UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 27, 1999
CFI ProServices, Inc.
(Exact name of registrant as specified in its charter)
Oregon 0-21980 93-0704365
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 S.W. Sixth Avenue, Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 274-7280
This Form 8-K consists of 7 pages. Exhibits are indexed on page 5.
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Item 2. Acquisition or Disposition of Assets.
Effective August 13, 1999, CFI ProServices, Inc. dba
Concentrex Incorporated, an Oregon corporation (the "Company") acquired all of
the outstanding common stock of Ultradata Corporation, a Delaware corporation
("Ultradata") for approximately $63.5 million in cash. The acquisition was
effected pursuant to an Agreement and Plan of Merger dated as of May 17, 1999
(the "Merger Agreement"), by and among the Company, UFO Acquisition Co. ("UFO"),
a Delaware corporation and a wholly owned subsidiary of the Company, and
Ultradata. The Merger Agreement provided for the merger of UFO with and into
Ultradata (the "Merger"). As a result of the merger, the separate existence of
UFO ended and Ultradata survives as a wholly owned subsidiary of the Company.
Pursuant to the Merger Agreement, the former holders of Ultradata common stock
received $7.50 in cash for each share of Ultradata common stock they held
immediately prior to the Merger.
Upon the closing of the Merger, a portion of the outstanding
employee stock options issued previously under Ultradata's 1994 Equity Incentive
Plan were assumed by the Company and converted into options for 273,266 shares
of Company common stock, which shares are a part of the 500,000 employee stock
option reserve approved by the Company's shareholders at the 1999 Annual
Meeting.
Ultradata provides information management software and
solutions for relationship-oriented financial institutions. Ultradata's
principal offices are located in Pleasanton, California. Ultradata's software
and solutions allow its customers to, among other things, engage in
cross-selling, relationship pricing, data mining and workflow control as well as
provide financial services such as checking, savings and investment accounts,
home banking, credit and debit cards, automated teller machine access and
consumer lending. Ultradata products are primarily targeted at large and
mid-sized credit unions that want to operate their systems in-house. For smaller
credit unions, Ultradata works through value-added resellers to provide
Ultradata's products. The Company intends to continue to utilize Ultradata's
facilities and equipment in the same manner Ultradata utilized them prior to the
Merger. The Company believes the Merger will allow the Company to deliver a
total system solution for front- and back-end technologies to banks, thrifts,
and credit unions and positions the Company as a leader in offering real-time
host processing capabilities. In addition, the Merger adds a business segment
based on a recurring service fees model, which the Company anticipates will
result in more predictable and consistent revenues for the Company, and provides
the Company's customer with tools to develop, manage and enhance profitable
customer relationships.
The Merger Agreement is filed as Exhibit 2.1, attached
thereto, and is incorporated into this Current Report on Form 8-K by this
reference.
To pay for the Merger, on August 13, 1999, the Company and its
subsidiaries entered into a financing agreement (the "Financing Agreement") with
Foothill Capital Corporation
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("Foothill") and certain other parties (collectively, the "Lenders") for three
credit facilities aggregating $80 million. The credit facilities provided under
the Financing Agreement are secured by the Company's assets. 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 Merger 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 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
Merger. 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 addition to loan fees and 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. U.S. Bancorp Libra, financial advisor and placement agent
for the Company, received warrants (the "Libra Warrants") to purchase 58,000
shares of Company common stock. The exercise price for both the Lender Warrants
and the Libra 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 and the Libra Warrants. The Lender Warrants and the Libra Warrants are
exercisable through August 13, 2004.
On August 13, 1999 the Company also issued to certain of 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
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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 Company has agreed to register for resale the shares of
common stock issuable upon the conversion of the Subordinated Notes. 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 with the Merger.
The foregoing descriptions of the Foothill Revolver, Term Note
A, Term Note B, Financing Warrants, Registration Rights Agreement for the
Financing Warrants, Note Purchase Agreement, Subordinated Notes, Registration
Rights Agreement for the Subordinated Notes, Libra Warrants, and Registration
Rights for the Libra Warrants are qualified by reference to the complete texts
of those documents, together with the exhibits attached thereto, and are
incorporated into this Current Report on Form 8-K by this reference. The
Financing Agreement was filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q dated August 16, 1999 and is incorporated into this Current Report
on Form 8-K by this reference.
Item 5. Other Events.
On July 1, 1999, the Company executed an amendment to its
401(k) Profit Sharing Plan to include employee stock ownership provisions. The
plan was renamed the CFI ProServices, Inc. Employee Savings and Stock Ownership
Plan ("ESOP"), and it was amended and restated in the form of Exhibit 5.1
hereto and is incorporated into this Current Report on Form 8-K by this
reference. The Company has reserved for issuance in 1999 up to 175,000 shares of
common stock in accordance with the terms and conditions of the ESOP.
Former officers of Ultradata Corporation, the Company's wholly
owned subsidiary by virtue of the August 13, 1999 Merger, are subject to
preexisting employment contracts with Ultradata Corporation. Those employment
contracts are attached hereto and incorporated herein by this reference as
Exhibits 5.2 through 5.6, respectively.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Financial statements will be filed with the
Commission within 60 days of the date this report
is required to be filed, in accordance with Item 7
of this Form 8-K.
(b) Pro forma financial information. Pro forma
financial information will be filed with the
Commission within 60 days of the date this report
is required to be filed, in accordance with Item 7
of this Form 8-K.
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(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of May 17, 1999, among the
Company, UFO Acquisition Co. and Ultradata Corporation.
2.2 Revolving Credit Note for principal up to $15,000,000 dated as of
August 13, 1999.
2.3 Form of Term Loan A promissory note for aggregate principal of
$35,000,000 dated as of August 13, 1999.
2.4 Form of Term Loan B promissory note for aggregate principal of
$30,000,000 dated as of August 13, 1999.
2.5 Form of Warrant issued by Company to the Lenders to purchase up to an
aggregate of 381,822 shares of the common stock of the Company dated
as of August 13, 1999.
2.6 Registration Rights Agreement for the Lender Warrants among the
Company and the Lenders dated as of August 13, 1999.
2.7 Note Purchase Agreement among the Company and the Note Holders dated
as of August 13, 1999.
2.8 Form of 10% Convertible Subordinated Discount Notes dated as of August
13, 1999.
2.9 Registration Rights Agreement for the Subordinated Notes among the
Company and the Note Holders dated as of August 13, 1999.
2.10 Warrant issued to U.S. Bancorp Libra, financial advisor and placement
agent for the Company, to purchase 58,000 shares of Company common
stock, dated as of August 13, 1999.
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2.11 Registration Rights Agreement for the Libra Warrants dated as of
August 13, 1999.
5.1 CFI ProServices, Inc. Employee Savings and Stock Ownership Plan.
5.2 Ultradata Employment Agreement with Robert J. Majteles dated October
22, 1996.
5.3 Ultradata Employment Agreement with Cindy Cooper dated November 6,
1998.
5.4 Ultradata Employment Agreement with David J. Robbins dated November 6,
1998.
5.5 Ultradata Employment Agreement with James R. Berthelson dated November
6, 1998.
5.6 Ultradata Employment Agreement with Ronald H. Bissinger dated November
6, 1998.
10.1 Financing Agreement dated as of August 13, 1999 by and among CFI
ProServices, Inc., 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. previously filed as Exhibit 10.1 to the
Company's Form 10-Q dated August 16, 1999, filed with the Securities
and Exchange Commission on August 16, 1999 and incorporated herein by
reference.
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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 hereunto duly authorized.
CFI PROSERVICES, INC.
dba Concentrex Incorporated
Date: August 27, 1999 By: /s/ Kurt W. Ruttum
-------------------
Kurt W. Ruttum, Vice President and
Chief Financial Officer
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AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 17, 1999
AMONG
CFI PROSERVICES, INC.,
UFO ACQUISITION CO.
AND
ULTRADATA CORPORATION
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TABLE OF CONTENTS
1. THE MERGER ....................................................... 1
1.1 The Merger .............................................. 1
1.2 Effective Time .......................................... 1
1.3 Closing of the Merger ................................... 2
1.4 Effects of the Merger ................................... 2
1.5 Certificate of Incorporation and Bylaws ................. 2
1.6 Directors ............................................... 2
1.7 Officers ................................................ 2
1.8 Conversion of Shares .................................... 3
1.9 Payment for Shares ...................................... 3
1.10 Dissenting Shares ....................................... 5
1.11 Stock Options ........................................... 5
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................... 6
2.1 Organization and Qualification .......................... 6
2.2 Capitalization of the Company and its Subsidiaries ...... 7
2.3 Authority Relative to this Agreement; Consents and
Approvals ............................................. 8
2.4 SEC Reports; Financial Statements ....................... 9
2.5 Information Supplied .................................... 10
2.6 Consents and Approvals; No Violations ................... 10
2.7 No Default .............................................. 11
2.8 No Undisclosed Liabilities; Absence of Changes .......... 11
2.9 Litigation .............................................. 11
2.10 Compliance with Applicable Law .......................... 12
2.11 Employee Benefit Plans .................................. 12
2.12 Environmental Laws and Regulations ...................... 14
2.13 Tax Matters ............................................. 15
2.14 Intangible Property ..................................... 15
2.15 Brokers ................................................. 15
2.16 Material Contracts ...................................... 16
2.17 Disclosure .............................................. 16
2.18 Termination of Certain Contracts ........................ 17
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB ................. 17
3.1 Organization ............................................ 17
3.2 Authority Relative to this Agreement .................... 18
3.3 Information Supplied .................................... 18
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3.4 Consents and Approvals; No Violations ................... 18
3.5 Litigation .............................................. 19
3.6 Brokers ................................................. 19
3.7 Financing ............................................... 19
4. COVENANTS ........................................................ 19
4.1 Conduct of Business of the Company ...................... 19
4.2 Preparation of Proxy Statement and Stockholders'
Meeting ............................................... 22
4.3 No Solicitation ......................................... 22
4.4 Access to Information ................................... 24
4.5 Additional Agreements; Reasonable Best Efforts .......... 24
4.6 Consents ................................................ 25
4.7 Public Announcements .................................... 25
4.8 Notification of Certain Matters ......................... 25
4.9 Release of Liens ........................................ 26
4.10 Company 401(k) Plan ..................................... 26
4.11 Parent 401(k) Plan ...................................... 26
5. CONDITIONS TO CONSUMMATION OF THE MERGER ......................... 26
5.1 Conditions to Each Party's Obligations to Effect the
Merger ................................................ 26
5.2 Conditions to the Obligations of the Company ............ 27
5.3 Conditions to the Obligations of Parent and Sub ......... 27
6. TERMINATION; AMENDMENT; WAIVER ................................... 28
6.1 Termination ............................................. 28
6.2 Effect of Termination ................................... 29
6.3 Fees and Expenses ....................................... 30
6.4 Amendment ............................................... 31
6.5 Extension; Waiver ....................................... 31
7. MISCELLANEOUS .................................................... 31
7.1 Nonsurvival of Representations and Warranties ........... 31
7.2 Entire Agreement; Assignment ............................ 31
7.3 Validity ................................................ 32
7.4 Notices ................................................. 32
7.5 Governing Law ........................................... 33
7.6 Descriptive Headings .................................... 33
7.7 Parties in Interest ..................................... 33
7.8 Severability ............................................ 34
7.9 Specific Performance .................................... 34
7.10 Subsidiaries ............................................ 34
7.11 Brokers ................................................. 34
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7.12 Counterparts ............................................ 34
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 17, 1999, is among
CFI PROSERVICES, INC., an Oregon corporation ("Parent"), UFO ACQUISITION CO., a
Delaware corporation and a direct wholly owned subsidiary of Parent ("Sub"), and
ULTRADATA CORPORATION, a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Company, Parent and Sub each
have, in light of and subject to the terms and conditions set forth herein, (i)
determined that the Merger (as defined in Section 1.1) is fair to their
respective stockholders and in the best interests of such stockholders and (ii)
approved the Merger in accordance with this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Sub hereby agree
as follows:
1. THE MERGER
1.1 The Merger
At the Effective Time and upon the terms and subject to the conditions
of this Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL"), Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of Sub shall
cease. At the option of Parent, upon five days prior written notice to the
Company, the Merger may be structured so that, and this Agreement shall
thereupon be deemed to be amended to provide that, either another direct or
indirect subsidiary of the Parent shall be merged with and into the Company or
the Company shall be merged with and into the Sub or another direct or indirect
wholly owned subsidiary of Parent, with the Sub or such other subsidiary of
Parent continuing as the Surviving Corporation; provided that, no such change in
structure will be deemed to apply for purposes of the Company's representations
and warranties contained in Section 2 hereof.
1.2 Effective Time
Subject to the provisions of this Agreement, Parent, Sub and the
Company shall cause the Merger to be consummated by filing an appropriate
Certificate of Merger
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or other appropriate documents (the "Certificate of Merger") with the Secretary
of State of the State of Delaware in such form as required by, and executed in
accordance with, the relevant provisions of the DGCL, as soon as practicable on
or after the Closing Date (as defined in Section 1.3). The Merger shall become
effective upon such filing or at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time").
1.3 Closing of the Merger
The closing of the Merger (the "Closing") will take place at a time and
on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article 5 (the "Closing Date"), at the offices of Perkins Coie LLP, 1211 S.W.
Fifth Avenue, Suite 1500, Portland, Oregon, unless another time, date or place
is agreed to in writing by the parties hereto.
1.4 Effects of the Merger
The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.5 Certificate of Incorporation and Bylaws
The Restated Certificate of Incorporation of the Company in effect at
the Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law. The Bylaws of the
Company in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
1.6 Directors
The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation until
such director's successor is duly elected or appointed and qualified.
1.7 Officers
The officers of Sub at the Effective Time shall be the initial officers
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until such
officer's successor is duly elected or appointed and qualified.
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1.8 Conversion of Shares
(a) At the Effective Time, each share of common stock, par
value $0.001 per share, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (individually a "Share" and
collectively, the "Shares") (other than (i) Shares held by any subsidiary of the
Company and (ii) Shares held by Parent, Sub or any other subsidiary of Parent or
Sub and (iii) Dissenting Shares (as defined in Section 1.10 hereof)) shall, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holder thereof, be converted into the right to receive (a) $7.50 in cash,
payable to the holder thereof without interest thereon, upon surrender of the
certificate formerly representing such Share (the "Merger Consideration").
(b) At the Effective Time, each outstanding share of the
common stock, par value $0.001 per share, of Sub shall be converted into one
share of common stock, par value $0.001 per share, of the Surviving Corporation.
(c) At the Effective Time, each share of Company Common Stock
held by Parent, Sub or any subsidiary of Parent, Sub or the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Sub, the Company or the holder thereof, be canceled,
retired and cease to exist and no payment shall be made with respect thereto.
1.9 Payment for Shares
(a) As of the Effective Time, Chase Mellon Shareholder
Services, L.L.C., or another bank or trust company designated by Parent and
reasonably acceptable to the Company shall act as paying agent (the "Paying
Agent") in effecting the payment of the Merger Consideration for certificates
that formerly represented Shares entitled to payment of the Merger Consideration
pursuant to Section 1.8 hereof. On or before the Effective Time, Parent or Sub
shall deposit, or cause to be deposited, in trust with the Paying Agent, the
aggregate Merger Consideration to which holders of Shares shall be entitled at
the Effective Time pursuant to Section 1.8 hereof.
(b) As soon as reasonably practicable after the Effective
Time, the Paying Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose Shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.8: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and
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(ii) instructions for use in effecting the surrender of the Certificates and
receiving the Merger Consideration therefor. Upon surrender of a Certificate for
cancellation to the Paying Agent, the Paying Agent shall pay the holder of such
Certificate the Merger Consideration multiplied by the number of Shares formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, the appropriate Merger
Consideration for such surrendered Certificate may be paid to a transferee if
the Certificate representing such Shares is presented to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.9, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the aggregate Merger Consideration relating thereto.
No interest shall be paid or accrued on the Merger Consideration.
(c) Promptly following the date which is one year after the
Effective Time, the Paying Agent shall deliver to the Surviving Corporation all
cash, Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly representing a
Share may surrender such Certificate to the Surviving Corporation and (subject
to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Consideration relating thereto,
without any interest or dividends thereon.
(d) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and canceled in
return for the payment of the aggregate Merger Consideration relating thereto,
subject to applicable law in the case of Dissenting Shares.
(e) In the event that any Certificate for Shares shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such certificate to be lost, stolen or destroyed, the Paying
Agent shall pay to such holder in exchange for such lost, stolen, or destroyed
certificate the aggregate Merger Consideration relating thereto, if any, as may
be required pursuant to this Agreement; provided, however, that Parent may, in
its discretion, require the delivery of a suitable bond or indemnity.
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(f) Neither Parent nor the Company shall be liable to any
holder of Shares for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.10 Dissenting Shares
Notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the DGCL,
if such Section 262 provides for appraisal rights for such Shares in the Merger
("Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration as provided in Section 1.8 hereof, unless and until such
holder fails to perfect or withdraws or otherwise loses his right to appraisal
and payment under the DGCL. If, after the Effective Time, any such holder fails
to perfect or withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration, if any, to which such
holder is entitled, without interest or dividends thereon. The Company shall
give Parent prompt notice of any demands received by the Company for appraisal
of Shares and, prior to the Effective Time, Parent shall have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
1.11 Stock Options
(a) At the Effective Time, each outstanding option to purchase
Company Common Stock issued pursuant to the Company's 1994 Equity Incentive Plan
(the "Assumed Plan"), whether vested or unvested, shall be assumed by Parent and
shall constitute an option (an "Assumed Option") to acquire, on the same terms
and conditions as were applicable under such option prior to the Effective Time,
the number of shares of Common Stock, no par value, of Parent ("Parent Common
Stock"), rounded down to the nearest whole number, determined by multiplying
.718 by the number of shares of Company Common Stock then subject to purchase
pursuant to such option. The exercise price for such Assumed Options shall be
equal to the aggregate exercise price for the shares of Company Common Stock
then subject to purchase pursuant to such option divided by the number of shares
of Parent Common Stock deemed to be purchasable pursuant to such Assumed Option.
With respect to an option for shares of Company Common Stock to which Section
421 of the Internal Revenue Code of 1986, as amended (the "Code") applies by
reason of its qualification under Section 422 or 423 of the Code (a "qualified
stock option"), in no event shall the terms of any Assumed Option give the
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holder of a qualified stock option additional benefits that he or she did not
have under such qualified stock option. Any references in each Assumed Option or
Assumed Plan to the Company shall be deemed to refer to Parent, where
appropriate, and Parent shall assume the obligations of the Company under the
Assumed Options and the Assumed Plan. Parent shall file as soon as reasonably
practicable following the Closing Date, and maintain the effectiveness of, a
registration statement on Form S-8 with respect to the Parent Common Stock
subject to the Assumed Options for so long as such Assumed Options remain
outstanding. Parent shall use reasonable efforts to take such actions as are
necessary for the conversion of the Assumed Options pursuant to this Section
1.11(b), including the reservation, issuance and listing of shares of Parent
Common Stock as is necessary to effectuate the transactions contemplated by this
Section 1.11(b). Following the Effective Time, Parent will prepare and
distribute to holders of Assumed Options a notice explaining the effect of the
conversion of such holder's unvested options into Assumed Options.
(b) Except as provided herein or as otherwise agreed to by the
parties, (i) the Company shall not take any action (or refrain from taking
action) the effect of which would cause any options to accelerate in connection
with the Merger (which options would not have otherwise accelerated pursuant to
their terms or the terms of any existing employment agreement disclosed to
Parent), (ii) the 1995 Director Stock Option Plan shall terminate as of the
Effective Time and the provisions in any other plan, program or arrangement,
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its subsidiaries (other than the Assumed
Plan) shall be canceled as of the Effective Time and (iii) no holder of options
to purchase Company Common Stock or any participant in any of the Company's
stock option plans or any other plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary thereof, other than with respect to the Assumed
Options. With respect to the options to purchase 100,000 shares of Company
Common Stock that have been granted under the 1995 Director Stock Option Plan as
of the date hereof and the options to purchase an aggregate of 1.2 million
shares of Company Common Stock outside of the Company's stock option plans, on
the Closing Date the Company shall pay to each holder of such options an amount
in respect thereof equal to the product of (A) the excess of $7.50 over the
exercise price thereof and (B) the number of shares of Company Common Stock
subject to such option.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company
to Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to each of Parent and Sub
as follows:
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2.1 Organization and Qualification
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) The Company has no subsidiaries and does not own, directly
or indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
(c) The Company is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have
a Material Adverse Effect (as defined below) on the Company. When used in
connection with the Company, the term "Material Adverse Effect" means any change
or effect that, when taken together with all other adverse changes and effects
(i) is or is reasonably likely to be materially adverse to the properties,
business, results of operations or condition (financial or otherwise) of the
Company, or (ii) may impair the ability of the Company to consummate the
transactions contemplated hereby.
(d) The Company has heretofore delivered to Parent accurate
and complete copies of the certificate of incorporation and by-laws, as
currently in effect, of the Company.
