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(m) Nature of Business. Neither any Loan Party nor any of its Subsidiaries is
engaged in any business other than the selling, licensing, developing,
distributing, servicing, and
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maintaining of hardware, software, forms, data processing services, automation
solutions, regulatory compliance, and other products and services primarily for
use by financial institutions and their affiliates and businesses reasonably
ancillary or complementary thereto.
(n) Adverse Agreements, Etc. Subject to the Acquisition Qualification, neither
any Loan Party nor any of its Subsidiaries is a party to any agreement or
instrument, or subject to any charter, limited liability company agreement,
partnership agreement or other corporate, partnership or limited liability
company restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority, which reasonably could
be expected to have a Material Adverse Effect.
(o) Permits, Etc. Subject to the Acquisition Qualification: (i) each of the Loan
Parties and its Subsidiaries has, and is in compliance in all material respects
with, all permits, licenses, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business currently owned, leased, managed or
operated, or to be acquired, by such Person; and (ii) no condition exists or
event has occurred which, in itself or with the giving of notice or lapse of
time or both, would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such permit, license, authorization, approval, entitlement
or accreditation, and there is no claim that any thereof is not in full force
and effect.
(p) Properties.
(i) Each of the Loan Parties and its Subsidiaries has good and marketable title
to, or valid leasehold interests in, all property and assets material to its
business, free and clear of all Liens except Permitted Liens and any source code
escrow or similar non-exclusive arrangements entered into in the ordinary course
of business. The properties are in good working order and condition, ordinary
wear and tear excepted.
(ii) Schedule 5.01(p) sets forth a list, that is complete and accurate as of the
Effective Date, of the location, by state and street address, of all real
property owned or leased by any of the Loan Parties and its Subsidiaries. As of
the Effective Date, each of the Loan Parties and its Subsidiaries has valid
leasehold interests in the Leases described on Schedule 5.01(p) to which it is a
party. Schedule 5.01(p) sets forth with respect to each such Lease, the
commencement date, termination date, renewal options (if any) and annual base
rents. Each such Lease is valid and enforceable in accordance with its terms in
all material respects and is in full force and effect. No consent or approval of
any landlord or other third party in connection with any such Lease is necessary
for any Loan Party or any of its Subsidiaries to enter into and execute the Loan
Documents to which it is a party, except as set forth on Schedule 5.01(p). To
the best knowledge of the Loan Parties, no other party to any such Lease is in
default in any material respect of its obligations thereunder, and none of the
Loan Parties and their Subsidiaries (or any other party to any such Lease) at
any time has delivered or received any notice of default which remains uncured
under any such Lease and, as of the Effective Date, no event has occurred which,
with the giving of notice or the passage of time or both, would constitute a
default of any material term under any such Lease.
(q) Full Disclosure.Subject to the Acquisition Qualification:
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(i) The Loan Parties have disclosed to the Lender Group all Material Contracts
to which any Loan Party or any of its Subsidiaries is subject, and all other
matters known to any Loan Party, that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(ii) None of the other reports, financial statements, certificates or other
information furnished by or on behalf of the Loan Parties to the Lender Group in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which it
was made, not misleading in any material respect; provided that, with respect to
projected financial information, the Loan Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
(iii) There is no contingent liability or material fact that could reasonably be
expected to have a Material Adverse Effect which has not been set forth in a
footnote included in the Financial Statements in accordance with the
requirements of GAAP or in the applicable schedule hereto.
(r) Year 2000.Subject to the Acquisition Qualification:
(i) Any reprogramming required to permit the proper functioning, in and
following the year 2000, of (y) the Loan Parties' mission critical computer
systems and (z) mission critical equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Loan
Parties' systems interface) and the testing of all such systems and equipment,
as so reprogrammed, will be completed by October 31, 1999.
(ii) The cost to the Loan Parties of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Loan Parties (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) reasonably could not be expected to result in a Material Adverse
Effect.
(iii) To the best knowledge of the Loan Parties, except for such of the
reprogramming referred to in clause (ii) above as may be necessary, the computer
and management information systems of the Loan Parties and their Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement to be, sufficient to permit the Loan Parties and their
Subsidiaries to conduct their business without Material Adverse Effect.
For purposes of this Section 5.01(r), the term "mission critical" means, with
respect to any computer system or equipment, such computer systems and equipment
that are reasonably required by the Loan Parties to perform their core business
activities.
(s) Operating Lease Obligations. On the Effective Date, neither any Loan Party
nor any of its Subsidiaries has any obligations as lessee for the payment of
rent for any real or personal property (that, in the case of any such personal
property lease, requires aggregate rental payments during the term of such lease
in excess of $100,000), other than (i) the leases identified on Schedule 5.01(p)
and (ii) Operating Lease Obligations set forth on Schedule 5.01(s).
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(t) Environmental Matters. Except as set forth on Schedule 5.01 (t), (i) the
operations of each of the Loan Parties and their Subsidiaries are in compliance
in all material respects with Environmental Laws; (ii) there has been no Release
at any of the properties owned or operated by any Loan Party or its Subsidiaries
or (to the best knowledge of the Loan Parties) a predecessor in interest, or at
any disposal or treatment facility which received Hazardous Materials generated
by any Loan Party or its Subsidiaries or (to the best knowledge of the Loan
Parties) any predecessor in interest which could reasonably be expected to have
a Material Adverse Effect; (iii) no Environmental Action has been asserted
against any Loan Party or its Subsidiaries or (to the best knowledge of the Loan
Parties) any predecessor in interest nor does any Loan Party or any of its
Subsidiaries have knowledge or notice of any threatened or pending Environmental
Action against any Loan Party or its Subsidiaries or (to the best knowledge of
the Loan Parties) any predecessor in interest which could reasonably be expected
to have a Material Adverse Effect; and (iv) no Environmental Actions have been
asserted against any facilities that may have received Hazardous Materials
generated by any Loan Party or its Subsidiaries or (to the best knowledge of the
Loan Parties) any predecessor in interest which could reasonably be expected to
have a Material Adverse Effect.
(u) Insurance. Each of the Loan Parties and its Subsidiaries keeps its property
adequately insured and maintains (i) insurance to such extent and against such
risks, including fire, as is customary with companies in the same or similar
businesses, (ii) workmen's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by it, and (iv) such other insurance as may be
required by law or as may be reasonably required by Collateral Agent (including,
without limitation, against larceny, embezzlement or other criminal
misappropriation). Schedule 5.01(u) sets forth a list of all liability,
property, and casualty insurance maintained by any Loan Party or its
Subsidiaries on the Effective Date.
(v) Use of Proceeds. The proceeds of the Loans shall be used solely (i) on the
Closing Date, for (A) the satisfaction in full of existing Indebtedness of the
Borrower to the Existing Lenders, and (B) payment of Lender Group Expenses and
fees incurred in connection with this Agreement and the other Loan Documents,
and (C) together with the funds described in Section 4.01(l), funding the
purchase price of the Ultradata Acquisition, and (ii) from and after the Closing
Date, for the Loan Parties' general operating expenses and corporate purposes in
a manner consistent with the provisions of this Agreement (including funding (A)
cash payments for deferred purchase price adjustments pursuant to acquisition
agreements (irrespective of whether related to acquisitions consummated prior to
the Closing Date, the Ultradata Acquisition Documents, or acquisition agreements
related to Permitted Acquisitions consummated after the Closing Date), and (B)
such cash portion of the purchase price of Permitted Acquisitions or Permitted
Toehold Investments as Collateral Agent, Administrative Agent, and the Required
Lenders may permit in their sole and absolute discretion (or, where expressly
provided in this Agreement, with consent not to be unreasonably withheld) and
all applicable laws.
(w) Solvency. After giving effect to the transactions contemplated by this
Agreement and the Ultradata Acquisition Documents and before and after giving
effect to each Loan, the Loan Parties, taken as a whole and on a consolidated
basis, are Solvent.
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(x) Location of Bank Accounts. Schedule 5.01(w) sets forth a complete and
accurate list as of the Effective Date of all deposit, checking and other bank
accounts, all securities and other accounts maintained with any broker dealer
and all other similar accounts maintained by any Loan Party, or any of its
Subsidiaries, together with a description thereof (i.e., the bank or broker
dealer at which such deposit or other account is maintained and the account
number and the purpose thereof).
(y) Intellectual Property. Except as set forth on Schedule 5.01(y), each of the
Loan Parties and its Subsidiaries owns or licenses or otherwise has the right to
use all licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights (other than Obsolete
Copyrights), copyright applications, franchises, authorizations and other
intellectual property rights that are necessary for the operations of its
businesses, without infringement upon or conflict with the rights of any other
Person with respect thereto, except for such infringements and conflicts which,
individually or in the aggregate, could not have a Material Adverse Effect.
Subject to the Acquisition Qualification, set forth on Schedule 5.01(y) is a
list, that is complete and accurate list as of the Effective Date, of all such
material licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights (other than Exempt
Copyrights), copyright applications, franchises, authorizations and other
intellectual property rights of the Loan Parties and their Subsidiaries. Subject
to the Acquisition Qualification, no claim or litigation regarding any of the
foregoing is pending or threatened, except for such infringements and conflicts
which could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the best knowledge of the Loan Parties,
no patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, individually or in
the aggregate, reasonably could be expected to have a Material Adverse Effect.
(z) Material Contracts.Subject to the Acquisition Qualification:
(i) Set forth on Schedule 5.01(z) is a list, that is complete and accurate list
as of the Effective Date, of (A) each Loan Party's customers party to software
licensing and maintenance agreements that are Material Contracts, and detailing
the amount of the last 12 months revenue and general categories of revenue in
respect of each such customer, and (B) all other Material Contracts of the Loan
Parties and their Subsidiaries, showing the parties and subject matter thereof
and material amendments and modifications thereto.
(ii) Each such Material Contract (x) is in full force and effect and is binding
upon and enforceable against each of the Loan Parties and their Subsidiaries
that is a party thereto and, to the best knowledge of the Loan Parties, all
other parties thereto in accordance with its terms, (y) has not been otherwise
amended or modified in any material respect, and (z) is not in default due to
the action of any Loan Party or its Subsidiaries or, to the best knowledge of
the Loan Parties, any other party thereto.
(aa) Holding Company and Investment Company Acts. Neither any Loan Party nor any
of its Subsidiaries is (i) 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, as amended, or (ii)
an "investment company" or
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an "affiliated person" or "promoter" of, or "principal underwriter" of or for,
an "investment company", as such terms are defined in the Investment Company Act
of 1940, as amended.
(bb) Employee and Labor Matters. There is (A) no unfair labor practice complaint
pending or, to the best knowledge of the Loan Parties, threatened against any
Loan Party or any of its Subsidiaries before any Governmental Authority and no
grievance or arbitration proceeding pending or threatened against any Loan Party
or any of its Subsidiaries which arises out of or under any collective
bargaining agreement, (B) no strike, labor dispute, slowdown, stoppage or
similar action or grievance pending or threatened against any Loan Party or any
of its Subsidiaries and (C) to the best knowledge of the Loan Parties, no union
representation question existing with respect to the employees of any Loan Party
or any of its Subsidiaries and no union organizing activity taking place with
respect to any of the employees of any of them.
(cc) Customers and Suppliers.Subject to the Acquisition Qualification: (i) there
exists no actual or, to the best knowledge of the Loan Parties, threatened
termination, cancellation or material limitation of, or material modification to
or material change in, the business relationship between (A) any Loan Party or
any of its Subsidiaries, on the one hand, and any customer or any group thereof,
on the other hand, that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, or (B) any Loan Party or any of its
Subsidiaries, on the one hand, and any material supplier thereof, on the other
hand, that individually or in the aggregate could reasonably be expected to have
a Material Adverse Effect; and (ii) there exists no present state of facts or
circumstances that could reasonably be expected to give rise to or result in any
such termination, cancellation, limitation, modification or change that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
(dd) No Bankruptcy Filing. Neither any Loan Party nor any of its Subsidiaries is
contemplating either the commencement of an Insolvency Proceeding or the
liquidation of all or a major portion of such Loan Party's or such Subsidiary's
assets or property, and neither any Loan Party nor any of its Subsidiaries has
any knowledge of any Person contemplating the commencement of an Insolvency
Proceeding against it.
(ee) Ultradata Acquisition Documents. The Borrower has delivered to the Lender
Group true, correct, and complete copies of all material Ultradata Acquisition
Documents, including all schedules and exhibits thereto. The Ultradata
Acquisition Documents set forth the entire agreement and understanding of the
parties thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby. The execution, delivery and performance of the
Ultradata Acquisition Documents have been duly authorized by all necessary
action (including, without limitation, the obtaining of any consent of
stockholders or other holders of Capital Stock required by law or by any
applicable corporate or other organizational documents) on the part of each such
Person. Except for the concurrent filing of the Certificate of Merger with the
Secretary of State of Delaware in respect of the merger of UFO Acquisition Co.
with and into Ultradata, no authorization or approval or other action by, and no
notice to filing with or license from, any Governmental Authority is required
for such sale other than such as have been obtained on or prior to the Effective
Date. Concurrently with the initial Loan, the Ultradata
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Acquisition has been consummated substantially in accordance with the terms of
the Ultradata Acquisition Documents and with all applicable laws, including laws
respecting bulk transfer of assets and the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended. The Ultradata Acquisition Documents are
the legal, valid and binding obligation of the parties thereto, enforceable
against such parties in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws and by general principles of equity
(ff) Consummation of Acquisition. All conditions precedent to the Ultradata
Acquisition have been fulfilled or (with the prior written consent of
Administrative Agent and Collateral Agent) waived, the Ultradata Acquisition
Documents have not been amended or otherwise modified, and there has been no
breach of any material term or condition of the Ultradata Acquisition Documents.
The Ultradata Acquisition has been duly approved by all requisite corporate and
shareholder action on the part of the Loan Parties. The Certificate of Merger
relative to the merger of UFO Acquisition Co. and Ultradata contemplated under
the Ultradata Acquisition Documents has been duly filed with the Secretary of
State of the State of Delaware. The number of "Dissenting Shares" (as such term
is defined in the Ultradata Acquisition Documents), if any, does not constitute
more than 5% of the Capital Stock of Ultradata issued and outstanding
immediately prior to the consummation of the Ultradata Acquisition.
(gg) Representations and Warranties under Ultradata Acquisition Documents. Each
of the representations and warranties of each of the Loan Parties set forth in
the Ultradata Acquisition Documents is true and correct in all material respects
as of the Effective Date and hereby is re-made by such Loan Party in favor of
the Lender Group, mutatis mutandis. To the best knowledge and belief of the Loan
Parties, each of the representations and warranties of any party to the
Ultradata Acquisition Documents (other than the Loan Parties) set forth in the
Ultradata Acquisition Documents is true and correct in all material respects as
of the Effective Date.
(hh) Separate Existence.
(i) All customary formalities regarding the corporate existence of each Loan
Party and its Subsidiaries have been observed at all times since its formation
and, in all material respects, will continue to be observed.
(ii) Each of the Loan Parties and their Subsidiaries has at all times since its
formation (or, if later, the date of its Acquisition by CFI) accurately
maintained its financial statements, accounting records and other organizational
documents separate from those of any Affiliate of any Loan Party or any of its
Subsidiaries or any other Person. Neither any Loan Party nor any of its
Subsidiaries has at any time since its formation (or, if later, the date of its
Acquisition by CFI) commingled its assets with those of any of its Affiliates or
any other Person. Each of the Loan Parties and its Subsidiaries has at all times
since its formation (or, if later, the date of its Acquisition by CFI)
accurately maintained its own bank accounts and separate books of account.
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(iii) Each of the Loan Parties and its Subsidiaries has at all times since its
formation (or, if later, the date of its Acquisition by CFI) paid its own
liabilities from its own separate assets.
(iv) Each of the Loan Parties and its Subsidiaries has at all times since its
formation (or, if later, the date of its Acquisition by CFI) identified itself,
in all dealings with the public, under its own name and as a separate and
distinct Person. Each of the Loan Parties and its Subsidiaries does not, and
will not, identify itself, as being a division or a part of any other Person.
(ii) Location of Inventory; Place of Business. There is no location at which any
Loan Party or any of its Subsidiaries has any Inventory (except for Inventory in
transit) other than (i) those locations listed on Schedule 5.01(ii) and (ii) any
other locations approved in writing by Administrative Agent and Collateral Agent
(which approval shall be given or withheld in their reasonable discretion and
shall not be effective until the receipt by Collateral Agent of such financing
statements and landlord waivers as Collateral Agent may require). Schedule
5.01(ii) hereto contains a true, correct and complete list, as of the Effective
Date, of the legal names and addresses of each warehouse at which Inventory of
any Loan Party or any of its Subsidiaries is stored. None of the receipts
received by any Loan Party or any of its Subsidiaries from any warehouse states
that the goods covered thereby are to be delivered to bearer or to the order of
a named Person or to a named Person and such named Person's assigns. Schedule
5.01(ii) sets forth a list, that is complete and accurate list, of each place of
business of each of the Loan Parties and their Subsidiaries.
(jj) Chief Executive Office; FEIN.The chief executive office of each of the Loan
Parties and their Subsidiaries is located at 400 S W Sixth Avenue, Suite 200,
Portland, Oregon 97204. Schedule 5.01(jj) sets forth a complete and accurate
list of the FEINs of each of the Loan Parties and their Subsidiaries.
ARTICLE VI
COVENANTS OF THE LOAN PARTIES
SECTION 6.01. Affirmative Covenants. So long as any principal of or interest on
any Loan or any other Obligations (whether or not due) shall remain unpaid or
any member of the Lender Group shall have any Commitment hereunder, the Loan
Parties will, unless the Lender Group shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to Administrative Agent and Collateral Agent
(and, if so requested in writing by any Lender, with a copy to such Lender):
(i) as soon as available and in any event within 45 days after the end of each
fiscal quarter of CFI and its Subsidiaries, consolidated balance sheets,
consolidated statements of operations and retained earnings and consolidated
statements of cash flows of CFI and its Subsidiaries as at the end of such
quarter, and for the period commencing at the end of the immediately preceding
Fiscal Year and ending with the end of such quarter, setting forth in each
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case in comparative form the figures for the corresponding date or period of the
immediately preceding Fiscal Year, all in reasonable detail and certified by a
Responsible Official as fairly presenting, in all material respects, the
financial position of CFI and its Subsidiaries as of the end of such quarter and
the results of operations and cash flows of CFI and its Subsidiaries for such
quarter, in accordance with GAAP applied in a manner consistent with that of the
most recent audited financial statements of CFI and its Subsidiaries furnished
to the Lender Group, subject to normal year-end adjustments and the lack of
complete footnotes;
(ii) as soon as available, and in any event within 90 days after the end of each
Fiscal Year consolidated balance sheets, consolidated statements of operations
and retained earnings and consolidated statements of cash flows of CFI and its
Subsidiaries as at the end of such Fiscal Year, setting forth in comparative
form the corresponding figures for the immediately preceding Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, and accompanied by a
report and an unqualified opinion, prepared in accordance with generally
accepted auditing standards, of independent certified public accountants of
recognized standing selected by Administrative Borrower and satisfactory to
Administrative Agent and Collateral Agent (which opinion shall be without (A) a
"going concern" or like qualification or exception, (B) any qualification or
exception as to the scope of such audit or (C) any qualification which relates
to the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause any noncompliance with the provisions of
Section 6.03;
(iii) as soon as available, and in any event within 30 days of the end of each
fiscal month of CFI and its Subsidiaries, internally prepared consolidated
balance sheets, consolidated statements of operations and consolidated
statements of cash flows for such fiscal month of CFI and its Subsidiaries for
such fiscal month and for the period from the beginning of such Fiscal Year to
the end of such fiscal month, all in reasonable detail and certified by a
Responsible Official as fairly presenting, in all material respects, the
financial position of CFI and its Subsidiaries as of the end of such fiscal
month and the results of operations and cash flows of CFI and its Subsidiaries
for such fiscal month, in accordance with GAAP applied in a manner consistent
with that of the most recent audited financial statements furnished to the
Lender Group, subject to normal year-end adjustments and lack of complete
footnotes;
(iv) simultaneously with the delivery of the financial statements of CFI and its
Subsidiaries required by clauses (i), (ii) and (iii) of this Section 6.01(a), a
certificate of a Responsible Official (A) stating that such Responsible Official
has reviewed the provisions of this Agreement and the other Loan Documents and
has reviewed the financial condition and operations of CFI and its Subsidiaries
during the period covered by such financial statements with a view to
determining whether CFI and its Subsidiaries were in compliance with the
provisions of such Loan Documents at the times such compliance is required by
the Loan Documents, and that such review has not disclosed, and such Responsible
Official has no knowledge of, the existence during such period of an Event of
Default or Default or, if an Event of Default or Default existed, describing the
nature and period of existence thereof and the action which CFI and its
Subsidiaries propose to take or have taken with respect thereto and (B)
attaching a schedule showing the calculations specified in Section 6.03;
(v) with respect to each fiscal month of the Borrower:
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(A) as soon as available and in any event within 5 Business Days following the
end of such month, or more frequently as Administrative Agent reasonably may
require from time to time, (1) reports in detail satisfactory to Administrative
Agent and certified by a Responsible Official as being accurate and complete
listing all Accounts Receivable of the Borrower and its Subsidiaries as of the
last Business Day of such month, which shall include the amount and age of each
Account Receivable, showing separately those which are more than 30, 60, 90 and
120 days old and a description of all Liens, set-offs, defenses and
counterclaims with respect thereto, together with a reconciliation of such
schedule with the schedule delivered to Administrative Agent pursuant to this
clause (A)(1) for the month immediately preceding such month, the name and
mailing address of each Account Debtor with respect to each such Account
Receivable and such other information as Administrative Agent request, and such
other information as Administrative Agent may reasonably request, all in detail
and in form reasonably satisfactory to Administrative Agent; and (2) a
calculation of the Dilution for such month; and
(B) as soon as available and in any event within 7 Business Days following the
end of such month, or more frequently as Administrative Agent reasonably may
require from time to time, reports in detail satisfactory to Administrative
Agent and certified by a Responsible Official as being accurate and complete
listing all accounts payable of the Borrower and its Subsidiaries as of the last
Business Day of such month which shall include the amount (and, if available,
the age) of each account payable, the name and mailing address of each account
creditor and such other information as Administrative Agent may request,
(vi) (A) so long as Excess Availability is $3,000,000 or more, by the third
Business Day of each week, a Borrowing Base Certificate as of the close of
business on the last Business Day of the prior week, and (B) if Excess
Availability is less than $3,000,000, on a daily basis, a Borrowing Base
Certificate as of the close of business on the immediately preceding Business
Day; in each case, supported by schedules showing the derivation thereof and
containing such detail and other information as Administrative Agent may request
from time to time provided, that (1) the Borrowing Base set forth in the
Borrowing Base Certificate shall be effective from and including the date such
Borrowing Base Certificate is duly received by Administrative Agent but not
including the date on which a subsequent Borrowing Base Certificate is received
by the Administrative Agent, unless Administrative Agent disputes the
eligibility of any property for inclusion in the calculation of the Borrowing
Base or the valuation thereof by notice of such dispute to the Borrower and (2)
in the event of any dispute about the eligibility of any property for inclusion
in the calculation of the Borrowing Base or the valuation thereof,
Administrative Agent's good faith judgment shall control;
(vii) as soon as possible, and in any event within 30 days following the
begiining of each Fiscal Year, financial projections supplementing and
superseding the financial projections for such period referred to in Section
5.01(h)(ii), prepared on a monthly basis and otherwise in form and substance
satisfactory to Administrative Agent and Collateral Agent, for such Fiscal Year
for the CFI and its Subsidiaries, all such financial projections to be
reasonable, to be prepared on a reasonable basis and in good faith, and to be
based on assumptions believed by the Loan Parties to be reasonable at the time
made and from the best information then available to the Loan Parties;
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(viii) promptly after submission to any Government Authority, all documents and
information furnished to such Government Authority in connection with any
investigation of any Loan Party or any of its Subsidiaries other than routine
inquiries by such Governmental Authority;
(ix) as soon as possible, and in any event within three days after the
occurrence of an Event of Default or Default under the Loan Documents or the
occurrence of any event or development that could reasonably be expected to have
a Material Adverse Effect, the written statement of a Responsible Official
setting forth the details of such Event of Default, Default, other event or
Material Adverse Effect and the action which the Loan Parties and their
Subsidiaries propose to take with respect thereto;
(x) (A) as soon as possible and in any event (1) within 10 days after any Loan
Party or any ERISA Affiliate thereof knows or has reason to know that any
Termination Event described in clause (i) of the definition of Termination Event
with respect to any Employee Plan has occurred, (2) within 10 days after any
Loan Party or any ERISA Affiliate thereof knows or has reason to know that any
other Termination Event with respect to any Employee Plan has occurred, or (3)
within 10 days after any Loan Party or any ERISA Affiliate thereof knows or has
reason to know that an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or
an extension of any amortization period under Section 412 of the Code with
respect to an Employee Plan, a statement of a Responsible Official setting forth
the details of such occurrence and the action, if any, which the applicable Loan
Party or such ERISA Affiliate propose to take with respect thereto, (B) promptly
and in any event within three days after receipt thereof by any Loan Party or
any ERISA Affiliate thereof from the PBGC, copies of each notice received by any
Loan Party or any ERISA Affiliate thereof of the PBGC's intention to terminate
any Plan or to have a trustee appointed to administer any Plan, (C) promptly and
in any event within 10 days after the filing thereof with the Internal Revenue
Service if requested by Collateral Agent, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each
Employee Plan and Multiemployer Plan, (D) promptly and in any event within 10
days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that a required installment within the meaning of Section 412 of the Code
has not been made when due with respect to an Employee Plan, (E) promptly and in
any event within three days after receipt thereof by any Loan Party or any ERISA
Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by any Loan Party or any ERISA Affiliate thereof
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA, and (F) promptly and in any event within 10
days after any Loan Party or any ERISA Affiliate thereof send notice of a plant
closing or mass layoff (as defined in WARN) to employees, copies of each such
notice sent by any Loan Party or any ERISA Affiliate thereof;
(xi) promptly after the commencement thereof but in any event not later than 5
days after service of process with respect thereto on, or the obtaining of
knowledge thereof by, any Loan Party or any of its Subsidiaries, notice of each
action, suit or proceeding
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before any court or other Governmental Authority or other regulatory body or any
arbitrator which, if adversely determined, could reasonably be expected to have
a Material Adverse Effect;
(xii) as soon as possible and in any event within 10 days after execution,
receipt or delivery thereof, copies of any material notices that the Borrower
executes or receives from or sends to any party to a Material Contract;
(xiii) promptly after the sending or filing thereof, copies of all statements,
reports and other information any Loan Party or any of its Subsidiaries sends to
any holders of its Indebtedness (only in relation to notes, bonds, or
debentures) or its securities or files with the SEC or any national (domestic or
foreign) securities exchange;
(xiv) promptly upon receipt thereof, copies of all financial reports (including,
without limitation, management letters), if any, submitted to any Loan Party or
any of its Subsidiaries by its independent auditors in connection with any
annual or interim audit of the books thereof;
(xv) on a monthly basis, a report of all new copyrightable materials generated
by each Borrower and each other Loan Party during the prior month identifying
all such copyrightable materials that are required to be registered pursuant to
Section 6.01(r); and a reasonably detailed listing of all copyright applications
filed and all copyrights granted since the date of the last report provided in
compliance with this subsection; and
(xvi) promptly upon request, such other information concerning the condition or
operations, financial or otherwise, of the Borrower or any of its Affiliates as
Administrative Agent or Collateral Agent may from time to time may reasonably
request.