2.2 Capitalization of the Company and its Subsidiaries
(a) The authorized capital stock of the Company consists of 25
million shares consisting of 2 million shares of preferred stock, $0.001 par
value, and 23 million shares of Company Common Stock. No preferred shares and
7,748,382 shares of Company Common Stock are issued and outstanding. All of the
issued and outstanding shares of Company Common Stock have been validly issued,
and are fully paid, nonassessable and free of preemptive rights. The Company has
reserved an aggregate of 2,750,000 shares of Company Common Stock for issuance
in connection with the Company's stock option plans and otherwise. The Company
has reserved an aggregate of 1,300,000 shares of Company Common Stock under the
1994 Equity Incentive Plan, of which 131,781 shares have been issued upon the
exercise of options and an aggregate of 862,504 shares of Company Common Stock
are currently subject to outstanding grants under such plan. The Company has
reserved an aggregate of 250,000 shares of Company Common Stock under the 1995
Directors Plan and options to purchase an aggregate of
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100,000 shares of Company Common Stock have been granted under such plan.
Options to purchase an aggregate of 1.2 million shares have been granted outside
of such plans to Nigel P. Gallop and Robert J Majteles (in the amount of 600,000
shares each). Schedule 2.2 sets forth, for each of option plans and for options
that were granted outside of the plans, the number of option shares currently
vested and exercisable, the number of additional option shares that will vest,
by their existing terms, at various specified dates prior to the Effective Time,
and the numbers of additional options that will become vested immediately prior
to the Merger as a result thereof. The Company has reserved 250,000 shares of
Company Common Stock for issuance under the Company's Employee Stock Purchase
Plan (the "ESPP"). A maximum of 13,000 shares of Company Common Stock will be
issued to participants under the ESPP after the date hereof and prior to the
Effective Time. The ESPP will terminate on or before the Effective Time and,
except as set forth in the preceding sentence, no additional shares of Company
Common Stock will be issued under the ESPP between the date hereof and the
Closing Date. Except as set forth above, there are outstanding (i) no shares of
capital stock or other voting securities of the Company, (ii) no securities of
the Company or its subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of the Company, (iii) no options or other
rights to acquire from the Company, and no obligations of the Company to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "Company Securities"). There are no outstanding obligations of
the Company to repurchase, redeem or otherwise acquire any Company Securities.
There are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or to which it is bound relating
to the voting of any shares of capital stock of the Company.
(b) The Company Common Stock constitutes the only class of
securities of the Company or its subsidiaries registered or required to be
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
2.3 Authority Relative to this Agreement; Consents and Approvals
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company (the "Company
Board") and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the then outstanding
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shares of Company Common Stock). This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
(b) The Company Board has, by unanimous vote of those present,
duly and validly approved, and taken all corporate actions required to be taken
by the Company Board for the consummation of the transactions, including the
Merger, contemplated hereby and resolved to recommend that the stockholders of
the Company approve and adopt this Agreement; provided, however, that such
approval and recommendation may be withdrawn, modified or amended in the event
that the Company Board by majority vote determines in its good faith judgment,
after consultation with and based upon the advice of independent legal counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
stockholders under applicable law. No state takeover statute or similar statute
or regulation applies or purports to apply to the Merger, this Agreement or any
of the transactions contemplated hereby.
2.4 SEC Reports; Financial Statements
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since February
14, 1996, each of which has complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. The Company has heretofore delivered to
Parent, in the form filed with the SEC (including any amendments thereto), (i)
its Annual Reports on Form 10-K for each of the fiscal years ended December 31,
1996, 1997 and 1998, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
February 14, 1996 and (iii) all other reports or registration statements filed
by the Company with the SEC since February 14, 1996 (the "Company SEC Reports").
None of such forms, reports or documents, including, without limitation, any
financial statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except as may be indicated in the notes thereto),
the financial position of the Company as of the dates thereof and its results of
operations and changes in financial position for the periods then ended
(subject, in the case of the unaudited interim financial statements, to normal
year-end adjustments).
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Since December 31, 1998, except as set forth in the Company SEC Reports, there
has not been any change, or any application or request for any change, by the
Company or any of its subsidiaries in accounting principles, methods or policies
for financial accounting or tax purposes.
(b) The Company has heretofore made available to Parent a
complete and correct copy of any material amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Exchange Act.
2.5 Information Supplied
None of the information with respect to the Company to be included in
the Proxy Statement (as defined in this Section below) will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated thereunder. The letters
to stockholders, notices of meeting, preliminary proxy statement, definitive
proxy statement and forms of proxies to be distributed to stockholders in
connection with the Merger, and any schedules to be filed with the SEC in
connection therewith are collectively referred to as the "Proxy Statement."
2.6 Consents and Approvals; No Violations
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Exchange Act,
the filing and recordation of the Certificate of Merger as required by the DGCL,
and the approval of the stockholders of the Company, no filing with or notice
to, and no permit, authorization, consent or approval of, any court or tribunal
or administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") or any other person or entity is necessary for the
execution and delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the certificate of incorporation or
bylaws of the Company, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or Lien (as
defined below)) (collectively, a "Default") under any of the terms, conditions
or provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation
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to which the Company is a party or by which it or any of its properties or
assets may be bound (collectively, "Agreements") or would result in a Default
under any of the Company's Agreements (whether or not such Agreement is
material) which would have a Material Adverse Effect on the Company, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its properties or assets. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.
2.7 No Default
The Company is not in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (i) its certificate of
incorporation or bylaws, or (ii) any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its properties
or assets, except in the case of subsection (ii) for violations, breaches or
defaults that would not have a Material Adverse Effect on the Company.
2.8 No Undisclosed Liabilities; Absence of Changes
Except as and to the extent publicly disclosed by the Company in the
Company SEC Reports, as of December 31, 1998, the Company had no liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by GAAP to be reflected in, reserved against or otherwise described in the
balance sheet of the Company (including the notes thereto) as of such date or
which could reasonably be expected to have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC Reports,
since December 31, 1998, the business of the Company has been carried on only in
the ordinary and usual course, the Company has not incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, and whether due or
to become due or asserted or unasserted which could reasonably be expected to
have, and there have been no events, changes or effects with respect to the
Company having or which could reasonably be expected to have, a Material Adverse
Effect on the Company.
2.9 Litigation
Except as publicly disclosed by the Company in the Company SEC Reports,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any of its
properties or assets which (a) could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
(b) as of the date hereof, questions the validity of this
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Agreement or any action to be taken by the Company in connection with the
consummation of the transactions contemplated hereby or could otherwise prevent
or delay the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by the Company, the Company is not subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, could reasonably be expected to have a Material Adverse
Effect on the Company or would prevent or delay the consummation of the
transactions contemplated hereby.
2.10 Compliance with Applicable Law
Except as publicly disclosed by the Company in the Company SEC Reports,
the Company holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of its
business (the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which could not reasonably
be expected to have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company is in
compliance with the terms of the Company Permits, except where the failure so to
comply could not reasonably be expected to have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC Reports,
the business of the Company is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity except for violations or
possible violations which do not, and, insofar as reasonably can be foreseen,
will not, have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company in the Company SEC Reports, to the best knowledge of
the Company no investigation or review by any Governmental Entity with respect
to the Company is pending or threatened, nor, to the best knowledge of the
Company, has any Governmental Entity indicated an intention to conduct the same.
2.11 Employee Benefit Plans
(a)......The Company Disclosure Schedule contains a list of all top hat
or excess benefit plans for a select group of management or highly compensated
employees, Code Section 401(a) plans, employee bonus plans, Code Section 125
plans, medical, dental, vision, hospitalization and life insurance, tuition
reimbursement, disability plans in excess of state law required benefits, paid
time off and vacation benefits, severance (including change in control
agreements), stock purchase, stock option, stock appreciation rights, fringe
benefit and other employee benefit plans and programs (including, without
limitation, each "employee benefit plan," as defined in section 3(3) of ERISA)
and each employment or consulting contract or agreement which provides for base
annual compensation in excess of $75,000, (i) sponsored, maintained or
contributed to by the Company or any ERISA Affiliate, (ii) covering or
benefiting any current or former
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officer, employee, director or independent contractor of the Company or any
ERISA Affiliate or (iii) with respect to which the Company or any ERISA
Affiliate has any material obligation or liability (individually, an "Employee
Benefit Plan" and, collectively, the "Employee Benefit Plans"). Neither the
Company nor any ERISA Affiliate has any agreement to create any additional
employee benefit plan or program, or to modify or amend any existing Employee
Benefit Plan. For purposes of this Agreement, "ERISA Affiliate" means any
Subsidiary and any other corporation, trade, business or other entity that must
be aggregated with either the Company or any Subsidiary under Section 414(b),
(c), (m) or (o) of the Code. The Company has delivered to Parent true, complete
and accurate copies of all Employee Benefit Plans (including all amendments
thereto and summary plan descriptions thereof).
(b)......There has been no amendment, written interpretation or
announcement (whether or not written) by either the Company or any ERISA
Affiliate relating to a change in participation or coverage under any Employee
Benefit Plan that, either alone or together with any other such items or events,
could increase the expense of maintaining such Plan above the level of expense
incurred with respect thereto for the most recent fiscal year included in the
Company's or any ERISA Affiliate's audited financial statements.
(c)......With respect to each Employee Benefit Plan (i) such Employee
Benefit Plan and any related trust agreements, insurance contracts or annuity
contracts (or any related trust instruments) are and at all times since
inception have been maintained, administered, operated and funded in accordance
with their terms and in compliance with each applicable provision of ERISA, the
Code and any other applicable laws, including, without limitation, rules
promulgated pursuant thereto or in connection therewith, (ii) each Employee
Benefit Plan that is intended to be "qualified" within the meaning of Section
401(a) of the Code has been the subject of a favorable determination letter
issued by the IRS and, to the best knowledge of the Company, no circumstances
exist that have or are likely to adversely affect, or result in the revocation
of, such determination, and (iii) no transaction, event or omission has occurred
or failed to occur that could subject the Company or any ERISA Affiliate,
directly or indirectly, to a tax, fine, penalty or related charge under any
applicable law, including, without limitation, Chapter 43 of Subtitle D of the
Code and Section 502(c), 502(i), 502(l) or 4071 of ERISA;
(d)......All contributions, premiums and other payments due or required
to be made to (or with respect to) each Employee Benefit Plan under the terms of
such Employee Benefit Plan or under applicable law have been made on or before
their due dates in accordance with the terms of such Employee Benefit Plan or
applicable law, or, if not yet due, have been properly accrued on the financial
statements of the Company. The costs of administering the Employee Benefit
Plans, including, without limitation, fees for the
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trustees and other service providers which are customarily paid by the Company
or any ERISA Affiliate, have been timely paid, or will be timely paid or accrued
on the financial statements of the Company;
(e)......Neither the Company nor any ERISA Affiliate sponsors,
maintains or contributes to, or has ever sponsored, maintained or contributed to
(or been obligated to contribute to), (i) any multiemployer plan within the
meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code,
(ii) any multiple employer plan within the meaning of Section 4063 or 4064 of
ERISA or Section 413(c) of the Code, or (iii) any employee benefit plan, fund,
program, contract or arrangement that is subject to Section 412 of the Code or
Section 302 or Title IV of ERISA;
(f)......There are no pending or threatened claims, lawsuits or
arbitration asserted or instituted against any Employee Benefit Plans,
fiduciaries or any officers, employees, directors, agents or owners of the
Company or any ERISA Affiliate with respect to such Plan, and the Company has no
knowledge of any facts which would give rise to or could reasonably be expected
to give rise to any such claims, lawsuits or arbitrations. No Employee Benefit
Plan is currently under investigation, audit or review by the IRS, Department of
Labor or any other governmental entity or agency, and the Company has no
knowledge of any facts which could give rise to or could reasonably be expected
to give rise to any such claims, lawsuits or arbitrations;
(g)......Neither the execution and delivery of this Agreement or any
related agreement nor the consummation of the transactions contemplated by this
Agreement or any related agreement will (i) entitle any current or former
officer, employee, director, agent or independent contractor of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any other
payment from the Company, any ERISA Affiliate or any other Person, or otherwise
increase the amount of compensation due to any such individual, (ii) result in
any benefit or right becoming established or increased, or accelerate the time
of payment or vesting of any benefit, under any Employee Benefit Plan, (iii)
require the Company or any ERISA Affiliate to make any contribution to a trust
or other funding arrangement or to increase its contributions to any Employee
Benefit Plan, or (iv) conflict with the terms of any Employee Benefit Plan,
whether or not some other subsequent action or event would be required to
trigger any of the items specified in this paragraph.
2.12 Environmental Laws and Regulations
(a) Except as publicly disclosed by the Company in the Company
SEC Reports, (i) the Company is in compliance with all applicable federal, state
and local laws and regulations relating to pollution or protection of human
health or the environment
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(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) (collectively, "Environmental Laws"), except for
non-compliance that could not reasonably be expected to have a Material Adverse
Effect on the Company, which compliance includes, but is not limited to, the
possession by the Company of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (ii) the Company has not received written
notice of, and, to the best knowledge of the Company, the Company is not the
subject of, any action, cause of action, claim, investigation, demand or notice
by any person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim"); and (iii) to the best knowledge of
the Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as publicly disclosed by the Company in the Company
SEC Reports, there are no Environmental Claims that are pending or, to the best
knowledge of the Company, threatened against the Company or, to the best
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law.
2.13 Tax Matters
The Company has accurately prepared in all material respects and duly
filed with the appropriate federal, state, local and foreign taxing authorities
all tax returns, information returns and reports that are, individually and in
the aggregate, material and are required to be filed with respect to the Company
and has paid in full or made adequate provision for the payment of all material
Taxes (as defined below). The Company is not delinquent in the payment of any
material Taxes. As used herein, the term "Taxes" means all federal, state, local
and foreign taxes, including, without limitation, income, profits, franchise,
employment, transfer, withholding, property, excise, sales and use taxes
(including interest penalties thereon and additions thereto).
2.14 Intangible Property
The Company owns or possesses adequate licenses or other valid rights
to use all material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the Company
as currently conducted or as contemplated to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
foregoing. The conduct of the business of the Company as heretofore and
currently conducted has not and does not conflict in any way with
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any license, trademark, trademark right, trade name, trade name right, service
mark, copyright or, to the Company's best knowledge, any patent or patent right
of any third party. To the best knowledge of the Company, there are no
infringements of any proprietary rights owned by or licensed by or to the
Company.
2.15 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission or expense reimbursement in connection with
the transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Company or any of its affiliates. The Company shall be
responsible for all such fees and expenses, except as otherwise provided in
Section 6.3.
2.16 Material Contracts
(a) The Company has delivered or otherwise made available to
Parent true, correct and complete copies of all contracts and agreements (and
all amendments, modifications and supplements thereto and all side letters to
which the Company is a party affecting the obligations of any party thereunder)
to which the Company is a party or by which any of its properties or assets are
bound that are, material to the business, properties or assets of the Company,
including, without limitation, to the extent any of the following are,
individually or in the aggregate, material to the business, properties or assets
of the Company, all: (i) employment, product design or development, personal
services, consulting, non-competition, severance or indemnification contracts
(including, without limitation, any contract to which the Company is a party
involving employees of the Company); (ii) licensing, publishing, merchandising
or distribution agreements; (iii) contracts granting a right of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets of the
Company (by merger, purchase or sale of assets or stock or otherwise); (vi)
contracts or agreements with any Governmental Entity; (vii) notes, bonds,
mortgages, indentures and leases; and (viii) all commitments and agreements to
enter into any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 4.1 hereof, the "Contracts"). The
Company is not a party to or bound by any severance, golden parachute or other
agreement with any employee or consultant pursuant to which such person would be
entitled to receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions contemplated
hereby.
(b) Each of the Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Contract so listed
either by the Company or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that
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with the lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or, to the knowledge of the Company, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on the Company. No party to any such
Contract has given notice to the Company of or made a claim against the Company
with respect to any breach or default thereunder.
(c) No party to any such Contract has given notice to the
Company of or made a claim against the Company with respect to any breach or
default thereunder.
2.17 Disclosure
No representation or warranty by the Company contained in this
Agreement and no statement contained in any certificate delivered by the Company
to Sub or Parent pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading when taken together in light of the
circumstances in which they were made.
2.18 Termination of Certain Contracts
The Company has terminated its Distributor Agreement and has no other
agreements with ACI Worldwide Inc. (as successor to USSI, Inc., "ACI") (provided
that the Company may continue to distribute 50 licenses of ACI's Trans24
software and appropriate provisions of the Distributor Agreement will continue
to apply to such licenses). On or prior to the closing the Company shall
terminate its agreements with UniKix Technologies. The Company has received a
release and settlement providing for a complete release from any and all claims
now existing or arising in the future against the Company and its affiliates by
ACI (other than with respect to the ongoing licenses and settlement payments)
for an amount payable by the Company as described in the Company Disclosure
Schedule. On or prior to the Closing the Company will have reached an agreement
with UniKix Technologies to provide for software licenses in connection with the
Trans24 software licenses with payments not to exceed the amount provided for in
the Company Disclosure Schedule.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company as follows:
3.1 Organization
(a) Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and
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has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted.
(b) Each of Parent and Sub is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect (as defined below) on Parent. When used in
connection with Parent or Sub, the term "Material Adverse Effect" means any
change or effect that, when taken together with all other adverse changes and
effects (i) is or is reasonably likely to be materially adverse to the
properties, business, results of operations or condition (financial or
otherwise) of Parent and its subsidiaries, taken as a whole, or (ii) may impair
the ability of Parent and/or Sub to consummate the transactions contemplated
hereby.
(c) Parent has heretofore delivered to the Company accurate
and complete copies of the articles of incorporation and by-laws of Parent as
currently in effect.
3.2 Authority Relative to this Agreement
Each of Parent and Sub has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the boards of directors of Parent and Sub and by Parent as the
sole stockholder of Sub, and no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a valid, legal
and binding agreement of each of Parent and Sub, enforceable against each of
Parent and Sub in accordance with its terms.
3.3 Information Supplied
None of the information with respect to Parent or Sub to be supplied by
Parent or Sub in writing specifically for inclusion in the Proxy Statement will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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3.4 Consents and Approvals; No Violations
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Exchange Act,
and the filing and recordation of the Certificate of Merger as required by the
DGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity or any other person or entity is necessary
for the execution and delivery by Parent or Sub of this Agreement or the
consummation by Parent or Sub of the transactions contemplated hereby. Neither
the execution, delivery and performance of this Agreement by Parent or Sub nor
the consummation by Parent or Sub of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate of incorporation or bylaws of Parent or Sub, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or Sub is a party or
by which any of them or any of their respective properties or assets may be
bound, or (iii) violate any order, writ, injunction, decree, law, statute, rule
or regulation applicable to Parent or Sub or any of Parent's subsidiaries or any
of their respective properties or assets.
3.5 Litigation
Except as publicly disclosed by Parent in reports filed by Parent with
the SEC (the "Parent SEC Reports"), there is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of Parent or Sub, threatened
against Parent or Sub or any of their respective properties or assets which as
of the date hereof, questions the validity of this Agreement or any action to be
taken by Parent in connection with the consummation of the transactions
contemplated hereby or could otherwise prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by
Parent in Parent's SEC Reports, neither Parent nor Sub is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, could reasonably be expected to have a Material Adverse
Effect on Parent or would prevent or delay the consummation of the transactions
contemplated hereby.
3.6 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Sub or any of
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their affiliates, except for fees that may be payable to placement agents or
lenders in connection with any debt financing obtained by Parent or Sub.
3.7 Financing
Parent or Sub has received commitments or highly confident letters from
financially responsible third parties to obtain, and will have at the time of
acceptance for payment and purchase of Shares at the Effective Time, the funds
necessary to consummate the Merger and to pay the Merger Consideration and
related fees and expenses.
4. COVENANTS
4.1 Conduct of Business of the Company
Except as contemplated by this Agreement, during the period from the
date hereof to the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Effective Time, neither the Company nor any of its subsidiaries will,
without the prior written consent of Parent:
(a) amend its certificate of incorporation or bylaws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights), except for
the issuance of up to 2,162,504 shares of Company Common Stock pursuant to the
exercise of currently granted stock options under the Company's stock option
plans and existing option agreements;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or
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otherwise make any payments to stockholders in their capacity as such, or redeem
or otherwise acquire any of its securities or any securities of any of its
subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary (other than the Merger);
(f) (i) incur or assume any long-term or short-term debt or
issue any debt securities; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person; (iii) make any loans, advances or capital
contributions to, or investments in, any other person; (iv) pledge or otherwise
encumber shares of capital stock of the Company or its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon;
(g) except as may be required by law or as contemplated by
this Agreement, enter into, adopt or amend or terminate any Employee Benefit
Plan (as defined in Section 2.11), or increase the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any Employee Benefit Plan as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance units);
(h) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which in the aggregate are material to
the Company and its subsidiaries taken as a whole, enter into any commitment or
transaction outside the ordinary course of business or grant any exclusive
distribution rights, except as contemplated by Section 2.18 hereof;
(i) except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(j) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course of
business or as required by GAAP;
(k) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or
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any equity interest therein; (ii) enter into any contract or agreement, other
than in the ordinary course of business or as contemplated in Section 2.18 or
amend in any material respect any of the Contracts or the agreements referred to
in Section 2.16; (iii) authorize any new capital expenditure or expenditures
other than up to an aggregate of $150,000, provided such expenditures are in
accordance with the Company's capital budget previously provided to Parent; or
(iv) enter into or amend any contract, agreement, commitment or arrangement
providing for the taking of any action that would be prohibited hereunder;
(l) make or revoke any tax election or settle or compromise
any tax liability material to the Company and its subsidiaries taken as a whole
or change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes;
(m) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of the Company
or incurred in the ordinary course of business consistent with past practice,
except as contemplated by Section 2.18 hereof;
(n) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby, except as
contemplated by Section 2.18 hereof; or
(o) take (other than to Parent in seeking its consent to the
taking of any such action), propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 4.1(a) through 4.1(n) or any
action which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect in any material respect.
4.2 Preparation of Proxy Statement and Stockholders' Meeting
(a) In order to consummate the Merger, the Company, acting
through the Board, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") as soon as practicable for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement relating
to the Merger and this Agreement and use its reasonable efforts (x) to obtain
and
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furnish the information required to be included by the SEC in the Proxy
Statement and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary Proxy Statement and
cause a definitive Proxy Statement to be mailed to its stockholders and (y) to
obtain the necessary approvals of the Merger and this Agreement by its
stockholders; and
(iii) subject to the fiduciary obligations of the Board under applicable
law as advised by outside counsel, include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in favor of
the approval of the Merger and the adoption of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all
of the Shares then owned by it, Sub or any of its other subsidiaries in favor of
the approval of the Merger and the adoption of this Agreement.
4.3 No Solicitation
(a) The Company, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition of all or any material portion of the
assets of, or any equity interest in, the Company or its subsidiaries or any
business combination with the Company or its subsidiaries. The Company may,
directly or indirectly, furnish information and access, in each case only in
response to unsolicited requests therefor, to any corporation, partnership,
person or other entity or group pursuant to confidentiality agreements, and may
participate in discussions and negotiate with such entity or group concerning
any merger, sale of assets, sale of shares of capital stock or similar
transaction involving the Company or any subsidiary or division of the Company,
if such entity or group has submitted a proposal to the Company (whether or not
in writing) relating to any such transaction and the Company Board by a majority
vote determines in its good faith judgment, after consultation with and based
upon the advice of independent legal counsel, that it is necessary to do so to
comply with its fiduciary duties to stockholders under applicable law. The
Company Board shall provide a copy of any such written proposal and a summary of
any oral proposal to Parent within 24 hours after receipt thereof and thereafter
keep Parent promptly advised of any material development with respect thereto.
Except as set forth above, neither the Company nor any of its affiliates shall,
nor shall the Company authorize or permit any of its or their respective
officers, directors, employees, representatives or agents to directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent and Sub, any affiliate or
associate of Parent and Sub or any designees of Parent and Sub) concerning any
merger, sale of assets, sale of shares of
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capital stock or similar transaction involving the Company or any subsidiary or
division of the Company; provided, however, that nothing herein shall prevent
the Company Board from taking, and disclosing to the Company's stockholders, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer; provided, further, that nothing herein
shall prevent the Company Board from making such disclosure to the Company's
stockholders as, in the good faith judgment of the Company Board, after
consultation with and based upon the advice of independent legal counsel, is
necessary to comply with its fiduciary duties to stockholders under applicable
law.
(b) Except as set forth in this Section 4.3, the Company Board
shall not approve or recommend, or cause the Company to enter into any agreement
with respect to any Third Party Transaction (as defined in Section 6.1(d)).
Notwithstanding the foregoing, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel,
determines in good faith that it is necessary to do so in order to comply with
its fiduciary duties to stockholders under applicable law, the Company Board may
approve or recommend a Superior Proposal (as defined below) or cause the Company
to enter into an agreement with respect to a Superior Proposal, but in each case
only (i) after providing reasonable written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Company Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal and (ii) if
Parent does not make within five days of Parent's receipt of the Notice of
Superior Proposal, an offer which the Company Board, after consultation with its
financial advisors, determines is superior to such Superior Proposal. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
to acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of Company Common Stock then outstanding
or all or substantially all the assets of the Company and otherwise on terms
which the Company Board determines in its good faith judgment (based on the
written advice of a financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the Merger.
4.4 Access to Information
(a) Between the date hereof and the Effective Time, the
Company will give to Parent or Sub and their authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records of its and its subsidiaries, will permit
such inspections as may reasonably be required and will cause their officers and
those of their subsidiaries to furnish such financial and operating data and
other information with respect to their business, properties and personnel as
may from time to time be reasonably requested, provided that no
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investigation pursuant to this Section 4.4(a) shall affect or be deemed to
modify any of the representations or warranties made in this Agreement.
(b) Between the date hereof and the Effective Time, the
Company shall furnish to Parent (i) within five business days after the delivery
thereof to management, such monthly financial statements and data as are
regularly prepared for distribution to management and (ii) at the earliest time
they are available, such quarterly and annual financial statements as are
prepared for its SEC filings, which (in the case of this clause (ii)) shall be
in accordance with their books and records.
(c) Parent and Sub will hold and will cause their consultants
and advisors to hold in confidence all documents and information received in
connection with the transactions contemplated by this Agreement.
4.5 Additional Agreements; Reasonable Best Efforts
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) cooperation in the preparation and filing of
the Proxy Statement; (ii) the taking of all action reasonably necessary, proper
or advisable to secure any necessary consents under existing contracts of the
Company and its subsidiaries or amend the agreements relating thereto to the
extent required by such agreements; (iii) contesting any legal proceeding
relating to the Merger; and (iv) the execution of any additional instruments,
including the Certificate of Merger, necessary to consummate the transactions
contemplated hereby; provided, however, that the Company may postpone a
previously-scheduled meeting of Company stockholders in the event that the
Company Board by majority vote determines in its good faith judgment, after
consultation with and based upon the advice of independent legal counsel, that
it is necessary to do so in order to comply with its fiduciary duties to
stockholders under applicable law and, at the time of such determination, the
Company has received a bona fide proposal to effect an alternate sale that is a
Superior Proposal and that has not been withdrawn. In case at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take all
such necessary action.
4.6 Consents
Parent, Sub and the Company each will use all reasonable efforts to
obtain consents of all third parties and Governmental Entities necessary, proper
or advisable for the consummation of the transactions contemplated by this
Agreement.
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4.7 Public Announcements
Each of Parent, Sub and the Company will consult with one another
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, including, without
limitation, the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
Nasdaq Stock Market, as determined by Parent, Sub or the Company, as the case
may be.
4.8 Notification of Certain Matters
The Company shall give prompt notice to Parent and Sub, and Parent and
Sub shall give prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective Time,
(ii) any material failure of the Company, Parent or Sub, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder, (iii) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by the Company or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract or agreement material to the financial condition, properties,
businesses or results of operations of it and its subsidiaries taken as a whole
to which it or any of its subsidiaries is a party or is subject, (iv) any notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement, or (v) any material adverse change in the
Company's financial condition, properties, business, results of operations or
prospects, other than changes resulting from general economic conditions;
provided, however, that the delivery of any notice pursuant to this Section 4.8
shall not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
4.9 Release of Liens
Prior to the Closing, the Company shall have all Liens relating to its
loan agreement and security agreement with Silicon Valley Bank terminated and
released.
4.10 Company 401(k) Plan
If requested in writing by Parent, on or prior to the Closing Date, the
Company will adopt a resolution that terminates its 401(k) Employee Retirement
Plan and cause to
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be filed with the IRS an application for a determination that the termination of
the plan does not adversely affect the qualified status of the plan under
Section 401(a) of the Code. The Company shall provide Parent with a copy of such
resolution and determination letter application prior to the Closing Date.
4.11 Parent 401(k) Plan
Parent will make such amendments to its 401(k) Plan to provide that the
Company's employees may commence participation in the Parent's 401(k) Plan,
effective upon or within a reasonable period following the Closing Date pursuant
to the terms of the plan.
5. CONDITIONS TO CONSUMMATION OF THE MERGER
5.1 Conditions to Each Party's Obligations to Effect the Merger
The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger; and
(c) any other governmental or regulatory notices or approvals
required with respect to the transactions contemplated hereby shall have been
either filed or received.
5.2 Conditions to the Obligations of the Company
The obligation of the Company to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations of Parent and Sub contained in this
Agreement or in any other document delivered pursuant hereto shall be true and
correct in all material respects at and as of the Effective Time with the same
effect as if made at and as of the Effective Time, and at the Closing Parent and
Sub shall have delivered to the Company a certificate to that effect signed by
the chief executive officer of each of Parent and Sub; and
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(b) each of the obligations of Parent and Sub to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and at the Closing Parent and Sub shall have delivered to the Company a
certificate to that effect signed by the chief executive officer of each of
Parent and Sub.
5.3 Conditions to the Obligations of Parent and Sub
The respective obligations of Parent and Sub to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of the Company contained in this
Agreement or in any other document delivered pursuant hereto shall be true and
correct in all material respects at and as of the Effective Time with the same
effect as if made at and as of the Effective Time, and at the Closing the
Company shall have delivered to Parent and Sub a certificate to that effect
signed by the chief executive officer of the Company;
(b) each of the obligations of the Company to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time and
at the Closing the Company shall have delivered to Parent and Sub a certificate
to that effect signed by the chief executive officer of the Company;
(c) the Company shall have obtained the consent or approval of
each person whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any subsidiary of the Company
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except for those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Company;
(d) there shall have been no events, changes or effects with
respect to the Company or its subsidiaries having or which could reasonably be
expected to have, a Material Adverse Effect on the Company; and
(e) each employee of the Company and its subsidiaries shall
have entered into a Proprietary Rights and Confidentiality Agreement, in the
form attached hereto as Exhibit A.
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6. TERMINATION; AMENDMENT; WAIVER
6.1 Termination
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by Parent and Sub or the Company if (i) any court of
competent jurisdiction in the United States or other United States governmental
authority shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by August 31, 1999; provided that no
party may terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have been
the reason that the Effective Time shall not have occurred on or before said
date;
(c) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of Parent or Sub set forth in this
Agreement, or if any representation or warranty of Parent or Sub shall have
become untrue, in either case such that the conditions set forth in Section
5.2(a) would be incapable of being satisfied by August 31, 1999 (or as otherwise
extended), (ii) there shall have been a breach by Parent or Sub of any of their
respective covenants or agreements hereunder materially adversely affecting (or
materially delaying) the consummation of the Merger, and Parent or Sub, as the
case may be, has not cured such breach by August 31, 1999 (or as otherwise
extended), (iii) the Company enters into a definitive agreement relating to a
Superior Proposal in accordance with Section 4.3(b) (provided that such
termination shall not be effective until payment of the amount required under
Section 6.3(a)), (iv) the Company shall have convened one or more meetings of
its stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders prior to August 31, 1999, or (v) the Company
Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of independent legal counsel, that
it is necessary to do so to comply with its fiduciary duties to stockholders,
provided that such termination under this clause (v) shall not be effective
unless at the time of such determination the Company has received a bona fide
proposal to effect a Third Party Transaction (as defined below) that is a
Superior Proposal and that has not been withdrawn as of the time of such
termination (provided that such termination shall not be effective until payment
of the amount required under Section 6.3(a)); or
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(d)......by Parent and Sub if (i) there shall have been a breach of any
representation or warranty on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 5.3(a)
would be incapable of being satisfied by August 31, 1999 (or as otherwise
extended), (ii) there shall have been a breach by the Company of its covenants
or agreements hereunder having a Material Adverse Effect on the Company or
materially adversely affecting (or materially delaying) the consummation of the
Merger, and the Company has not cured such breach by August 31 1999 (or as
otherwise extended), (iii) the Company Board shall have withdrawn, modified or
changed its approval or recommendation of this Agreement or the Merger, shall
have recommended to the Company's stockholders a Third Party Transaction or
shall have failed to call, give notice of, convene or hold a stockholders'
meeting to vote upon the Merger, or shall have adopted any resolution to effect
any of the foregoing, or (iv) the Company shall have convened a meeting of its
stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders by August 31, 1999 (or as otherwise
extended).
"Third Party Transaction" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Sub or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the
total assets of the Company and its subsidiaries, taken as a whole; or (iii) the
acquisition by a Third Party of 30% or more of the outstanding shares of Company
Common Stock.
6.2 Effect of Termination
In the event of the termination and abandonment of this Agreement
pursuant to Section 6.1, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party hereto or its affiliates,
directors, officers or stockholders, other than the provisions of this Section
6.2 and Sections 4.4(c), 6.3, 7.5, 7.7, 7.9 and 7.11 hereof. Nothing contained
in this Section 6.2 shall relieve any party from liability for any breach of
this Agreement.
6.3 Fees and Expenses
(a) In the event that this Agreement shall be terminated
pursuant to Section 6.1(d)(i) through 6.1(d)(iv) or Section 6.1(c)(iii), (iv),
or (v) Parent and Sub would suffer direct and substantial damages, which damages
cannot be determined with reasonable certainty. To compensate Parent and Sub for
such damages, the Company shall pay to Parent the amount of $5.0 million as a
termination fee on the date of such
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termination. It is specifically agreed that the amount to be paid pursuant to
this Section 6.3(a) represents a negotiated termination fee and is not a
penalty.
(b) In the event that this Agreement shall be terminated
pursuant to Section 6.1(c)(i) or (ii), the Company would suffer direct and
substantial damages, which damages cannot be determined with reasonable
certainty. To compensate the Company for such damages, Parent shall pay to the
Company the amount of $5.0 million as a termination fee on the date of such
termination. It is specifically agreed that the amount to be paid pursuant to
this Section 6.3(b) represents a negotiated termination fee and is not a
penalty.
(c) Upon the termination of this Agreement pursuant to
Sections 6.1(c)(iii), (iv) or (v) or 6.1(d)(i) through (iv), the Company shall
reimburse Parent, Sub and their affiliates (not later than ten business days
after submission of statements therefor) for all actual documented out-of-pocket
fees and expenses, not to exceed $250,000, actually and reasonably incurred by
any of them or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, fees payable to counsel to any of the foregoing, and
accountants). If Parent or Sub shall submit a request for reimbursement
hereunder, Parent or Sub will provide the Company in due course with invoices or
other reasonable evidence of such expenses upon request. The Company shall in
any event pay the amount requested (not to exceed $250,000) within ten business
days of such request, subject to the Company's right to demand a return of any
portion as to which invoices are not received in due course.
(d) Upon the termination of this Agreement pursuant to
Sections 6.1(c)(i) or (ii), Parent shall reimburse the Company and their
affiliates (not later than ten business days after submission of statements
therefor) for all actual documented out-of-pocket fees and expenses, not to
exceed $250,000, actually and reasonably incurred by any of them or on their
behalf in connection with the Merger and the consummation of all transactions
contemplated by this Agreement (including, without limitation, fees payable to
counsel to any of the foregoing, and accountants). If the Company shall submit a
request for reimbursement hereunder, the Company will provide Parent in due
course with invoices or other reasonable evidence of such expenses upon request.
Parent shall in any event pay the amount requested (not to exceed $250,000)
within ten business days of such request, subject to Parent's right to demand a
return of any portion as to which invoices are not received in due course.
(e) Except as specifically provided in this Section 6.3, each
party shall bear its own expenses in connection with this Agreement and the
transactions
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contemplated hereby. The cost of printing the Proxy Statement shall be paid by
the Company.
6.4 Amendment
This Agreement may be amended by action taken by the Company, Parent
and Sub at any time before or after approval of the Merger by the stockholders
of the Company (if required by applicable law) but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
6.5 Extension; Waiver
At any time prior to the Effective Time, each party hereto (for these
purposes, Parent and Sub shall together be deemed one party and the Company
shall be deemed the other party) may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of either party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of either party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
7. MISCELLANEOUS
7.1 Nonsurvival of Representations and Warranties
The representations and warranties made herein shall not survive beyond
the Effective Time or a termination of this Agreement.
7.2 Entire Agreement; Assignment
This Agreement (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise; provided, however, that Sub may assign any or all of its
rights and obligations under this Agreement to any subsidiary of Parent, but no
such assignment shall relieve Sub of its obligations hereunder if such assignee
does not perform such obligations.
32
<PAGE>
7.3 Validity
If any provision of this Agreement, or the application thereof to any
person or circumstance, is held invalid or unenforceable, the remainder of this
Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and to such end, the provisions of
this Agreement are agreed to be severable.
7.4 Notices
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telegram,
facsimile or telex, or by registered or certified mail (postage prepaid, return
receipt requested), to the other party as follows:
if to Parent or Sub:
CFI ProServices, Inc.
Suite 200
400 S.W. Sixth Avenue
Portland, OR 97204
Fax: (503) 274-7280
Attn: President
with a copy to:
Perkins Coie LLP
Suite 1500
1211 S.W. Fifth Avenue
Portland, OR 97204
Fax: (503) 727-2222
Attn: Roy W. Tucker
33
<PAGE>
and a copy to:
Farleigh, Wada & Witt, P.C.
Suite 600
121 S.W. Morrison
Portland, OR 97204
Fax: (503) 228-1741
Attn: F. Scott Farleigh
if to the Company to:
Ultradata Corporation
5000 Franklin Drive
Pleasanton, CA 94588
Fax: (925) 224-9879
Attn: Chief Financial Officer
with a copy to:
Fenwick & West LLP 100 The Embarcadero, Suite 300 San Francisco, CA
94105 Fax: (415) 281-1350 Attn: Robert B. Dellenbach
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
7.5 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the principles of conflicts
of law thereof.
7.6 Descriptive Headings
The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
7.7 Parties in Interest
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto and its successors and permitted assigns, and nothing in this
Agreement, express or
34
<PAGE>
implied, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
7.8 Severability
If any term or other provision of this Agreement is invalid, illegal or
unenforceable, all other provisions of this Agreement shall remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
7.9 Specific Performance
The parties hereto acknowledge that irreparable damage would result if
this Agreement were not specifically enforced, and they therefore consent that
the rights and obligations of the parties under this Agreement may be enforced
by a decree of specific performance issued by a court of competent jurisdiction.
Such remedy shall, however, not be exclusive and shall be in addition to any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.
7.10 Subsidiaries
The term "subsidiary" shall mean, when used with reference to any
entity, any entity more than fifty percent (50%) of the outstanding voting
securities or interests (including membership interests) of which are owned
directly or indirectly by such former entity.
7.11 Brokers
Except as otherwise provided in Section 6.3, the Company agrees to
indemnify and hold harmless Parent and Sub, and Parent and Sub agree to
indemnify and hold harmless the Company, from and against any and all liability
to which Parent and Sub, on the one hand, or the Company, on the other hand, may
be subjected by reason of any brokers, finders or similar fees or expenses with
respect to the transactions contemplated by this Agreement to the extent such
similar fees and expenses are attributable to any action undertaken by or on
behalf of the Company, or Parent or Sub, as the case may be.
7.12 Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
35
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.
ULTRADATA CORPORATION
By: /s/ Robert J. Majteles
----------------------
Robert J. Majteles
Title: President and Chief Executive Officer
CFI PROSERVICES, INC.
By: /s/ Matthew W. Chapman
----------------------
Matthew W. Chapman
Title: Chairman and Chief Executive Officer
UFO ACQUISITION CO.
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President
<PAGE>
ULTRADATA CORPORATION
5000 FRANKLIN DRIVE
PLEASANTON, CALIFORNIA 94588-3354
May 17, 1999
CFI Pro Services, Inc.
400 S.W. Sixth Avenue
Portland, OR 97204
Ladies and Gentlemen:
In connection with and pursuant to Article 2 of that certain Agreement
and Plan of Merger dated as of May 17, 1999 (the "Merger Agreement"), by and
among CFI Pro Services, Inc., a corporation organized under the laws of the
state of Oregon ("Parent"), UFO Acquisition Co., a subsidiary of Parent
organized under the laws of the state of Delaware ("Merger Sub") and ULTRADATA
Corporation, a corporation organized under the laws of the state of Delaware
("Company"), under cover of this letter Company is delivering to Parent and
Merger Sub this disclosure letter ("Disclosure Letter").