(b) Additional Guarantors/Borrowers and Collateral Security. Cause:
(i) each Subsidiary of the Borrower not in existence on the Effective Date, upon
formation or acquisition thereof by a Loan Party, to execute and deliver to
Collateral Agent for the benefit of the Lender Group promptly and in any event
within three days after the formation, acquisition or change in status thereof
(A) a joinder, in form and substance reasonably satisfactory to Collateral Agent
and Administrative Agent, to this Agreement and the other Loan Documents,
pursuant to which such Subsidiary becomes a Borrower or a Guarantor, as
Administrative Agent and Collateral Agent may determine in their sole and
absolute discretion, (B) if such Subsidiary has any Subsidiaries, a Pledge
Agreement together with (x) certificates evidencing all of the Capital Stock of
any Person owned by such Subsidiary, (y) undated stock powers executed in blank
with signature guaranteed, and (z) such opinions of counsel and such approving
certificate of such Subsidiary as Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares, (C) one or more deeds of trust or mortgages creating on
the real property of such Subsidiary a perfected, first priority Lien on such
real property, a title insurance policy covering such real property, a current
ALTA survey thereof and a surveyor's certificate, each in form and substance
satisfactory to Collateral Agent, together with such other agreements,
instruments and documents as Collateral Agent may reasonably require, whether
comparable to the documents required under Section 6.01(o) or otherwise, (D)
such other agreements, instruments, approvals, legal
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opinions or other documents reasonably requested by Collateral Agent in order to
create, perfect, establish the first priority of or otherwise protect any Lien
purported to be covered by any such Loan Document or otherwise to effect the
intent that such Subsidiary shall become bound by all of the terms, covenants
and agreements contained in the Loan Documents and that all property and assets
of such Subsidiary shall become Collateral for the Obligations, and (E) opinions
of counsel to such Subsidiary, substantially in the form of Exhibit O-1 and
Exhibit O-2 and as to such other matters as Administrative Agent or Collateral
Agent may reasonably request; and
(ii) each owner of the Capital Stock of any such Subsidiary to execute and
deliver promptly and in any event within three days after the formation or
acquisition of such Subsidiary a Pledge Agreement, together with (A)
certificates evidencing all of the Capital Stock of such Subsidiary, (B) undated
stock powers or other appropriate instruments of assignment executed in blank
with signature guaranteed, (C) such opinions of counsel and such approving
certificate of such Subsidiary as Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares and (D) such other agreements, instruments, approvals,
legal opinions or other documents reasonably requested by Collateral Agent.
(c) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to
comply, in all material respects with all applicable laws, rules, regulations
and orders (including, without limitation, all Environmental Laws), such
compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any of its properties, and (ii)
paying all lawful claims which if unpaid might become a Lien or charge upon any
of its properties, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof.
(d) Preservation of Existence, Etc. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its existence, rights and privileges, and
become or remain duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary; provided,
however, that any Loan Party or Subsidiary thereof may consummate a merger to
the extent permitted under Section 6.02(c)(i).
(e) Keeping of Records and Books of Account. Borrower shall keep adequate
records and books of account, with complete entries made in accordance with
GAAP. Without limiting the generality of the foregoing, each Loan Party shall
keep records, true and correct in all material respects at all times, in respect
of all filed copyrights, copyright applications under prosecution, and
copyrightable material, and all service and maintenance contracts and
agreements, and such records shall, at all times, be in form and substance
satisfactory to Administrative Agent in its reasonable discretion, and stored at
each Loan Party's chief executive office (with a true, correct, and complete
copy thereof stored, in any event, at Administrative Borrower's chief executive
office if such Loan Party's chief executive office is at a different location).
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(f) Inspection Rights. Permit, and cause each of its Subsidiaries to permit,
Administrative Agent, Collateral Agent, or any agents or representatives thereof
at any time and from time to time, at the reasonable expense of the Borrower, to
examine and make copies of and abstracts from their records and books of
account, to visit and inspect their properties, to verify materials, leases,
notes, accounts receivable, deposit accounts and other assets of any Loan Party
and its Subsidiaries, to conduct audits, physical counts, valuations,
appraisals, environmental assessments or examinations and to discuss their
affairs, finances and accounts with any of the directors, officers, managerial
employees, independent accountants or other representatives thereof. Subject to
Section 2.06(a), the Borrower agrees to pay the reasonable cost of such audit,
count, valuation, appraisal, assessment, or examination. So long as no Event of
Default has occurred and is continuing and neither Administrative Agent nor
Collateral Agent deems itself insecure with respect to such Agent's good faith
belief or suspicion that Borrower has engaged in defalcation, intentional
misrepresentation, or fraud, any such inspection or examination shall be made
during normal business hours and upon at least 1 Business Day prior written
notice to Administrative Borrower.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of their material properties which
are necessary or useful in the proper conduct of their business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause each
of its Subsidiaries to comply, in all material respects and at all times with
the provisions of all leases to which each of them is a party as lessee or under
which each of them occupies property, so as to prevent any loss or forfeiture
thereof or thereunder.
(h) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability,
hazard, rent and business interruption insurance) with respect to their
properties (including all real properties leased or owned by them) and business,
in such amounts and covering such risks as is required by any Governmental
Authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and in any event in amount, adequacy and scope reasonably
satisfactory to Collateral Agent. All policies covering the Collateral are to be
made payable to Collateral Agent for the benefit of the Lender Group, as its
interests may appear, in case of loss, under a standard non-contributory
"lender" or "secured party" clause and are to contain such other provisions as
the Collateral Agent may reasonably require to fully protect the Lender Group's
interest in the Collateral and to any payments to be made under such policies.
All certificates of insurance are to be delivered to Collateral Agent and the
policies are to be premium prepaid, with the loss payable and additional insured
endorsement in favor of Collateral Agent for the benefit of the Lender Group and
such other Persons as the Collateral Agent may designate for time to time, and
shall provide for not less than 30 days' prior written notice to Collateral
Agent of the exercise of any right of cancellation. If any Loan Party or any of
its Subsidiaries fails to maintain such insurance, the Lender Group may arrange
for such insurance, but at the Borrower's expense and without any responsibility
on the Lender Group's part for obtaining the insurance, the solvency of the
insurance companies, the adequacy of the coverage, or the collection of claims.
Upon the occurrence of an Event of Default, Collateral Agent for the benefit of
the Lender Group shall have the sole right, in the name of the Lender Group and
the Loan Parties and their Subsidiaries,
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to file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause each of
its Subsidiaries to obtain, maintain and preserve, all material permits,
licenses, authorizations, approvals, entitlements and accreditations which are
necessary or reasonably useful in the proper conduct of its business and become
or remain, and cause each of its Subsidiaries to become or remain, duly
qualified and in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(j) Environmental. (i) Keep any property either owned or operated by it or any
of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause it
Subsidiaries to comply, in all material respects with Environmental Laws and
provide to Collateral Agent documentation of such compliance which Collateral
Agent reasonably requests; (iii) immediately notify Collateral Agent of any
Release of a Hazardous Material in excess of any reportable quantity from or
onto property owned or operated by any Loan Party or any of its Subsidiaries and
take any Remedial Actions required to abate said Release; (iv) promptly provide
Collateral Agent with written notice within 10 days of the receipt of any of the
following: (A) notice that an Environmental Lien has been filed against any
property of any Loan Party or any of its Subsidiaries; (B) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against the Borrower or any of its Subsidiaries; and (C) notice of a violation,
citation or other administrative order which could have a Material Adverse
Effect and (v) defend, indemnify and hold harmless the Lender Group and its
transferees, and their respective employees, agents, officers, directors, and
equityholders, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the presence, disposal,
Release or threatened Release of any Hazardous Materials on any property at any
time owned or occupied by any Loan Party or any of its Subsidiaries (or its
respective predecessors in interest or title) or at any disposal facility which
received hazardous materials generated by any Loan Party or any predecessor in
interest, (B) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Materials, (C)
any investigation, lawsuit brought or threatened, settlement reached or
government order relating to such Hazardous Materials, (D) any violation of any
Environmental Law and/or (E) any Environmental Action.
(k) Further Assurances. Take such action and execute, acknowledge and deliver,
and cause each of its Subsidiaries to take such action and execute, acknowledge
and deliver, at the Borrower's sole cost and expense, such agreements,
instruments or other documents as the Lender Group may reasonably require from
time to time in order (i) to carry out more effectively the purposes of this
Agreement and the other Loan Documents, (ii) to subject to valid and perfected
first priority Liens any of the Collateral or any other property of each Loan
Party and its Subsidiaries, (iii) to establish and maintain the validity and
effectiveness of any of the Loan Documents and the validity, perfection and
priority of the Liens intended to be created thereby, and (iv) to better assure,
convey, grant, assign, transfer and confirm unto the Lender Group the
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rights now or hereafter intended to be granted to the Lender Group under this
Agreement or any other Loan Document. Without limiting the generality of the
foregoing, the Loan Parties shall provide Collateral Agent (with a copy to
Administrative Agent), on a monthly basis, with appropriate, recordable
supplements to the Patent Security Agreement, the Trademark Security Agreement,
and the Copyright Security Agreement reflecting all patents, trademarks, and
copyrights developed, created, generated, or acquired by Borrower during the
month then ended.
(l) Change in Collateral; Collateral Records. (i) Give Administrative Agent and
Collateral Agent not less than 30 days' prior written notice of any change in
the location of any Collateral, other than to locations set forth on Schedule
6.01(1) and with respect to which the Lender Group has filed financing
statements and otherwise fully perfected its Liens thereon, (ii) advise
Collateral Agent promptly, in sufficient detail, of any material adverse change
relating to the type, quantity or quality of the Collateral or the Lien granted
thereon and (iii) execute and deliver, and cause each of its Subsidiaries to
execute and deliver, to Collateral Agent for the benefit of the Lender Group
from time to time, solely for the Lender Group's convenience in maintaining a
record of Collateral, such written statements and schedules as Collateral Agent
may reasonably require, designating, identifying or describing the Collateral.
(m) Landlord Waivers.
(i) Use reasonable best efforts to deliver to Collateral Agent, within 60 days
following the Effective Date, a landlord waiver, in form and substance
satisfactory to Collateral Agent and which may be included as a provision
contained in the relevant Lease or amendment thereof, executed by each landlord
with respect to each of the Leases set forth on Schedule 5.01(p).
(ii) Obtain at the time any Loan Party enters into a lease for real property not
occupied on the Effective Date a landlord's waiver from the landlord of such
real property (which waiver may be contained in such lease), in form and
substance reasonably satisfactory to the Collateral Agent.
(n) Subordination. Cause all Indebtedness and other obligations now or hereafter
owed by any Loan Party to any of its Affiliates to be subordinated in right of
payment and security to the Indebtedness and other Obligations owing to the
Lender Group in accordance with the Intercompany Subordination Agreement.
(o) After Acquired Real Property. Upon the acquisition by any Loan Party or any
of its Subsidiaries after the date hereof of any interest (whether fee or
leasehold) in any real property (wherever located) (each such interest being an
"After Acquired Property") (x) with a Current Value (as defined below) in excess
of $100,000 in the case of a fee interest, or (y) requiring the payment of
annual rent exceeding in the aggregate $360,000 in the case of leasehold
interest, immediately so notify Collateral Agent, setting forth with specificity
a description of the interest acquired, the location of the real property, any
structures or improvements thereon and, in the event of a purchase, either an
appraisal or the Borrower's good-faith estimate of the current value of such
real property (for purposes of this Section, the "Current Value"). Collateral
Agent shall notify Administrative Borrower whether Collateral Agent for the
benefit of the Lender Group intends to require a mortgage or deed of trust and
the
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other documents referred to below or in the case of leasehold, a leasehold
mortgage or leasehold deed of trust or landlord's waiver (pursuant to Section
6.01(m) hereof). Upon receipt of such notice requesting a mortgage or deed of
trust, the Person which has acquired such After Acquired Property shall furnish
promptly to Collateral Agent the following, each in form and substance
reasonably satisfactory to Collateral Agent: (i) a mortgage or deed of trust and
an environmental indemnity agreement with respect to such real property and
related assets located at the After Acquired Property, each duly executed by
such Person and in form and substance reasonably satisfactory to Collateral
Agent (including in recordable form); (ii) evidence of the recording of the
mortgage or deed of trust referred to in clause (i) above in such office or
offices as may be necessary or, in the opinion of Collateral Agent, reasonably
desirable to create and perfect a valid and enforceable first priority lien on
the property purported to be covered thereby or to otherwise protect the rights
of the Lender Group thereunder, (iii) a title insurance policy in form and
substance reasonably satisfactory to Collateral Agent, (iv) a survey of such
real property, certified to the Lender Group and to the issuer of the title
insurance policy by a licensed professional survey or reasonably satisfactory to
Collateral Agent, (v) phase I environmental assessment reports with respect to
such real property, certified to the Lender Group by a company reasonably
satisfactory to Collateral Agent and in form and substance reasonably
satisfactory to Collateral Agent, (vi) in the case of a leasehold interest, a
certified copy of the lease between the landlord and such Person with respect to
such real property in which such Person has a leasehold interest, and the
certificate of occupancy with respect thereto, (vii) in the case of a leasehold
interest, an attornment and nondisturbance agreement between the landlord (and
any fee mortgagee) with respect to such real property and Collateral Agent for
the benefit of the Lender Group, in form and substance reasonably satisfactory
to Collateral Agent, and (viii) such other documents or instruments (including
guarantees and opinions of counsel) as Collateral Agent may reasonably require
and in form and substance satisfactory to Collateral Agent. The Borrower shall
pay all Lender Group Expenses, including reasonable attorneys' fees and
expenses, and all title insurance charges and premiums, in connection with their
obligations under this Section 6.01(o).
(p) Fiscal Year. Cause the Fiscal Year of the Borrower and its Subsidiaries to
end on December 31 of each calendar year unless the Lender Group consents to a
change in such Fiscal Year (and appropriate related changes to this Agreement).
(q) Listing. CFI shall do or cause to do all things reasonably necessary to, at
all times, maintain the listing of its common stock on the NASDAQ National
Market System or, if CFI so elects, maintain a listing of its common stock on
the New York Stock Exchange.
(r) Copyright Registrations.
(i) No later than the last Business Day within 10 days following the Effective
Date, deliver to Administrative Agent and Collateral Agent reasonably
satisfactory evidence that all existing copyrights of Borrower (other than
Exempt Copyrights) that are capable of being registered pursuant to Section 6(a)
of the Copyright Security Agreement have been registered with the United States
Copyright Office, and that all such copyrights and any proceeds thereof are
specifically encumbered by the Copyright Security Agreement.
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(ii) No less frequently than monthly, unless Administrative Agent and Collateral
Agent shall otherwise agree in writing, the Loan Parties shall (y) cause all
copyrights generated by the Loan Parties (other than: (1) Exempt Copyrights; and
(2) non-material corrections or modifications to existing copyrighted software
that do not add material functionality changes) that are, in any way, licensed
or otherwise give rise to Eligible Accounts Receivable and that are not already
the subject of a registration with the United States Copyright Office (or an
application therefor diligently prosecuted) to be registered with the United
States Copyright Office in a manner sufficient to impart constructive notice of
Borrower's or such other Loan Party's ownership thereof, and (z) cause to be
prepared, executed, and delivered to Collateral Agent (with a copy to
Administrative Agent), with sufficient time to permit Collateral Agent to record
no later than the last Business Day within 10 days following the date that such
copyrights have been registered or an application for registration has been
filed, a Copyright Security Agreement or supplemental schedules to the Copyright
Security Agreement reflecting the security interest of Collateral Agent for the
benefit of the Lender Group in such new copyrights (other than: (1) Exempt
Copyrights, which, although subject to the security interest of Collateral Agent
for the benefit of the Lender Group, shall not be required to be registered
until such time, if any, as they cease to be Incipient Copyrights; and (2)
non-material corrections or modifications to existing copyrighted software that
do not add material functionality changes), which Copyright Agreement or
supplemental schedules shall be in form and content suitable for registration
with the United States Copyright Office so as to give constructive notice, when
so registered, of the transfer by Borrower or such Loan Party to Collateral
Agent for the benefit of the Lender Group of a security interest in such
copyrights. The Loan Parties also shall maintain copies of all source and object
code for all software utilized in their business operations at safe and secure
offsite locations reasonably acceptable to Collateral Agent, shall, at the
request of Collateral Agent, advise the operators of such locations of the
security interest of Collateral Agent for the benefit of the Lender Group in
such software, shall keep Collateral Agent fully informed of each such location,
and shall maintain the currency of all such software stored offsite.
(s) Reservation of Warrant Shares. CFI shall, from time to time, in accordance
with the laws of the State of its incorporation, increase the authorized amount
of its common stock prior to such time as the failure to do so would cause the
number of shares of such common stock remaining authorized but unissued to be
insufficient to permit exercise of the Warrants. No later than the first to
occur of (i) the date a "Shelf Registration" (as such term is defined in the
Registration Rights Agreement) with respect to CFI's common stock issuable upon
exercise of the Warrants is filed with the Securities and Exchange Commission
pursuant to the Registration Rights Agreement or (ii) 90 days following the
Effective Date, CFI through its board of directors shall specifically reserve
for issuance not less than 381,822 shares of CFI's common stock to be issued
upon exercise of the Warrants (as such number may be adjusted pursuant to the
provisions of the Warrant). Upon any adjusted increase in the number of shares
of CFI's common stock that become issuable upon exercise of the Warrants,
whether due to antidilution provisions in the Warrants or otherwise, CFI through
its board of directions shall reserve such shares for issuance upon exercise of
the Warrants and maintain an adequate number of shares so reserved until such
time as the Warrants have been exercised or expired unexercised. CFI shall cause
any additional shares of its common stock that become issuable upon exercise of
the Warrants as a result of such adjusted increase in the "Exercise Price" (as
such term is defined
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in the Warrants) to be listed, as of the effective date of such adjusted
increase, on the NASDAQ National Market System or other exchange on which the
common stock of CFI is then listed.
SECTION 6.02. Negative Covenants. So long as any principal of or interest on any
Loan or any other Obligation (whether or not due) shall remain unpaid or the
Lenders shall have any Commitment hereunder, the Loan Parties shall not, unless
the Lender Group shall otherwise consent in writing:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property, whether now owned or hereafter acquired, to file
or suffer to exist under the Uniform Commercial Code, the Copyright Act, or any
similar law or statute of any jurisdiction, a financing statement (or the
equivalent thereof) or a copyright security document that names any Loan Party
or any of its Subsidiaries as debtor, to sign or suffer to exist any security
agreement authorizing any secured party thereunder to file such financing
statement (or the equivalent thereof), to sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to any Loan Party or any of its Subsidiaries or assign or otherwise transfer, or
permit any of its Subsidiaries to assign or otherwise transfer, any account or
other right to receive income, other than Permitted Liens.
(b) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or
otherwise become or remain liable with respect to, or permit any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness.
(c) Fundamental Changes. Wind-up, liquidate or dissolve itself (or permit or
suffer any thereof) or merge, consolidate or amalgamate with any Person, convey,
sell, lease or sublease, transfer or otherwise dispose of, whether in one
transaction or a series of related transactions, all or any non-immaterial part
of its business, property or assets, whether now owned or hereafter acquired, or
(agree to do any of the foregoing) or purchase or otherwise acquire, whether in
one transaction or a series of related transactions, all or substantially all of
the assets of any Person (or any division thereof) (or agree to do any of the
foregoing), or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that:
(i) any wholly-owned Subsidiary of any one or more Loan Parties may be merged
with any other wholly-owned Subsidiary of one or more Loan Parties, so long as
(A) no other provision of this Agreement would be violated thereby, (B)
Administrative Borrower gives Collateral Agent and Administrative Agent at least
30 days' prior written notice of such merger, (C) no Default or Event of Default
shall have occurred and be continuing either before or after giving effect to
such transaction, (D) the Lender Group's rights in any Collateral, including,
without limitation, the existence, perfection and priority of any Lien thereon,
are not adversely affected by such merger, (E) if the merger is between a
Subsidiary that is a Borrower and another Subsidiary that is not a Borrower, the
Subsidiary that is a Borrower shall be the surviving entity of such merger, and
(F) the surviving Subsidiary is a party to this Agreement and such other Loan
Documents as Collateral Agent and Administrative Agent may require, and the
Capital Stock of such Subsidiary is the subject of the Pledge Agreement, in each
case, in full
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force and effect on the date of and immediately after giving effect to such
merger or consolidation;
(ii) any of the Loan Parties and its Subsidiaries may: (A) sell or lease
Inventory or license intellectual property in the ordinary course of business;
(B) dispose of obsolete or worn-out equipment in the ordinary course of
business; and (C) sell or otherwise dispose of other property or assets
(excluding Accounts Receivable and intellectual property) for cash in an
aggregate amount not less than the fair market value of such property or assets,
provided that the Net Cash Proceeds of such Dispositions do not exceed $250,000
in the aggregate in any twelve-month period and are paid to the Lender Group
pursuant to the terms of Section 2.05(c)(vi);
(iii) (A) any Subsidiary of any Loan Party that is not a Loan Party may make a
Disposition of any or all of its property or assets to any Loan Party or to any
other Subsidiary of any Loan Party, subject to the continuing Liens of the
Lender Group thereon; (B) any Loan Party that is not a Borrower may make a
Disposition of any or all of its property or assets to any other Loan Party that
is not a Borrower or to any other Loan Party, subject to the continuing Liens of
the Lender Group thereon; (C) any Borrower other than CFI may make a Disposition
of any or all of its property of assets to any other Borrower, subject to the
continuing Liens of the Lender Group thereon; in each case, so long as (1) no
other provision of this Agreement would be violated thereby, (2) Administrative
Borrower gives Collateral Agent and Administrative Agent at least 30 days' prior
written notice of such Disposition; (D) no Default or Event of Default shall
have occurred and be continuing either before or after giving effect to such
transaction; and (E) the Lender Group's rights in any Collateral, including,
without limitation, the existence, perfection and priority of any Lien thereon,
are not adversely affected by such Disposition (or, if so adversely affected,
such adverse effect is not promptly cured to the reasonable satisfaction of
Collateral Agent), and
(iv) subject to compliance with Section 6.01(b) (if and to the extent
applicable), a Loan Party may acquire the Capital Stock or assets of another
Person pursuant to a Permitted Acquisition or a Permitted Toehold Investment.
(d) Change in Nature of Business. Make, or permit any of its Subsidiaries to
make, any fundamental or material change in the nature of its business as
described in Section 5.01(m).
(e) Loans, Advances, Investments, Etc. Make or commit or agree to make any loan,
advance guarantee of obligations, other extension of credit or capital
contributions to, or hold or invest in or commit or agree to hold or invest in,
or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the Capital Stock, bonds, notes, debentures or other
securities of, or make or commit or agree to make any other investment in, any
other Person, or purchase or own any futures contract or otherwise become liable
for the purchase or sale of currency or other commodities at a future date in
the nature of a futures contract, or permit any of its Subsidiaries to do any of
the foregoing, except for: (i) the Ultradata Acquisition; (ii) Investments
existing on the date hereof, as set forth on Schedule 6.02(e) hereto, but not
any increase in the amount thereof as set forth in such Schedule or any other
modification of the terms thereof; (iii) subject to the Intercompany
Subordination Agreement, temporary loans
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and advances by any Loan Party to its Subsidiaries and by such Subsidiaries to
such Loan Party, made in the ordinary course of business and not exceeding, in
the aggregate for all such Persons at any one time outstanding: (A) during the
first 6 months following the Effective Date, $1,500,000; provided, however, that
no such individual temporary loan or advance shall remain outstanding for more
than 30 days during such 6 month period; and (B) thereafter, $500,000; (iv)
Permitted Investments; and (v) Permitted Acquisitions.
(f) Lease Obligations. Create, incur or suffer to exist, or permit any of its
Subsidiaries to create, incur or suffer to exist, any obligations as lessee (i)
for the payment of rent for any real or personal property in connection with any
sale and leaseback transaction, or (ii) for the payment of rent for any real or
personal property under leases or agreements to lease other than (A) Capitalized
Lease Obligations which would not cause the aggregate amount of all obligations
under Capitalized Leases entered into after the Effective Date owing by the Loan
Parties and their Subsidiaries in any Fiscal Year to exceed the amounts set
forth in subsection (g) of this Section 6.02, and (B) Operating Lease
Obligations which would not cause the aggregate amount of all Operating Lease
Obligations owing by the Loan Parties and their Subsidiaries to exceed: (1)
during the Fiscal Year ending December 31, 1999, $700,000; (2) during the Fiscal
Year ending December 31, 2000, $1,000,000; (3) during the Fiscal Year ending
December 31, 2001, $1,200,000; and (4) during the Fiscal Year ending December
31, 2002, $1,500,000.
(g) Capital Expenditures. Except for Permitted Acquisitions and Permitted
Investments, make or commit or agree to make, or permit any of its Subsidiaries
to make or commit or agree to make, any Capital Expenditure (by purchase or
Capitalized Lease) that would cause the aggregate amount of all such Capital
Expenditures made by the Loan Parties and their Subsidiaries to exceed: (i)
during the period commencing on the Effective Date and ending December 31, 1999,
$1,300,000; (ii) during the Fiscal Year ending December 31, 2000, $5,300,000;
(iii) during the Fiscal Year ending December 31, 2001, $6,400,000; and (iv)
during the Fiscal Year ending December 31, 2002, $7,600,000; .
(h) Restricted Payments. (i) Declare or pay any dividend or other distribution,
direct or indirect, on account of any Capital Stock of any Loan Party or any of
its Subsidiaries, now or hereafter outstanding, (ii) make any repurchase,
redemption, retirement, defeasance, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any Capital Stock of any
Loan Party, now or hereafter outstanding, (iii) make any payment to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights
for the purchase or acquisition of shares of any class of Capital Stock of any
Loan Party, now or hereafter outstanding, (iv) return any capital to any
shareholders or other equity holders of any Loan Party or any of its
Subsidiaries, or make any other distribution of property, assets, shares of
Capital Stock, warrants, rights, options, obligations or securities thereto as
such or (v) pay any management fees or any other fees or expenses (including the
reimbursement thereof by any Loan Party or any of its Subsidiaries) pursuant to
any management, consulting or other services agreement to any of the
shareholders or other equityholders of any Loan Party or any of its Subsidiaries
or other Affiliates, or to any other Subsidiaries or Affiliates of any Loan
Party; provided, however, that:
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(A) Subsidiaries that are wholly-owned by one or more
Loan Parties may declare and pay cash and stock dividends, return
capital and make distributions of assets (subject to the Lender Group's
Liens thereon) to such Loan Parties;
(B) CFI may make regularly scheduled mandatory
redemptions, as and when due and payable, of the CFI Class A Preferred
Stock, in an aggregate amount not to exceed $103,142 in any fiscal
year;
(C) CFI may declare and pay dividends and
distributions payable solely in shares of CFI's common stock;
(D) Ultradata may make payments to holders of the
"Dissenting Shares" (as such term is defined in the Ultradata
Acquisition Documents), if any, with respect to such Dissenting Shares,
to the extent required under the Delaware General Corporation Law and
the Ultradata Acquisition Documents; provided, however, that the number
of Dissenting Shares shall not constitute more than 5% of the Capital
Stock of Ultradata issued and outstanding immediately prior to the
consummation of the Ultradata Acquisition;
(E) CFI may make payments to the Warrantholders,
pursuant to Section 4(a)(2) or Section 4(a)(3) of the Warrants, in
order to reduce the number of Warrant Shares issuable under the
Warrants upon exercise thereof;
(F) CFI may continue to grant options and, upon
exercise thereof, issue common stock, to its employees pursuant to the
Stock Option Plans and such other qualified or non-qualified stock
option plans that CFI adopts from time to time in the ordinary course
of its business and consistent with past practices; and
(G) CFI may issue options or warrants for not more
than 150,000 shares of common stock to an outside investor relations
firm.
(i) Federal Reserve Regulations. Permit any Loan or the proceeds of any Loan
under this Agreement to be used for any purpose that would cause such Loans to
be margin loans under the provisions of Regulation T, U or X of the Board.
(j) Transactions with Affiliates. Enter into, renew, extend or be a party to, or
permit any of its Subsidiaries to enter into, renew, extend or be a party to any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any
kind or the rendering of services of any kind) with any of its Affiliates,
except in the ordinary course of business in a manner and to an extent
consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to such Loan Party or such Subsidiary than would be obtainable in a comparable
arm's length transaction with a Person that is not an Affiliate thereof.
(k) Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its
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Subsidiaries (i) to pay dividends or to make any other distribution on any
shares of Capital Stock of such Subsidiary owned by any Loan Party or any of its
Subsidiaries, (ii) subject to Section 6.02(r), to pay or prepay or to
subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries,
(iii) to make loans or advances to any Loan Party or any of its Subsidiaries, or
(iv) to transfer any of its property or assets to any Loan Party or any of its
Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that nothing in any of clauses (i) through (iv) of this
Section 6.02(k) shall prohibit or restrict:
(A) this Agreement and the other Loan Documents;
(B) any agreements in effect on the date of this
Agreement and described (including the nature and extent of such
encumbrances or restrictions) on Schedule 6.02(k);
(C) any applicable law, rule or regulation
(including, without limitation, applicable currency control laws and
applicable state corporate statutes restricting the payment of
dividends in certain circumstances);
(D) in the case of clause (iv) any agreement setting
forth customary restrictions on the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or
contract of similar property or assets; or
(E) in the case of clause (iv) any holder of a
Permitted Lien from restricting on customary terms the transfer of any
property or assets subject thereto.
(l) Limitation on Issuance of Capital Stock.
(i) Issue or sell or enter into any agreement or arrangement for the issuance
and sale of any shares of its Capital Stock, any securities convertible into or
exchangeable for its Capital Stock or any warrants, options or other rights for
the purchase or acquisition of any of its Capital Stock; provided, however, than
nothing herein shall prevent CFI from: (w) selling shares of its common stock or
granting options, warrants, or rights with respect thereto pursuant to the Stock
Option Plans and such other qualified or non-qualified stock option plans that
CFI adopts from time to time in the ordinary course of its business and
consistent with past practices, (x) issuing the Warrants or shares of its common
stock upon exercise thereof, (y) issuing of the Permitted Subordinated
Indebtedness or shares of its common stock upon conversion thereof in accordance
with the terms and conditions of the Permitted Subordinated Indebtedness
Documents, or (z) selling or issuing any Permitted Preferred Stock; and
(ii) Permit any of its Subsidiaries to issue or sell or enter into any agreement
or arrangement for the issuance and sale of any shares of its Capital Stock, any
securities convertible into or exchangeable for its Capital Stock or any
warrants.
(m) Modifications of Indebtedness, Organizational Documents and Certain Other
Agreements; Etc.
(i) Cause, suffer, or permit the amendment, modification or other change of any
of the provisions of the Permitted Subordinated Indebtedness Documents if such
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amendment, modification or change would shorten the final maturity or average
life to maturity of, or require any material payment to be made earlier than the
date originally scheduled on, such Indebtedness, would increase the interest
rate applicable to such Indebtedness, or would change the subordination
provisions of such Indebtedness in a manner adverse to interests of the Lender
Group, or would otherwise be adverse to the interests of the Lender Group or
materially adverse to the interests of any Loan Party or any of its Subsidiaries
in any respect;
(ii) Cause, suffer, or permit the amendment, modification or other change, in
any material respect, of any of the provisions of any other Indebtedness of any
Loan Party or any of its Subsidiaries or of any instrument or agreement
(including, without limitation, any purchase agreement, indenture, loan
agreement or security agreement) relating to any such Indebtedness if such
amendment, modification or change would shorten (other than by an immaterial
amount of time) the final maturity or average life to maturity of, or require
any material payment to be made earlier than the date originally scheduled on,
such Indebtedness, would increase (other than by an immaterial amount) the
interest rate applicable to such other Indebtedness, or would change the
subordination provision (if any) of such other Indebtedness in a manner adverse
to interests of the Lender Group, or would otherwise be adverse to the interests
of the Lender Group or materially adverse to the interests of any Loan Party or
any of its Subsidiaries in any respect;
(iii) except for the Obligations, make any voluntary or optional payment,
prepayment, redemption or other acquisition for value of any Indebtedness of any
Loan Party or any of its Subsidiaries (including, without limitation, by way of
depositing money or securities with the trustee therefor before the date
required for the purpose of paying any portion of such Indebtedness when due),
or refund, refinance, replace or exchange any other Indebtedness for any such
Indebtedness, or make any prepayment, redemption or repurchase of any
outstanding Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any
notice with respect to any of the foregoing; or
(iv) amend, modify or otherwise change in any material respect its certificate
of incorporation or bylaws (or other similar organizational documents),
including, without limitation, by the filing or modification of any certificate
of designation, or any agreement or arrangement entered into by it, with respect
to any of its Capital Stock (including any shareholders' agreement), or enter
into any new agreement with respect to any of its Capital Stock except any such
amendments, modifications or changes or any such new agreements or arrangements
pursuant to this clause (iv) that either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(n) Investment Company Act of 1940. Engage in any business, enter into any
transaction, use any securities or take any other action or permit any of its
Subsidiaries to do any of the foregoing, that would cause it or any of its
Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being an "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.
(o) Compromise of Accounts Receivable.
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(i) Compromise or adjust any Eligible Account Receivable (or extend the time of
payment thereof) or grant any material discounts, allowances or credits, or
permit any of its Subsidiaries to do so, other than, so long as no Default or
Event of Default has occurred and is continuing, in the ordinary course of
business and consistent with past practice; provided, however, in no event shall
any such extension of the time for payment extend beyond 30 days from the
original due date; provided further that, from and after the date of any such
adjustment or extension thereof, the determination of whether any Account
Receivable so adjusted or extended constitutes an Eligible Account Receivable
shall take into account such adjustment or extension.
(ii) Compromise or adjust any Account Receivable other than Eligible Accounts
Receivable (or extend the time of payment thereof) or grant any material
discounts, allowances or credits, or permit any of its Subsidiaries to do so
,other than, so long as no Default or Event of Default has occurred and is
continuing, in the ordinary course of business and consistent with past practice
with the relevant Account Debtor; provided, however, in no event shall (A) (1)
any such discount, allowance or credit exceed, with respect to any Account
Debtor and its Affiliates, the greater of (y) $20,000, and (z) 20% of the
aggregate amount owed by such Account Debtor and its Affiliates, or (2) all such
discounts, allowances, and credits exceed, with respect to all Account Debtors,
$100,000 in the aggregate in any one fiscal quarter, or (B) any such extension
of the time for payment extend beyond 120 days from the original due date.
(p) Environmental. Permit the use, handling, generation, storage, treatment,
release or disposal of Hazardous Materials at any property owned or leased by
any Loan Party or any of its Subsidiaries except in compliance in all material
respects with Environmental Laws and so long as such use, handling, generation,
storage, treatment, release or disposal of Hazardous Materials does not result
in a Material Adverse Effect.
(q) Certain Agreements. Agree to any amendment or other change to or waiver of
any of its rights under any Material Contract, if such amendment, other change,
or waiver is adverse to the interests of the Lender Group or materially adverse
to the interests of any Loan Party or any of its Subsidiaries.
(r) Permitted Subordinated Indebtedness. Without limiting the generality of
Section 6.02(m), make, or permit any Subsidiary of any Loan Party to make, any
payment of any part or all of any Permitted Subordinated Indebtedness (including
the prepayment, redemption, retirement, defeasement, purchase, or other
acquisition of any principal amount of the Permitted Subordinated Indebtedness);
provided, however, that CFI may, to the extent permitted under the Permitted
Subordinated Indebtedness Documents, accrete the original issue discount in
respect of the Permitted Subordinated Indebtedness during the first 3 years
following its issuance and thereafter pay interest on the Permitted Subordinated
Indebtedness as and when scheduled in accordance with the terms and conditions
of the Permitted Subordinated Indebtedness Documents.
SECTION 6.03. Financial Covenants. So long as any principal of or interest on
any Loan or any other Obligation (whether or not due) shall remain unpaid or the
Lenders shall have any Commitment hereunder, the Loan Parties shall not, unless
the Lender Group shall otherwise consent in writing:
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(a) Current Ratio. Permit the ratio of (i) Consolidated Current Assets of CFI
and its Subsidiaries, to (ii) Consolidated Current Liabilities of CFI and its
Subsidiaries at the end of any fiscal quarter to be less than the applicable
ratio set forth below:
Fiscal Quarter Ending Ratio
- --------------------- -----
September 30, 1999 1.05 : 1.00
December 31, 1999 1.15 : 1.00
March 31, 2000 1.25 : 1.00
June 30, 2000 1.25 : 1.00
September 30, 2000 1.25 : 1.00
December 31, 2000 1.35 : 1.00
March 31, 2001 1.35 : 1.00
June 30, 2001 1.35 : 1.00
September 30, 2001 1.35 : 1.00
December 31, 2001 1.50 : 1.00
March 31, 2002 1.50 : 1.00
June 30, 2002 1.50 : 1.00
(b) [intentionally omitted]
(c) Tangible Net Worth. Permit Consolidated Tangible Net Worth of CFI and its
Subsidiaries at the end of each fiscal quarter set forth below to be less than
the amount set forth opposite such date.
Fiscal Quarter Ending Tangible Net Worth
- --------------------- ------------------
September 30, 1999 ($75,000,000)
December 31, 1999 ($75,000,000)
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March 31, 2000 ($65,000,000)
June 30, 2000 ($65,000,000)
September 30, 2000 ($57,000,000)
December 31, 2000 ($57,000,000)
March 31, 2001 ($50,000,000)
June 30, 2001 ($45,000,000)
September 30, 2001 ($45,000,000)
December 31, 2001 ($32,000,000)
March 31, 2002 ($32,000,000)
June 30, 2002 ($25,000,000)
(d) Cash Flow Ratio. Permit the Cash Flow Ratio for each period of four (4)
consecutive fiscal quarters of CFI and its Subsidiaries for which the last
quarter ends on a date set forth below to be less than the ratio set forth
opposite such date:
Fiscal Quarter Ending Ratio
- --------------------- -----
September 30, 1999 1.75 : 1.00
December 31, 1999 2.00 : 1.00
March 31, 2000 2.25 : 1.00
June 30, 2000 2.25 : 1.00
September 30, 2000 3.00 : 1.00
December 31, 2000 3.25 : 1.00
March 31, 2001 3.25 : 1.00
June 30, 2001 3.50 : 1.00
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September 30, 2001 3.50 : 1.00
December 31, 2001 3.50 : 1.00
March 31, 2002 3.50 : 1.00
June 30, 2002 3.50 : 1.00
(e) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio for each
period of four (4) consecutive fiscal quarters of CFI and its Subsidiaries for
which the last quarter ends on a date set forth below to be less than the amount
set forth opposite such date:
Fiscal Quarter Ending Ratio
- --------------------- -----
September 30, 1999 1.10 : 1.00
December 31, 1999 1.10 : 1.00
March 31, 2000 1.20 : 1.00
June 30, 2000 1.20 : 1.00
September 30, 2000 1.20 : 1.00
December 31, 2000 1.20 : 1.00
March 31, 2001 1.20 : 1.00
June 30, 2001 1.20 : 1.00
September 30, 2001 1.20 : 1.00
December 31, 2001 1.20 : 1.00
March 31, 2002 1.20 : 1.00
June 30, 2002 1.20 : 1.00
(f) Consolidated EBITDA. Permit Consolidated EBITDA of CFI and its Subsidiaries
for each period of four (4) consecutive fiscal quarters of CFI and its
Subsidiaries for which the last fiscal quarter ends on a date set forth below to
be less than the amount set forth opposite such date; provided, however, that
the contribution of MECA to Consolidated EBITDA
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of CFI and its Subsidiaries shall be included therein only for periods from and
after May 17, 1999:
Fiscal Quarter Ending Consolidated EBITDA
- --------------------- -------------------
September 30, 1999 $16,000,000
December 31, 1999 $17,500,000
March 31, 2000 $19,000,000
June 30, 2000 $21,500,000
September 30, 2000 $24,000,000
December 31, 2000 $25,500,000
March 31, 2001 $26,500,000
June 30, 2001 $26,500,000
September 30, 2001 $26,500,000
December 31, 2001 $30,000,000
March 31, 2002 $32,000,000
June 30, 2002 $32,500,000
(g) [intentionally omitted]
(h) [intentionally omitted]
(i) Debt Ratio. Permit the ratio of (i) the amount equal to the sum of (A) the
Obligations, plus (B) Capitalized Lease Obligations, to (ii) Consolidated EBITDA
for each period of four (4) consecutive fiscal quarters of CFI and its
Subsidiaries for which the last fiscal quarter ends on a date set forth below to
be greater than the ratio set forth opposite such date:
Fiscal Quarter Ending Ratio
- --------------------- -----
September 30, 1999 4.00 : 1.00
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December 31, 1999 4.00 : 1.00
March 31, 2000 3.50 : 1.00
June 30, 2000 3.50 : 1.00
September 30, 2000 2.50 : 1.00
December 31, 2000 2.50 : 1.00
March 31, 2001 2.25 : 1.00
June 30, 2001 2.25 : 1.00
September 30, 2001 2.00 : 1.00
December 31, 2001 2.00 : 1.00
March 31, 2002 2.00 : 1.00
June 30, 2002 2.00 : 1.00
ARTICLE VII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
SECTION 7.01. Collection of Accounts Receivable; Management of Collateral.
(a) The Loan Parties shall establish and at all times maintain one or more
lockboxes (each, a "Lockbox") and shall instruct all Account Debtors to remit
all amounts owed by them to one of such Lockboxes. The Loan Parties,
Administrative Agent, and the applicable Lockbox Bank shall enter into the
Lockbox Agreements, which among other things shall provide for the opening of a
Lockbox Account for the deposit of Collections at the applicable Lockbox Bank.
The Loan Parties agree that all Collections received by the Loan Parties from
any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or other arrangement
contemplated thereby shall be modified by any Loan Party without the prior
written consent of Administrative Agent on behalf of the Lender Group. Upon the
terms and subject to the conditions set forth in the Lockbox Agreements, all
amounts received in each Lockbox Account shall be wired each Business Day into
the Administrative Agent Account. Until the Lender Group has advised
Administrative Borrower to the contrary after the occurrence and during the
continuance of an Event of Default,
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the Loan Parties and their Subsidiaries may and will enforce, collect and
receive all amounts owing on the Account Receivables for the Lender Group's
benefit and on the Lender Group's behalf, but at the Borrower's expense; such
privilege shall terminate, at the election of the Lender Group, upon the
occurrence and during the continuance of any Event of Default. All Collections
(including checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness) received directly by any Loan Party or any Subsidiary
from any Account Debtor or any other source (exclusive of the Lender Group),
whether as proceeds from Accounts Receivable, or as proceeds of any other
Collateral, or otherwise, shall be received and held by Administrative Borrower
on behalf of the Loan Parties in trust for the Lender Group and deposited by the
Loan Parties in original form and no later than the next Business Day after
receipt thereof into a Lockbox Account. No Loan Party shall commingle such
Collections with the Loan Parties' own funds or the funds of any Subsidiary or
Affiliate of the Loan Parties or with the proceeds of any assets not included in
the Collateral. Administrative Agent shall charge the Loan Account, for the sole
and separate accounts of Collateral Agent and Administrative Agent as set forth
below, on the last day of each month, for 2 Business Days of 'clearance' or
`float' at the rate applicable to Revolving Loans set forth in Section 2.04(a)
or Section 2.04(b), as applicable, on all Collections that are received by
Administrative Agent (regardless of whether received in a Lockbox Account,
whether provisionally applied to reduce the Obligations under the Loan
Documents, or otherwise); it being agreed by Administrative Agent and Collateral
Agent that 50% of all such clearance or float shall be for the sole and separate
account of Administrative Agent and that the other 50% of all such clearance or
float shall be for the sole and separate account of Collateral Agent. This
across-the-board 2 Business Day clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the Lender Group's financing of the Borrower, and shall apply irrespective of
the characterization of whether receipts are owned by the Loan Parties or the
Lender Group, and whether or not there are any outstanding Revolving Loans, the
effect of such clearance or float charge being the equivalent of charging 2
Business Days of interest on such Collections. All funds received in the Lockbox
Account pursuant to this Section 7.01(a) shall be credited to the Loan Account
for application at the end of each Business Day to reduce the then principal
balance of the Revolving Loans, conditional upon final payment to the Lender
Group. No checks, drafts or other instruments received by the Lender Group shall
constitute final payment to the Lender Group unless and until such instruments
have actually been collected.