UNLESS OTHERWISE DEFINED, ANY CAPITALIZED TERMS IN ANY SCHEDULE
DELIVERED BY COMPANY TO PARENT AND MERGER SUB UNDER THIS DISCLOSURE LETTER OR
OTHERWISE DELIVERED TO PARENT AND/OR MERGER SUB IN CONNECTION WITH THE MERGER
AGREEMENT SHALL HAVE THE SAME MEANINGS ASSIGNED TO SUCH TERMS IN THE MERGER
AGREEMENT. NOTHING IN THIS DISCLOSURE LETTER BY COMPANY TO PARENT AND MERGER SUB
OR OTHERWISE DELIVERED BY COMPANY TO PARENT AND/OR MERGER SUB IN CONNECTION WITH
THE MERGER AGREEMENT SHALL CONSTITUTE AN ADMISSION OF ANY LIABILITY OR
OBLIGATION OF THE COMPANY TO ANY THIRD PARTY, NOR AN ADMISSION AGAINST THE
COMPANY'S INTERESTS.
Sincerely,
ULTRADATA CORPORATION
/s/ Ronald H. Bissinger
-----------------------
Ronald H. Bissinger
Chief Financial Officer
<PAGE>
Schedule 2.2
Options
Vested
Outs 5/14 Vested 5/14 Vested 8/30 Accelerated Effective Date
- --------- ----------- ----------- ----------- --------------
1994 Equity Incentive Plan
- --------------------------
862,504 364,791 403,906 324,343 728,249
1995 Directors Plan
- -------------------
100,000 46,250 48,750 51,250 100,000
Nigel Gallop Option
- -------------------
600,000 600,000 600,000 0 600,000
Robert Majteles Option
- ----------------------
600,000 387,496 424,995 175,005 600,000
TOTAL
- -----
2,162,504 1,398,537 1,477,651 550,598 2,028,249
- --------- --------- --------- ------- ---------
<PAGE>
Section 2.4
Company Financial Statements
(a) The description of Mr. Gallop's option agreements in Company's Proxy
Statement relating to Company's Annual Stockholders' Meeting held on
May 8, 1998 provides that Mr. Gallop's option remains in effect so long
as he continues to provide services to Company. However, such options
remain exercisable though July 31, 2000 without any other obligation on
the part of Mr. Gallop. This description was corrected in the Company's
Proxy Statement relating to Company's Annual Stockholders' Meeting held
on May 7, 1999.
The Company received notice of an informal investigation of Company by
the U.S. Securities and Exchange Commission relating to certain 1996
and 1997 quarterly and 1997 year-end adjustments made by Company.
However, the Company has not received any communication from the SEC
since June 10, 1998.
<PAGE>
Section 2.6
Consents and Approvals; No Violations
Consents and/or permissions are required to be obtained prior to the
Merger pursuant to the Company's agreements with each of the following
customers to avoid breach or termination:
Air Academy Federal Credit Union dated September 30, 1996 Bank-Fund
Staff Federal Credit Union dated March 6, 1995 Honeywell/Alliant
Tech Systems Federal Credit Union dated July 8, 1997
Notices are required to be given in connection with the Merger pursuant
to the Company's agreements with each of the following parties:
Credit Union 1 (f/k/a Frontier Alaska State Credit Union) dated
September 1, 1992 Fischer Technology Group Incorporated, UniKix
Technologies Division, under Independent Software Vendor Agreement
dated July 1, 1997.
The following contracts permit assignment in connection with the Merger
so long as Parent and Sub agree to be bound by the terms and conditions
of the agreement:
GentelCo West Federal Credit Union (f/k/a Long Beach GentelCo
Federal Credit Union) dated September December 1, 1994 San Mateo
Credit Union dated September 6, 1993 and June 5, 1995
The Merger will trigger the right of Marriott Employees' Federal Credit
Union to receive source code pursuant to the Escrow Agreement dated
July 16, 1990.
Consents and/or permissions is required to be obtained prior to the
Merger pursuant to the following Agreements to avoid breach or
termination:
Reseller Agreement with Tracer Technologies dated August 1, 1998.
Value Added Reseller Agreement dated April 14, 1998 with
DecisionOne.
Distributor Agreement with USSI, Inc., dated June 30, 1997
(only if Parent or Sub is a competitor of USSI).
<PAGE>
Section 2.9
Litigation
Dennis Roberts, a former employee of Company, commenced a lawsuit against
Company on July 5, 1997. Mr. Roberts purports to represent a class of current
and former employees of Company who he alleges are non-exempt and entitled to
payment of overtime wages for hours worked in excess of forty per week or eight
per day. Plaintiff alleges he represents employees in all computer related
occupations at Company other than clerical employees. Plaintiff worked for
Company for approximately nine months as a senior field service engineer. Mr.
Roberts' allegations have not yet been adjudicated, nor have his ability or
qualifications to represent the alleged class. Mr. Roberts has not yet sought
class certification, and discovery has commenced.
Company received a notice on May 1, 1998 that Steve Fisher, a former employee of
Company at Company's Texas facility, commenced a lawsuit against Company
alleging age discrimination and retaliation. Mr. Fisher was laid off on March
31, 1997, along with approximately fifty other employees at Company's Texas
facility. Company targeted for layoff programmers and other employees who did
not works at Company's headquarters in Pleasanton, California. Mr. Fisher was
laid off over similarly qualified, lower paid programmers who worked out of
Company's headquarters. Mr. Fisher based his claim of retaliation on alleged
discussions prior to the layoff with Human Resources personnel that he was being
treated unfairly because of his age or location by his then current supervisor.
On May 13, 1999, the Company received a letter on behalf of Ex-Cel Solutions,
Inc. in which Ex-Cel alleges breach of contractual relations, misappropriation
of trade secrets, interference with contractual relations and unfair trade
practices. The letter does not describe in detail the alleged facts on which the
assertions of these claims are based.
<PAGE>
Section 2.10
Compliance with Applicable Law
See disclosure with respect to Section 2.4.
<PAGE>
Section 2.11
Employee Benefit Plans
(a) Company maintains or contributes to the following:
(i) Company Pension Plans: Company's 401(k) Employee Retirement Plan.
---------------------
(ii) Company Welfare Plans:
---------------------
(A) Group Health insured through the following:
(1) Care-ousel Blue Card Plan issued under Blue Cross Life & Insurance
Company. Policy number WLA3010 (JW310).
(2) Care-ousel Prudent Buyer Plan (PPO). Issued under Blue Cross of
California policy number RT03010 (JW JW 310).
(3) Care-ousel California Care HMO Plan. Issued under Blue Cross of
California policy number RT03010 (JW JW 310).
(4) Kaiser HMO effective January 1, 1999.
(B) Group Life and Accidental Dismemberment Plan. Insured benefits are
provided under UNUM Life Insurance Company of America policy number 522098-012.
(C) Dental Plan: Insured under DMHO Dental Net Plan, policy issued under
Blue Cross WL/DN 3040 (JW 310) and Point of Service policy
(D) Chiropractic Plan: insured under HMO Medical Plan. Issued under
American Specialty Health Plans policy number HP1167.
(E) Vision Plan: Insured through Vision Service Plan, Group Number 12055-78
(F) Employee Assistance Plan: Issued under Blue Cross of California, policy
number EAP-030310 (JW 310) (G) Cafeteria Plan: Medical Reimbursement and
Dependent Care administered by BeneSphere under policy numbers 348936 and
348937.
(H) Holiday Benefit
<PAGE>
(I) Paid Time Off Benefit
(J) Wellness
. Health Club
. Quit Smoking
. Weight Watchers
(K) Short Term Disability insured through UNUM.
(L) Long Term Disability insured through UNUM.
(M) Education Reimbursement Program
(N) Voluntary Life. Insured under UNUM policy number 521198-0011.
(iii) Employee Plans:
--------------
(A) 1994 Equity Incentive Plan
(B) 1995 Employee Stock Purchase Plan
(C) 1995 Director Stock Option Plan
(D) Non-Plan Stock Option to Nigel P. Gallop
(E) Non-Plan Stock Option to Robert J. Majteles
(iv) Employment Agreements:
---------------------
(A) 1999 Management Bonus Plan
(B) Nigel Gallop Separation Agreement dated April 30, 1997
(C) Robert J. Majteles Employment Agreement dated October 31, 1996
(D) James R. Berthelsen Employment Agreement dated November 6, 1998.
(E) Ronald H. Bissinger Employment Agreement dated November 6, 1998.
(F) David J. Robbins Employment Agreement dated November 6, 1998.
(G) Cindy L. Cooper Employment Agreement dated November 6, 1998.
<PAGE>
(H) 1999 Sales Compensation Plan, Vice President, Sales & Marketing (Jim
Berthelsen).
(I) 1999 Sales Compensation Plan, Director, Emerging Technologies, with
Addendum (Tim Lerew).
(J) 1999 Incentive Plan, Director, Customer Relations (Mary Ann Hearne).
(c), (d), (f)
Reference is made to the Department of Labor's January 9, 1998 letter
stating that it will take no further action with respect to its
investigation of the Company's 401(k) Plan. The Department of Labor
informed the Company that, as required by ERISA, it will refer the
findings of its investigation to the Internal Revenue Service. The
Company has not received any communication from the Internal Revenue
Service in connection with this referral.
(g) The Nonqualified Stock Option Agreement between Company and Robert J.
Majteles for a total of 600,000 shares with a date of grant of October
17, 1996 provides that immediately prior to the closing date for a
corporate transaction, all shares remaining unvested thereunder shall
immediately become vested and exercisable. This acceleration of vesting
in addition to a 2.90 severance payment due Mr. Majteles under his
Employment Agreement described under clause (a)(iv)(C) above with the
Company may cause an "excess parachute payment," as defined in Section
280G of the Code.
The employment agreements listed in clauses (a)(iv)(D)-(G) above
include provision for full acceleration of options upon the
consummation of the Merger and payment of 12 months severance
consisting of base salary and other benefits in the event that the
employee is terminated without cause or constructively terminated
within the 12 months following the consummation of the Merger.
Pursuant to Company's 1995 Directors Stock Option Plan, prior to the
consummation of the Merger, the vesting of all options granted under
such plan will accelerate and the options will become exercisable in
full.
<PAGE>
Section 2.14
The Value Added Reseller Agreement dated September 3, 1992 with
UNIDATA, Inc. (now Ardent) has expired. The Company is in the
process of negotiating a renewal, which it expects to complete prior
to the closing.
<PAGE>
Section 2.16
See disclosure regarding Section 2.11(g).
See disclosure regarding Section 2.14.
See information pertaining to Ex-Cel Solutions, Inc. in the disclosure regarding
Section 2.9.
<PAGE>
Section 2.18
The termination agreement with ACI provides for (a) payment of an aggregate of
$1.2 million, with $500,000 payable up front and the remaining amount payable
over 24 months; and (b) that the Company may continue to distribute 50 licenses
of ACI's Trans24 software and that the appropriate provisions of the Distributor
Agreement will continue to apply to such licenses. In connection with such
distribution, the Company will need to license software from UniKix. The
agreement with UniKix provides that it terminates upon the termination of the
ACI Distribution Agreement. The Company's position is that the termination of
such Distribution Agreement as provided in the termination agreement with ACI
terminates the UniKix agreement and the Company's obligation thereunder to pay
the additional $350,00 required to be paid under such agreement. However, as
certain provisions of the ACI Distribution Agreement survive with respect to the
50 Trans25 licenses, and the Company will need UniKix software in connection
with the distribution of such licenses, the Company will need to enter into a
new agreement with UniKix, the amounts payable under which will not exceed
$350,000.
SECURED PROMISSORY NOTE
$15,000,000 As of August 13, 1999
Revolving Credit Note No. 1
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of Foothill Capital Corporation, a California
corporation (hereinafter "Lender"), such payment to be made to Administrative
Agent for the account of Lender, in such coin or currency of the United States
which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment, the principal sum of $15,000,000 or so much
thereof as may be advanced and remain outstanding from time to time, on a
revolving basis, together with interest from and after the date hereof on the
principal amount hereof outstanding at the end of each day at the greater of (y)
8.75% per annum, and (z) a fluctuating rate per annum equal to the Reference
Rate plus 1%. The rate of interest set forth in the foregoing sentence shall
increase or decrease by an amount equal to any increase or decrease in the
Reference Rate, effective as of the opening of business on the day that any such
change in the Reference Rate occurs.
This Secured Promissory Note (this "Note") is one of a series of the
Revolving Credit Notes referred to in, and is issued pursuant to, that certain
Financing Agreement, dated as of August 13, 1999 (hereinafter, as amended from
time to time, the "Financing Agreement"), among Borrower, Lender, and certain
other financial institutions or funds party thereto and is entitled to all of
the benefits and security of the Financing Agreement. All of the terms,
covenants and conditions of the Financing Agreement and the other Loan Documents
are hereby made a part of this Note and are deemed incorporated herein in full.
All capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Financing Agreement. This
Note evidences the Revolving Loans by Lender to Borrower pursuant to Lender's
Revolving Credit Commitment, or so much thereof as may be advanced and remain
outstanding from time to time.
All interest shall be computed in the manner provided in Section 2.04
of the Financing Agreement. Upon the occurrence and during the continuation of
an Event of Default, the interest rate provided herein shall be increased in
accordance with the provisions of Section 2.04(b) of the Financing Agreement.
The principal amount and accrued interest of this Note shall be due and
payable in accordance with the Financing Agreement. Notwithstanding the
foregoing, the entire unpaid principal balance hereof and accrued interest
thereon shall be due and payable immediately upon any termination of the
Financing Agreement pursuant to Section 2.05 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 2.05(c) of the Financing Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies set forth in Section 8.01 of the Financing Agreement and
in the other Loan Documents.
1
<PAGE>
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower or any other property or indebtedness due
or to become due to Borrower. Borrower agrees that, without releasing or
impairing Borrower's liability hereunder, Lender (or its agent) may at any time
release, surrender, substitute or exchange any collateral securing this Note and
may at any time release any party primarily or secondarily liable for the
indebtedness evidenced by this Note.
To the maximum extent permitted by law, each Person composing Borrower
hereby waives any defenses such Person might have based upon suretyship or
impairment of collateral, such waiver being intended to be a reservation of
rights or a waiver contemplated by Section 3-606 of the Code.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
[SIGNATURE PAGES FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered on
the date first above written.
CFI PROSERVICES, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
ULTRADATA CORPORATION, a Delaware corporation and
successor by merger to UFO Acquisition Co.
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MONEYSCAPE HOLDINGS, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MECA SOFTWARE, L.L.C., a Delaware limited liability company
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
3
FORM OF
SECURED PROMISSORY NOTE
$35,000,000 As of August 13, 1999
Term Note A No. ____
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of ______________________________________________
(hereinafter "Lender"), such payment to be made to Administrative Agent for the
account of Lender, in such coin or currency of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, the principal sum of $__________, together with interest from and
after the date hereof on the unpaid principal balance outstanding of the Term
Loan A evidenced by this Note at the greater of (y) 9.75% per annum, and (z) a
fluctuating rate per annum equal to the Reference Rate plus 2%. The rate of
interest set forth in the foregoing sentence shall increase or decrease by an
amount equal to any increase or decrease in the Reference Rate, effective as of
the opening of business on the day that any such change in the Reference Rate
occurs.
This Secured Promissory Note (this "Note") is one of a series of the
Term Notes A referred to in, and is issued pursuant to, that certain Financing
Agreement among Borrower, Lender, and certain other financial institutions or
funds party thereto, dated as of August 13, 1999 (hereinafter, as amended from
time to time, the "Financing Agreement"), and is entitled to all of the benefits
and security of the Financing Agreement. All of the terms, covenants and
conditions of the Financing Agreement and the other Loan Documents are hereby
made a part of this Note and are deemed incorporated herein in full. All
capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Financing Agreement. This
Note evidences the outstanding principal balance of the Term Loan A by Lender to
Borrower as of the date hereof.
All interest shall be computed in the manner provided in Section 2.04
of the Financing Agreement. Upon the occurrence and during the continuation of
an Event of Default, the interest rate provided herein shall be increased in
accordance with the provisions of Section 2.04(b) of the Financing Agreement.
The principal amount and accrued interest of this Note shall be due and
payable in accordance with the Financing Agreement. Notwithstanding the
foregoing, the entire unpaid principal balance hereof and accrued interest
thereon shall be due and payable immediately upon any termination of the
Financing Agreement pursuant to Section 2.05 thereof.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of Section 2.05(c) of the Financing Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 8.01 of the Financing Agreement and in
the other Loan Documents.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives
<PAGE>
presentment, demand, protest, notice of dishonor, notice of non-payment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity, diligence in collection, and the benefit of any exemption or
insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower or any other property or indebtedness due
or to become due to Borrower. Borrower agrees that, without releasing or
impairing Borrower's liability hereunder, Lender (or its agent) may at any time
release, surrender, substitute or exchange any collateral securing this Note and
may at any time release any party primarily or secondarily liable for the
indebtedness evidenced by this Note.
To the maximum extent permitted by law, each Person composing Borrower
hereby waives any defenses such Person might have based upon suretyship or
impairment of collateral, such waiver being intended as a reservation of rights
or a waiver contemplated by Section 3-606 of the Code.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
[SIGNATURE PAGES FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and
delivered on the date first above written.
CFI PROSERVICES, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
ULTRADATA CORPORATION, a Delaware corporation and
successor by merger to UFO Acquisition Co.
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MONEYSCAPE HOLDINGS, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MECA SOFTWARE, L.L.C., a Delaware limited liability company
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
3
<PAGE>
SCHEDULE OF TERM LOAN A NOTES
-----------------------------
Holder Amount
- ---------------------------- -----------
Foothill Capital Corporation, a California corporation $15,000,000
Ableco Finance LLC, a Delaware limited liability company $10,000,000
Styx Partners, L.P., a Delaware limited partnership $10,000,000
-----------
Total $35,000,000
===========
FORM OF
SECURED PROMISSORY NOTE
$30,000,000 As of August 13, 1999
Term Note B No. ___
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of ________________________________________________
(hereinafter "Lender"), such payment to be made to Administrative Agent for the
account of Lender, in such coin or currency of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, the principal sum of $_________, together with interest from and
after the date hereof on the unpaid principal balance outstanding of the Term
Loan B evidenced by this Note at the greater of (y) 12.75% per annum, and (z) a
fluctuating rate per annum equal to the Reference Rate plus 5%. The rate of
interest set forth in the foregoing sentence shall increase or decrease by an
amount equal to any increase or decrease in the Reference Rate, effective as of
the opening of business on the day that any such change in the Reference Rate
occurs.
This Secured Promissory Note (this "Note") is one of a series of the
Term Notes B referred to in, and is issued pursuant to, that certain Financing
Agreement among Borrower, Lender, and certain other financial institutions or
funds party thereto, dated as of August 13, 1999 (hereinafter, as amended from
time to time, the "Financing Agreement"), and is entitled to all of the benefits
and security of the Financing Agreement. All of the terms, covenants and
conditions of the Financing Agreement and the other Loan Documents are hereby
made a part of this Note and are deemed incorporated herein in full. All
capitalized terms used herein, unless otherwise specifically defined in this
Note, shall have the meanings ascribed to them in the Financing Agreement. This
Note evidences the outstanding principal balance of the Term Loan B by Lender to
Borrower as of the date hereof.
All interest shall be computed in the manner provided in Section 2.04
of the Financing Agreement. Upon the occurrence and during the continuation of
an Event of Default, the interest rate provided herein shall be increased in
accordance with the provisions of Section 2.04(b) of the Financing Agreement.
The principal amount and accrued interest of this Note shall be due and
payable in accordance with the Financing Agreement. Notwithstanding the
foregoing, the entire unpaid principal balance hereof and accrued interest
thereon shall be due and payable immediately upon any termination of the
Financing Agreement pursuant to Section 2.05 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 2.05(c) of the Financing Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies set forth in Section 8.01 of the Financing Agreement and
in the other Loan Documents.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives
<PAGE>
presentment, demand, protest, notice of dishonor, notice of non-payment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity, diligence in collection, and the benefit of any exemption or
insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower or any other property or indebtedness due
or to become due to Borrower. Borrower agrees that, without releasing or
impairing Borrower's liability hereunder, Lender (or its agent) may at any time
release, surrender, substitute or exchange any collateral securing this Note and
may at any time release any party primarily or secondarily liable for the
indebtedness evidenced by this Note.
To the maximum extent permitted by law, each Person composing Borrower
hereby waives any defenses such Person might have based upon suretyship or
impairment of collateral, such waiver being intended as a reservation of rights
or a waiver contemplated by Section 3-606 of the Code.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
[SIGNATURE PAGES FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered on the
date first above written.
CFI PROSERVICES, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
ULTRADATA CORPORATION, a Delaware corporation and
successor by merger to UFO Acquisition Co.
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MONEYSCAPE HOLDINGS, INC., an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
MECA SOFTWARE, L.L.C., a Delaware limited liability company
By: /s/ Robert P. Chamness
----------------------
Robert P. Chamness
Title: President and Chief Operating Officer
3
<PAGE>
SCHEDULE OF TERM LOAN B NOTES
-----------------------------
Holder Amount
- ---------------------------- -----------
Ableco Finance, LLC, a Delaware limited liability company $ 7,500,000
Levine Leichtman Capital Parnters II, L.P., a California
limted partnership $10,000,000
Foothill Partners III, L.P., a Delaware limited partnership $ 5,000,000
Styx Partners, L.P., a Delaware limited partnership $ 7,500,000
-----------
Total $30,000,000
===========
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) UNLESS PURSUANT TO AN EXEMPTION
THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR PROVISION) OF THE ACT.