(b) After the occurrence and during the continuance of an Event of Default, the
Lender Group may send a notice of assignment and/or notice of the Lender Group's
security interest to any and all Account Debtors or third parties holding or
otherwise concerned with any of the Collateral, and thereafter the Lender Group
shall have the sole right to collect the Accounts Receivable and/or take
possession of the Collateral and the books and records relating thereto. Except
in the absence of a continuing Event of Default, as permitted by Section
6.02(o), each of the Loan Parties shall not, and shall not permit its
Subsidiaries to, without prior written consent of Administrative Agent, grant
any extension of time of payment of any Account Receivable, compromise or settle
any Account Receivable for less than the full amount thereof, release, in whole
or in part, any Person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(c) Each Loan Party hereby appoints the Administrative Agent for the benefit of
the Lender Group or its designee on behalf of the Lender Group as such Loan
Party's
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attorney-in-fact with power exercisable during the continuance of any Default or
Event of Default to do any one or more of the following:
(i) to endorse such Loan Party's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Accounts
Receivable;
(ii) to sign the such Loan Party's name on any invoice or bill of lading
relating to any of the Accounts Receivable, drafts against Account Debtors with
respect to Accounts Receivable, assignments and verifications of Accounts
Receivable and notices to Account Debtors with respect to Accounts Receivables;
(iii) to send verification of Accounts Receivable;
(iv) to renew and extend any Loan Party's copyrights, copyright registrations,
and copyright rights and to register works protectable by copyright; and
(v) to notify the Postal Service authorities to change the address for delivery
of mail addressed to such Loan Party or any of its Subsidiaries to such address
as Administrative Agent for the benefit of the Lender Group may designate and to
do all other acts and things necessary to carry out this Agreement.
All acts of said attorney or designee are hereby ratified and approved, and said
attorney or designate shall not be liable for any acts of omission or commission
made in good faith (other than acts or omissions constituting gross negligence
or willful misconduct), or for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the Loans
and other Obligations under the Loan Documents are paid in full in cash and all
of the Loan Documents are terminated.
(d) Nothing herein contained shall be construed to constitute the Lender Group
as agent of any Loan Party or any of its Subsidiaries for any purpose
whatsoever, and the Lender Group shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof (other than
from acts or omissions of the Lender Group made in bad faith or constituting
gross negligence or willful misconduct, in each case, as determined by a final
judgment of a court of competent jurisdiction). The Lender Group shall not,
under any circumstance or in any event whatsoever, have any liability for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any of the Accounts Receivable or any instrument received in
payment thereof or for any damage resulting therefrom (other than acts or
omissions of the Lender Group made in bad faith or constituting gross negligence
or willful misconduct, in each case, as determined by a final judgment of a
court of competent jurisdiction). The Lender Group, by anything herein or in any
assignment or otherwise, does not assume any of the obligations under any
contract or agreement assigned to the Lender Group and shall not be responsible
in any way for the performance by any Loan Party or any of its Subsidiaries of
any of the terms and conditions thereof.
(e) If any Account Receivable includes a charge for any tax payable to any
Governmental Authority, Administrative Agent is hereby authorized (but in no
event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the Borrower's
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account and to charge the Borrower therefor. Administrative Borrower on behalf
of the applicable Loan Parties shall notify Administrative Agent if any Account
Receivable includes any taxes due to any such Governmental Authority and, in the
absence of such notice, Administrative Agent for the benefit of the Lender Group
shall have the right to retain the full proceeds of such Account Receivable and
shall not be liable for any taxes that may be due by reason of the sale and
delivery creating such Account Receivable.
SECTION 7.02. Accounts Receivable Documentation. The Loan Parties will at such
intervals as Administrative Agent may reasonably require, execute and deliver
confirmatory written assignments of the Accounts Receivable to the Lender Group
and furnish such further schedules and/or information as Administrative Agent
may reasonably require relating to the Accounts Receivable, including, without
limitation, sales invoices or the equivalent, credit memos issued, remittance
advises, reports and copies of deposit slips and copies of original shipping or
delivery receipts for all merchandise sold. In addition, Administrative Borrower
on behalf of the Loan Parties promptly shall notify Administrative Agent, in
writing, of any non-compliance in respect of the representations, warranties and
covenants contained in Section 7.03. The items to be provided under this Section
7.02 are to be in form reasonably satisfactory to Administrative Agent and are
to be executed and delivered to Administrative Agent from time to time solely
for its convenience in maintaining records of such Collateral. The Loan Parties'
failure to give any of such items to the Lender Group shall not affect,
terminate, modify or otherwise limit the Lender Group's Lien on the Collateral.
The Loan Parties shall not re-date any invoice or sale or make sales on extended
dating beyond that customary in the Loan Parties' industry, and shall not
re-bill any Accounts Receivable without promptly disclosing the same to
Administrative Agent and providing Administrative Agent with copy of such
re-billing, identifying the same as such. If any Loan Party becomes aware of
anything materially detrimental to the credit of any customer of any of the Loan
Parties, Administrative Borrower on behalf of the Loan Parties will promptly
advise Administrative Agent thereof in writing.
SECTION 7.03. Status of Accounts Receivable and Other Collateral. With respect
to Collateral of any Loan Party at the time the Collateral becomes subject to
the Lender Group's Lien, each of the Loan Parties covenants, represents and
warrants (subject to the Acquisition Qualification): (a) such Loan Party shall
be the sole owner, free and clear of all Liens except in the favor of the Lender
Group or otherwise permitted hereunder, and fully authorized to sell, transfer,
pledge and/or grant a security interest in each and every item of said
Collateral; (b) each Account Receivable shall be a good and valid account
representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the Account Debtor therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to any absolute sale and
delivery upon the specified terms of goods sold or services rendered by such
Loan Party, except for such disputes, defenses, or offset claims that arise in
the ordinary course of business and, individually or in the aggregate, do not
affect a material portion of any one or more of the Accounts Receivable; (c)
except as disclosed in writing to Administrative Agent or as is customary in the
Loan Parties' business, no Account Receivable shall be subject to any defense,
offset, counterclaim, discount or allowance except as may be stated in the
invoice relating thereto; (d) none of the transactions underlying or giving rise
to any Account Receivable shall violate, in any material respect, any applicable
state or federal laws or regulations, and all documents relating thereto shall
be legally sufficient under such laws or regulations and shall be
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legally enforceable in accordance with their terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws and by general principles of equity; (e) no agreement under which any
deduction or offset of any kind, other than normal trade discounts, may be
granted or shall have been made by any Loan Party at or before the time such
Accounts Receivable is created; (f) all agreements, instruments and other
documents relating to any Account Receivable shall be true, correct, and
complete and in all material respects what they purport to be; (g) all
signatures and endorsements that appear on all material agreements, instruments
and other documents relating to Account Receivable shall be genuine and all
signatories and endorsers shall have full capacity to contract; (h) the Loan
Parties shall maintain books and records pertaining to said Collateral in such
detail, form and scope as Administrative Agent shall reasonably require; (i)
Administrative Borrower on behalf of the Loan Parties promptly shall notify
Administrative Agent in writing if any accounts arise out of contracts with the
United States or any department, agency, or instrumentality thereof and will
execute any instruments and take any steps required by Administrative Agent in
order that all monies due or to become due under any such contract shall be
assigned to the Lender Group and notice thereof given to the United States
Government under the Federal Assignment of Claims Act; (j) Administrative
Borrower on behalf of the Loan Parties will, immediately upon any Loan Party's
learning thereof, report in writing to Administrative Agent and Collateral Agent
any material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters affecting in any material respect the value,
enforceability or collectibility of any of the Collateral; (k) if any amount
payable under or in connection with any Account Receivable is evidenced by a
promissory note or other instrument, such promissory note or instrument shall be
promptly pledged, endorsed, assigned and delivered to Collateral Agent for the
benefit of the Lender Group as additional Collateral; (l) no Loan Party shall
re-date any invoice or sale or make sales on extended dating beyond that which
is customary in the ordinary course of its business and in the industry; (m) the
Loan Parties shall conduct a physical count of the Inventory at such intervals
as Administrative Agent may reasonably request and Administrative Borrower on
behalf of the Loan Parties promptly shall supply Administrative Agent with a
copy of such count accompanied by a report of the value (based on the lower of
cost (on a first in first out basis) and market value) of such Inventory; and
(n) the Loan Parties are not, and shall not be, entitled to pledge the Lender
Group's credit on any purchases or for any purpose whatsoever.
SECTION 7.04. Collateral Custodian. Upon the occurrence and during the
continuance of any Default or Event of Default, the Lender Group may at any time
and from time to time employ and maintain on the premises of the Borrower a
custodian selected by Collateral Agent who shall have full authority to do all
acts necessary to protect the Lender Group's interests. Each Loan Party hereby
agrees to, and to cause its Subsidiaries to, cooperate with any such custodian
and to do whatever Collateral Agent may reasonably request to preserve the
Collateral. All Lender Group Expenses incurred by the Lender Group by reason of
the employment of the custodian shall be the responsibility of the Borrower and
charged to the Loan Account.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following Events of Default shall
occur and be continuing:
(a) any Loan Party fails to pay when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) any Obligation within
the meaning of clause (i) of such term, including, without limitation any
principal of or interest on any Loan or any fee or other amount due hereunder;
(b) any representation or warranty made or deemed made by or on behalf of any
Loan Party or by any officer of the foregoing under or in connection with any
Loan Document or under or in connection with any report, certificate, or other
document delivered to the Lender Group pursuant to any Loan Document shall have
been incorrect in any material respect when made or deemed made;
(c) any Loan Party fails to perform or comply with any covenant or agreement
contained in:
(i) Section 6.01(a)(ix), (x), (xi), or (xv), Section 6.01(b), Section 6.01(f),
Section 6.01(k), Section 6.01(r), Section 6.02, or Section 6.03 hereof;
(ii) Section 2.2, Section 2.4, or Section 5 of any Security Agreement to which
it is a party;
(iii) Section 4, Section 5, or Section 6 of any Copyright Security Agreement to
which it is a party; or
(iv) Section 3 of any Pledge Agreement to which it is a party;
(d) any Loan Party fails to perform or comply with any other material term,
covenant or agreement contained in any Loan Document to be performed or observed
by it and, except as set forth in subsections (a), (b) and (c) of this Section
8.01, such failure, if capable of being remedied, shall remain unremedied for 10
days after the earlier of the date a senior officer of any Loan Party becomes
aware of such failure and the date written notice of such default shall have
been given by Collateral Agent on behalf of the Lender Group to Administrative
Borrower for the benefit of the Loan Parties; provided, however, the foregoing
cure period shall not apply to any failure that was caused by the intentional
action by or on behalf of any Loan Party or has occurred on another occasion
within 6 months before such failure;
(e) any Loan Party fails to pay any principal of or interest on any of its
Indebtedness (excluding the Obligations) in excess of $100,000, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness, or any other default under any
agreement or instrument relating to any such Indebtedness, or any other event,
shall occur and
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shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased or an offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case prior to the stated
maturity thereof;
(f) (i) an Insolvency Proceeding shall be commenced by any Loan Party, or (ii)
any Loan Party shall be generally not paying its debts as such debts become due
or shall admit in writing its inability to pay its debts generally, or (iii)
shall take any action to authorize or effect any of the actions set forth above
in this subsection (f);
(g) any Insolvency Proceeding shall be commenced against any Loan Party and any
of the following shall occur: (i) such Loan Party consents to the institution of
the Insolvency Proceeding against it; (ii) the petition commencing the
Insolvency Proceeding is not timely controverted; (iii) the petition commencing
the Insolvency Proceeding is not dismissed within 30 calendar days of the date
of the filing thereof; provided, however, that, during the pendency of such
period, Administrative Agent (including any successor agent) and each other
member of the Lender Group shall be relieved of its obligation to extend credit
hereunder; (iv) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, such Loan Party; or (v) an order for
relief shall have been issued or entered therein;
(h) any provision of any Loan Document shall at any time for any reason (other
than pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against any Loan Party intended to be a party thereto, or the
validity or enforceability thereof shall be contested by any party thereto, or a
proceeding shall be commenced by any Loan Party or any Governmental Authority
having jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny in writing that it has
any liability or obligation purported to be created under any Loan Document;
(i) any Security Agreement, Copyright Security Agreement, Trademark Security
Agreement, Patent Security Agreement, Pledge Agreement, or any other Loan
Document that is a security document, after delivery thereof pursuant hereto,
shall for any reason fail or cease to create a valid and perfected and, except
to the extent permitted by the terms hereof or thereof, first priority Lien in
favor of the Lender Group on any Collateral purported to be covered thereby
(unless such failure or cessation is due solely to the acts or omissions of the
Lender Group and not in any respect due to any act or omission of any Loan
Party, and provided that the Loan Parties shall cooperate fully with the Lender
Group to cure such failure or cessation to the extent it may be cured);
(j) one or more judgments or orders for the payment of money exceeding $250,000
in the aggregate shall be rendered against any Loan Party and remain unsatisfied
and either (i) enforcement proceedings shall have been commenced by any creditor
upon any such judgment or order, or (ii) there shall be a period of 10
consecutive days after entry thereof during which a stay of enforcement of any
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; provided, however, that any such judgment or order shall not
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give rise to an Event of Default under this subsection (j) if and for so long as
(A) the amount of such judgment or order is covered by a valid and binding
policy of insurance between the defendant and the insurer covering full payment
thereof and (B) such insurer has been notified, and has not disputed the claim
made for payment, of the amount of such judgment or order; or
(k) any Loan Party or any of its ERISA Affiliates shall have made a complete or
partial withdrawal from a Multiemployer Plan, and, as a result of such complete
or partial withdrawal, any Loan Party or such ERISA Affiliate incurs a
withdrawal liability in an annual amount exceeding $50,000; or a Multiemployer
Plan enters reorganization status under Section 4241 of ERISA, and, as a result
thereof, any Loan Party's, or such ERISA Affiliate's, annual contribution
requirement with respect to such Multiemployer Plan increases in an annual
amount exceeding $50,000;
(l) any Termination Event with respect to any Employee Plan shall have occurred,
and, 30 days after notice thereof shall have been given to Administrative Agent
for the benefit of the Loan Parties by Collateral Agent on behalf of the Lender
Group, (i) such Termination Event (if correctable) shall not have been
corrected, and (ii) the then current value of such Employee Plan's vested
benefits exceeds the then current value of assets allocable to such benefits in
such Employee Plan by more than $150,000 (or, in the case of a Termination Event
involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Code, the
liability is in excess of such amount);
(m) a Change of Control shall have occurred;
(n) an event or development occurs which has a Material Adverse Effect; or
(o) an event of default under any other Loan Document occurs, after giving
effect to all cure periods (if any) expressly applicable thereto;
then, and in any such event, Collateral Agent, at the written instruction of the
Required Lenders, may, by notice to Administrative Borrower for the benefit of
the Loan Parties, (i) terminate the Commitments, whereupon the Commitments shall
terminate immediately, (ii) declare all Loans then outstanding to be due and
payable, whereupon the aggregate principal of such Loans, all accrued and unpaid
interest thereon, all fees and all other Obligations payable under this
Agreement and the other Loan Documents shall become due and payable immediately,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Loan Parties, and (iii) exercise any and all
other rights and remedies available to the Lender Group at law or in equity, or
hereunder and under the other Loan Documents; provided, however, that upon the
occurrence of any Event of Default with respect to any Loan Party described in
subsection (f) or (g) of this Section 8.01, without any notice to any Loan Party
or any other Person or any act by the Lender Group, the Commitments shall
automatically terminate and the Loans then outstanding, together with all
accrued and unpaid interest thereon, all fees and all other amounts due under
this Agreement and the other Loan Documents shall become due and payable
automatically and immediately, without presentment, demand, protest or notice of
any kind, all of which are expressly waived by the Loan Parties.
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ARTICLE IX
ISSUANCE OF EQUITY INTERESTS TO HOLDCO AND OTHER WARRANTHOLDERS
SECTION 9.01. Authorization and Issuance of Warrants. On the Effective Date, CFI
shall issue to Holdco and each other Warrantholder one or more warrant
certificates covering the purchase of shares of Common Stock substantially in
the form of Exhibit W-1 hereto (such certificates, together with the rights to
purchase Common Stock provided thereby and all warrant certificates covering
such stock issued upon transfer, division or combination of, or in substitution
for, any thereof, being herein called the "Warrants") in an aggregate amount
equal to 5.0% (as such percentage may be adjusted pursuant to the terms and
conditions of the Warrants) of the issued and outstanding shares of Common Stock
as of such date on a fully diluted basis. It is understood and agreed that the
Warrants contain provisions affecting the number of shares of Common Stock that
may be acquired, which provisions are set forth in the Warrants. Such Warrants
will have an exercise price as set forth in the Warrants and will cease to be
exercisable on a date that is the fifth anniversary of the Effective Date.
SECTION 9.02. Securities Act Matters.
(a) Collateral Agent represents and warrants to CFI that:
(i) Holdco is acquiring the Warrants hereunder for its own account, without a
view to the distribution thereof, all without prejudice, however, to the right
of Holdco at any time, in accordance with this Agreement, lawfully to sell or
otherwise to dispose of all or any part of the Warrants or Warrant Shares held
by it.
(ii) Holdco is an "accredited investor" within the meaning of Regulation D under
the Securities Act.
(b) each Warrantholder (other than Holdco) represents and warrants to CFI that:
(i) such Warrantholder is acquiring the Warrants hereunder for its own account,
without a view to the distribution thereof, all without prejudice, however, to
the right of such Warrantholder at any time, in accordance with this Agreement,
lawfully to sell or otherwise to dispose of all or any part of the Warrants or
Warrant Shares held by it.
(ii) such Warrantholder is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
(c) CFI represents and warrants to Collateral Agent, Holdco, and each other
Warrantholder that:
(i) Assuming the truth and accuracy of the representations and warranties of
Collateral Agent (relative to Holdco) and each Warrantholder (other than
Holdco), as the case may be, contained in the immediately preceding paragraphs,
the issuance of the Warrants to Holdco and each such Warrantholder (as the case
may be)
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hereunder and the issuance of shares of Common Stock to Holdco or each such
Warrantholder (as the case may be) pursuant to the Warrants are exempt from the
registration and prospectus delivery requirements of the Securities Act.
(ii) All stock and securities of CFI heretofore issued and sold by CFI were, and
all securities of CFI issued and sold by CFI on and after the date hereof are or
will be issued and sold in accordance with, or are or will be exempt from, the
registration and prospectus delivery requirements of the Securities Act.
(iii) CFI agrees that neither it nor any Person acting on its behalf has offered
or will offer the Warrants or Warrant Shares or any part thereof or any similar
securities for issue or sale to, or has solicited or will solicit any offer to
acquire any of the same from, any Person so as to bring the issuance and sale of
the Warrants or Warrant Shares hereunder within the provisions of the
registration and prospectus delivery requirements of the Securities Act.
SECTION 9.03. Certain Taxes. CFI shall pay all taxes (other than Federal, state
or local income taxes, including any taxes imposed upon the gross receipts or
net income of any member of the Lender Group by the United States of America or
any political subdivision thereof and any franchise tax imposed in lieu of tax
on gross receipts or net income) which may be payable in connection with the
execution and delivery of this Agreement or the issuance of the Warrants or
Warrant Shares hereunder or in connection with any modification of this
Agreement or the Warrants and shall hold the Lender Group and Holdco harmless
without limitation as to time against any and all liabilities with respect to
all such taxes. The obligations of CFI under this Section 9.03 shall survive any
redemption, repurchase or acquisition of Warrants or Warrant Shares by CFI, any
termination of this Agreement, and any cancellation or termination of the
Warrants. The parties hereto agree that, for income tax purposes, the Warrants
are issued as consideration of the making of Term Loan B. In connection
therewith, each Warrantholder (other than Holdco), Collateral Agent on behalf of
Holdco, and CFI hereby agree to negotiate in good faith to determine a mutually
acceptable purchase price per share to be attributed to the Warrants issued to
the Warrantholders hereunder on the date hereof; provided, however, that each
Warrantholder (other than Holdco), Collateral Agent on behalf of Holdco, and CFI
expect and intend that such purchase price per share shall not exceed $3.79 (it
being acknowledged that such maximum purchase price per share does not reflect
any agreement whatsoever among such parties as to the actual agreed upon
purchase price).
SECTION 9.04. Cancellation and Issuance. If a Term Loan B Lender assigns or
otherwise transfers all or any of its Term Loan B (including by selling
participations therein) to any Person, such Term Loan B Lender (or Holdco, if
such Term Loan B Lender is an Affiliate of Holdco) may request (upon 10 days'
prior notice to CFI) that (a) a number of Warrants held by such Term Loan B
Lender or Holdco (as the case may be) be canceled on the date of such assignment
and transfer and (b) a like number of Warrants be issued by CFI to the Person to
whom such Loans are being assigned or otherwise transferred. Upon the date
specified in such request:
(i) CFI shall issue, and by such Term Loan B Lender or Holdco (as the case may
be) shall surrender (or cause to be surrendered) for cancellation, such number
of Warrants as aforesaid, provided that such issuance shall not violate the
Securities Act or any applicable state securities laws;
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(ii) CFI will deliver to each Person that receives a certificate for Warrants a
favorable legal opinion from counsel to CFI acceptable to such Person, covering
the matters set forth in the opinion of counsel to CFI and its Subsidiaries
attached as Exhibit O-1 hereto (to the extent relating to the Warrants and the
Registration Rights Agreement) and Exhibit O-2 hereto (to the extent relating to
the Warrants and the Registration Rights Agreement);
(iii) each Person that receives Warrants will deliver a certificate to CFI
affirming the representations and warranties as to such Person contained in
Section 9.02(a) and Section 9.02(b) hereof as of such date; and
(iv) CFI will deliver a certificate to each Person that receives Warrants
affirming the representations and warranties contained in Section 9.02(c) hereof
as of such date.
ARTICLE X
GUARANTY
SECTION 10.01. Guaranty; Limitation of Liability. Each Guarantor hereby
unconditionally and irrevocably:
(a) guarantees the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of:
(i) all Obligations (other than the Obligations
described in clauses (ii) and (iii) below) of each Borrower (other than
such Guarantor, if such Guarantor also is a Borrower) now or hereafter
existing under any Loan Document, whether for principal, interest,
fees, Lender Group Expenses or otherwise;
(ii) all Obligations constituting principal and
interest in respect of Term Loan A of each Borrower (other than such
Guarantor, if such Guarantor also is a Borrower) now or hereafter
existing under any Loan Document; and
(iii) all Obligations constituting principal and
interest in respect of Term Loan B of each Borrower (other than such
Guarantor, if such Guarantor also is a Borrower) now or hereafter
existing under any Loan Document;
(all such obligations described in the foregoing clauses (i), (ii), and
(iii), to the extent not paid by the Borrower, being the "Guaranteed
Obligations"); and
(b) agrees to pay any and all Lender Group Expenses (including
reasonable counsel fees and expenses) incurred by the Lender Group in
enforcing any rights under the guaranty set forth in this Article.
Without limiting the generality of the foregoing, such Guarantor's liability
shall extend to all amounts that constitute part of the Guaranteed Obligations
and would be owed by the Borrower to the Lender Group under any Loan Document
but for the fact that they are unenforceable or not allowable due to the
existence of an Insolvency Proceeding involving the Borrower.
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SECTION 10.02. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Lender
Group with respect thereto. The obligations of each Guarantor under this Article
are independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against any Guarantor to enforce such obligations,
irrespective of whether any action is brought against the Borrower or whether
the Borrower is joined in any such action or actions. The liability of each
Guarantor under this Article shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now or hereafter have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or any agreement
or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations, or any other amendment or waiver
of or any consent to departure from any Loan Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any Collateral, or any
taking, release or amendment or waiver of or consent to departure from the
guaranty of any other Person, for all or any of the Guaranteed Obligations;
(d) any change, restructuring or termination of the corporate, limited liability
company or partnership structure or existence of the Borrower or any other Loan
Party; or
(e) any other circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by the Lender
Group that might otherwise constitute a defense available to, or a discharge of,
the Guarantor, the Borrower or any other guarantor or surety.
This Article shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Lender Group or any other Person upon the
insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as
though such payment had not been made.
SECTION 10.03. Waiver. Each Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Article and any requirement that the Lender Group exhaust
any right or take any action against the Borrower or any other Person or any
collateral. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated herein and that the waiver
set forth in this Section 10.03 is knowingly made in contemplation of such
benefits. Each Guarantor hereby waives any right to revoke this Article, and
acknowledges that this Article is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
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SECTION 10.04. Continuing Guaranty; Assignments. The guaranty set forth in this
Article is a continuing guaranty and shall (a) remain in full force and effect
until the later of the cash payment in full of the Guaranteed Obligations (other
than indemnification obligations as to which no claim has been made) and all
other amounts payable under this Article and the Final Maturity Date, (b) be
binding upon each Guarantor, its successors and assigns and (c) inure to the
benefit of and be enforceable by the Lender Group and its successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), the Lender Group may pledge, assign or otherwise transfer all or any
portion of its rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or any portion of its Commitments,
the Loans owing to it and any Note held by it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted the Lender Group herein or otherwise, in each case as provided
in Section 11.07.
SECTION 10.05. Subrogation. No Guarantor will exercise any rights that it may
now or hereafter acquire against the Borrower or any other insider guarantor
that arise from the existence, payment, performance or enforcement of any
Guarantor's obligations under this Article, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Lender Group against the Borrower or any other insider guarantor or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under this
Article shall have been paid in full in cash and the Final Maturity Date shall
have occurred. If any amount shall be paid to the Guarantor in violation of the
immediately preceding sentence at any time prior to the later of the payment in
full in cash of the Guaranteed Obligations and all other amounts payable under
this Article and the Final Maturity Date, such amount shall be held in trust for
the benefit of the Lender Group and shall forthwith be paid to the Lender Group
to be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Article, whether matured or unmatured, in accordance with the
terms of this Agreement, or to be held as collateral for any Guaranteed
Obligations or other amounts payable under this Article thereafter arising. If
(i) the Guarantor shall make payment to the Lender Group of all or any part of
the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Article shall be paid in full in cash and (iii) the
Final Maturity Date shall have occurred, the Lender Group will, at the
Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 10.06. Suretyship Agreement. The agreements and waivers set forth in
this Section 10 are in addition to, and not in limitation of, the agreements and
waivers set forth in the Suretyship Agreement, and the provisions of the
Suretyship Agreement are incorporated herein by this reference.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered:
if to any Loan Party, in care of Administrative Borrower for the benefit of such
Loan Party, at the following address:
CFI PROSERVICES, INC.
400 S W Sixth Avenue, Suite 200
Portland, Oregon 97204
Attention: Jeffrey P. Strickler, Esq. and Mr. Kurt Ruttum
Telephone: 503.274.7280
Telecopier: 503.790.9229
with a copy to:
Farleigh, Wada & Witt, P.C.
121 S.W. Morrison, Suite 600
Portland, Oregon 97204
Attention: F. Scott Farleigh, Esq.
Telephone: 503.228.6044
Telecopier: 503.228.1741
if to Administrative Agent or to Administrative Agent on behalf of the Revolving
Credit Lenders, at the following address:
Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025-3333
Attention: Business Finance Division Manager
Telephone: 310.996.7000
Telecopier: 310.478.9788
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with a copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telephone: 213.489.4060
Telecopier: 213.745.3345
if to Collateral Agent or to Collateral Agent on behalf of the Term Loan
Lenders, at the following address:
Ableco Finance LLC
450 Park Avenue
New York, New York 10022
Attention: Mr. Kevin P. Genda
Telephone: 212.891.2117
Telecopier: 212.755.3009
with a copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telephone: (213) 489-4060
Telecopier: (213) 745-3345
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 11.01. All such notices and other communications shall be
effective, (i) if mailed, when received or five days after deposited in the
mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered, upon delivery, except that notices
to Administrative Agent pursuant to Article II shall not be effective until
received by Administrative Agent.
SECTION 11.02. Amendments, Etc. No amendment or waiver of any provision of this
Agreement, any Note, or any other Loan Document, and no consent to any departure
by the Borrower or any other Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required Lenders
(or by Administrative Agent and Collateral Agent, in each case, at the written
request of the Required Lenders), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
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unless in writing and signed by Borrower, all the Lenders, Administrative Agent,
and Collateral Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due to
the Lender Group (or any member of the Lender Group) hereunder or under any
other Loan Document; provided, however, that, with respect to any Obligation
relating solely to a particular member of the Lender Group, no consent of any
other member of the Lender Group shall be required for the compromise of such
Obligation owing to such member of the Lender Group;
(c) reduce the principal of, or the rate of interest specified herein on any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document, or forgive, compromise, or cancel any of the Obligations; provided,
however, that no consent of the Term Loan A Lenders or the Term Loan B Lenders
shall be required for the compromise of any Obligation relating solely to
Revolving Loans, no consent of the Revolving Credit Lenders or the Term Loan B
Lenders shall be required for the compromise of any Obligation relating solely
to Term Loans A, and no consent of the Revolving Credit Lenders or the Term Loan
A Lenders shall be required for the compromise of any Obligation relating solely
to Term Loans B;
(d) change the percentage of the Commitments that is required for the Lenders or
any of them to take any action hereunder;
(e) amend any provision of the Agreement or any other Loan Document providing
for consent or other action by all Lenders;
(f) release Collateral other than as permitted by Section 12.11, or subordinate
any security interests or liens of Collateral Agent for the benefit of the
Lender Group;
(g) change the definition of "Required Lenders";
(h) release Borrower from any Obligation for the payment of money, or agree to
subordinate any of the Obligations in right of payment to any other
Indebtedness;
(i) amend the provisions of Section 3.03;
(j) increase the advance rate with respect to the Eligible Accounts (except for
the restoration of an advance rate after the prior reduction thereof by
Administrative Agent) or any sublimit in the Borrowing Base applicable thereto;
(k) permit the sale of all or substantially all of the Capital Stock of any Loan
Party or any of its Subsidiaries; or
(l) amend any of the provisions of this Section 11.02 or Article XII;
and, provided further, however, that (1) no amendment, waiver or consent shall,
unless in writing and signed by Administrative Agent, affect the rights or
duties of Administrative Agent under
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this Agreement or any other Loan Document, and (2) no amendment, waiver or
consent shall, unless in writing and signed by Collateral Agent, affect the
rights or duties of Collateral Agent under this Agreement or any other Loan
Document. The foregoing notwithstanding, any amendment, modification, waiver,
consent, termination, or release of or with respect to any provision of this
Agreement or any other Loan Document that relates only to the relationship of
the Lender Group among themselves, and that does not affect the rights or
obligations of Borrower or any other Loan Party, shall not require consent by or
the agreement of Borrower or any other Loan Party.
SECTION 11.03. No Waiver; Remedies, Etc. No failure on the part of the Lender
Group to exercise, and no delay in exercising, any right hereunder or under any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Lender Group provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Lender Group under any Loan Document against
any party thereto are not conditional or contingent on any attempt by the Lender
Group to exercise any of their rights under any other Loan Document against such
party or against any other Person.
SECTION 11.04. Expenses; Taxes, Attorneys' Fees. The Borrower will pay on
demand, all Lender Group Expenses incurred by or on behalf of the Lender Group,
regardless of whether the transactions contemplated hereby are consummated,
including, without limitation, reasonable fees, costs, client charges and
expenses of the several counsel (including in-house counsel) for the several
members of the Lender Group, accounting, due diligence, periodic field audits,
physical counts, valuations, fees of Rating Agencies associated with the rating
of the Loans, investigations, monitoring of assets, appraisals of Collateral,
environmental assessments, miscellaneous disbursements, examination, travel,
lodging and meals, arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Loan Documents, (including, without limitation, the
preparation of any additional Loan Documents, pursuant to Section 6.01(b) or the
review of any of the agreements, instruments and documents referred to in
Section 6.02(f)), (b) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given, (c) the preservation and protection of any of the Lender
Group's rights under this Agreement or the other Loan Documents, (d) the defense
of any claim or action asserted or brought against the Lender Group by any
Person that arises from or relates to this Agreement, any other Loan Document,
the Lender Group's claims against the Borrower and each other Loan Party, or any
and all matters in connection therewith, (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Loan Document, (f) the filing of any petition, complaint, answer,
motion or other pleading by the Lender Group, or the taking of any action in
respect of the Collateral or other security, in connection with this Agreement
or any other Loan Document, (g) the protection, collection, lease, sale, taking
possession of or liquidation of, any Collateral or other security in connection
with this Agreement or any other Loan Document, (h) any attempt to enforce any
Lien or security interest in any Collateral or other security in connection with
this Agreement or any other Loan Document, (i) any attempt to collect from the
Borrower or any other Loan Party, (j) the receipt by the Lender Group of any
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advice from its professionals with respect to any of the foregoing, (k) all
liabilities and costs arising from or in connection with the past, present or
future operations of the Borrower and each other Loan Party involving any damage
to real or personal property or natural resources or harm or injury alleged to
have resulted from any Release of Hazardous Materials on, upon or into such
property, (1) any Environmental Liabilities and Costs incurred in connection
with the investigation, removal, cleanup and/or remediation of any Hazardous
Materials present or arising out of the operations of any facility of the
Borrower and its Subsidiaries and any other Loan Party, or (m) any Environmental
Liabilities and Costs incurred in connection with any Environmental Lien.
Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrower agrees to pay all stamp, document, transfer, recording or
filing taxes or fees and similar impositions now or hereafter imposed or levied
in connection with this Agreement or any other Loan Document, and the Borrower
agrees to save the Lender Group harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions, (y) the
Borrower agrees to pay all broker fees that may become due in connection with
the transactions contemplated by this Agreement, and (z) if any Loan Party fails
to perform any covenant or agreement contained herein or in any other Loan
Document, the Lender Group may itself perform or cause performance of such
covenant or agreement, and the Lender Group Expenses of the Lender Group
incurred in connection therewith shall be reimbursed on demand by the Borrower.
SECTION 11.05. Right of Set-off, Sharing of Payments, Etc.
(a) Upon the occurrence and during the continuance of any Event of Default and
in addition to (and without limitation of) any right of set-off, banker's lien,
or counterclaim any Lender may otherwise have, each Lender (at its option but
only with the prior written consent of Administrative Agent and Collateral
Agent) may, and is hereby authorized by the Loan Parties to, at any time and
from time to time, without notice to any Loan Party (any such notice being
expressly waived by the Loan Parties) and to the fullest extent permitted by
law, set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of any Loan Party against any
and all obligations of the Loan Parties either now or hereafter existing under
any Loan Document, irrespective of whether or not the Lender Group shall have
made any demand hereunder or thereunder and although such obligations may be
contingent or unmatured. The Lender Group agrees to notify Administrative
Borrower for the benefit of the Loan Parties, Collateral Agent, and
Administrative Agent promptly (but in no event later than 5 Business Days) after
any such set-off and application made by the Lender Group provided that the
failure to give such notice to the Loan Parties shall not affect the validity of
such set-off and application.
(b) If any Lender shall obtain from any Loan Party payment of any Obligation
through the exercise of any right of set-off, banker's lien, or counterclaim or
similar right or otherwise (other than from Administrative Agent as provided in
this Agreement), and, as a result of such payment, such Lender shall have
received a greater amount of the Obligations than the amount allocable to such
Lender hereunder, Administrative Agent and the other members of the Lender Group
(including such Lender) shall promptly make such adjustments from time to time
as shall be equitable, to the end that the Lender Group shall share the benefit
of such excess
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payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with Section 3.03. To such end the
Lender Group shall make appropriate adjustments among themselves if such payment
is rescinded or must otherwise be restored.
(c) Nothing contained in this Section 11.05 shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Loan Party. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a set-off to which this Section 11.05 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of Lenders entitled under this Section 11.05
to share in the benefits of any recovery on such secured claim.
SECTION 11.06. Severability. Any provision of this Agreement, which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.07. Assignments and Participations.
(a) This Agreement, the Notes, and the other Loan Documents shall be binding
upon and inure to the benefit of the Borrower and the other the Loan Parties and
the Lender Group and their respective successors and assigns; provided, however,
that (i) the Borrower and the other Loan Parties may not sell, assign, or
transfer any of its rights hereunder, or under the Notes or any other Loan
Documents, without the prior written consent of the Lender Group and any such
assignment without the Lender Group's prior written consent shall be null and
void ab initio, and (ii) any member of the Lender Group may pledge, sell,
assign, or transfer any of its rights hereunder, or under the Notes or any other
Loan Documents, to any Person without notice to or consent of the Borrower or
any other Loan Party. Except as provided in this Section 11.07, this Agreement
shall not inure to the benefit of any party other than the Loan Parties and the
Lender Group.
(b) Subject to the other provisions of this Section 11.07, any member of the
Lender Group may at any time sell, assign or participate to an Affiliate of such
member of the Lender Group or any other Person its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or a portion of its Commitments, the Loans made by it, and the Notes held by it)
without notice to or the consent of the Borrower or any other Loan Party. The
Borrower and each other Loan Party shall execute and deliver such Notes and any
amendment or other modification restatement of this Agreement or any Loan
Document as may be requested by such member of the Lender Group to reflect any
such sale or assignment.
(c) Administrative Borrower on behalf of the Borrower shall maintain, or cause
to be maintained, a register (the "Register") on which it enters the name of
each Lender as the registered owner of the Loans held by such Lender. A
Registered Loan (and the Registered Note, if any, evidencing the same) may be
assigned or sold in whole or in part only by
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registration of such assignment or sale on the Register (and each Registered
Note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the Registered Note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the Registered Note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such Registered Note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new Registered Notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the Registered Note, if any evidencing the same), the
Borrower shall treat the Person in whose name such Loan (and the Registered
Note, if any, evidencing the same) is registered as the owner thereof for the
purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(d) In the event that any Lender sells participations in the Registered Loan,
such Lender shall maintain a register on which it enters the name of all
participants in the Registered Loans held by it (the "Participant Register"). A
Registered Loan (and the Registered Note, if any, evidencing the same) may be
participated in whole or in part only by registration of such participation on
the Participant Register (and each Registered Note shall expressly so provide).
Any participation of such Registered Loan (and the Registered Note, if any,
evidencing the same) may be effected only by the registration of such
participation on the Participant Register.
(e) Any foreign Person who purchases or is assigned or participates in any
portion of such Loan shall provide Administrative Borrower (for the benefit of
the Borrower) and Administrative Agent (in the case of a purchase or assignment)
or the applicable Lender (in the case of a participation) with a completed
Internal Revenue Service Form W-8 (Certificate of Foreign Status) or a
substantially similar form for such purchaser, participant or any other
affiliate who is a holder of beneficial interests in the Loan.
(f) Any Lender may, with the written consent of Collateral Agent and
Administrative Agent (which consent shall not be unreasonably withheld in any
event), sell, assign, and delegate to one or more assignees (provided that no
written consent of Collateral Agent or Administrative Agent shall be required in
connection with any sale, assignment, and delegation by a Lender to an Eligible
Transferee) (each an "Assignee") all, or any part of all, of the Obligations,
the Commitments and the other rights and obligations of such Lender hereunder
and under the other Loan Documents, in a minimum amount of $2,500,000 (provided
that no such minimum amount shall be required in the case of an Assignee that is
an Affiliate of the assigning Lender); provided, however, that Borrower and the
other Loan Parties, Collateral Agent, and Administrative Agent may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to Administrative Borrower (for the benefit of
the Loan Parties), Collateral Agent, and Administrative Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have delivered to
Administrative Borrower (for the benefit of the Loan Parties), Collateral Agent,
and Administrative Agent an assignment and acceptance agreement, in form and
substance satisfactory to Collateral Agent ("Assignment and Acceptance"); and
(iii) the assignor Lender or Assignee has paid to Collateral Agent for
Collateral Agent's sole and separate account a processing fee in the amount of
$2,500. Anything
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contained herein to the contrary notwithstanding, the consent of Collateral
Agent and Administrative Agent shall not be required (and payment of such
processing fees shall not be required) if such assignment is in connection with
any merger, consolidation, sale, transfer, or other disposition of all or any
substantial portion of the business or loan portfolio of such Lender.
(g) From and after the date that each of Collateral Agent and Administrative
Agent notifies the assignor Lender that it has received an executed Assignment
and Acceptance and payment of the above referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.15) and be released from its obligations under this
Agreement (except with respect to Section 12.05) that arise after the effective
date of such assignment (and in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement and the other Loan Documents, such Lender shall
cease to be a party hereto and thereto), and such assignment shall effect a
novation among the Loan Parties, the assignor Lender, and the Assignee.
(h) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto;
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto; (3) such
Assignee confirms that it has received a copy of this Agreement, together with
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;
(4) such Assignee will, independently and without reliance upon Administrative
Agent, Collateral Agent, such assigning Lender, or any other Lender, 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 Agreement; (5) such Assignee appoints and authorizes each of Administrative
Agent and Collateral Agent to take such action as Administrative Agent or
Collateral Agent (as the case may be) on its behalf and to exercise such powers
under this Agreement as are delegated to Administrative Agent or Collateral
Agent (as the case may be) by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(i) Immediately upon each Assignee's making any required processing fee payment
in respect of such Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee
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and the resulting adjustment of the Commitments arising therefrom. The
Commitments allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.
(j) Subject to Section 11.07(d), any Lender may at any time, with the written
consent of Collateral Agent and Administrative Agent, sell to one or more
commercial banks, financial institutions or funds, or other Persons not
Affiliates of such Lender (a "Participant") participating interests in the
Obligations, the Commitments, and the other rights and interests of that Lender
(the "originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Collateral Agent or Administrative Agent
shall be required in connection with any sale of any such participating
interests by a Lender to an Eligible Transferee); provided, however, that: (i)
the originating Lender's obligations under this Agreement shall remain
unchanged; (ii) the originating Lender shall remain solely responsible for the
performance of such obligations; (iii) the Loan Parties, Collateral Agent, and
Administrative Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents; (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to, this Agreement
or of any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating, (B) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender, or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; (v) all amounts payable by Borrower or the other Loan Parties shall be
determined as if such Lender had not sold such participation; and (vi) any such
participation shall be in a minimum amount of $2,500,000. The rights of any
Participant only shall be derivative through the originating Lender with whom
such Participant participates and no Participant shall have any direct rights as
to the other Lenders, Administrative Agent, Collateral Agent, Borrower or any
other Loan Party, the Collections, the Collateral, or otherwise in respect of
the Obligations. No Participant shall have the right to participate directly in
the making of decisions by the Lender Group among themselves.
(k) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and information
which it now or hereafter may have relating to any Loan Party or any Loan
Party's business; provided in each case that such assignee or participant (or
prospective assignee or participant) shall agree to maintain the confidentiality
of such information pursuant to Section 11.19(e).
(l) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
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(m) Notwithstanding anything in this Section 11.07 to the contrary, no Lender
may assign or participate to any Loan Party or any Affiliate or Subsidiary
thereof, if any, any interest in any Obligation or Commitment (or any related
rights, remedies, powers or privileges) without the prior written consent of
each Lender, Collateral Agent, and Administrative Agent.
SECTION 11.08. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE
OF NEW YORK.
SECTION 11.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK
OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT OR A JOINDER HERETO, EACH LOAN
PARTY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH LOAN PARTY
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
ADMINISTRATIVE BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION
11.01, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER GROUP TO SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN
PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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SECTION 11.11. WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY AND EACH MEMBER OF THE
LENDER GROUP HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES OR OTHER
LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES
THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER GROUP HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER GROUP WOULD NOT, IN THE
EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER GROUP'S ENTERING INTO THIS AGREEMENT.
SECTION 11.12. Consent by the Lender Group. Except as otherwise expressly set
forth herein to the contrary and subject to the provisions of Section 11.02, if
the consent, approval, satisfaction, determination, judgment, acceptance or
similar action (an "Action") of the Lender Group (or any member thereof) shall
be permitted or required pursuant to any provision hereof or any provision of
any other agreement to which the Borrower and any other Loan Party are parties
and to which the Lender Group (or any member thereof) has succeeded thereto,
such Action shall be required to be in writing and may be withheld or denied by
the Lender Group (or any member thereof) with or without any reason, and without
being subject to question or challenge on the grounds that such Action was not
taken in good faith.
SECTION 11.13. No Party Deemed Drafter. Each of the parties hereto agrees that
no party hereto shall be deemed to be the drafter of this Agreement.
SECTION 11.14. Reinstatement; Certain Payments. If any claim is ever made upon
the Lender Group for repayment or recovery of any amount or amounts received by
the Lender Group in payment or on account of any of the Obligations, the Lender
Group shall give prompt notice of such claim to Administrative Borrower (for the
benefit of the Loan Parties), and if the Lender Group repays all or part of such
amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over the Lender Group or any of its
property, or (ii) any good faith settlement or compromise of any such claim
effected by the Lender Group with any such claimant, then and in such event the
Borrower agrees that (A) any such judgment, decree, order, settlement or
compromise shall be binding upon it notwithstanding the cancellation of any Note
or other instrument evidencing the Obligations or the other Loan Documents or
the termination of this Agreement or the other Loan Documents, and (B) it shall
be and remain liable to the Lender Group hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Lender Group.
SECTION 11.15. Indemnification. In addition to the Loan Parties' other
Obligations under this Agreement, each Loan Party, jointly and severally with
the other Loan
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Parties, agrees to defend, protect, indemnify and hold harmless the Lender
Group, the Agent-Related Persons, the Lender-Related Persons, any Securitization
Party and all of their respective officers, directors, employees, attorneys,
consultants and agents (collectively called the "Indemnitees") from and against
any and all losses, damages, liabilities, obligations, penalties, fees,
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to or from and after the Effective Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement, any other Loan Document or of any
other document executed in connection with the transactions contemplated by this
Agreement, (ii) the Lender Group's furnishing of funds to the Borrower under
this Agreement, including, without limitation, the management of any such Loans,
(iii) any matter relating to the financing transactions contemplated by this
Agreement or the other Loan Documents or by any document executed in connection
with the transactions contemplated by this Agreement or the other Loan
Documents, or (iv) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto
(collectively, the "Indemnified Matters"); provided, however, that the Loan
Parties shall not have any obligation to any Indemnitee under this Section 11.15
for any Indemnified Matter caused by the gross negligence or willful misconduct
of such Indemnitee, as determined by a final judgment of a court of competent
jurisdiction. Such indemnification for all of the foregoing losses, damages,
fees, costs and expenses of the Indemnitees are chargeable against the Loan
Account. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section 11.15 may be unenforceable because it is violative of
any law or public policy, each of the Loan Parties shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.
This Indemnity shall survive the repayment of the Obligations and the discharge
of the Liens granted under the Loan Documents.
SECTION 11.16. Records. The unpaid principal of and interest on the Notes, the
interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, the Revolving Credit Commitment, and the accrued
and unpaid fees payable pursuant to Section 2.06 hereof, including, without
limitation, the fees payable to the Lender Group hereunder and under the other
Loan Documents (including the Fee Letter), shall at all times be ascertained
from the records of the Lender Group, which shall be conclusive and binding
absent manifest error.
SECTION 11.17. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and the Lender Group and when the
conditions precedent set forth in Section 4.01 hereof have been satisfied or
waived in writing by the Lender Group, and thereafter shall be binding upon and
inure to the benefit of the Borrower and the Lender Group, and their respective
successors and assigns, except that the Borrower shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of the Lender Group, and any assignment by the Lender Group shall be
governed by Section 11.07 hereof.