Warrant No. ___ Dated: August 13, 1999
CFI PROSERVICES, INC
FORM OF
WARRANT TO PURCHASE _______ SHARES
OF COMMON STOCK
CFI PROSERVICES, INC., an Oregon corporation (the "Company"),
hereby certifies that, for value received, ________________________________
(the "Initial Holder"), or its registered transferees, successors or assigns
(collectively, together with the Initial Holder, the "holder"), is the
registered holder of warrants (the "Warrants") to subscribe for and purchase
_______ shares of the fully paid and nonassessable Common Stock (as adjusted
pursuant to Section 4 hereof, the "Warrant Shares") of the Company, at a
purchase price per share equal to $12.34375 (such price, as adjusted pursuant to
Section 4 hereof, the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a) the term "Common
Stock" shall mean the Company's presently authorized Common Stock, no par value,
and any stock into or for which such Common Stock may hereafter be converted or
exchanged, and (b) the term "Date of Grant" shall mean the date of this Warrant.
The term "Warrant" as used herein shall be deemed to include any warrant issued
upon transfer or partial exercise of this Warrant, unless the context clearly
requires otherwise.
This Warrant is being issued pursuant to that certain
Financing Agreement (the "Financing Agreement") of even date herewith by and
among the Company, UltraData Corporation, Meca Software, L.L.C., Moneyscape
Holdings, Inc., the Lenders (as such term is defined therein), Foothill Capital
Corporation, as administrative agent for the Lenders, and Ableco Finance LLC, as
collateral agent for the Lender Group. Capitalized terms not otherwise defined
herein have the meanings set forth in the Financing Agreement. This Warrant,
together with other Warrants issued under the Financing Agreement as of the date
hereof, are referred to herein as the "Investor Warrants." The holder is
entitled to the rights and benefits under the Registration Rights Agreement (the
"Registration Rights Agreement") of even date herewith by and among the Company
and the holders of the Investor Warrants.
<PAGE>
1. Term. This Warrant is exercisable, in whole or in part, at any time and
from time to time from the Date of Grant through and including the close of
business on the fifth anniversary of this Warrant (the "Expiration Date");
provided, however, that in the event that any portion of this Warrant is
unexercised as of the Expiration Date, the terms of Section 2(b) below shall
apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, this Warrant may be exercised by the holder hereof, in whole or in
part and from time to time, by the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company, and, except as otherwise provided for herein, by the
payment to the Company of an amount equal to the then applicable Warrant Price
multiplied by the number of Warrant Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing shares of Common Stock
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised if exercised prior to the close of
business on such date; otherwise, the date of record shall be the next business
day. In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered by
the Company at its expense to the holder hereof as soon as possible and in any
event within ten (10) days after such exercise and, unless this Warrant has been
fully exercised (including without limitation, exercise pursuant to Section 2(b)
below), a new Warrant representing the portion of the Warrant Shares, if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder hereof as soon as possible and in any event within such
ten (10)-day period.
b. Automatic Exercise. In the event that any portion of this Warrant
remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4.i. below) of one (1) share of Common
Stock as of the Expiration Date is greater than the applicable Warrant Price as
of the Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of record of such
Warrant Shares as of the close of business on such Automatic Exercise Date. This
Warrant shall be deemed to be surrendered to the Company on the Automatic
Exercise Date by virtue of this Section 2.b. and without any action by the
holder of this Warrant or any other person, and payment to the Company of the
then applicable Warrant Price multiplied by the number of Warrant Shares then
being purchased shall be deemed to be made as of the Automatic Exercise Date
pursuant to the conversion provisions of Section 2(c) below (without payment by
the holder of any cash exercise price). As promptly as practicable on or after
the Automatic Exercise Date and in any event within ten (10) days thereafter,
the Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
Warrant Shares issuable upon such exercise.
2
<PAGE>
c. Cashless Right to Convert Warrant into Common Stock; Net Issuance.
(1) Right to Convert. In addition to and without limiting the rights of the
holder hereof under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Common Stock as provided in this Section 2.c. at any time or from time
to time during the term of this Warrant, including upon the Automatic Exercise
Date. Upon exercise of the Conversion Right with respect to all or a specified
portion of Warrant Shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without payment by the holder
of any cash or other cash consideration) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Section 2(c)(2) hereof), which value shall be equal to (A) the
aggregate fair market value of the Converted Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Conversion
Date less (B) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right by (ii) the fair
market value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as
follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock to be issued
to the holder
Y = the fair market value ("FMV") of one (1) share of
Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant
Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of the Registration Rights
Agreement, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) Method of Exercise. The Conversion Right may be exercised by the holder
by the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being
3
<PAGE>
surrendered (referred to in Section 2(c)(1) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective
upon receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within ten (10) days following the Conversion
Date.
(3) Determination of Fair Market Value. For purposes of this Section 2.c.,
"fair market value" of a share of Common Stock shall have the meaning set forth
in Section 4.i. below.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges, and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events as set forth below:
a. Adjustment for Initial Errors and the Happening of Certain Events.
(1) The Company hereby acknowledges that the initial number of Warrant
Shares purchasable upon the exercise of this Warrant (the "Exercise Quantity")
was calculated based upon the Company's representation that the number of
outstanding shares of Common Stock of the Company as of the Date of Grant,
calculated on a fully diluted basis using the treasury stock method as
contemplated by the Accounting Principles Board Opinion No. 15 (as referred to
in the Statement of Financial Accounting Standards No. 128) (such shares as
calculated on any date, being referred to as "Fully Diluted Shares"), and before
giving effect to the issuance of any of the Warrants or Warrant Shares, totaled
7,636,440 shares. If for any reason it shall hereafter be determined that the
number of Fully Diluted Shares as of the Date of Grant differed from such
initial number of Warrant Shares, then the Company or the holder (whichever
shall discover such error) shall notify the other of such determination in
writing and the Company shall forthwith (but in no event more than five (5) days
thereafter) reissue all of the outstanding Warrants with an appropriate
proportional adjustment in said number of Warrant Shares to be effective as of
and from the Date of Grant, provided that such adjustment shall be made only if
it results in an increase in the number of Warrant Shares hereunder.
(2) If, prior to the first anniversary of the Date of Grant, holder has
been paid in full all Obligations owed to it and has received its pro rata
portion of a reduction fee of One Million dollars ($1,000,000) and the "success
fee" payable to it (as contemplated in
4
<PAGE>
the applicable Lender Group Side Letter), then the initial Exercise Quantity of
this Warrant shall be decreased to 114,547 Warrant Shares or 60% of the initial
Exercise Quantity (the "First-Year Clawback Quantity"). If, prior to holder's
receipt of all such payments, holder has exercised this Warrant for more than
the First-Year Clawback Quantity, then holder shall return to the Company (and
if such a number of Warrant Shares equal to the excess over the First-Year
Clawback Quantity against delivery to holder by the Company of the aggregate
exercise price for such excess Warrant Shares (it being understood that if
holder has sold or otherwise disposed of such excess Warrant Shares, holder
shall still be required to return to the Company such excess Warrant Shares)
and, if the holder fails to return such excess Warrant Shares to the Company
within forty-five (45) days of the date the holder has been paid in full all
Obligations, the Company shall have a right of offset.
(3) If, after the first anniversary of the Date of Grant and prior to the
second anniversary of the Date of Grant, the holder has been paid in full all
Obligations under the Financing owed to it and has received its pro rata portion
of a reduction fee of Three Million dollars ($3,000,000) and the "success fee"
payable to it (as contemplated in the applicable Lender Group Side Letter), then
the initial Exercise Quantity of this Warrant shall be decreased to 57,273
Warrant Shares or 30% of the initial Exercise Quantity (the "Second-Year
Clawback Quantity"). If, prior to holder's receipt of all such payments, holder
has exercised this Warrant for more than the Second-Year Clawback Quantity, then
holder shall return to the Company a number of Warrant Shares equal to the
excess over the Second-Year Clawback Quantity against delivery to holder by the
Company of the aggregate exercise price for such excess Warrant Shares (it being
understood that if holder has sold or otherwise disposed of such excess Warrant
Shares, holder shall still be required to return to the Company such excess
Warrant Shares) and, if the holder fails to return such excess Warrant Shares to
the Company within forty-five (45) days of the date the holder has been paid in
full all Obligations, the Company shall have a right of offset.
(4) Any adjustments to the Warrant Price and the number of Warrant Shares
issuable upon exercise of this Warrant pursuant to the other subsections of this
Section 4 prior to the date of any increase or decrease in the Exercise Quantity
pursuant to Sections 4.a.(1), (2) or (3) shall be recalculated as if such
increased or decreased Exercise Quantity had been the Exercise Quantity since
the Date of Grant, but no such adjustment shall affect the number of Warrant
Shares issued upon any exercise of this Warrant prior to the date any such
adjustment is made.
b. Merger, Sale, Reclassification. In case of any (i) consolidation or
merger of the Company with or into another entity (other than a merger or
reorganization (A) in which the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or issuance of any dividend or other distribution of cash,
securities or property to holders of the then outstanding shares of Common
Stock, or (B) resulting solely in a change in par value, or from par value to no
par value, or from no par value to par value, or in a stock split, subdivision
or combination which is the subject of another paragraph in this Section 4),
(ii) sale or other disposition of all or substantially all of the Company's
assets or distribution of property to stockholders (other than distributions
payable out of earnings or retained earnings), or (iii) reclassification, change
or
5
<PAGE>
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of any stock split, subdivision or
combination which is the subject of another paragraph in this Section 4), then
the Company shall take all necessary actions (including but not limited to
executing and delivering to the holder of this Warrant an additional Warrant or
other instrument, in form and substance mutually agreeable to the Company and
the holder of this Warrant) to ensure that the holder of this Warrant shall
thereafter have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon the effectiveness of such consolidation, merger, sale
or other disposition, reclassification, change or conversion by a holder of the
number of shares of Common Stock then purchasable under this Warrant (which, in
the case of such a transaction in which holders of Common Stock were entitled to
elect between different forms of consideration, shall be deemed to be the form
of consideration received by a plurality of the electing holders of Common
Stock). Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.b. shall similarly apply to successive
reclassifications, changes and conversions.
c. Split, Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall split, subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination, effective at the close
of business on the date the split, subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, or (ii) make any other
distribution with respect to Common Stock (except any distribution specifically
provided for in Section 4.b. or Section 4.c. hereof) of Common Stock, then the
Warrant Price shall be adjusted, from and after the date of determination of
stockholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of Fully Diluted Shares immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
Fully Diluted Shares immediately after such dividend or distribution.
e. Rights Offerings. In case the Company shall, at any time after the Date
of Grant, issue to holders of shares of the capital stock of the Company (solely
as a result of such holders' status as stockholders of the Company) any rights,
options or warrants entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible or exchangeable into Common Stock) at a price
per share of Common Stock (or having a conversion or exchange price per share of
Common Stock if a security convertible or exchangeable into Common Stock) less
than the fair market value per share of Common Stock on the record date for such
issuance (or the date of issuance, if there is no record date), the Warrant
Price to be in effect on and after such record date (or issuance date, as the
case may be)
6
<PAGE>
shall be adjusted so that it shall equal the price determined by multiplying the
Warrant Price in effect immediately prior to such record date (or issuance date,
as the case may be) by a fraction (i) the numerator of which shall be the number
of Fully Diluted Shares on such record date (or issuance date, as the case may
be) plus the number of shares of Common Stock which the aggregate offering price
of the total number of shares of such Common Stock so to be offered (or the
aggregate initial exchange or conversion price of the exchangeable or
convertible securities so to be offered) would purchase at such fair market
value on such record date (or issuance date, as the case may be) and (ii) the
denominator of which shall be the number of Fully Diluted Shares on such record
date (or issuance date, as the case may be) plus the number of additional shares
of Common Stock to be offered for subscription or purchase (or into which the
convertible securities to be offered are initially exchangeable or convertible).
In case such subscription price may be paid in part or in whole in a form other
than cash, the fair market value of such consideration shall be determined by
the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, provided, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under outstanding Investor Warrants disagree in writing
with such determination, then the fair market value of such consideration shall
be determined in the same manner as a Valuation Procedure under Section 4(i)
below. Such adjustment shall be made successively whenever such an issuance
occurs; and in the event that such rights, options, warrants, or convertible or
exchangeable securities are not so issued or are canceled, expire or cease to be
convertible or exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Warrant Price shall again be adjusted to be the
Warrant Price that would then be in effect if such issuance had not occurred,
but such subsequent adjustment shall not affect the number of Warrant Shares
issued upon any exercise of this Warrant prior to the date such subsequent
adjustment is made.
f. Other Special Distributions. In case the Company shall fix a record date
for the making of a distribution (other than dividends, distributions or
issuances referred to in Section 4(c), Section 4(d) or Section 4(e) above) to
all holders of shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the surviving
corporation) of cash, evidences of indebtedness, assets or subscription rights,
options, warrants, or exchangeable or convertible securities containing the
right to subscribe for or purchase shares of any class of equity securities of
the Company, the Warrant Price to be in effect on and after such record date
shall be adjusted by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction (i) the numerator of which shall be the fair
market value per share of Common Stock on such record date (determined in
accordance with Section 4(i) below), less the cash and/or the fair market value
(as determined by the Board of Directors of the Company in good faith as set
forth in a duly adopted board resolution certified by the Company's Secretary or
Assistant Secretary) of the portion of the assets or evidences of indebtedness
so to be distributed or of such subscription rights, options, warrants, or
exchangeable or convertible securities applicable to one (1) share of the Common
Stock outstanding as of such record date, provided, that in the event the Board
of Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same
7
<PAGE>
manner as a Valuation Procedure under Section 4(i) below, and (ii) the
denominator of which shall be such fair market value per share of Common Stock
as determined in the manner set forth under Section 4(i) below. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Warrant Price shall again be
adjusted to be the Warrant Price which would then be in effect if such record
date had not been fixed, but such subsequent adjustment shall not affect the
number of Warrant Shares issued upon any exercise of this Warrant prior to the
date such subsequent adjustment was made.
g. Other Issuances and Adjustments.
(1) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock (excluding (i) shares, rights, options, warrants,
or convertible or exchangeable securities outstanding on the Date of Grant, or
issued in any of the transactions described in Sections 4(b), 4(c), 4(d), 4(e)
or 4(f) above, (ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or exchangeable
securities, and (iii) up to One Million Nine Hundred Eighty-Nine Thousand
Ninety-One (1,989,091) shares of Common Stock (subject to adjustment for splits,
recapitalizations or similar events) issued, issuable or reserved for issuance
to directors, officers, employees or consultants of the Company or any
subsidiary of its subsidiaries in connection with their services as directors,
officers, employees or consultants pursuant to any stock grant, stock option,
warrant or other similar right issued by the Company and approved by the Board
of Directors of the Company under a stock option or incentive plan duly adopted
and approved by the shareholders of the Company and in existence on the date
hereof), at a price per share of Common Stock (determined in the case of such
rights, options, warrants, or convertible or exchangeable securities by dividing
(x) the total amount received and/or receivable by the Company in consideration
of the sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) less than the fair market value per
share of Common Stock (determined in accordance with Section 4(i) below and in
the case of rights, options, warrants or convertible or exchangeable securities,
determined at the time of issuance of such securities rather than upon exercise
thereof), in each case on the date the Company fixes the offering price of such
shares, rights, options, warrants, or convertible or exchangeable securities,
then the Warrant Price shall be adjusted so that it shall equal the price
determined by multiplying the Warrant Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A) the number of
Fully Diluted Shares immediately prior to such sale and issuance plus (B) the
number of shares of Common Stock which the aggregate consideration received or
receivable (determined as provided herein) in connection with such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
immediately after such sale and issuance. Such adjustment shall be made
successively whenever such an issuance is made.
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(2) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, make or agree to (i) any downward adjustment in the exercise,
exchange or conversion price of, (ii) any increase in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of, or (iii) any
change in the consideration payable for the exercise, conversion or exchange of,
any rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or acquire shares of Common Stock, other
than such adjustment that is specifically contemplated and required under the
terms of any such instrument as of the Date of Grant, then the Warrant Price
shall be adjusted so that it shall equal the price determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction the numerator of
which shall be the sum of (A) the number of Fully Diluted Shares immediately
prior thereto, plus (B) the number of shares of Common Stock to be issued upon
such exercise, conversion or exchange immediately prior thereto, multiplied by
the aggregate amount of the fair market value of the consideration to be
received by the Company upon such exercise, conversion or exchange immediately
thereafter, and the denominator shall be the sum of (X) the number of shares of
Fully Diluted Shares immediately thereafter, plus (Y) the number of shares of
Common Stock to be issued upon such exercise, conversion or exchange immediately
thereafter, multiplied by the aggregate amount of the fair market value of the
consideration to be received by the Company upon such exercise, conversion or
exchange immediately prior thereto. Such adjustment shall be made successively
whenever such an issuance is made.
(3) For the purposes of an adjustment under this Section 4(g), the maximum
number of shares of Common Stock which the holder of any right, option, warrant
or convertible or exchangeable security shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding; furthermore, the
consideration received by the Company therefor shall be deemed to be equal to
the price per share of Common Stock (determined in the case of such rights,
options, warrants, or convertible or exchangeable securities by dividing (x) the
total amount received and/or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) multiplied by the number of shares
deemed issued and outstanding in the previous sentence. In case the Company
shall issue shares of Common Stock, or issue or make an adjustment to the
exercise, exchange or conversion price of rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock for a consideration consisting, in whole or in
part, of consideration other than cash or its equivalent, then in determining
the price per share of Common Stock and the consideration received by the
Company, the Board of Directors of the Company shall determine, in good faith,
the fair market value of said property, and such determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, provided, that in the event the Board of
Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below. In case the Company shall issue
shares of Common Stock, or issue or make an adjustment to the exercise or
conversion price of rights,
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options, warrants, or convertible or exchangeable securities containing the
right to subscribe for or acquire shares of Common Stock, together with one (1)
or more other security as a part of a unit at a price per unit, then in
determining the price per share of Common Stock and the consideration received
or to be by the Company, the Board of Directors of the Company shall determine,
in good faith, which determination shall be described in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary, the fair
market value of the rights, options, warrants, or convertible or exchangeable
securities then being sold as part of such unit, provided, that in the event the
Board of Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below.
h. Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Warrant Shares purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Warrant Shares purchasable immediately prior to such adjustment in the Warrant
Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
i. Determination of Fair Market Value. For purposes of those provisions of
this Warrant requiring a determination in accordance with this Section 4.i.,
"fair market value" as of a particular date (the "Determination Date") shall
mean (i) if the Common Stock is publicly traded at the time of determination,
the average of the closing prices on such day of the Common Stock on all
domestic securities exchanges on which the Common Stock is then listed, or, if
there have been no sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such day
or, if on any such day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ system as of 4:00 P.M.,
New York time, on such day, or if on any day such security is not quoted on the
Nasdaq system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of ten (10) days consisting of the day as of
which "fair market value" is being determined and the nine consecutive business
days prior to such day (provided that, if fair market value is being determined
as of the date of a firm commitment public offering of the Common Stock, fair
market value as of such date shall be the offering price for the Common Stock
subject to such public offering); or (ii) if the Common Stock is not publicly
traded at the time of determination, the Common Stock price per share determined
by dividing Market Value (as defined below) by the number of Fully Diluted
Shares. "Market Value" means the highest price that would be paid for the entire
common equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
interest) and determined in accordance with the "Valuation Procedure" (as
defined below) and assuming full disclosure and understanding of all relevant
information and a reasonable period of time for effectuating such sale. For the
purposes of determining the "Market Value", (a) the exercise
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price of options or warrants to acquire Common Stock which are deemed to have
been exercised for the purpose of determining the number of Fully Diluted
Shares, shall be deemed to have been received by the Company, (b)(i) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for the
purpose of determining the issued and outstanding number of Fully Diluted Shares
of Common Stock and (ii) any contractual limitation in respect of the shares of
Common Stock relating to voting rights, shall be deemed to have been eliminated
or canceled and (c) full effect shall be given to any discount that may arise as
the result of the fact that the shares of Common Stock are not publicly traded.
"Valuation Procedure" means, with respect to the determination
of any amount or value required to be determined in accordance with such
procedure, a determination (which shall be final and binding on the Company and
the holders) made (i) by agreement among the Company and the holders of at least
fifty-one percent (51%) of the Warrant Shares issuable under outstanding
Investor Warrants (collectively, the "Requesting Holders") within twenty (20)
days following the event requiring such determination or (ii) in the absence of
such an agreement, by an Independent Financial Expert selected in accordance
with the further provisions of this definition. If required, an Independent
Financial Expert shall be selected within five (5) days following the expiration
of the twenty (20)-day period referred to above, either by agreement among the
Company and the Requesting Holders or, in the absence of such agreement, by lot
from a list of four potential Independent Financial Experts remaining after the
Company nominates three (3), the Requesting Holders nominate three (3), and each
side eliminates one potential Independent Financial Expert. The Independent
Financial Expert shall be instructed by the Company and the Requesting Holders
to make its determination within twenty (20) days of its selection. The fees and
expenses of an Independent Financial Expert selected hereunder shall be paid by
the Company.
"Independent Financial Expert" means a nationally-recognized
investment banking firm (a) that does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company or any holder, (b) that has not been, and, at the time
it is called upon to serve as an Independent Financial Expert under this
Agreement, is not (and none of whose directors, officers, employees or
Affiliates is not), a promoter, director or officer of the Company or any
Holder, (c) that has not been retained during the preceding two years by the
Company or the holder for any purpose, and (d) that is otherwise qualified to
serve as an Independent Financial Advisor. Any such person or entity may receive
customary compensation and indemnification by the Company for opinions or
services it provides as an Independent Financial Expert.
j. Adjustments to Anti-Dilution Rights; Limitations on Subsequent Grants of
Anti-Dilution Rights.
(1) Notwithstanding the foregoing provisions of this Section 4, to the
extent that any holders of equity securities of the Company are entitled to
anti-dilution rights that are superior or more favorable to the holder of such
equity securities than those granted pursuant to this Section 4, the holder
hereof shall be entitled to such anti-dilution rights with respect to the
Warrant Shares.
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(2) From and after the Date of Grant, the Company shall not, without the
prior written consent of the holders of at least fifty-one percent (51%) of the
Warrant Shares issuable under outstanding Investor Warrants, grant any holders
of equity securities of the Company anti-dilution rights with respect to such
equity securities that are superior or more favorable than those granted
pursuant to this Section 4.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall deliver to holder a certificate, signed by its chief
financial officer, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which certificate
shall be mailed (without regard to Section 11 hereof, by first class mail,
postage prepaid) to the holder within five (5) days of the date of determination
of such adjustment.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value
(as determined in accordance with Section 4.i. above) of a share of Common Stock
on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
Shares.
a. Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof, are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant or the Warrant
Shares except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). Upon exercise of this Warrant,
unless the Warrant Shares to be received upon such exercise are intended to be
included in a registration statement under the Act, the holder hereof shall
confirm in writing, by executing the form attached as Schedule 1 to Exhibit A
hereto, that the shares of Common Stock so received are being acquired for
investment and not with a view toward distribution or resale in violation of the
Act. All shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), (iv) UNLESS PURSUANT
TO AN EXEMPTION THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR
PROVISION) OF THE ACT OR (v) OTHERWISE COMPLYING WITH THE
PROVISIONS OF
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SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for resale in connection with any "distribution" thereof for
purposes of the Act in violation of the Act. The holder acknowledges that such
holder, or such holder's representatives, if any, has been given access to
information about the Company, through written material provided in or attached
to the Financing Agreement, and through meetings with representatives of the
Company, and has had an opportunity to verify the accuracy of such information,
to ask questions of the Company's officers and directors, and has received
answers to such holder's satisfaction. The holder understands that the valuation
and terms of this Warrant has been made solely through and upon negotiations
between the Company and the holder, and not by an independent accountant,
auditor, investment banker or third party. The holder represents that such
holder has evaluated the fairness of the terms and conditions of this Warrant to
the extent he, she or it has deemed necessary. In making a decision to purchase
this Warrant, the holder has relied solely on the information contained or
referred to herein and upon independent investigations made by such holder in
its discretion. In addition, the holder is not purchasing the Warrant as a
result or subsequent to: (1) any advertisement, article, notice, or other
publication published in any newspaper, magazine, or similar broadcast media
over the internet, television, or radio; or (2) any seminar or meeting whose
attendees, including the holder, were invited as a result of, subsequent to, or
pursuant to, any general solicitation.
(2) The holder understands that this Warrant and the Warrant Shares have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
(3) The holder understands that this Warrant and the Warrant Shares may be
held indefinitely unless subsequently registered under the Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 promulgated under the
Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three (3)-month
period not exceeding the specified limitations stated therein.
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<PAGE>
(5) The holder understands that at the time such holder wishes to sell this
Warrant and the Warrant Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144, and
that, in such event, the holder may be precluded from selling this Warrant and
the Warrant Shares under Rule 144 even if the one (1)-year minimum holding
period had been satisfied.
b. Disposition of Warrant or Warrant Shares. This Warrant and the Warrant
Shares may be detached and sold or otherwise transferred, in whole or in part,
separately from the Loans made pursuant to the Financing Agreement. With respect
to any offer, sale or other disposition of this Warrant, or any Warrant Shares
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or Warrant Shares, the holder hereof and each subsequent holder of this
Warrant agrees to deliver, prior to the registration of any such transfer, a
written opinion of such holder's counsel (which may be in-house counsel for such
holder), if reasonably requested by the Company, to the effect that the sale or
other disposition of this Warrant or the Warrant Shares, as the case may be, may
be effected without registration under the Act. If a determination has been made
pursuant to this Section 7.b. that the opinion of counsel for the holder is not
reasonably satisfactory to the Company, the Company shall so notify the holder
in writing promptly after such determination has been made (but in any event no
more than two business days thereafter). The foregoing notwithstanding, this
Warrant or the Warrant Shares, as the case may be, may, as to such federal laws,
be offered, sold or otherwise disposed of in accordance with Rule 144 under the
Act, provided that the Company shall have been furnished with such information
as the Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless based on
the aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instructions to its transfer agent or, if acting as its own transfer agent, the
Company may stop transfer on its corporate books, in connection with such
restrictions.
8. Rights as Stockholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise, until this Warrant shall have been exercised and the Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, the Company will transmit to the
holder of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the stockholders.
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9. Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by the Company and is
a valid and binding obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and the rules of law or principles at equity governing
specific performance, injunctive relief and other equitable remedies;
b. The Warrant Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable and are not subject to any
preemptive right of any stockholder of the Company;
c. The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the holders thereof are as set forth in the
certificate of incorporation of the Company, as amended to the Date of Grant (as
so amended, the "Charter"), a true and complete copy of which has been delivered
by the Company to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the issuance and
delivery of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the charter or by-laws of the
Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company, do
not and will not conflict with or contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any Federal, state or local government
authority or agency or other person, except for the filing of notices pursuant
to federal and state securities laws, which filings will be effected. This
Warrant and the Warrant Shares are not and will not, be subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding to which the Company is a party, including such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof, other than the Registration Rights Agreement;
e. There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant;
f. As of the Date of Grant, the authorized capital stock of the Company (of
all classes and series, including Common Stock and preferred stock), the par
value thereof, and the issued and outstanding amounts thereof, are as set forth
on Schedule 9.f. hereof. The issuance and sale of all such interests was in
compliance with all applicable federal and state securities laws, and all issued
and outstanding shares of capital stock of the Company are duly
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authorized, validly issued, fully paid, and non-assessable. Other than the
Warrants, and other than as specified on Schedule 9.f. hereof, as of the Date of
Grant there are no preemptive rights or any outstanding subscriptions, options,
warrants, rights, convertible securities, calls or other agreements,
arrangements or commitments (including, without limitation, registration rights
agreements and anti-dilution rights) relating to the issued or unissued shares
of the Company's capital stock or other securities, including any right of
conversion or exchange under any outstanding security or other instrument. Other
than the Registration Rights Agreement, the Warrants and any shares of Common
Stock issued upon exercise of the Warrants are not and will not be subject to
any voting trust agreement or other contract, agreement, arrangement, commitment
or understanding to which the Company is a party, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof. There are not any outstanding bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth on Schedule 9.f., as of the Date of Grant, there are not any securities,
options, warrants, calls, rights, convertible or exchangeable securities or
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell or
create, or cause to be issued, delivered or sold or created, additional shares
of capital stock or other voting securities or stock equivalents of the Company
or any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or understanding. As of the Date of
Grant, other than as specified on Schedule 9.f. hereof, the Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock.
10. Modification and Waiver. Subject to Section 20, this Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
11. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to a number provided to a party specifically for such
purposes, and facsimile confirmation of receipt is obtained promptly after
completion of transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after mailing, if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such holder or to the Company at the address indicated therefor on the
signature page of this Warrant. Any party hereto may change its address for
purposes of this Section 11 by giving the other party written notice of the new
address in the manner set forth herein.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or
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substantially all of the Company's assets, and all of the obligations of the
Company relating to the Common Stock issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof. The Company
will, at the time of the exercise or conversion of this Warrant, in whole or in
part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in respect
of any rights to which the holder hereof shall continue to be entitled after
such exercise or conversion in accordance with this Warrant; provided, however,
that the failure of the holder hereof to make any such request shall not affect
the continuing obligation of the Company to the holder hereof in respect of such
rights.
13. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will promptly
(but in no event more than three business days) make and deliver a new Warrant
or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
14. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
15. Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by, and construed in accordance with, the laws of the
State of New York applicable to contracts made and to be performed entirely
within such State, regardless of the law that might be applied under principles
of conflicts of law.
16. Survival of Representations, Warranties and Agreements. Each of the
respective representations and warranties of the Company and the holder hereof
contained herein shall survive the Date of Grant, the exercise or conversion of
this Warrant (or any part hereof) and the termination or expiration of any
rights hereunder. Each of the respective agreements of each of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
17. Remedies. In case any one (1) or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
18. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
19. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any
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of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
20. Amendment. This Warrant may be amended by the signed, written agreement
of the Company and holders of holding at least fifty-one percent (51%) of the
Investor Warrants, collectively and on an as-exercised basis, and such amendment
shall be binding on all holders of this Warrant or Warrant Shares; provided,
however, that the consent of all holders of Warrants affected by any amendment
will be required for an amendment pursuant to which (i) the Warrant Price is
increased, (ii) the number of Warrant Shares purchasable upon exercise of this
Warrant is decreased (other than pursuant to any adjustments provided herein),
(iii) the Expiration Date is changed, or (iv) any right of the holder is
adversely impacted in a manner different than the other holders of Investor
Warrants.
21. Registration Rights Agreement. The Company shall provide to the holder
hereof, upon written request at any time, a true copy of the Registration Rights
Agreement, as amended and modified to date.
[Signature page follows.]
18
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[SIGNATURE PAGE TO WARRANT]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the day and
year first above written.
COMPANY: CFI PROSERVICES, INC.,
an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
Address: 400 SW Sixth Avenue
Portland, OR 97204
[Signature page continues]
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: CFI ProServices, Inc.
1. The undersigned hereby elects to purchase _____ shares of Common Stock
of ______________________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
- ----------------------------- ------------------------------
(Name)
------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares in violation of
the Securities Act of 1933, as amended. In support thereof, the undersigned has
executed an Investment Representation Statement attached hereto as Schedule 1.
_________________________ (Signature) __________________(Date)
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
------------------------------
5. I elect to convert this Warrant pursuant to the cashless Conversion
Right described in Section 2.c. of the Warrant Agreement for ____________
Warrant Shares (as such term is defined therein). ___ (check here)
Date: _________________________
By: (Warrantholder)
Name: (Print)
Its:
<PAGE>
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: CFI ProServices, Inc.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "Registrable Securities"), the undersigned (the "Purchaser") represents to
the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Registrable Securities. The
Purchaser is purchasing the Registrable Securities for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "Act").
(b) The Purchaser understands that the Registrable Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein.
(c) The Purchaser further understands that the Registrable Securities may
be held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. In addition, the Purchaser
understands that the certificate evidencing the Registrable Securities will be
imprinted with the legend referred to in the Warrant under which the Registrable
Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
<PAGE>
(e) The Purchaser further understands that at the time it wishes to sell
the Registrable Securities there may be no public market upon which to make such
a sale, and that, even if such a public market then exists, the Company may not
be satisfying the current public information requirements of Rule 144, and that,
in such event, the Purchaser may be precluded from selling the Registrable
Securities under Rule 144 even if the one-year minimum holding period had been
satisfied.
Purchaser:
<PAGE>
SCHEDULE OF WARRANTS TO PURCHASE SHARES OF COMMON STOCK
-------------------------------------------------------
Number of
Holder Shares
- --------------------------------------------------------- ----------
Abelco Holdings LLC, a Delaware limited liability company 190,911
Levine Leichtman Capital Partners, II, L.P., a California
limited partnership 127,274
Foothill Partners III, L.P., a Delaware limited partnerhip 63,637
-------
Total 381,822
=======
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of August 13, 1999
(this "Agreement"), by and among CFI ProServices, Inc., an Oregon corporation
(the "Company"), and the Investors named on the signature page hereof (each, an
"Investor" and collectively, the "Investors").
R E C I T A L S
WHEREAS, this Agreement is being entered into pursuant to that
certain Financing Agreement (the "Financing Agreement") of even date herewith by
and among the Company, UltraData Corporation, Meca Software, L.L.C., Moneyscape
Holdings, Inc., the Lenders (as such term is defined therein), Foothill Capital
Corporation, as administrative agent for the Lenders, and Ableco Holdings LLC,
as collateral agent for the Lender Group (as such term is defined therein); and
WHEREAS, in connection with the Financing Agreement, the
Company has agreed to issue to the Investors warrants (the "Warrants") to
purchase in the aggregate 381,822 shares of Common Stock representing five
percent (5%) of shares of the Company as of Closing on a fully diluted basis.
NOW THEREFORE, in consideration of these premises, and the
respective promises and covenants contained herein, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS
"Act" means the United States Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under the Act, as they each may, from time to time, be in
effect.
"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.
"Commission" means the United States Securities and Exchange
Commission, or any other Federal agency at the time administering the Act.
"Common Stock" means the shares of common stock, no par value,
of the Company.
<PAGE>
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under the Exchange Act, as they each may,
from time to time, be in effect.
"Holder" means any Investor who holds Registrable Securities
and any person or entity who holds Registrable Securities and to whom the rights
granted under this Agreement have been transferred in compliance with this
Agreement, and their Permitted Transferees (as defined in Section 2.9 hereof).
"Indemnified Party" has the meaning described in Section 2.5
(c) below.
"Indemnifying Party" has the meaning described in Section 2.5
(c) below.
"Registration Statement" means a registration statement filed
by the Company with the Commission in compliance with the Act and the rules and
regulations promulgated thereunder for a public offering and sale of its Common
Stock (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another entity).
"Registrable Securities" means shares of Common Stock issued
or issuable pursuant to the exercise of the Warrants. Registrable Securities
shall include any warrants, shares of capital stock or other securities of the
Company issued as a dividend or other distribution with respect to or in
exchange for or in replacement of such shares of Common Stock. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (a) a Registration Statement with respect to the sale of such
securities shall have become effective under the Act and such securities shall
have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement, (b) such securities shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration under the Act, (c) such
securities shall have ceased to be outstanding or (d) upon any sale, transfer or
other disposition in any manner to a person or entity which, by virtue of
Section 2.9 hereof, is not entitled to the rights provided by this Agreement.
ARTICLE 2.
REGISTRATION RIGHTS
Section 2.1 Shelf Registration of Registrable Securities.
(a) The Company shall mail as soon as practicable a questionnaire (the
"Questionnaire"), soliciting the information required by Items 507 and 508 of
Regulations S-K under the Act, to each of the Holders, and shall deliver a copy
of such Questionnaire to any
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<PAGE>
Holder within five (5) days of it becoming available. As a condition to any
Registrable Securities being included in the Registration Statement referred to
below, such Holder shall submit a Questionnaire and shall amend and submit to
the Company a revised Questionnaire any time the information contained therein
ceases to be accurate and complete.
(b) The Company agrees to file with the Commission, a Registration
Statement (the "Shelf Registration") for an offering to be made on a continuous
basis pursuant to Rule 415 under the Act covering all Registrable Securities
held by the Holder, as soon as practicable from the date hereof, but in no event
more than ninety (90) days from the date hereof. The Holders shall be included
as selling securityholders in such Registration Statement promptly, and within
two (2) Business Days, after they have fully completed and returned to the
Company the Questionnaire. The Shelf Registration shall be on Form S-3 under the
Act or another appropriate form (including Form S-1, if applicable) permitting
registration of such Registrable Securities for resale by the Holders in the
manner or manners reasonably designated by them (including, without limitation,
one or more underwritten offerings). The Company shall cause the Shelf
Registration to be declared effective pursuant to the Act on or prior to the
date that is 180 days after the date of the Closing under the Financing
Agreement (the "Effectiveness Target Date") and to keep the Shelf Registration
continuously effective under the Act for 60 months (the "Effectiveness Period")
or such shorter period ending when there ceases to be outstanding any
Registrable Securities.
(c) The Company shall use all reasonable best efforts to keep the Shelf
Registration continuously effective, for the period described in Section 2.1(b)
hereof, by supplementing and amending the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration, if required by the Act or if reasonably requested by
the Holders of a majority in amount of Registrable Securities (determined on a
fully converted basis) covered by such Shelf Registration.
(d) In the event any adjustment in the Exercise Quantity (as defined in the
Warrants) would result in the issuance of additional Registrable Securities upon
exercise of the Warrants, the Company shall promptly, and within ten (10)
Business Days, amend or supplement the Shelf Registration in order to effect a
Shelf Registration of such additional Registrable Securities pursuant to the
terms of Section 2.1(b), provided, that notwithstanding anything to the contrary
in Section 2.1(b) or the Financing Agreement, the Effectiveness Target Date
shall be ninety (90) days from the date of the effective date of the adjustment
to the Exercise Quantity resulting in additional Registrable Securities becoming
issuable to the Holders.
(e) Notwithstanding anything to the contrary in this Section 2.1, the
Company may, by delivering written notice to the Holders, prohibit offers and
sales of Registrable Securities pursuant to the Shelf Registration at any time
if (A)(i) the Company is in possession of material non-public information
relating to the Company, (ii) the Company determines (based on advice of
counsel) that such prohibition is necessary in order to avoid a
3
<PAGE>
requirement to disclose such material non-public information to the public and
(iii) the Company determines in good faith that public disclosure of such
material non-public information would not be in the best interests of the
Company and its stockholders, or (B)(i) the Company has made a public
announcement relating to an acquisition or business combination transaction
including the Company and/or one or more of its subsidiaries that is material to
the Company and its subsidiaries taken as a whole and (ii) the Company
determines in good faith that (x) offers and sales of Registrable Securities
pursuant to the Shelf Registration prior to the consummation of such transaction
(or such earlier date as the Company shall determine) would not be in the best
interests of the Company and its shareholders or (y) it would be impracticable
at the time to obtain any financial statements relating to such acquisition or
business combination transaction that would be required to be set forth in the
Shelf Registration; provided, however, that upon (i) the public disclosure by
the Company of the material non-public information described in clause (A) of
this paragraph or (ii) the consummation, abandonment or termination of, or the
availability of the required financial statements with respect to, a transaction
described in clause (B) of this paragraph, the suspension of the use of the
Shelf Registration pursuant to this Section 2.1(e) shall cease and the Company
shall promptly comply, prior to the next Business Day, with Section 2.3 hereof
and notify the Holders that dispositions of Registrable Securities may be
resumed. In the event that during the Effectiveness Period the prospectus under
the Shelf Registration becomes not usable as a result of the Company's
notification under this Section, the Company shall use its reasonable best
efforts to provide the Holders a usable prospectus as soon as practicable, and
in no event shall sales of Registrable Securities under the Shelf Registration
be suspended for more than 30 days in any 365-day period.
Section 2.2 [Reserved]
Section 2.3 Registration Procedures.