SECTION 11.18. Joint and Several. The obligations of the Loan Parties hereunder
are joint and several. The Lender Group may, in its sole and absolute
discretion,
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enforce the provisions hereof against any one or more of the Loan Parties and
shall not be required to proceed against the Loan Parties jointly or seek
payment from the Loan Parties ratably. In addition, the Lender Group may, in its
sole and absolute discretion, select the Collateral of any one or more of the
Loan Parties for sale or application to the Obligations, without regard to the
ownership of such Collateral, and shall not be required to make such selection
ratably from the Collateral owned by each of the Loan Parties. The release or
discharge of any Loan Party by the Lender Group shall not release or discharge
the other Loan Party from the obligations of such Person hereunder.
SECTION 11.19. Confidentiality. Each member of the Lender Group 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 its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, the Confidential Information and to use reasonable
precautions to prevent such member of the Lender Group's unauthorized use of the
Confidential Information; provided, however, that nothing herein shall limit the
disclosure of any Confidential Information (a) to the extent required by
statute, rule, regulation or judicial process, (b) (i) to any other member of
the Lender Group, (ii) to counsel for such member of the Lender Group on a "need
to know" basis if such disclosure is reasonably determined by the disclosing
party to be reasonably necessary to such Person in connection with the
Obligations or the Loan Documents or the transactions contemplated thereunder,
or (iii) to counsel for any other member of the Lender Group on a "need to know"
basis if such disclosure is reasonably determined by the disclosing party to be
reasonably necessary to such Person in connection with the Obligations or the
Loan Documents or the transactions contemplated thereunder, (c) to examiners,
auditors, accountants or Securitization Parties on a "need to know" basis if
such disclosure is reasonably determined by the disclosing party to be
reasonably necessary to such Person in connection with the Obligations or the
Loan Documents or the transactions contemplated thereunder, (d) in connection
with any litigation to which the Lender Group is a party, (e) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first agrees, in writing,
to be bound by confidentiality provisions similar in substance to this Section
11.19 in all material respects, or (f) pursuant to the sale of the relevant
Collateral by the Lender Group in connection with the exercise of the Lender
Group's remedies upon the occurrence and during the continuation of an Event of
Default. The Lender Group agrees that, upon receipt of a request or
identification of the requirement for disclosure pursuant to clauses (a) or (d)
hereof, it will make reasonable efforts to keep Administrative Borrower on
behalf of the Loan Parties informed of such request or identification (and,
unless prohibited by applicable law, statute, regulation, or court order,
concurrently with, or where practicable, prior to the disclosure thereof);
provided, however, that each Loan Party acknowledges that the Lender Group may
make disclosure as required or requested by any Governmental Authority or
representative thereof and that the Lender Group may be subject to review by
Securitization Parties or other regulatory agencies and may be required to
provide to, or otherwise make available for review by, the representatives of
such parties or agencies any such non-public information, and that
Administrative Borrower shall be kept informed reasonably of such requests and
review of Confidential Information.
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SECTION 11.20. [Intentionally Omitted].
SECTION 11.21. Power of Attorney. Each Loan Party hereby irrevocably designates,
makes, constitutes, and appoints Collateral Agent (and all Persons designated by
Collateral Agent, including Administrative Agent designated hereby) as such Loan
Party's true and lawful attorney (and agent-in-fact), and Collateral Agent, or
Collateral Agent's agent, may, without notice to the Loan Parties and in either
the Loan Parties' or Collateral Agent's name, but at the cost and expense of
Borrower:
(a) At such time or times upon or after the occurrence of a Default or an Event
of Default as Collateral Agent or said agent (including Administrative Agent),
in its sole discretion, may determine, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders, or any other evidence of payment or
proceeds of the Collateral which come into the possession of the Lender Group or
under the Lender Group's control and shall deposit such item of payment into the
Administrative Agent's Account or credit the amount thereof (in accordance with
the provisions of this Agreement) to the Obligations.
(b) At such time or times upon or after the occurrence of an Event of Default as
Collateral Agent or its agent (including Administrative Agent), in its sole
discretion, may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of the Loan Parties' rights and remedies with respect to
the collection of the Accounts, (ii) settle, adjust, compromise, discharge, or
release any of the Accounts or other Collateral or any legal proceedings brought
to collect any of the Accounts or other Collateral, (iii) sell or assign any of
the Accounts and other Collateral upon such terms, for such amounts, and at such
time or times as Collateral Agent deems advisable, (iv) take control, in any
manner, of any item of payment or proceeds relating to any Collateral, (v)
prepare, file, and sign any Loan Party's name to a proof of claim in bankruptcy
or similar document against any Account Debtor, or to any notice of lien,
assignment, or satisfaction of lien or similar document in connection with any
of the Collateral, (vi) (A) receive and open all mail addressed to any Loan
Party, (B) retain all such mail relating to Collateral and cause all other such
mail to be delivered (at Borrower's expense) to Administrative Borrower, and (C)
notify postal authorities to change the address for delivery thereof to such
address as Collateral Agent may designate, (vii) endorse the name of any Loan
Party upon any of the items of payment or proceeds relating to any Collateral,
and deposit the same to the account of Collateral Agent on account of the
Obligations, (viii) endorse the name of any Loan Party upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document,
or agreement relating to the Accounts, Inventory and any other Collateral, (ix)
use any Loan Party's stationery and sign the name of any Loan Party to
verifications of the Accounts Receivable and notices thereof to Account Debtors,
(x) use the information recorded on or contained in any data processing
equipment, computer hardware, and software relating to the Accounts, Inventory,
Equipment, and any other Collateral, (xi) make and adjust claims under policies
of insurance, and (xii) do all other acts and things necessary, in Collateral
Agent's determination, to fulfill the Loan Parties' obligations under this
Agreement.
SECTION 11.22. Concerning the Collateral and Related Loan Documents. Each Lender
authorizes and directs Collateral Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the benefit of the Lenders.
Each Lender agrees that any
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action taken by Collateral Agent or Required Lenders, as applicable, in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral and the exercise by Collateral Agent or Required Lenders, as
applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
SECTION 11.23. Field Audits and Examination Reports, Confidentiality;
Disclaimers by Lenders; Other Reports and Information. By signing this
Agreement, each Lender:
(a) is deemed to have requested that Administrative Agent or Collateral Agent,
as the case may be, furnish such Lender, promptly after it becomes available, a
copy of each field audit or examination report (each a "Report" and
collectively, "Reports") prepared by such Agent, and such Agent shall so furnish
each Lender with such Reports;
(b) expressly agrees and acknowledges that neither Foothill Capital Corporation
and Administrative Agent nor Ableco Finance LLC and Collateral Agent (i) makes
any representation or warranty as to the accuracy of any Report, or (ii) shall
be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that the applicable Agent or other party performing any
audit or examination will inspect only specific information regarding the Loan
Parties and will rely significantly upon the Loan Parties' books and records, as
well as on representations of the Loan Parties' personnel;
(d) agrees to keep all Reports and other material, non-public information
regarding the Loan Parties and their Subsidiaries and their operations, assets,
and existing and contemplated business plans in a confidential manner; it being
understood and agreed by each Loan Party that in any event such Lender may make
disclosures (a) to counsel for and other advisors, accountants, and auditors to
such Lender, (b) reasonably required by any bona fide potential or actual
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, (c) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (d) to the extent
required by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however , that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Administrative Borrower
(for the benefit of the Loan Parties) of any request by any court, governmental
or administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof; provided further that the terms
and conditions of Section 11.19 shall govern any Confidential Information; and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold any Agent and any such other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the
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indemnifying Lender may reach or draw from any Report in connection with any
loans or other credit accommodations that the indemnifying Lender has made or
may make to Borrower, or the indemnifying Lender's participation in, or the
indemnifying Lender's purchase of, a loan or loans of Borrower; and (ii) to pay
and protect, and indemnify, defend and hold any Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including reasonable attorneys fees)
incurred by any such Agent and any such other Lender preparing a Report as the
direct or indirect result of any third parties who might obtain all or part of
any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
any Agent in writing that such Agent provide to such Lender a copy of any report
or document provided by the Loan Parties to such Agent that has not been
contemporaneously provided by the Loan Parties to such Lender, and, upon receipt
of such request, such Agent shall provide a copy of same to such Lender promptly
upon receipt thereof from the Loan Parties; (y) To the extent that any Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from the Loan Parties, any Lender may, from time to time,
reasonably request such Agent to exercise such right as specified in such
Lender's notice to such Agent, whereupon such Agent promptly shall request of
Administrative Borrower for the benefit of the Loan Parties the additional
reports or information specified by such Lender, and, upon receipt thereof from
the Loan Parties, such Agent promptly shall provide a copy of same to such
Lender; and (z) Any time that Administrative Agent renders to Administrative
Borrower for the benefit of the Loan Parties a statement regarding the Loan
Account, Administrative Agent shall send a copy of such statement to each Lender
and Collateral Agent.
SECTION 11.24. CFI as Administrative Borrower. Each Borrower hereby irrevocably
appoints CFI as the borrowing agent and attorney-in-fact of and for Borrower
(the "Administrative Borrower"), which appointment shall remain in full force
and effect unless and until both Administrative Agent and Collateral Agent shall
have received prior written notice signed by each Borrower that such appointment
has been revoked and that another Borrower has been appointed Administrative
Borrower, and authorizes the Administrative Borrower (i) to provide
Administrative Agent with all notices with respect to Loans obtained for the
benefit of any Borrower and to provide Administrative Agent or Collateral Agent,
as the case may be, all other notices and instructions under this Agreement and
the other Loan Documents, and (ii) to take such action as the Administrative
Borrower deems appropriate on its behalf to obtain Loans, and to exercise such
other powers as are reasonably incidental thereto to carry out the purposes of
this Agreement and the other Loan Documents. It is understood that the handling
of the Loan Account and Collateral of Borrower in a combined fashion, as more
fully set forth herein, is done solely as an accommodation to Borrower in order
to utilize the collective borrowing powers of Borrower in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to Borrower as a result thereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce Lender Group to do so, and in consideration thereof, each Borrower hereby
jointly and severally agrees to indemnify Lender Group and hold Lender Group
harmless against any and all liability, expense, loss, or claim of damage or
injury, made against Lender Group by any Borrower or by any third party
whosoever, arising from or incurred by reason of (a) the handling of the Loan
Account and Collateral of
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Borrower as herein provided, (b) Lender Group's relying on any instructions of
the Administrative Borrower, or (c) any other action taken by Lender Group
hereunder or under the other Loan Documents, except that Borrower will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 11.24 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.
SECTION 11.25. Lender Group Side Letters.
(a) Administrative Agent, the Revolving Credit Lenders, Collateral Agent, and
the Term Loan A Lenders have executed and delivered the Revolving Loan/Term Loan
A Side Letter as of the Effective Date, pursuant to which Administrative Agent,
the Revolving Credit Lenders, Collateral Agent, and the Term Loan A Lenders have
agreed to, among other things, certain voting arrangements relative to matters
requiring the approval of the Lender Group. The rights and duties of
Administrative Agent, the Revolving Credit Lenders, Collateral Agent, and the
Term Loan A Lenders, and their respective successors and assigns, as between and
among themselves, are subject to the Revolving Loan/Term Loan A Side Letter. All
right, title, and interest of Styx Partners, L.P. in, to, and under the
Commitments, the Obligations, and the Loan Documents acquired under that certain
Assignment and Acceptance, dated as of the Effective Date, between Ableco
Finance LLC, as assignor, and Styx Partners, L.P., as assignee, and accepted by
Collateral Agent, shall be subject to the terms and conditions of the Revolving
Loan/Term Loan A Side Letter.
(b) The rights and duties of Collateral Agent, Levine, and FP III, and their
respective successors and assigns, as between and among themselves, are subject
to the Term Loan B Side Letter.
SECTION 11.26. Legal Representation of Ableco and Foothill. In connection with
the negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
Brobeck, Phleger & Harrison LLP ("Brobeck") only has represented and only shall
represent (a) Ableco Finance LLC in its capacity as Collateral Agent and as a
Lender, and (b) Foothill Capital Corporation in its capacity as Administrative
Agent and as a Lender. Each other Lender hereby acknowledges that Brobeck does
not represent any other Lender in connection with any such matters.
ARTICLE XII
THE AGENTS
SECTION 12.01. Appointment Powers and Immunities; Delegation of Duties,
Liability of Agents.
(a) Each member of the Lender Group hereby designates and appoints
Administrative Agent as its administrative agent under this Agreement and the
other Loan
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Documents and Collateral Agent as its collateral agent under this Agreement and
the other Loan Documents. Each member of the Lender Group hereby irrevocably
authorizes each such Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Each such Agent agrees to act as such on the
express conditions contained in this Article XII. The provisions of this Article
XII are solely for the benefit of the Administrative Agent, Collateral Agent,
and the Lenders. No Loan Party shall have any rights as a third party
beneficiary of any of the provisions contained herein; provided, however, that
certain of the provisions of Section 12.13 hereof also shall be for the benefit
of Borrower. Any provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document notwithstanding, each such Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall each such Agent have or be deemed to have any fiduciary relationship with
any other member of the Lender Group, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against each such Agent;
it being expressly understood and agreed that the use of the word "Agent" is for
convenience only and that each such Agent is merely the representative of the
other members of the Lender Group, and has only the contractual duties set forth
in this Agreement and the other Loan Documents. Except as expressly otherwise
provided in this Agreement, each such Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which such
Agent is expressly entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. No member of the Lender Group shall have
any right of action whatsoever against each such Agent as a result of such Agent
acting or failing to act hereunder pursuant to such discretion (other than any
action taken or failure to act arising out of such Agent's gross negligence or
willful misconduct) and any such action taken or failure to act pursuant to such
discretion shall be binding on the Lender Group. Without limiting the generality
of the foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Administrative Agent or Collateral Agent, each of the
members of the Lender Group agree that, as long as this Agreement remains in
effect: (i) (A) Administrative Agent shall have the right to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Obligations, the Revolving Loans, the Term Loans, the
Collections, and related matters, and (B) Collateral Agent shall have the right
to maintain, in accordance with its customary business practices, ledgers and
records reflecting the status of the Collateral and related matters; (ii)
Collateral Agent shall have the right to execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents; (iii) Administrative Agent shall have the right to make
the Revolving Loans, for itself or on behalf of the applicable Lenders as
provided in the Loan Documents; (iv) Administrative Agent shall have the right
to exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (v) Administrative Agent shall have the right to open and
maintain such bank accounts and lock boxes as Administrative Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collections and, on behalf of Collateral
Agent, the Collateral; (vi) (A) Administrative Agent shall have the right to
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to the Loan Parties, the Obligations, the Collections,
or
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otherwise related to any of same as provided in the Loan Documents, and (B)
Collateral Agent shall have the right to perform, exercise, and enforce any and
all other rights and remedies of the Lender Group with respect to the Loan
Parties, the Obligations, the Collateral, or otherwise related to any of same as
provided in the Loan Documents; and (vii) Administrative Agent and Collateral
Agent each shall have the right to incur and pay such fees and Lender Group
Expenses under the Loan Documents as such Agent reasonably may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents. Administrative Agent may deem and treat the
payee of any Obligation as the holder thereof for all purposes of the Loan
Documents unless and until a notice of the assignment or transfer of such
Obligation shall have been filed with Administrative Agent. Each member of the
Lender Group further consents to (y) the execution, delivery, and performance by
Administrative Agent or Collateral Agent of each Loan Document entered into by
such Agent on behalf of the Lender Group as contemplated by this Agreement, and
(z) the terms of such Loan Documents.
(b) Except as otherwise provided in this section, each of Administrative Agent
and Collateral Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Each of Administrative Agent and Collateral Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made in compliance with this
section and without gross negligence or willful misconduct.
(c) None of the Agent-Related Persons shall (i) be liable for any action taken
or omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any members of the Lender Group for any recital, statement,
representation or warranty made by any Loan Party or any Subsidiary or Affiliate
thereof, or any officer or director thereof, contained in this Agreement or in
any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Administrative Agent or
Collateral Agent under or in connection with, this Agreement or any other Loan
Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Loan Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any member of the Lender Group to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party or any of its Subsidiaries or
Affiliates.
SECTION 12.02. Reliance by Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person,
and upon advice and statements of legal counsel (including counsel to the Loan
Parties or counsel to any member of the Lender Group), independent accountants
and other experts selected by such Agent. Each Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it first shall receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are
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received, such Agent shall act, or refrain from acting, as it deems advisable.
If any Agent so requests, it first shall be indemnified to its reasonable
satisfaction by the Lender Group against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
Each Agent in all cases shall be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Lender Group and such request and any action taken
or failure to act pursuant thereto shall be binding upon all members of the
Lender Group.
SECTION 12.03. Defaults. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and Lender
Group Expenses required to be paid to Administrative Agent for the account of
the Lender Group, except with respect to Events of Default of which
Administrative Agent has actual knowledge, and unless Administrative Agent shall
have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a "Notice of Default." Administrative Agent promptly will notify the
Lender Group of its receipt of any such notice or of any Event of Default of
which Administrative Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and each Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Sections 12.02 and 12.07, each Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Article VIII; provided, however, that unless and until such
Agent has received any such request, such Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
SECTION 12.04. Rights as a Lender.
(a) With respect to its Commitments and the Loans made by it, Foothill Capital
Corporation (and any successor acting as Administrative Agent, if any, as
permitted by Section 12.08(a) hereof) in its capacity as a Lender under the Loan
Documents shall have the same rights, privileges and powers under the Loan
Documents as any other Lender and may exercise the same as though it were not
acting as Administrative Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include Administrative Agent in its individual
capacity. Foothill Capital Corporation (and any successor acting as
Administrative Agent) and its affiliates may (without having to account for the
same to any member of the Lender Group) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking, trust or other
business with Borrower (and any of its Subsidiaries or Affiliates) as if it were
not acting as Administrative Agent, and Foothill Capital Corporation (and its
successors) and its affiliates may accept fees and other consideration from
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lender Group.
(b) With respect to its Commitments and the Loans made by it, Ableco Finance LLC
(and any successor acting as Collateral Agent, if any, as permitted by Section
12.08(b) hereof) in its capacity as a Lender under the Loan Documents shall have
the same rights, privileges and powers under the Loan Documents as any other
Lender and may exercise the
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same as though it were not acting as Collateral Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include Collateral
Agent in its individual capacity. Ableco Finance LLC (and any successor acting
as Collateral Agent) and its affiliates may (without having to account for the
same to any member of the Lender Group) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking, trust or other
business with Borrower (and any of its Subsidiaries or Affiliates) as if it were
not acting as Collateral Agent, and Ableco Finance LLC and its affiliates may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to the
Lender Group.
SECTION 12.05. Costs and Expenses; Indemnification. Each Agent may incur and pay
fees, costs, and Lender Group Expenses under the Loan Documents to the extent
such Agent deems reasonably necessary or appropriate for the performance and
fulfillment of its functions, powers, and obligations pursuant to the Loan
Documents, including without limiting the generality of the foregoing, court
costs, reasonable attorneys fees and expenses, costs of collection by outside
collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrower is
obligated to reimburse the Lender Group for such expenses pursuant to the Loan
Agreement or otherwise. Each Lender hereby agrees that it is and shall be
obligated to pay to or reimburse Agent for the amount of such Lender's Pro Rata
Share thereof (in accordance with its Total Commitments). Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (without limiting the obligation of the
Loan Parties to do so), according to their Pro Rata Shares (in accordance with
their respective Total Commitments), from and against any and all Indemnified
Liabilities (including without limitation Indemnified Liabilities arising under
any Environmental Law as provided in Section 11.15); provided, however, that no
Lender shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse Administrative Agent or Collateral Agent, as the
case may be, upon demand for such Lender's ratable share of any costs or
out-of-pocket expenses (including attorneys fees and expenses) incurred by such
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein . The undertaking in this section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of any Agent.
SECTION 12.06. Non-Reliance on Agents and Other Lenders. Each Lender
acknowledges that none of the Agent-Related Persons has made any representation
or warranty to it, and that no act by any Agent hereinafter taken, including any
review of the affairs or Property of the Loan Parties and their Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender. Each Lender represents to each Agent that it
has, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
Property, financial and other condition and creditworthiness of Borrower and any
other Person (other than the Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the
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transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrower. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lender Group by Agent, no Agent
shall have any duty or responsibility to provide any member of the Lender Group
with any credit or other information concerning the business, prospects,
operations, Property, financial and other condition or creditworthiness of
Borrower and any other Person party to a Loan Document that may come into the
possession of any of the Agent-Related Persons.
SECTION 12.07. Failure to Act. Except for action expressly required of any Agent
under the Loan Documents, such Agent shall in all cases be fully justified in
failing or refusing to act under any Loan Document unless it shall receive
further assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 12.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
SECTION 12.08. Resignation of Agent.
(a) Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, Administrative Agent may resign at any time by notice
to the Lender Group and Administrative Borrower (for the benefit of the Loan
Parties). Upon any such resignation, Required Lenders shall have the right to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been appointed by Required Lenders and have accepted such appointment
within 30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of Lenders,
appoint a successor Administrative Agent. Upon the acceptance of any appointment
as Administrative Agent by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, remedies, powers, privileges, duties and obligations of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations, under the Loan Documents. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Article XII 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 Administrative
Agent.
(b) Subject to the appointment and acceptance of a successor Collateral Agent as
provided below, Collateral Agent may resign at any time by notice to the Lender
Group and Administrative Borrower (for the benefit of the Loan Parties). Upon
any such resignation, Required Lenders shall have the right to appoint a
successor Collateral Agent. If no successor Collateral Agent shall have been
appointed by Required Lenders and have accepted such appointment within 30 days
after the retiring Collateral Agent's giving of notice of resignation, then the
retiring Collateral Agent may, on behalf of Lenders, appoint a successor
Collateral
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<PAGE>
Agent. Upon the acceptance of any appointment as Collateral Agent by a successor
Collateral Agent, such successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, remedies, powers, privileges, duties and
obligations of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations, under the Loan Documents.
After any retiring Collateral Agent's resignation as Collateral Agent, the
provisions of this Article XII 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
Collateral Agent.
SECTION 12.09. Collateral Sub-Agents. Each member of the Lender Group by its
execution and delivery of this Agreement (or any joinder hereto or any
Assignment and Acceptance hereunder) agrees that, in the event it shall hold any
monies or other investments on account of Borrower or any other Loan Party, such
monies or other investments shall be held in the name and under the control of
such member of the Lender Group, and such member of the Lender Group shall hold
such monies or other investments as a collateral sub-agent for Collateral Agent
under this Agreement and the other Loan Documents. Each Loan Party by its
execution and delivery of this Agreement hereby consents to the foregoing.
SECTION 12.10. Communications by Loan Parties. Except as otherwise provided in
this Agreement, the Loan Parties' communications with respect to the Loan
Documents shall be with Administrative Agent or Collateral Agent, as the case
may be, and the Loan Parties shall not be under any obligation to communicate
directly with the Lenders.
SECTION 12.11. Collateral Matters.
(a) The Lenders hereby irrevocably authorize Collateral Agent, at its option and
in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrower
of all Obligations; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies in writing to Collateral Agent that the sale or disposition is
permitted under this Agreement or the other Loan Documents (and Collateral Agent
may rely conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrower owned no interest at the time the
security interest was granted or at any time thereafter; (iv) constituting
property leased to Borrower under a lease that has expired or is terminated in a
transaction permitted under this Agreement, or (v) which, in the aggregate with
all other dispositions of Equipment, has a fair market value or book value,
whichever is less, of $500,000 or less. Except as provided above or expressly
provided in any other Loan Document, Collateral Agent will not execute and
deliver a release of any Lien on any Collateral without the prior written
authorization of all of the Lenders. Upon request by Collateral Agent or
Borrower at any time, Administrative Agent and the Lenders will confirm in
writing Collateral Agent's authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 12.11; provided, however,
that (1) Collateral Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Collateral Agent's opinion,
would expose Collateral Agent to liability or create any obligation or entail
any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrower in respect of) all
interests retained by
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<PAGE>
Borrower, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(b) Collateral Agent shall have no obligation whatsoever to any other member of
the Lender Group to assure that the Collateral exists or is owned by Borrower or
is cared for, protected, or insured or has been encumbered, or that the
Collateral Agent's Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Collateral Agent pursuant to any
of the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, subject to the terms
and conditions contained herein, Collateral Agent may act in any manner it may
deem appropriate, in its sole discretion given Collateral Agent's own interest
in the Collateral in its capacity as one of the Lenders and that Collateral
Agent shall have no other duty or liability whatsoever to any other member of
the Lender Group as to any of the foregoing, except as otherwise provided
herein.