(a) The Company shall, at its expense:
(i) file with the Commission within 90 days a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause that
Registration Statement to become and remain effective prior to the Effectiveness
Target Date and for the duration of the Effectiveness Period;
(ii) prepare and file with the Commission any amendments and supplements to
the Registration Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement effective for
the period described in Section 2.3(a)(i) above and comply with the provisions
of the Act with respect to the disposition of all securities covered by such
Registration Statement;
(iii) furnish to each selling Holder such reasonable numbers of copies of
the Registration Statement, preliminary prospectus, final prospectus and any
4
<PAGE>
amendments and supplements and such other documents as each selling Holder may
reasonably request in order to facilitate the public offering of such
securities;
(iv) promptly and prior to the next Business Day, furnish to each selling
Holder written notice of any stop order or similar notice issued by the
Commission or any state agency charged with the regulation of securities and of
any notice from the Nasdaq National Market or other securities exchange then
listing the Registrable Securities covered by such Registration Statement;
(v) register or qualify the Registrable Securities covered by the
Registration Statement under the securities or Blue Sky laws of such states as
shall be reasonably appropriate for the distribution of the Registrable
Securities; provided, however, that the Company shall not for any purpose be
required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified;
(vi) use its best efforts to make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder;
(vii) use its best efforts to comply with all rules and regulations of the
Nasdaq National Market, or such other principal securities exchange on which the
equity securities issued by the Company are then quoted or listed and traded, to
ensure that the Registrable Securities are freely tradeable thereon upon
registration thereof under the Act;
(viii) provide, if one has not already been appointed by the Company, a
transfer agent and registrar for all Registrable Securities covered by such
Registration Statement not later than the effective date of such Registration
Statement;
(ix) enter into a cross-indemnity agreement, in customary form, with each
underwriter, if any;
(x) include in the Registration Statement filed with the Commission, all
Registrable Securities; and promptly, within two (2) Business Days after filing
of such a registration statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to each Holder copies of all such documents
so filed including, if requested, documents incorporated by reference in the
registration statement; and notify each selling Holder of any stop order issued
or threatened by the Commission and use its best efforts to prevent the entry of
such stop order or to remove it if entered;
(xi) notify each selling Holder, at any time when a prospectus relating to
such selling Holder's Registrable Securities is required to be delivered under
the Act,
5
<PAGE>
of the occurrence of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein not
misleading, and as soon as practicable prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xii) cause all such Registrable Securities to be listed on the Nasdaq
National Market System (or on such other principal securities exchange on which
the equity securities issued by the Company are then quoted or listed and
traded);
(xiii) enter into an underwriting agreement in customary form and take all
such other actions that the selling Holders or their underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(xiv) make available for inspection by each selling Holder and one (1) of
its counsel acting for them, any underwriter participating in any disposition
pursuant to such registration statement, and any counsel retained by any such
underwriter, all pertinent financial and other information and corporate
documents of the Company reasonably requested, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such selling Holder, underwriter or counsel in connection with such registration
statement and to participate in "road shows" or management presentations as may
be reasonably requested by any underwriter;
(xv) with respect to any underwritten offering, use its reasonable best
efforts to obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the selling Holders or any underwriter may
reasonably request;
(xvi) with respect to an underwritten offering, obtain an opinion of
counsel to the Company, addressed to the selling Holders and any underwriter, in
customary form and including such matters as are customarily covered by such
opinions in underwritten registered offerings of equity securities as the
selling Holders or any underwriter may reasonably request, such opinion to be
reasonably satisfactory in form and substance to each selling Holder; (xvii)
furnish to each selling Holder upon request of such selling Holder within three
(3) Business Days, copies of all correspondence between the Company, the
Commission and any applicable state securities regulatory agencies relating to
such registration;
(xviii) during the period that the Company is required to keep such
Registration Statement effective, promptly and prior to the next Business Day,
notify each selling Holder of Registrable Securities covered by such
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of
6
<PAGE>
any event as a result of which the prospectus or any prospectus supplement
included in such registration statement, as then in effect, or any material
incorporated by reference therein, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, or if it is necessary to amend or supplement such
prospectus or any prospectus supplement or registration statement or material
incorporated by reference therein to comply with the law, and at the request of
any such selling Holder, prepare and furnish to such selling Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus or any
prospectus supplement or material incorporated by reference therein as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus or any prospectus supplement or material
incorporated by reference therein shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and so that such prospectus or prospectus supplement
or registration statement or material incorporated by reference therein, as
amended or supplemented, will comply with the law;
(xix) upon the reasonable request of any selling Holder, to include in a
prospectus supplement or an amendment to a Registrable Securities Shelf
Registration any change in the information provided to the Company pursuant to
Rules 507 or 508 under Regulation S-K under the Act; and
(xx) upon delivery of the certificates with respect to the Registrable
Securities to be registered pursuant hereto, issue to any underwriter to which
the selling Holder may sell such Registrable Securities in connection with any
such registrations (and to any direct or indirect transferee of any such
underwriter) certificates evidencing such Registrable Securities without any
legend restricting the transferability of the Registrable Securities.
(b) Each selling Holder of Registrable Securities agrees that, upon receipt
of any written notice from the Company of (i) any request by the Commission for
amendments or supplements to a Registration Statement or related prospectus
covering any of such selling Holder's Registrable Securities, (ii) the issuance
by the Commission of any stop order suspending the effectiveness of a
Registration Statement covering any of such selling Holder's Registrable
Securities or the initiation of any proceedings for that purpose, (iii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (iv) the happening
of any event that requires the making of any changes in the Registration
Statement covering any of such selling Holder's Registrable Securities so that
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that any related prospectus will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (v) the Company's reasonable
7
<PAGE>
determination that a post-effective amendment to a Registration Statement
covering any of such selling Holder's Registrable Securities or a supplement to
any related prospectus is required under the Act; such selling Holder will
forthwith discontinue disposition of such Registrable Securities until it is
advised in writing by the Company that the use of the applicable prospectus (as
amended or supplemented, as the case may be) and disposition of the Registrable
Securities covered thereby pursuant thereto may be resumed, provided, however,
(x) that such selling Holder shall not resume its disposition of Registrable
Securities pursuant to such Registration Statement or related prospectus unless
it has received notice from the Company that such Registration Statement or
amendment has become effective under the Act and has received a copy or copies
of the related prospectus (as then amended or supplemented. as the case may be)
unless the Registrable Securities are then listed on a national securities
exchange and the Company has advised such selling Holder that the Company has
delivered copies of the related prospectus, as then amended or supplemented, in
transactions effected upon such exchange, subject to any subsequent receipt by
such selling Holder from the Company of written notice of any of the events
contemplated by clauses (i) through (v) of this paragraph, and, (y) if so
directed by the Company, such holder will deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Holders are required to refrain from
disposition of Registrable Securities for more than 30 days in any 365-day
period, the Company shall be deemed in breach of this Agreement.
Section 2.4 Registration Expenses. The Company shall bear all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all fees and expenses relating to the listing of
any Registrable Securities with the Nasdaq National Market System (or on such
other principal securities exchange on which the equity securities issued by the
Company are then quoted or listed and traded), fees and expenses of compliance
with securities or Blue Sky laws in jurisdictions reasonably requested by any
selling Holder or underwriter pursuant to Section 2.3(b) (including reasonable
fees and disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Securities), all word processing, duplicating and printing
expenses, messenger and delivery expenses, fees and disbursements of counsel for
the Company and one (1) counsel for the selling Holders (selected by Holders
holding a majority of the Registrable Securities), independent public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance) and underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals attributable to the securities
being registered, which discounts, commissions or fees with respect to any
selling Holder's respective Registrable Securities shall be paid by such selling
Holder), all the Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), fees of the National Association of Securities Dealers,
Inc., the expense of any annual audit, the expenses of any special audit
incident to or required by any registration, the expense of any liability
insurance (if the Company determines to obtain such insurance) and the
reasonable fees and expenses of any special experts
8
<PAGE>
(including attorneys) retained by the Company (if it so desires) in connection
with such registration and fees and expenses of other persons retained by the
Company.
Section 2.5 Indemnification.
(a) In the event of any registration of any of the Registrable Securities
under the Act pursuant to this Agreement, the Company will indemnify and hold
harmless the selling Holder of such Registrable Securities, each of its
officers, directors, partners, legal counsel and accountants, each underwriter
(if any) and each other person, if any, who controls such selling Holder or such
underwriter within the meaning of the Act, against any expenses, losses, claims,
damages or liabilities, joint or several, arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement under which such Registrable Securities were
registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arising out of or based upon any
omission (or alleged omission) to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Act or any rule or regulation promulgated
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration; and, subject to Section
2.5(c) below, the Company will reimburse such selling Holder, each of its
officers, directors, partners, legal counsel and accountants, each underwriter,
if any, and each such controlling person for any legal and any other expenses
reasonably incurred by such selling Holder or controlling person in connection
with investigating and defending any such expense, loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such expense, loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus, final prospectus, or
summary prospectus, or any such amendment or supplement, made in reliance upon
and in conformity with information furnished to the Company, in writing, by such
selling Holder and stated to be specifically for use therein.
(b) Each selling Holder of Registration Securities will, severally, and not
jointly and severally, in the event that any Registrable Securities held by such
selling Holder as to which any registration is being effected under the Act
pursuant to this Agreement, indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any), and each other person, if
any, who controls the Company or any such underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities, joint or several,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement of a material fact
contained in any Registration Statement under which such Registrable Securities
were registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission to state a material fact required to be stated therein or necessary to
make the statement therein not misleading, if the statement or omission was made
in
9
<PAGE>
reliance upon and in conformity with information furnished in writing to the
Company by such selling Holder and stated to be specifically for use therein,
and shall reimburse the Company, its directors and officers, and each such
controlling person for any legal or other expenses reasonably incurred by any of
them in connection with investigation or defending any such loss, claim, damage,
liability or action. This indemnity shall remain in full force and effect for
the applicable statute of limitation period regardless of any investigation made
by or on behalf of the Company or such controlling person and shall survive the
transfer of shares. No selling Holder shall be liable to the Company and the
other indemnified parties under this Section 2.5(b) for any amount in excess of
the net proceeds received from the Registrable Securities sold by it pursuant to
the Registration Statement.
(c) Each party entitled to indemnification under this Section 2.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any loss, claim, action, damage or liability as to which
indemnity may be sought, and shall permit the Indemnified Party to assume the
defense of any such claim or any litigation resulting therefrom; provided, that
counsel for the Indemnifying Party who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party whose approval shall
not be unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnified Party of its obligations under this Section 2.5, except to the
extent that such failure to give notice prejudices the Indemnifying Party or
such Indemnifying Party is damaged by such delay. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense (but in no event shall the
Indemnifying Party be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Party or Parties) if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would, in
the reasonable judgment of the Indemnified Party, be inappropriate due to actual
or potential conflict of interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. If, in the Indemnified
Party's reasonable judgment, a conflict of interest between such Indemnified and
Indemnifying Parties may exist in respect of such claim, the Indemnified Party
may assume the defense of such claim, jointly with any other Indemnified Party
that reasonably determines such conflict of interest to exist, and the
Indemnifying Party shall be liable to such Indemnified Parties for the
reasonable legal fees and expenses of one counsel for all such Indemnified
Parties and for other expenses reasonably incurred in connection with the
defense thereof incurred by the Indemnified Parties. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party (which consent shall not be unreasonably withheld),
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
10
<PAGE>
(d) If the indemnification provided for in this Section 2.5 is finally
determined by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein or contribution is required under the Act in circumstances
for which indemnification is provided under this Section 2, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other and also the
relative fault of the Indemnifying Party and the Indemnified Party as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact related to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case,
(A) no Holder will be required to contribute any amount in excess of the net
proceeds received from the Registrable Securities sold by it pursuant to such
Registration Statement, and (B) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Act, shall be
entitled to contribution from any person or entity who is not guilty of such
fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified in this
Section 2.5(e) (with appropriate modifications) shall be given by the Company
and each selling Holder with respect to any required registration or other
qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
(f) The indemnification required by this Section 2.5 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
(g) The obligations under this Section 2.5 shall survive the completion of
any offering of Registrable Securities in a Registration Statement.
Section 2.6 Indemnification with Respect to Underwritten Offering.
(a) In the event that Registrable Securities are sold pursuant to a
Registration Statement in an underwritten offering, the Company agrees to enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
11
<PAGE>
(b) No Holder may participate in any underwritten registration pursuant to
Section 2 hereunder unless such Holder (i) agrees to sell the Registrable
Securities which it proposes to sell in such underwritten registration on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, reasonable and customary indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and provides such other information and documentation
as the Company or the underwriters may reasonably request in connection with
such underwritten registration.
Section 2.7 Information by Holder. Each holder of Registrable Securities
included in any Registration shall furnish to the Company such information
regarding such holder and the distribution in proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Article
2.
Section 2.8 Termination. All of the Company's obligations to register
Registrable Securities under this Agreement pursuant to this Agreement shall
terminate on the earlier of (x) when there are no Registrable Securities as
defined herein and (y) seven years from the date hereof.
Section 2.9 Transfer of Rights.
(a) The rights and obligations of each Holder (or assignee thereof) under
this Agreement may be transferred or assigned by such Holder (or assignee
thereof), in whole or in part, without the consent of the Company or any other
Holder, (i) to any Affiliate of the Holder or (ii) any person or entity
acquiring at least five hundred (500) Registrable Securities (as adjusted for
stock splits, stock dividends, recapitalization or similar events) (all of such
parties, collectively, the "Permitted Transferees"). The Company may not assign
this Agreement or any of its rights or obligations hereunder or under the
Warrant without the prior written consent of each Holder and each Warrant holder
(which consent may be withheld for any reason in the sole discretion of such
Holder or Holders).
(b) Any transferee (other than a Holder who is already a party to an
agreement in form and substance similar to this Agreement) to whom rights under
this Agreement are transferred shall, as a condition to such transfer, deliver
to the Company a written instrument by which such transferee identifies itself,
gives the Company notice of the transfer of such rights, indicates the
Registrable Securities owned by it and agrees to be bound by the obligations
imposed upon the Investors under this Agreement.
(c) A transferee to whom rights or obligations are transferred pursuant to
this Section 2.9 may not again transfer such rights or obligations to any other
person or entity, other than as provided in this Section 2.9.
12
<PAGE>
Section 2.10 Rule 144. The Company will file the reports required to be
filed by it under the Act and the Exchange Act, and will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Act within the limitations of the
exemptions provided by (a) Rule 144 under the Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the written request of any Holder of Registrable
Securities, the Company will deliver to such Holder, within five days of
delivery of such request, a written statement as to whether it has complied with
such filing requirements. In connection with any sale of Registrable Securities
that will result in such securities no longer being "restricted securities" (as
defined in Rule 144 promulgated under the Act), the Company shall cooperate with
the selling Holders and the underwriter(s), if any, and facilitate the
preparation and delivery of certificates representing such securities to be sold
which do not bear any restrictive legends to permit delivery of such securities.
Section 2.11 Information Reports. The Company covenants that, except at
such times as the Company is a reporting company under Section 13 or 15(d) of
the Exchange Act, the Company shall, upon the written request of any Holder of
Registrable Securities, provide to any such Holder and to any prospective
institutional transferee of Registrable Securities designated by such Holder,
within five Business Days after delivery of such written request, such financial
and other information as is available to the Company and as such Holder may
reasonably determine is required to permit a transfer of such Registrable
Securities to comply with the requirements of Rule 144A promulgated under the
Act.
Section 2.12 Investor Representations. In connection with the acquisition
of the Warrants, each of the Investors hereby represents that it has such
knowledge and experience in financial and business matters that such Investor is
capable of evaluating the merits and risks of its investment contemplated by
this Agreement and has the capacity to protect its own interests. Each Investor
acknowledges that investment in the Warrant and the shares of Company common
stock issuable upon exercise of such Warrant ("Warrant Shares") is highly
speculative and involves a substantial and high degree of risk of loss of the
entire investment. Each Investor has adequate means of providing for current and
anticipated financial needs and contingencies, is able to bear the economic risk
of its investment in the Warrant and Warrant Shares and could afford complete
loss of such investment. Each Investor is an "accredited investor" (as such term
is defined in Rule 501 of Regulation D under the Act).
Section 2.13 Market Stand-off Agreement. Each Holder agrees, in connection
with any underwritten public offering that, upon request of the Company or the
underwriters managing any underwritten public offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Common Stock of the Company (other than
those shares of Common Stock included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred twenty (120) days) from the
effective date of
13
<PAGE>
such registration as may be requested by the underwriters. The Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
ARTICLE 3.
MISCELLANEOUS
Section 3.1 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
on the signature page hereof (or such other address as may be provided by one
party in a notice to the other). Notice delivered in accordance with the
foregoing shall be effective (i) when delivered, if delivered personally, (ii)
three hours after confirmation of receipt, if delivered by facsimile
transmission, or (iii) two days after being delivered in the United States
(properly addressed and all fees paid) for by overnight delivery service to a
courier (such as Federal Express) which regularly provides such service and
regularly obtains executed receipts evidencing delivery. Notices shall not be
given via U.S. Mail.
Section 3.2 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by (i) the parties hereto; (ii) the
Permitted Transferees; and (iii) the respective successors of the foregoing,
including those resulting by operation of law.
Section 3.3 Headings. Article and Section headings used in this Agreement
are for convenience of reference only and shall not constitute a part of this
Agreement for any purpose or affect the construction of this Agreement.
Section 3.4 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
one and the same Agreement. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
Section 3.5 Governing Law. This Agreement shall be deemed to have been made
in the State of New York and the validity of this Agreement, the construction,
interpretation and enforcement thereof, and the rights of the parties thereto
shall be determined under, governed by, and construed in accordance with the
internal laws of the State of New York, without regard to principles of
conflicts of law.
14
<PAGE>
Section 3.6 Survival of Agreements, Representations and Warranties. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 3.7 WAIVER OF JURY TRIAL. THE COMPANY WAIVES (A) THE RIGHT TO TRIAL
BY JURY (WHICH EACH INVESTOR HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE WARRANT OR THE WARRANT CERTIFICATE. THE COMPANY WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 3.8 Amendment and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 51% of the Registrable Securities; provided, that this Agreement may be
amended with the consent of the holders of less than all Registrable Securities
(but not less than 51% of such shares) only in a manner which affects all
Registrable Securities in the same fashion. In no event may this Agreement be
amended to (i) shorten the Effectiveness Period, (ii) extend the Effectiveness
Target Date or (iii) require a Holder to pay expenses otherwise borne by the
Company under Section 2.4, without the prior written consent of each Holder
affected thereby. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
Section 3.9 Availability of Equitable Remedies. Each party acknowledges
that a breach of the provisions of this Agreement could not adequately be
compensated by money damages. Accordingly, any party shall be entitled, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance of
any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and the parties hereby
consent to such injunction and to the ordering of specific performance.
Section 3.10 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof.
Section 3.11 Attorneys Fees. Any holder of the Warrant shall be entitled to
recover from the Company the reasonable attorneys' fees and expenses incurred by
such holder in connection with enforcement by such holder of any obligation of
the Company hereunder or under the Warrant.
15
<PAGE>
Section 3.12 No Impairment Rights. The Company will not, by amendment of
its Certificate of Incorporation or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Agreement, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Agreement against impairment.
Section 3.13 No Inconsistent or Superior Registration Rights.
(a) From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of a majority in principal
amount of Registrable Securities, (i) enter into any agreement granting
registration rights with respect to the Common Stock or other securities which
are inconsistent with or superior to the rights granted to the Holders
hereunder; or (ii) amend any agreement, in effect as of the date hereof, so as
to grant registration rights to any other person or entity which causes such
registration rights to be inconsistent with those granted to the Holders
hereunder or to otherwise adversely affect the registration rights granted to
the Holders hereunder.
(b) Notwithstanding the foregoing, the Investors acknowledge and agree that
comparable registration rights have been granted concurrently herewith to (i)
the holders of the 10% Convertible Subordinated Discount Notes issued pursuant
to that certain Note Purchase Agreement dated of even date herewith by and among
the Company the subsidiaries of the Company listed on Exhibit A thereto and the
purchasers of such notes listed on the signature page thereof and (ii) the
holders of 58,000 warrants to purchase shares of Common Stock issued to U.S.
Bancorp Investments, Inc., pursuant to a warrant agreement dated of even date
herewith.
[Signature Page Follows.]
16
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CFI PROSERVICES, INC.
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
Address: 400 S.W. Sixth Avenue
Portland, Oregon 97204
INVESTORS:
ABLECO HOLDINGS LLC, a Delaware limited liability
company
By: /s/ Steven Feinberg
-------------------
Name: Steven Feinberg
Title: Chief Executive Officer
LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P., a
California limited partnership
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/ Arthur E. Levine
--------------------
Name: Arthur E. Levine
Title: President
[Signature page continues]
<PAGE>
FOOTHILL PARTNERS III, L.P., a Delaware limited
partnership, as a Lender
By: /s/ William Shiao
-----------------
Name: William Shiao
Title: Vice President
NOTE PURCHASE AGREEMENT
BY AND AMONG
CFI PROSERVICES, INC.,
THE SUBSIDIARIES OF CFI PROSERVICES, INC.,
AND
THE PURCHASERS LISTED ON EXHIBIT A HERETO
August 13, 1999
<PAGE>
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 13th day of August 1999, by and among CFI ProServices, Inc., an
Oregon corporation ("Seller" or the "Company"), 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 (together with
Ultradata and MECA, the "Guarantors"), and the purchasers listed on Exhibit A
hereto (collectively, the "Purchasers").
R E C I T A L S
WHEREAS, concurrently herewith, Seller is seeking financing to
complete its acquisition of Ultradata Corporation, and for working capital
purposes and, in connection therewith is seeking senior debt financing in the
form of a $35,000,000 term loan designated as "Term Loan A", a $30,000,000 term
loan designated as "Term Loan B", and a revolving credit facility in an
aggregate principal amount not to exceed $15,000,000 at any time outstanding,
all of which are being issued pursuant to that certain Financing Agreement dated
as of August 13, 1999 (the "Credit Agreement," and together with any notes,
security agreements or other documents entered into by the Seller pursuant
thereto, the "1999 Credit Facility") by and among the Seller, the Guarantors,
the financial institutions or funds identified therein as the "Lenders",
Foothill Capital Corporation, as administrative agent for the Lenders, and
Ableco Finance LLC, as collateral agent for the Lender Group (as defined
therein);
WHEREAS, as part of the contemplated transaction, Seller is also
seeking to obtain subordinated debt financing, the net proceeds of which,
together with the net proceeds of the 1999 Credit Facility, would be applied to
complete the acquisition of Ultradata Corporation and used for working capital
purposes;
WHEREAS, in order to obtain such subordinated financing, Seller is
willing to authorize, issue and sell, an aggregate principal face amount of
$7,437,535 of its 10% Convertible Subordinated Discount Notes (the "Notes"),
which Notes will be guaranteed by the Guarantors; and
WHEREAS, subject to the terms and conditions set forth herein, the
Purchasers are willing to purchase the Notes.