SECTION 12.12. Restrictions on Actions by Administrative Agent and the Lenders;
Sharing Payments.
(a) Administrative Agent and each of the Lenders agrees that it shall not,
without the express consent of Collateral Agent, and that it shall, to the
extent it is lawfully entitled to do so, upon the request of Collateral Agent,
set off against the Obligations, any amounts owing by such member of the Lender
Group to Borrower or any accounts of Borrower now or hereafter maintained with
such member of the Lender Group. Administrative Agent and each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Collateral Agent , take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral the purpose of
which is, or could be, to give such member of the Lender group any preference or
priority against the other members of the Lender group with respect to the
Collateral.
(b) Subject to Section 12.04, if, at any time or times any Lender shall receive
(i) by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or
any payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Administrative Agent pursuant to the terms of this
Agreement, or (ii) payments from Administrative Agent in excess of such Lender's
ratable portion of all such distributions by Administrative Agent, such Lender
promptly shall turn the same over to Administrative Agent, in kind, and with
such endorsements as may be required to negotiate the same to Administrative
Agent, or in same day funds, as applicable, for the account of the Lender Group
and for apportionment and application to the Obligations in accordance with
Section 3.03 hereof.
SECTION 12.13. Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust" within the
meaning of the IRC and such Lender claims exemption from, or a reduction of,
U.S.
122
<PAGE>
withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with
and in favor of Administrative Agent and Administrative Borrower (for the
benefit of Borrower), to deliver to Administrative Agent and Administrative
Borrower:
(i) if such Lender claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty, properly completed IRS Forms 1001 and W-8
before the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement is exempt
from United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, two properly completed and
executed copies of IRS Form 4224 before the payment of any interest is due in
the first taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the IRC or other laws of
the United States as a condition to exemption from, or reduction of, United
States withholding tax.
Such Lender agrees promptly to notify Administrative Agent and Administrative
Borrower of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender, such Lender agrees to notify
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, Administrative Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax by
filing IRS Form 4224 with Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable withholding tax,
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by clause (a) of
this Section are not delivered to Administrative Agent, then Administrative
Agent may withhold from any interest payment to such Lender not providing such
forms or other documentation an amount equivalent to the applicable withholding
tax.
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<PAGE>
(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Administrative Agent did not properly withhold
tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Administrative Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify Administrative Agent fully for
all amounts paid, directly or indirectly, by Administrative Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Administrative Agent under this
Section, together with all Lender Group Expenses (including attorneys fees and
expenses). The obligation of the Lenders under this Section shall survive the
payment of all Obligations and the resignation or replacement of Administrative
Agent.
SECTION 12.14. Several Obligations; No Liability. Notwithstanding that certain
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of an Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Administrative Agent (if any) to
make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any member of the Lender
Group any interest in, or subject any member of the Lender Group to any
liability for, or in respect of, the business, assets, profits, losses, or
liabilities of any other member of the Lender Group. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no member of the
Lender Group shall have any obligation, duty, or liability to any Participant of
any other Lender. Except as provided in Section 12.05, no Agent or any Lender
shall have any liability for the acts of the other Agent or any other Lender. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
CFI PROSERVICES, INC., an Oregon corporation
By: /s/ Robert P. Chamness
Name: Robert P. Chamness
Title: President & COO
ULTRADATA CORPORATION, a Delaware corporation and
successor by merger to UFO Acquisition Co.
By: /s/ Robert P. Chamness
Name: Robert P. Chamness
Title: President & COO
MONEYSCAPE HOLDINGS, INC., an Oregon corporation
By: /s/ Robert P. Chamness
Name: Robert P. Chamness
Title: President & COO
MECA SOFTWARE, L.L.C., a Delaware limited liability company
By: /s/ Robert P. Chamness
Name: Robert P. Chamness
Title: President & COO
ABLECO FINANCE LLC, a Delaware limited liability company, as
Collateral Agent and as a Lender
By: /s/ Kevin Genda
Name: Kevin Genda
Title: Senior Vice President
125
<PAGE>
FOOTHILL CAPITAL CORPORATION, a California corporation, as
Administrative Agent and as a Lender
By: /s/ William Shiao
Name: William Shiao
Title: Vice President
LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P., a California
limited partnership, as a Lender
By: LLCP California Equity Partners II, L.P.,
a California limited partnership, its General
Partner
By: Levine Leichtman Capital Partners, Inc., a
California corporation, its General Partner
By:/s/ Lauren B. Leichtman
Lauren B. Leichtman
Chief Executive Officer
FOOTHILL PARTNERS III, L.P., a Delaware limited partnership,
as a Lender
By: /s/ M. E. Stearns
Name: M. E. Stearns
Title: Managing General Partner
126
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CERTAIN TERMS...........................................1
SECTION 1.01. Definitions...................................1
SECTION 1.02. Terms Generally..............................32
SECTION 1.03. Accounting and Other Terms...................33
SECTION 1.04. Time References..............................33
ARTICLE II THE LOANS..........................................................33
SECTION 2.01. Commitments..................................33
SECTION 2.02. Making the Loans.............................34
SECTION 2.03. Notes; Repayment of Loans and other
Obligations..................................37
SECTION 2.04. Interest.....................................38
SECTION 2.05. Reduction of Revolving Credit Commitment;
Prepayment of Loans; Term and Termination....39
SECTION 2.06. Fees.........................................43
SECTION 2.07. Securitization...............................43
ARTICLE III PAYMENTS AND OTHER COMPENSATION...................................44
SECTION 3.01. Payments; Computations and Statements........44
SECTION 3.02. Payments to Lender Group, Return of
Payments.....................................45
SECTION 3.03. Apportionment and Application of Payments....45
SECTION 3.04. All Loans to Constitute One Obligation.......47
SECTION 3.05. Loan Account; Statements of Account..........47
ARTICLE IV CONDITIONS TO LOANS................................................47
SECTION 4.01. Conditions Precedent to Effectiveness and the
Initial Loan.................................47
SECTION 4.02. Conditions Precedent to Subsequent Loans.....54
i
<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES......................................54
SECTION 5.01. Representations and Warranties...............54
ARTICLE VI COVENANTS OF THE LOAN PARTIES......................................64
SECTION 6.01. Affirmative Covenants........................64
SECTION 6.02. Negative Covenants...........................75
SECTION 6.03. Financial Covenants..........................81
ARTICLE VII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND
OTHER COLLATERAL..............................................................86
SECTION 7.01. Collection of Accounts Receivable; Management
of Collateral................................86
SECTION 7.02. Accounts Receivable Documentation............89
SECTION 7.03. Status of Accounts Receivable and Other
Collateral...................................89
SECTION 7.04. Collateral Custodian.........................90
ARTICLE VIII EVENTS OF DEFAULT................................................91
SECTION 8.01. Events of Default............................91
ARTICLE IX ISSUANCE OF EQUITY INTERESTS TO HOLDCO AND OTHER WARRANTHOLDERS....94
SECTION 9.01. Authorization and Issuance of Warrants.......94
SECTION 9.02. Securities Act Matters.......................94
SECTION 9.03. Certain Taxes................................95
SECTION 9.04. Cancellation and Issuance....................95
ARTICLE X GUARANTY............................................................96
SECTION 10.01. Guaranty; Limitation of Liability............96
SECTION 10.02. Guaranty Absolute............................97
SECTION 10.03. Waiver.......................................97
SECTION 10.04. Continuing Guaranty; Assignments.............98
SECTION 10.05. Subrogation..................................98
ii
<PAGE>
SECTION 10.06. Suretyship Agreement.........................98
ARTICLE XI MISCELLANEOUS......................................................99
SECTION 11.01. Notices, Etc.................................99
SECTION 11.02. Amendments, Etc.............................100
SECTION 11.03. No Waiver; Remedies, Etc....................102
SECTION 11.04. Expenses; Taxes, Attorneys' Fees............102
SECTION 11.05. Right of Set-off, Sharing of Payments, Etc..103
SECTION 11.06. Severability................................104
SECTION 11.07. Assignments and Participations..............104
SECTION 11.08. Counterparts................................108
SECTION 11.09. GOVERNING LAW...............................108
SECTION 11.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND
VENUE.......................................108
SECTION 11.11. WAIVER OF JURY TRIAL, ETC...................109
SECTION 11.12. Consent by the Lender Group.................109
SECTION 11.13. No Party Deemed Drafter.....................109
SECTION 11.14. Reinstatement; Certain Payments.............109
SECTION 11.15. Indemnification.............................109
SECTION 11.16. Records.....................................110
SECTION 11.17. Binding Effect..............................110
SECTION 11.18. Joint and Several...........................110
SECTION 11.19. Confidentiality.............................111
SECTION 11.20. [Intentionally Omitted].....................112
SECTION 11.21. Power of Attorney...........................112
SECTION 11.22. Concerning the Collateral and Related Loan
Documents...................................112
iii
<PAGE>
SECTION 11.23. Field Audits and Examination Reports,
Confidentiality; Disclaimers by Lenders;
Other Reports and Information...............113
SECTION 11.24. CFI as Administrative Borrower..............114
SECTION 11.25. Lender Group Side Letters...................115
SECTION 11.26. Legal Representation of Ableco and
Foothill....................................115
ARTICLE XII THE AGENTS.......................................................115
SECTION 12.01. Appointment Powers and Immunities; Delegation
of Duties, Liability of Agents..............115
SECTION 12.02. Reliance by Agents..........................117
SECTION 12.03. Defaults....................................118
SECTION 12.04. Rights as a Lender..........................118
SECTION 12.05. Costs and Expenses; Indemnification.........119
SECTION 12.06. Non-Reliance on Agents and Other Lenders....119
SECTION 12.07. Failure to Act..............................120
SECTION 12.08. Resignation of Agent........................120
SECTION 12.09. Collateral Sub-Agents.......................121
SECTION 12.10. Communications by Loan Parties..............121
SECTION 12.11. Collateral Matters..........................121
SECTION 12.12. Restrictions on Actions by Administrative Agent
and the Lenders; Sharing Payments...........122
SECTION 12.13. Withholding Tax.............................122
SECTION 12.14. Several Obligations; No Liability...........124
iv
<PAGE>
Table of Contents
SCHEDULES AND EXHIBITS
----------------------
Schedule C-1 Commitments
Schedule P-1 CFI Class A Preferred Stock
Schedule 5.01(e) CFI Capital Stock
Schedule 5.01(f) Subsidiaries
Schedule 5.01(g) Litigation
Schedule 5.01(j) ERISA
Schedule 5.01(p) Real Property
Schedule 5.01(s) Operating Leases
Schedule 5.01(t) Environmental Matters
Schedule 5.01(u) Insurance
Schedule 5.01(w) Bank Accounts
Schedule 5.01(y) Intellectual Property
Schedule 5.01(z) Material Contracts
Schedule 5.01(ii) Inventory Locations; Places of Business
Schedule 5.01(jj) FEINs
Schedule 6.01(l) Collateral Locations
Schedule 6.02(a) Existing Liens
Schedule 6.02(b) Existing Indebtedness
Schedule 6.02(e) Existing Investments
Schedule 6.02(k) Existing Payment Restrictions
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit N-1 Form of Notice of Borrowing
Exhibit O-1 Form of Opinion of Primary Counsel
Exhibit O-2 Form of Opinion of Special New York Counsel
Exhibit P-1 Form of Permitted Subordinated Indebtedness
Agreement
Exhibit R-1 Form of Revolving Credit Note
Exhibit T-1 Form of Term Note A
Exhibit T-2 Form of Term Note B
Exhibit W-1 Form of Warrant
v
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE C-1
(COMMITMENTS)
Pro Rata Share
Revolving (Revolving Pro Rata Share Pro Rata Share
Credit Credit Term Loan A (Term Loan A Term Loan B (Term Loan B Total
Lender Commitments Commitments) Commitments Commitments) Commitments Commitments) Commitments
------ ----------- -------------- ----------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Foothill Capital $15,000,000 100.00% $15,000,000 42.86% - 0 - - 0 - % $30,000,000
Corporation
Ableco Finance - 0 - - 0 -% $10,000,000 28.57% $7,500,000 25.00% $17,500,000
LLC [*]
Styx Partners, - 0 - - 0 -% $10,000,000 28.57% $7,500,000 25.00% $17,500,000
L.P. [*]
Levine Leichtman - 0 - - 0 -% - 0 - - 0 -% $10,000,000 33.33% $10,000,000
Capital Partners
II, L.P.
Foothill - 0 - - 0 -% - 0 - - 0 -% $5,000,000 16.67% $5,000,000
Partners III,
L.P.
All Lenders $15,000,000 100.00% $35,000,000 100.00% $30,000,000 100.00% $80,000,000
</TABLE>
SCHEDULE C-1 CONTINUED
(COMMITMENTS)
Pro Rata Share
(Total
Lender Commitments)
Foothill Capital 37.50%
Corporation
Ableco Finance 21.875%
LLC [*]
Styx Partners, 21.875%
L.P. [*]
Levine Leichtman 12.50%
Capital Partners
II, L.P.
Foothill 6.25%
Partners III,
L.P.
All Lenders 100.00%
[*] after giving effect to the Assignment and Acceptance, dated as of the
Effective Date, between Ableco Finance LLC, as assignor, and Styx Partners,
L.P., as assignee, and accepted by Collateral Agent.
400 SIXTH AVENUE BUILDING
Third Amendment to Lease
By and between:
John Hancock Mutual Life Insurance Company ("Landlord")
and
CFI ProServices, Inc., an Oregon Corporation ("Tenant")
August 11, 1999
Recitals:
1. Landlord and Tenant are parties to a Lease Agreement dated March 18,
1994, and to a First Amendment to Lease dated July 8, 1996, and to a
Second Amendment to Lease dated January 11, 1999 (collectively, the
"Agreement").
2. Pursuant to the Agreement, Tenant leases from landlord approximately
79,832 rentable square feet (RSF) on the second, third, fourth, tenth
floors as well as Suites 905 and 906 on the ninth floor of the 400
Sixth avenue Building known as Suites 200, 300, 400, 1000, 905, and
906.
3. The term of the Agreement is through September 30, 2003.
4. Pursuant to the Second Amendment to Lease dated January 11, 1999, (the
"Second Amendment"), the occupancy date and rent commencement date for
Suite 906 is August 1, 1999.
5. Tenant desires to occupy Suite 906 not later than May 24, 1999.
6. Capitalized terms used in this Third Amendment to Lease (this "Third
Amendment") without definitions shall have the meanings given to them
in the Agreement, except as otherwise expressly provided in this Third
Amendment.
Agreement:
Now, therefore, the parties agree as follows:
1. Commencement and Expiration Date: The Commencement Date of the term for
a portion of the Expansion Area, Suite 906, shall be May 24, 1999. As
of May 24, 1999, Tenant may fully occupy 4,812 RSF on the ninth floor
known as Suite 906. The Agreement, as amended by this Third Amendment,
will expire as to the entirety of the Premises on September 30, 2003.
2. Early Access: Landlord shall provide Tenant with early access to Suite
906 on May 14, 1999, in order for Tenant to ready Suite 906 for
occupancy.
3. Rent Commencement: The monthly base rent for Suite 906 will begin on
June 1, 1999.
<PAGE>
4. Monthly Rent For Expansion Area: Section 4 of the Second Amendment
is hereby amended to read as follows in its entirety:
<TABLE>
<CAPTION>
Months SF Rate ($/SF) Monthly Rent
------------------------------------------- ----- ----------- ------------
<S> <C> <C> <C>
April 1, 1999 - May 31, 1999 2,909 $20.00 $4,848.33
June 1, 1999 - March 31, 2000 7,721 $20.00 $12,868.33
April 1, 2000 - March 31, 2002 7,721 $21.00 $13,511.75
April 1, 2002 - March 31, 2003 7,721 $22.00 $14,155.17
April 1, 2003 - September 30, 2003 7,721 $23.00 $14,798.58
</TABLE>
5. Base Rent Schedule: That section of the Second Amendment headed "Base
Rent Schedule" is hereby amended to read as follows in its entirety:
<TABLE>
<CAPTION>
Lease Original Tenth
Term Lease Floor Suites 905 & 906 Total Base Rent
---------------- ---------- ---------- ---------------- ---------------
<S> <C> <C> <C> <C>
4/1/99 - 5/31/99 $72,729.00 $26,124.00 $4,848.33 $103,701.33
6/1/99 - 6/30/99 $72,729.00 $26,124.00 $12,868.33 $111,721.33
7/1/99 - 7/31/99 $78,261.50 $26,124.00 $12,868.33 $117,253.83
8/1/99 - 3/31/00 $78,261.50 $27,707.00 $12,868.33 $118,836.83
4/1/00 - 7/31/01 $78,261.50 $27,707.00 $13,511.75 $119,480.25
8/1/01 - 3/31/02 $87,113.00 $30,478.00 $13,511.75 $131,102.75
4/1/02 - 3/31/03 $87,113.00 $30,478.00 $14,155.17 $131,746.17
4/1/03 - 9/30/03 $87,113.00 $30,478.00 $14,798.58 $132,389.58
</TABLE>
Except as amended by this Third Amendment, all other terms and conditions of the
Lease Agreement shall remain in full force and effect.
In witness whereof, the parties have executed this Third Amendment as of the
date first set forth above.
AFB/bdb
a3-cfi.doc
AGREED AND ACCEPTED AGREED AND ACCEPTED
John Hancock Mutual Life Insurance CFI ProServices, Inc., Tenant
Company, Landlord
By: By:
Title: Title:
Date: Date:
EMPLOYMENT CONFIDENTIALITY AND INVENTION AGREEMENT
THIS EMPLOYMENT, CONFIDENTIALITY AND INVENTION AGREEMENT ("Agreement")
is dated the 12th day of December, 1997, and is entered into by and between MECA
SOFTWARE, L.L.C., a Delaware corporation ("Company"), and Paul D. Harrison
("Executive").
Statement of Purpose
The Company and Executive previously entered into an Amended and
Restated Employment, Confidentiality and Invention Agreement dated June 22, 1995
(the "Employment Agreement") and Severance Agreement dated June 30, 1997 ("the
Severance Agreement"). The Company and the Executive desire to replace the
Employment Agreement and the Severance Agreement except for certain provisions
set forth more fully below. Accordingly, the following provisions supersede in
their entirety the Employment Agreement and the Severance Agreement effective as
of January 1,1998 (the AEffective Date@), except that the provisions of Section
1.03 ( c ) of the Employment Agreement dealing with payment and vesting of
long-term incentive awards earned through the Effective Date shall continue to
apply; provided, however, that if the vesting of Deferral Accounts is increased
to 100% pursuant to Section 1.03 (c ) (iii) of this agreement, then such
long-term incentive awards shall become 100% vested as well.
ARTICLE ONE
EMPLOYMENT
1.01B Term of Employment. The Company hereby agrees to employ the
Executive and Executive hereby accepts such employment by the Company for the
period beginning on the Effective Date and ending thirty-six months from the
Effective Date ("Employment Period"), subject to the provisions of Section 1.07.
Any termination or expiration of this Agreement shall not be effective as to
those portions of this Agreement which, by their express terms as set forth
below, require performance by any party following termination of this Agreement.
1.02 B Duties. Executive is employed by the Company to:
(a) serve in an executive management capacity for the
Company subject to the authority and direction of the Board of Directors of the
Company and its more senior executives and, subject to the foregoing, the
Executive shall have such authority and responsibility and duties as are
normally associated with such position; and
(b) perform such other duties and responsibilities
and exercise such other authority and have such other titles transferred as
the Board of Directors of more senior executives of the Company may, from time
to time, reasonably prescribe (giving due consideration to Executive's
experience and expertise); provided, however, that the Company shall not
relocate Executive beyond 35 miles from Executive's present business location
without Executive=s prior consent; and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.
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(c) so long as Executive is employed under this
Agreement, devote Executive's full business time and efforts exclusively on
behalf of the Company. Executive shall not be prohibited form engaging in such
personal, charitable, or other nonemployment activities as do not interfere with
Executive=s full-time employment hereunder and which do not violate the other
provisions of this Agreement. Executive shall comply fully with all reasonable
policies of the Company as are from time to time in effect.
1.03B Compensation. (a) Base Salary. The Company shall pay to Executive
during the Employment Period a minimum gross salary at an annual rate of $ **
(the "Base Salary"), payable monthly or at any shorter pay periods as the
Company may form time to time use for its other executive employees.
(b) Short Term Incentive Awards. The Company shall establish
for Executive for each "Performance Year" (as defined below) during the
Employment Period a short term incentive arrangement pursuant to which Executive
shall have the opportunity to earn an award based on the achievement of
specified performance criteria during the applicable Performance Year. The award
for a Performance Year shall have a targeted amount of not less than $ **, but
the actual amount paid, if any, will depend on the level of achievement of the
specified performance criteria and shall be no less than $ ** and no more than $
**. Any earned short term incentive award shall be payable within ninety (90)
days following the end of the applicable Performance Year. For purposes of this
Agreement, "Performance Year" means each of the calendar years 1998, 1999 and
2000.
(c) Long Term Incentive Award. Executive shall
be eligible to receive long term incentive award in accordance with the
following provisions:
(i) Variable Award. As of the last day of each
Performance Year, Executive shall be awarded a sum equal to the Short Term
Incentive awarded for such Performance Year pursuant to Section 1.03 (b),
subject to the provisions of this Section 1.03 (c). Amounts awarded pursuant to
this Section 1.03 (c) (I), if any, shall be credited to the Deferral Account as
of such day. A separate Deferral Account shall be established for each
Performance Year.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE INFORMATION
CONTAINED WITHIN THE "[**]" MARKINGS. SUCH MARKED PORTIONS HAVE BEEN OMITTED
FROM THIS FILING AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
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(ii) Interest Credits. As of the last day of each calendar
year, each Deferral Account shall be credited with interest in an amount equal
to the balance of the Deferral Account as of the beginning of such Performance
Year times the yield to maturity on five (5) year U.S. Treasury Bonds determined
as of the last business day of the immediately preceding Performance Year.
(iii) Vesting. As of the last day of the calendar year
following the Performance Year for which a Deferral Account was established
one-third (1/3) of the balance of such Deferral Account as of such date shall
become vested. As of the last day of the second calendar year following the
Performance Year for which a Deferral Account was established two-thirds (2/3)
of the balance of such Deferral Account as of such date shall become vested. As
of the last day of the third calendar year following he Performance Year for
which a Deferral Account was established all of the balance of such Deferral
Account shall become vested. All Deferral Accounts shall become 100% vested upon
the end of the Employment Period or upon termination of the Employment of the
Executive, other than a voluntary termination by Executive or termination by the
Company for cause, prior to the end of the Employment Period. Notwithstanding
the foregoing, in the event of Executive's death or Atotal and permanent
disability@ (as defined in Section 1.06 below), the amount credited to the
Deferral Account as of the date of such death or Atotal and permanent
disability@ shall become fully (100%) vested as of such date.
(iv) Forfeiture and Cessation of Credits. In the
event Executive's employment with the Company is terminated by the Employee
voluntarily or by the Company for cause (as defined in Section 1.07(a), below)
prior to the Deferral Account becoming fully (100%) vested in accordance with
subparagraph (iv) above, then (i) any unvested portion of the Deferral Account
shall be forfeited as of the date of such termination and (ii) any vested
portion of the Deferral Account that has not been previously paid but instead
has been further deferred by the parties shall be paid in accordance with the
applicable deferral agreement, if any, between the parties and no further
amounts (including award under subparagraph (i) above and interest credits under
subparagraph (iii) above) shall be credited to any Deferral Account.
(v) Payment. As of the date an amount becomes vested
in the Deferral Account in accordance with subparagraph (iv) above, such
amount shall become payable to Executive, reduced by any amount(s) that
previously became payable to Executive in accordance with this subparagraph (v).
Any such amount shall be paid to Executive in a single cash payment within
ninety (90) days after such date; provided, however, that the parties reserve
the right to provide for the further deferral of any such amount in accordance
with their mutual agreement from time to time.
(vi) Miscellaneous. Executive's rights and
interests in the Deferral Account may not be assigned or transferred by
Executive. The amount credited to the Deferral Account shall be an unsecured and
unfunded obligation of the Company. To the extent Executive acquires a right to
receive payments form the Deferral Account under this Section 1.03 (c), such
right shall be no greater the right of any unsecured general creditor of the
Company. Nothing contained in this Section 1.03 (c) shall be deemed to create a
trust of any kind or any fiduciary relationship between the Company and
Executive.
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1.04 B Business Expenses. The Company shall promptly pay directly, or
reimburse Executive for, all business expenses, to the extent such expenses are
paid or incurred by Executive during the term hereof in accordance with the
Company policy approved by the Board of Directors of the Company and in effect
form time to time and to the extent such expenses are reasonable and necessary
to the conduct by Executive of the business of the Company.
1.05B Fringe Benefits. During the Employment Period, the Company shall
provide to Executive such insurance, vacation sick leave and other like benefits
as are approved by the Board of Directors of the Company and provided form time
to time to the other management-level employees holding similar positions with
the Company.
1.06 B Death; Disability. Upon the death of Executive or in the event
of the Executive's 'total and permanent disability," the Employment Period and
the payments under Sections 1.03 (a ) and 1.05 to Executive shall cease as of
the end of the month during which either such event may occur. In addition, no
payments under Section 1.03 (b) shall be made if such death or 'total and
permanent disability' occurs prior to the payment date therefor, and Section
1.03 (c) shall govern regarding the effect of Executive's death or "total and
permanent disability" on any awards thereunder. Executive shall be entitled to
receive such payments as may be provided under any benefit plans maintained by
the Company and applicable to the Executive. "Total and permanent disability"
shall have the meaning provided in any long-term disability or similar plan
maintained form time to time by the Company or, in the absence thereof, shall
mean the inability, in the opinion of a physician selected by the Company and
reasonably acceptable to Executive, of Executive to perform Executive's
employment duties under this Agreement by reason of Executive's physical or
mental illness or condition of permanent or indefinite duration.
1.07 B Other Termination of Employment and Employment Period. The
employment of Executive under this Agreement may be terminated by the Company
during the Employment Period in accordance with subsections 1.07 (a) or (b)
below.
(a) Executive's employment may be terminated by the Company if
"cause" for such termination exists and the Company serves written notice of
such termination upon Executive. As used in this Agreement, the term "cause"
shall refer only to any one or more of the following grounds:
(i) commission of an act of dishonesty, including, but
not limited to, misappropriation of funds or any property of the Company;
(ii) engaging in business-related activities or conduct
injurious to the reputation of the Company;
(iii) incompetently performing Executive=s assigned duties and
responsibilities or failing to manage the Company in a manner consistent with
the directions of the Board of Directors of the Company (after 30-
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days following the written notice described above from the Company specifying
such incompetent performance or lack of performance and Executive's failure to
cure or remedy the same within such 30-day period);
gross insubordination by Executive;
(v) the violation of any of the terms and conditions of this
Agreement (so long as such violations continue) or any material written
agreement or agreements Executive may from time to time have with the Company;
or
(vi) conviction of Executive for a misdemeanor (involving an
act of moral turpitude) or a felony.
In the event Executive=s employment is terminated under this Section 1.07 (a),
Executive's Base Salary under Section 1.03 (a) and Executive's fringe benefits
under Section 1.05 shall be paid through the date of such termination and no
payments under Section 1.03 (b) shall be made if such termination occurs prior
to the payment date therefor. In addition, Section 1.03 (c) shall govern
regarding the effect of a termination of employment on any awards thereunder.
(b) The Company may, in its sole discretion, terminate
Executive=s employment with the company upon 30 days' prior written notice
without cause. Upon termination of Executive's employment without cause during
the Employment Period, the Company shall continue to pay Executive=s Base Salary
and provide the benefits described in Section 1.05 through the balance of the
year within which such notice was given and thereafter for an additional period
of twelve (12) months or the balance of the Employment Period, whichever is
longer (the "Additional Period"). Payments of the target amount under Section
1.03 (b) shall be made with respect to a Performance Year under Section 1.03 (b)
if such termination occurs prior to the end of such Performance Year and for the
Additional Period, and payments under Section 1.03 (c) shall be made for the
Performance Year in which such termination occurs. Upon any expiration of the
Employment Period or cessation of Executive's employment hereunder, the Company
shall have no further obligations under this Agreement and no further payments
shall be payable by the Company to Executive, except as provided in this
subsection (b) or Section 1.03 (c) and except as required by the express terms
of any written benefit plans or written arrangements maintained by the Company
and applicable to Executive at the time of such termination, expiration or
cessation of Executive's employment.
1.08 B Change in Work Location, Duties or Base Salary. Without limiting
the definition of "cause" under Section 1.07(a), if the Company's Board of
Managers requests in writing that Executive (i) relocate beyond 35 miles form
Executive's present business location or (ii) significantly change his
employment duties, and Executive declines either such request, then such request
shall be deemed to be termination of Executive's employment by the Company
without cause. In addition, if the Company decreases the aggregate of (A)
Executive's Base Salary (as defined in Section 1.03 (a) and (B) Executive's
short term incentive award target (as described in Section 1.03 (b)) by more
than 10% in any one year period and Executive declines to continue his
employment by the Company within three months after the initial effective data
of such decrease, then such decrease shall be deemed to be a termination of
Executive's employment by the Company without cause.
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ARTICLE TWO
CONFIDENTIALITY AND INVENTIONS
2.01 B Background and Relationship of Parties. The parties acknowledge
that the Company has been and will be engaged in a continuous program of
acquisition, research, development and production respecting its business,
present and future, and that, in connection with Executive=s employment by the
Company, Executive is and will be expected to make or have access to new
contributions and inventions of value to the Company and that Executive's
employment creates a relationship of confidence and trust between Executive and
the Company with respect to any information applicable to the business of the
Company or applicable to the business of any client or customer of the Company
which has been or may be made known to Executive by the Company or by any such
client or customer or has been or may be learned by Executive during any period
of Executive's employment with the Company. Executive possesses and had and will
possess or have unfettered access to information that has been created,
discovered, developed, acquired or otherwise become known to the Company
(including, without limitation, information created, acquired, discovered,
developed, or made known to Executive prior to and during the Employment Period)
and which has commercial value in the business in which the Company has been and
will be engaged and has not been publicly disclosed by the Company. All
information described above hereinafter called AProprietary Information.@ By way
of illustration, but not limitation, Propriety Information includes hardware,
formulae, processes, software, documentation, data, programs, know-how, trade
secrets, improvements, discoveries, developments, designs, inventions,
techniques, marketing plans, product information, business and financial
information and plans, strategies, forecasts, new products, financial
statements, budgets, projections, licenses, prices, acquisition plans, costs and
lists of customers and suppliers. The term Asuppliers@ as used herein includes,
without limitation, information providers, system operators, third-party
software and hardware developers and other independent contractors supplying
goods or services to the Company. Proprietary Information shall not include
information which is now or hereafter is made public by third parties in a
lawful manner or made public by parties hereto without violation of this
Agreement.
2.02 B Inventions and Proprietary Information are Property of the
Company. (a) Executive has or will promptly disclose to the Company (or any
persons designated by it) all discoveries, developments, designs, improvements,
inventions, formulae, software, hardware, documentation, processes, techniques,
know-how, trade secrets and data, whether or not patentable or registrable under
copyright or similar statutes, made or conceived or reduced to practice or
learned by Executive, either alone or jointly with others, during the period of
Executive's employment (whether or not during regular business hours) by the
Company and that result from or are conceived during the performance of tasks
which have been, or that are or will be assigned to or otherwise undertaken by
Executive or that relate to the business or products of the Company or that
result form use of property, equipment, or premises owned, leased or contracted
for by the Company. All such discoveries, developments, designs, improvements,
inventions, formulae, software, hardware, documentation, processes, techniques,
know-how, trade secrets and data are hereinafter referred to as AInventions.@
All Proprietary Information and all Inventions are and shall be the
sole property
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of the Company and its assigns, and it shall be the sole owner of all patents,
copyrights, trademarks, names and other rights in connection therewith,
Executive hereby assigns to the Company any rights Executive may have or may
acquire in such Proprietary Information and Inventions. At all times, during the
Employment Period and thereafter, Executive will keep in strictest confidence
and trust all Proprietary Information and Inventions and Executive will not use
or disclose any Proprietary Information or Inventions without written consent of
the Company, except as may be necessary in the ordinary course of performing
duties as an employee of the Company or as may be required by law or the order
of any court or governmental authority. As to all Inventions, Executive shall
assist the Company in every proper way (but at the expense of the Company) in
obtaining and form time to time enforcing patents, copyrights, and other rights
and protections relating to Inventions in any and all countries and to that end,
Executive will execute all documents for use in applying for and obtaining such
patents, copyrights and other rights and protections and enforcing such
Inventions as the Company may desire, together with any assignments thereof, to
the Company or persons designated by either of them. Executive's obligation to
assist the Company in obtaining and enforcing patents, copyrights and other
rights and protections relating to Inventions in any way and in all countries
shall continue beyond the Employment Period, but the Company shall, unless
Executive's Employment with the Company continues beyond the Employment Period,
compensate Executive at a reasonable rate after termination of the Employment
Period for the time actually spent by Executive at the request of the Company
for such assistance. In the event the Company is unable, after reasonable
effort, to secure the signature of Executive on any document or documents needed
to apply for or procure any patent, copyright, or other right or protection
relating to an invention, whether because of Executive's physical or mental
incapacity or for any other reason whatsoever, Executive irrevocably designates
and appoints the Company and its duly authorized officers and agents as the
agent and attorney-in-fact of Executive to act for and in behalf and stead of
Executive to execute and file any such application or applications and to do all
other lawfully permitted acts to further the prosecution and issuance of
patents, copyrights or similar protections thereon with the same legal force and
effect as if executed by Executive.
(c) In the event of the termination (during the Employment
Period or thereafter) of Executive's employment by the Company for any reason
(including no reason), Executive shall promptly deliver to the Company all
copies of all documents, notes, drawings, specifications, programs, software,
hardware, documentation, data and other materials of any nature belonging to the
Company and obtained during the course of Executive's employment with the
Company. Executive will not remove any of the foregoing or any reproduction of
any of the foregoing or any Proprietary Information or Invention that is
embodied in a tangible medium of expression.
2.03 B Confidentiality of Agreement. Executive shall keep in full
confidence all information concerning this Agreement, including without
limitation the amount of Executive's Base Salary and incentive award
opportunities, except (i) to the extent disclosure is made to more senior
executives of the Company or with the Company=s prior written consent, (ii) to
the extent disclosure is or may be required by applicable law or (iii) in
connection with Executive's financial planning (e.g., estate planning, tax
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planning, loan or other financing applications, etc).
ARTICLE THREE
NON-COMPETITION
3.01 B During and After Employment. During the "Covenant Period" (as
defined below), Executive shall not engage in, or own or control any interest in
(except as a passive investor in publicly-held companies, holding less than one
percent of its outstanding securities), or act as an officer, director or
employee of, or consultant, advisor or lender to, any firm, corporation or
institution which provides, publishes, manufactures, or markets any computer
software products or services and related documentation which the Company
provides, publishes, manufactures or markets (or which the Company is engaged in
evaluating or developing). For purposes of this Agreement, "Covenant Period"
means and refers to the period during which Executive is actually employed by
the Company plus (i) the remainder of the Employment Period if Executive's
employment is terminated in accordance with provisions of Section 1.07 (a), or
(ii) the period during which amounts are payable by the Company to Executive in
accordance with the provisions of Section 1.07 (b) if Executive's employment is
terminated in accordance with the provisions of Section 1.07 (b).
3.02 B Non-Hiring of Company Employees. During the Covenant Period, the
Executive will not recruit, solicit or hire any employee of the Company or
otherwise induce any such employee to leave the employment of the Company to
become an employee of or otherwise be associated with Executive or any company
or business with which Executive is or may become associated.
3.03 B Non-Solicitation of Customers. During the Covenant Period,
Executive will not directly or indirectly, by or for the Executive or with or on
behalf of any other person, partnership, corporation, firm or other entity,
solicit, call upon or otherwise contact any "Customer of the Company" (as
defined below) for the purpose of providing to such Customer of the Company the
types of services or products normally provided by the Company to its customers.
For purposes of this Section 3.03, "Customer of the Company" means and refers to
(A) each customer served by the Company during the period of Executive's
employment hereunder and (B) each person or entity formally solicited by the
Company during the six (6) month period ending on the date of termination of
Executive's employment hereunder.
3.04 B No Conflicts. Executive represents that the performance by
Executive of all the terms of this Agreement, as a former or continuing employee
of the Company has not, does not and will not breach any agreement as to which
Executive is or was a party and which requires Executive to keep any information
in confidence or in trust. Executive has not entered into, and will not enter
into, any agreement either written or oral in conflict herewith. Executive has
not brought with Executive to the Company nor will Executive use in the
performance of employment responsibilities at the Company any proprietary
materials or documents of a former employer that are not generally available to
the public, unless Executive has obtained express written authorization from
such
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former employer for their possession and use. Executive has delivered to the
Company a true and correct copy of any employment, proprietary information,
confidentiality or non-competition agreement to which Executive is or was a
party with any former employers, which remains or may remain in effect as of the
date of Executive's first employment by the Company and which Executive was able
to obtain a copy of. Executive has not and will not breach any obligation of
confidentiality that Executive may have to former employers and Executive shall
fulfill all such obligations during Executive's employment with the Company.
3.05 B Reasonableness of Restrictions. Executive acknowledges that the
restrictions contained in this Agreement are reasonable, but should any
provisions of this Agreement be determined invalid, illegal or otherwise
unenforceable or unreasonable in scope by any court of competent jurisdiction,
the validity, legality and enforceability of the other provisions of this
Agreement shall not be affected thereby and the provision found invalid, illegal
or otherwise unenforceable or unreasonable, shall be considered by the Company
to be amended as to scope of protection, time or geographic area (or any one of
them, as the case may be) in whatever manner is considered reasonable by that
court and, as so amended, shall be enforced.
ARTICLE FOUR
MISCELLANEOUS
4.01 B Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Company and Executive concerning the
subject matter hereof and any other agreements between the Company and Executive
concerning the subject matter hereof are terminated without further liability of
any party thereto. No modification, amendment, termination or waiver of this
Agreement shall be binding unless in writing and signed by Executive and a duly
authorized officer of the Company. Failure of the Company or Executive to insist
upon strict compliance with any of the terms, covenants or conditions hereof
shall not be deemed a waiver of such terms, covenants and conditions.
4.02 B Specific Performance by Executive. Executive acknowledges that
money damages alone will not adequately compensate the Company for breach of any
of Executive's covenants and agreements herein and, therefore, in the event of
the breach or threatened breach of any such covenant or agreement by Executive,
in addition to all other remedies available to the Company at law, in equity or
otherwise, the Company shall be entitled to injunctive relief compelling
specific performance of (or other compliance with) the terms hereof. The party
adjudged by a court of competent jurisdiction to be the losing party to any
legal action under this Section 4.02 shall pay the legal fees of the party so
adjudged to be the successful party.
4.03 B Survival. This Agreement shall be binding upon Executive
irrespective of the duration of Executive's employment by the Company, the date
of or reasons for the termination of Executive's employment by the Company, or
the amount of Executive's salary or wages. The provisions of Article Two and
Article Three shall survive (i) the
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termination of Executive's employment by the Company irrespective of the reasons
for such termination and (ii) the expiration of this Agreement regardless of
whether Executive remains employed with the Company after such expiration, and
such provisions shall not in any way be modified, altered or otherwise affected
by Executive's termination or this Agreement=s expiration.
4.04 B Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Executive and the heirs, executors and administrators of
Executive or Executive's estate and property and shall be binding upon and inure
to the benefit of the Company and its successors and assigns. Executive may not
assign or transfer to others the right to receive payments hereunder nor the
obligation to perform duties hereunder.
4.05 B Executive's Acknowledgement. EXECUTIVE ACKNOWLEDGES THAT, BEFORE
PLACING Executive's SIGNATURE HEREUNDER, EXECUTIVE HAS READ ALL OF THE
PROVISIONS OF THIS EMPLOYMENT, CONFIDENTIALITY AND INVENTION AGREEMENT, AND HAS
THIS DAY RECEIVED A COPY HEREOF.
4.06 B Taxes. From any payments due hereunder to Executive form the
Company, there shall be withheld amounts reasonably believed by the Company to
be sufficient to satisfy liabilities for federal, state and local taxes and
other charges. Executive remains primarily liable to such authorities for such
taxes and charges to the extent not actually paid the Company.
4.07 B Notices. Notices hereunder shall be deemed delivered five days
following deposit thereof in the United States mails (postage prepaid) addressed
to Executive at the Company location where Executive is primarily employed and
to the Company at 55 Walls Drive, Fairfield, Connecticut 06430, ATTN: Chairman
of the Board.
4.08 B Life Insurance. Executive acknowledges that the Company has an
insurable interest in the life of the Executive and that Executive will, from
time to time as requested by the Company, cooperate with the Company in its
purchase (at its sole cost) of life insurance on the life of the Executive, such
insurance to be payable to and owned by the Company.
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This Agreement is to be governed by, constructed and enforced in
accordance with, the laws of the State of Connecticut. This Agreement may be
executed in one or more counterparts which, together, shall constitute the
agreement of the parties hereto.
IN WITNESS WHEREOF, Executive has hereunto set Executive's hand and
seal and the Company has caused this Agreement to be executed by its duly
authorized officer, all as of the day and year first above written.
WITNESS:
/s/ Steven R. Bump Jr. /s/ Paul D. Harrison
- ---------------------------- ---------------------------
Name: Steven R. Bump Jr. Paul D. Harrison
"Executive"
MECA SOFTWARE, L.L.C.,
A Delaware Corporation
By: /s/ Amy Woods Brinkley
------------------------
Name: Amy Woods Brinkley
Title: EVP
"Company" MECA Compensation Committee
<PAGE>
AGREEMENT
THIS AGREEMENT made this 27th day of May, 1999 by and among CFI
ProServices, Inc., an Oregon corporation with a principal place of business in
Portland, Oregon ("Company"), MECA Software, L.L.C., a Delaware limited
liability company with offices in Trumbull, Connecticut ("MECA Software"), and
Paul D. Harrison, of Newtown, Connecticut ("Executive").
STATEMENT OF PURPOSE
A. Executive and MECA Software are parties to that certain Employment,
Confidentiality and Invention Agreement, dated December 12, 1997 (the
"Agreement"), a copy of which is attached hereto as Exhibit A.
Effective as of May 17, 1999, the Company acquired all of the ownership
interests of MECA Software (the "Acquisition"), and, subsequent to the
Acquisition, MECA Software is a wholly owned subsidiary of the Company (or its
affiliates). The Company has requested Executive remain with MECA Software to
aid in the transition of ownership and the Executive has agreed to do so,
subject to the terms and conditions set forth herein.
AGREEMENT
Executive agrees to remain employed by MECA Software through and including
January 2, 2000 pursuant to the terms of the Agreement, as modified herein, and
agrees to perform such duties as are reasonably required of him by the Company.
To the extent such notice is deemed necessary by any party to this agreement,
Executive, the Company and MECA Software each hereby acknowledge and give notice
that Executive's employment with MECA Software is hereby terminated, effective
as of January 2, 2000. The parties agree that the effective date of such
termination shall not be changed without the written consent of all parties to
this Agreement.
Article 1 of the Agreement (except for the last sentence of Section 1.01 and
Section 1.04 thereof) is hereby deleted in its entirety and the terms there
stated shall be of no further force and effect. Notwithstanding the foregoing,
the parties hereby acknowledge and agree that the compensation to be paid to
Executive pursuant to paragraph 4 of this Agreement represents amounts,
obligations and liabilities arising from such Article 1, and this Agreement is
not intended to modify, increase or enlarge the obligations of the Company or
MECA Software under the Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT.
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The Company and MECA Software hereby agree that MECA Software shall compensate
Executive as follows (such compensation to be in lieu of any compensation due to
Executive under the Agreement):
Base Salary. From the date hereof through December 31, 2000, MECA
Software shall pay to Executive a gross salary at an annual rate of $
**, payable twice monthly.
Lump Sum Payments.
On or before January 31, 2000, MECA Software shall pay to
Executive a lump sum payment of $ **.
On or before January 31, 2001, MECA Software shall pay to
Executive a lump sum payment of $ **.
The foregoing lump sum payments shall be made via corporate
check or wire transfer of funds, at the discretion of MECA
Software or the Company.
MECA Software shall continue to provide to the Executive the fringe
benefits set forth in Section 1.05 of the Agreement through December
31, 2000, other than fringe benefits involving the payment of money or
stock to the Executive (e.g., payments with respect to a bonus, profit
sharing, retirement, severance or other such plan).
The payments set forth in this paragraph 4 shall be in complete
satisfaction of all obligations owing from the Company of MECA Software
to Executive pursuant to the Agreement, any other employment agreement
between Executive and MECA Software of the Company, or this agreement,
including any obligations to pay interest on such obligations.
In the event MECA Software or the Company shall fail to pay Executive
the lump sum payments set forth hereinabove on the dates specified,
MECA Software or the Company shall pay Executive interest on the unpaid
balance at the rate of ten percent (10%) per annum. In the event
Executive commences litigation or other dispute resolution to enforce
the provisions of this paragraph 4, the losing party in such action
shall pay to the prevailing party such prevailing party's reasonable
attorney's fees and court costs incurred in such action (including any
appeals thereon).
The obligations of MECA or the Company to make the payments set forth in
paragraph 4 hereunder shall not be reduced or otherwise affected as a result of
Executive's death or
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE INFORMATION
CONTAINED WITHIN THE "[**]" MARKINGS. SUCH MARKED PORTIONS HAVE BEEN OMITTED
FROM THIS FILING AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
2
<PAGE>
disability.
With respect to Section 3.02 of the Agreement only, the Covenant Period (as such
term is defined in Section 3.01 of the Agreement) shall mean the period from the
date hereof through December 31, 2001. For all other purposes, the parties
acknowledge that the Covenant Period shall end effective December 31, 2000.
In addition to Executive's obligations set forth in Article Two of the
Agreement, Executive agrees that Executive will not disparage, take any action
to disparage, nor encourage others to disparage, the Company or MECA Software,
or either of their affiliate organizations.
The Company and/or MECA Software agree that after October 1,1999, Executive may
request and neither the Company or MECA Software will unreasonably withhold the
approval of time off to search for new employment.
The Company hereby ratifies all of the terms and conditions of the Agreement
dated December 12,1997 and shall be bound by said Agreement which shall remain
in full force and effect, except as may be modified herein.
The terms and conditions of the within Agreement shall be binding upon
and inure to the benefit of the parties hereto, their heirs, successors and
assigns.
CFI ProServices, Inc.
By: /s/ Jeffrey P. Strickler
------------------------
Name: Jeffrey P. Strickler
Its: Vice President & General Counsel
MECA Software, L.L.C.
By: /s/ Kathleen M. Bromage
------------------------
Name: Kathleen M. Bromage
Its: Chief Operating Officer
/s/ Paul D. Harrison
- ------------------------
Paul D. Harrison, Executive
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