A G R E E M E N T
In consideration of the mutual premises and covenants and agreements
contained herein, the parties hereto agree as follows:
<PAGE>
SECTION 1
PURCHASE OF THE NOTES
1.1 Authorization. Seller has authorized the issuance, sale and
delivery to the Purchasers of the Notes in the form attached as Exhibit B
hereto, in the aggregate principal face amount of $7,437,535.
1.2 Purchase from Seller. Subject to the terms and conditions of this
Agreement, each Purchaser, severally, and not jointly or jointly and severally,
agrees to purchase from Seller, and Seller agrees to sell to each Purchaser
Note(s) in the principal face amount set forth opposite each Purchaser's name on
Exhibit A, at a purchase price equal to 74.6215% of the principal amount thereof
(the "Purchase Price").
1.3 Closing. The purchase and sale of the Notes (the "Closing") shall
take place at the offices of Brobeck, Phleger & Harrison LLP located in Los
Angeles, California, on August 13, 1999 (or such other place and time as the
parties may mutually agree). At the Closing:
(a) Seller shall deliver to each Purchaser such Purchaser's
Note(s), dated the Closing Date, duly registered in the Purchaser's name; and
(b) Each Purchaser shall deliver to Seller the Purchase Price
set forth opposite its name on Exhibit A to the bank account of Seller,
designated by Seller two (2) business days prior to the Closing, in immediately
available funds.
1.4 Other Defined Terms. Certain other terms used or incorporated
by reference herein, but not defined herein, are defined on Annex I.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser hereby severally, and not jointly or jointly and
severally, represents and warrants to Seller that:
2.1 Due Incorporation or Formation; Authorization of Agreement. It is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate power and authority
necessary to execute and deliver this Agreement and to perform its obligations
hereunder, and the execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate or other action. This Agreement
has been duly and validly executed and delivered by it, and constitutes the
legal, valid, and binding obligation of it, enforceable against it in accordance
with its terms, subject to
2.
<PAGE>
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization and
other similar laws of applicability relating to creditors rights and to general
equity principles.
2.2 No Conflict.
(a) Neither the execution, delivery and performance of this
Agreement nor the consummation by it of the transactions contemplated hereby
will (i) violate any provision of its organizational documents; or (ii) violate
any judgment, order, decree, statute, law, ordinance, rule or regulation binding
upon it or its properties or assets, other than such violations which
individually or in the aggregate would not have a material adverse effect on its
ability to consummate the transactions contemplated by this Agreement and under
its Note.
(b) No authorization, consent or approval of, or filing with,
any public body or governmental authority is necessary for the consummation by
it of the transactions contemplated by this Agreement.
2.3 Investment Intent. Each Purchaser is acquiring the Notes and the
Common Stock issuable upon conversion of the Notes (the "Securities") pursuant
to this Agreement for its own account. Each Purchaser is purchasing the
Securities for investment purposes and not with a view to the sale or
distribution of any Securities, by public or private sale or other disposition,
in violation of the Securities Act. Notwithstanding the foregoing or anything
else contained herein to the contrary, the Notes and the shares of Common Stock
issuable or issued upon conversion of the Notes may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
2.4 Certificates to be Legended. Each Purchaser understands that each
Security will bear a legend on the face thereof (or on the reverse thereof with
a reference to such legend on the face thereof) required by the Securities and
Exchange Commission or a state securities commission.
2.5 Securities Will be "Restricted Securities". Each Purchaser
understands that the Securities will be "restricted securities" as that term is
defined in Rule 144 promulgated under the Securities Act.
2.6 Sophistication of Purchasers; Accredited Investor Status. Each
Purchaser has such knowledge and experience in financial and business matters
that such Purchaser is capable of evaluating the merits and risks of its
investment contemplated by this Agreement and has the capacity to protect its
own interests. Each Purchaser acknowledges that investment in the Securities is
highly speculative and involves a substantial and high degree of risk of loss of
the entire investment. Each Purchaser has adequate means of providing for
current and anticipated financial needs and contingencies, is able to bear the
economic risk of its investment in the Securities and could afford complete loss
of such investment. Each Purchaser is an "accredited investor" (as such term is
defined in Rule 501 of Regulation D under the Securities Act).
3.
<PAGE>
2.7 Due Diligence. Each Purchaser has had an opportunity to discuss
the Seller's business, management, and financial affairs with its management.
Each Purchaser is entering into this Agreement and the other agreements
described therein and the transactions contemplated hereby and thereby in
reliance on its own investigation and review of the information concerning the
Seller provided to it and the representations contained in this Agreement and in
the 1999 Credit Facility.
SECTION 3
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND GUARANTORS
Seller and each of the Guarantors hereby represents and warrants to
the Purchasers, jointly and severally, as follows:
3.1 Representations and Warranties Incorporated by Reference. All
representations and warranties of Seller and each Guarantor contained in the
1999 Credit Facility as in effect on the Closing Date (without giving effect to
any modifications or supplements to the 1999 Credit Facility or termination of
the 1999 Credit Facility after the Closing Date) are incorporated herein by
reference and are made to or for the benefit of the Purchasers. Without limiting
the generality of the foregoing, the representations and warranties of Seller
and each Guarantor set forth in Article V and Section 9.02 of the Credit
Agreement, together with related definitions and ancillary provisions and
schedules and exhibits, are hereby incorporated in this Agreement by reference,
as if set forth in this Agreement in full, mutatis mutandis; provided, that, as
incorporated into this Agreement, (i) each reference in the Credit Agreement to
a "Loan Party" or the "Loan Parties" shall be deemed to be a reference to one or
more of the Seller and the Guarantors, (ii) each reference in the Credit
Agreement to the "Lender Group" shall be deemed to be a reference to the
Purchasers, (iii) each reference in the Credit Agreement to a "Loan Document" or
a "Warrant" shall be deemed to be a reference to this Agreement, the Notes, the
Registration Rights Agreement, and any other document entered into in connection
herewith (the "Subordinated Note Documents"), and (iv) each other defined term
used in the Credit Agreement and incorporated by reference herein shall have the
meanings given them in the Credit Agreement.
3.2 Shares Reserved. As of the date hereof, 602,534 shares of Seller's
Common Stock, no par value per share ("Common Stock"), have been duly authorized
for issuance in connection with the conversion of the Notes. Upon conversion,
the shares of Common Stock issued to the Holders will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in the
Registration Rights Agreement, and a registration rights agreement entered into
pursuant to the 1999 Credit Facility, Seller has not granted to any Person the
right to cause Seller to register with any state or federal securities agency
any Capital Stock owned by such Person.
4.
<PAGE>
3.3 Indebtedness. After giving effect to the transactions contemplated
hereby, Seller and the Guarantors will have Indebtedness due to the persons and
in the amounts and pursuant to the terms set forth on Exhibit C hereto.
SECTION 4
CONDITIONS TO CLOSING
The obligation of each Purchaser to purchase the Notes to be purchased
during the Closing is subject to the fulfillment to its satisfaction of each of
the following conditions:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Seller and the Guarantors in Section 3 hereof shall be
true and correct in all respects when made, and shall be true and correct on the
Closing Date, with the same force and effect as if they had been made on and as
of that date.
4.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Seller on or prior to the
Closing Date shall have been performed or complied with in all respects.
4.3 Opinion of Seller's Counsel. Each Purchaser shall have received
from Farleigh, Wada & Witt, P.C., and Hiscock & Barclay, counsel to the Seller
and the Guarantors, opinions addressed to it, dated the Closing Date, and in
substantially the form attached as Exhibit D hereto.
4.4 Legal Investment. The issuance of the Notes to each Purchaser
hereunder shall be legally permitted by all federal and state laws and
regulations, and any rules or regulations of any stock exchange or the Nasdaq
National Market, to which such issuance and the Seller are subject.
4.5 Compliance Certificate. Seller shall have delivered an Officer's
Certificate, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Sections 4.1 and 4.2 of this Agreement.
4.6 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to each Purchaser and its counsel.
4.7 Qualification. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and sale of the Notes pursuant to this Agreement, the
conversion of the Notes into Common Stock and the issuance of such Common Stock
upon such conversion shall have been duly obtained and shall be effective on and
as of the Closing Date.
5.
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4.8 Closing of Credit Agreement. Each of the conditions precedent to
the Lender Group's obligation to make the initial loans under the Credit
Agreement shall have been satisfied or waived on terms reasonably satisfactory
to the Purchasers.
4.9 Closing of Acquisition; Use of Proceeds. The acquisition of
Ultradata Corporation shall have been consummated simultaneously herewith
pursuant to the terms of the Ultradata Acquisition Documents, and the Purchasers
shall have been satisfied in their reasonable discretion that the proceeds of
the purchase and sale of the Notes are being used in accordance with Section
7.15 hereof.
4.10 Registration Rights Agreement. Seller shall have delivered to
each Purchaser an executed Registration Rights Agreement in the form attached
hereto as Exhibit E.
4.11 Suretyship Agreement. Seller shall have delivered to each
Purchaser an executed Suretyship Agreement in the form attached hereto as
Exhibit F.
SECTION 5
SUBORDINATION
5.1 Subordination of the Subordinated Notes. Anything in this
Agreement or the Subordinated Notes to the contrary notwithstanding, the Holder,
by its acceptance of a Subordinated Note hereunder, hereby agrees that the
Indebtedness evidenced by this Agreement and the Subordinated Notes and any
guarantee of payment with respect thereto, including the payment of principal
of, premium, if any, or interest on the Subordinated Notes and any other
Indebtedness, whether now existing or hereafter created, arising under or in
connection with this Agreement and the Subordinated Notes, including all
expenses, fees, and other amounts now or hereafter payable hereunder or
thereunder (all of the foregoing, the "Subordinated Obligations") are and shall
be subordinate and junior, to the extent set forth below, and subject in right
of payment to the prior payment in full of all Senior Indebtedness.
The expression "payment in full" or "paid in full" or any similar term
or phrase, when used in this Section 5.1 with respect to Senior Indebtedness,
shall mean the payment in full of all such Senior Indebtedness in cash and the
termination of all financing commitments of the Senior Lenders, or, in the case
of Senior Indebtedness consisting of contingent obligations in respect of
letters of credit or other reimbursement obligations, the setting apart of cash
sufficient to discharge such portion of Senior Indebtedness in an account for
the exclusive benefit of the holders thereof, in which account such holders
shall have (or be granted by the Seller) a first priority perfected security
interest in a manner reasonably acceptable to such holders.
(a) If (i) the Seller shall default in the payment of any
Senior Indebtedness (whether principal, interest or other amount) when the same
becomes due and payable, whether at maturity or at a date fixed for scheduled
payment or by declaration or acceleration or otherwise
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(a "Payment Default Event"), and (ii) the Holders (or the Designated
Representative, as applicable) shall have received a Payment Default Notice,
then the Seller shall not make, and no Holder of the Subordinated Notes shall
accept or receive, any direct or indirect payment or distribution of any kind or
character (whether in cash, securities, Assets, by set-off, or otherwise), on
account of the Subordinated Obligations during the Payment Blockage Period
applicable to such Payment Default Event (it being understood however that,
notwithstanding anything to the contrary, the Seller may issue Common Stock or
other junior securities upon conversion of any Subordinated Notes, and the
Subordinated Notes shall continue to accrete in value to the extent, and in the
manner, provided for in the Subordinated Notes, during any Payment Blockage
Period); provided, however, that in the case of any payment on or in respect of
any Subordinated Obligation that would (in the absence of any such Payment
Default Notice) have been due and payable on any date (a "Scheduled Payment
Date") during such Payment Blockage Period, the provisions of this subsection
(a) shall not prevent the making of such payment (a "Scheduled Payment") on or
after the date immediately following the termination of such Payment Blockage
Period. The foregoing provisions of this subsection to the contrary
notwithstanding, the failure by the Seller to make a Scheduled Payment on a
Scheduled Payment Date during a Payment Blockage Period shall constitute an
Event of Default. If the Holders (or the Designated Representative, as
applicable), shall have received a Payment Default Notice from or on behalf of
the Agent, then each Holder shall, during the Standstill Period applicable
thereto, be prohibited from accelerating the Indebtedness evidenced by its
Subordinated Notes and enforcing any of its default remedies (other than the
application of the Default Rate and the default rate of accretion and the
accrual (but not the payment) of Liquidated Damages, if any, but including the
right to accelerate such Indebtedness and exercise set-off rights) with respect
thereto (including any right to sue the Seller or to file or participate in the
filing of an involuntary bankruptcy petition against the Seller) until such
Standstill Period shall cease to be in effect; provided, however, that if a
Holder had initiated an enforcement action prior to the commencement of such
Standstill Period at a time when such Holder was entitled to do so, then such
Holder shall not be prevented during such Standstill Period from taking such
otherwise prohibited steps, but no others, with respect to such pending
enforcement action as are required by a mandatory provision of law. Each Holder
upon the termination of any Standstill Period applicable thereto, may, at its
sole election, exercise any and all remedies (including the acceleration of the
maturity of the Subordinated Notes) available to it under this Agreement, the
Subordinated Notes, or applicable law.
In the event that, notwithstanding the foregoing, the Seller shall
make any payment to any Holder prohibited by the foregoing provisions of this
subsection (a), then and in such event such payment shall be segregated by such
Holder and held in trust for the benefit of and immediately shall be paid over
to the Agent (in the same form received, with all necessary endorsements) for
application against the Senior Indebtedness remaining unpaid until the Senior
Indebtedness is paid in full.
(b) Except under circumstances when the terms of subsections
(a) or (d) are applicable, if (i) an event of default (other than a payment
default) shall have occurred and be continuing under the Credit Agreement (or a
refinancing agreement in respect thereof) (a "Non-Payment Default Event"), and
(ii) the Holders (or the Designated Representative, as
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applicable) shall have received a Non-Payment Default Notice, then the Seller
shall not make, and no Holder shall accept or receive, any direct or indirect
payment or distribution of any kind or character (whether in cash, Assets,
securities, by set-off, or otherwise) on account of the Subordinated Obligations
during the Non-Payment Blockage Period applicable to such Non-Payment Default
Event (it being understood however that, notwithstanding anything to the
contrary, the Seller may issue Common Stock or other junior securities upon
conversion of any Subordinated Notes, and the Subordinated Notes shall continue
to accrete in value to the extent, and in the manner, provided for in the
Subordinated Notes, during any Non-Payment Blockage Period); provided, however,
that in the case of any Scheduled Payment on or in respect of any Subordinated
Obligation that would (in the absence of any such Non-Payment Default Notice)
have been due and payable on any Scheduled Payment Date during such Non-Payment
Blockage Period, the provisions of this subsection (b) shall not prevent the
making of such Scheduled Payment on or after the date immediately following the
termination of such Non-Payment Blockage Period. The foregoing provisions of
this subsection (b) to the contrary notwithstanding, the failure by the Seller
to make a Scheduled Payment on a Scheduled Payment Date during a Non-Payment
Blockage Period shall constitute an Event of Default. If the Holders (or the
Designated Representative, as applicable) shall have received a Non-Payment
Default Notice from or on behalf of the Agent, then each Holder of the
Subordinated Notes, during the Standstill Period applicable thereto, shall be
prohibited from accelerating the Indebtedness evidenced thereby and shall be
prohibited from enforcing any of its default remedies (other than the
application of the Default Rate and the default rate of accretion and the
accrual (but not the payment) of Liquidated Damages, if any, but including the
right to accelerate such Indebtedness and exercise set-off rights) with respect
thereto (including any right to sue the Seller or to file or participate in the
filing of an involuntary bankruptcy petition against the Seller) until such
Standstill Period shall cease to be in effect; provided, however, that if a
holder of a Subordinated Note had initiated an enforcement action prior to the
commencement of such Standstill Period at a time when such holder was entitled
to do so, then such holder shall not be prevented during such Standstill Period
from taking those steps, but no others, with respect to such pending enforcement
action as are required by a mandatory provision of law. Each Holder of the
Subordinated Notes, upon the termination of any Standstill Period applicable
thereto, may, at its sole election, exercise any and all remedies (including the
acceleration of the maturity of the Subordinated Notes) available to it under
this Agreement or applicable law.
In the event that, notwithstanding the foregoing, the Seller shall
make any payment to any Holder of the Subordinated Notes prohibited by the
foregoing provisions of this subsection (b), then and in such event such payment
shall be segregated by such holder and held in trust for the benefit of and
immediately shall be paid over to the Agent (in the same form received, with any
necessary endorsements) for application against the Senior Indebtedness
remaining unpaid until the Senior Indebtedness is paid in full.
(c) Anything contained in Sections 5.1(a) or 5.1(b) to the
contrary notwithstanding: (i) no Holder shall exercise any of its default
remedies (other than the application of the Default Rate and the default rate of
accretion and the accrual (but not the payment) of Liquidated Damages, if any,
but including any judicial or non-judicial action to
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accelerate or enforce the Indebtedness evidenced thereby, any exercise of
set-off rights, and any right to sue the Seller or to file or participate in the
filing of an involuntary bankruptcy petition against the Seller) with respect to
an Event of Default prior to five (5) Business Days after the receipt by the
Representative of Senior Indebtedness of a written notice from any Holders (or
the Designated Representative, as applicable) stating that an Event of Default
has occurred and is continuing, specifying in reasonable detail the nature of
such Event of Default, and specifically designating such notice as a "Default
Notice"; and (ii) the aggregate number of days that any Holder shall be subject
to one or more Non-Payment Blockage Periods (or Standstill Periods on account of
Non-Payment Blockage Periods) shall not exceed 270 days in any 360 consecutive
day period; provided, however, that if the Senior Indebtedness is accelerated
and the Agent or the Required Lenders, as the case may be, have commenced and
diligently and in good faith are pursuing a judicial proceeding to collect the
Senior Indebtedness or diligently and in good faith are pursuing material
non-judicial remedies to effect the foreclosure and sale of the collateral
securing the Senior Indebtedness, then any applicable Blockage Period (and
correlative Standstill Period) may continue beyond the maximum number of days
set forth in this clause (ii) unless and until the Agent or the Required
Lenders, as applicable, rescind such acceleration in writing, or abandon,
terminate, or fail diligently to pursue such judicial or non-judicial remedies.
No Non-Payment Default Event that existed on the date of delivery of any
Non-Payment Default Notice or during the resulting Non-Payment Blockage Period
shall be made the basis for a subsequent Non-Payment Blockage Period. No
Non-Payment Default Event or Payment Default Event that existed on the date of
delivery of any Payment Default Notice or during the resulting Payment Blockage
Period shall be made the basis for a subsequent Non-Payment Blockage Period or
Payment Blockage Period.
(d) In the event of (i) any Insolvency Proceedings relative to
the Seller or any Guarantor, (ii) any proceedings for voluntary liquidation,
dissolution, or other winding up of the Seller or any Guarantor, whether
involving any Insolvency Proceedings, or (iii) any arrangement, adjustment,
composition or relief of the Seller or its debts or any marshaling of the assets
of the Seller, then, in each case, (A) all Senior Indebtedness shall first be
paid in full before any payment is made by or on behalf of the Seller or any
Guarantor on the Subordinated Obligations; (B) any payment or distribution of
any kind or character (whether in cash, securities, Assets, by set-off, or
otherwise, but excluding any Common Stock or other junior securities issued by
the Seller upon conversion of any Subordinated Notes and the accretion in value
of the Subordinated Notes to the extent, and in the manner, provided for
therein) to which the Holders would be entitled but for the provisions of this
subsection (d) (including, without limitation, any payment or distribution which
may be payable or deliverable to such holders by reason of the payment of any
other Indebtedness of the Seller or its Subsidiaries being subordinated to
payment of the Subordinated Obligations) shall be paid or delivered by the
Person making such payment or distribution, whether a trustee in bankruptcy, a
receiver, a liquidating trustee, or otherwise, directly to the Agent, or the
agent or other Representative of the holders of the Senior Indebtedness, for the
benefit of the holders of the Senior Indebtedness, as their interest may appear,
to the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid. In the event that, in the circumstances contemplated by this
subsection (d), and notwithstanding the foregoing provisions of this subsection
(d), the Holders of the Subordinated
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Notes shall have received any such payment or distribution of any kind or
character (whether in cash, securities, Assets, by setoff, or otherwise that
they are not entitled to receive by the foregoing provisions, before all Senior
Indebtedness is paid in full, then and in such event such payment or
distribution shall be segregated and held in trust for the benefit of and
immediately shall be paid over to the Agent, or the agent or other
representative of the holders of the Senior Indebtedness, for the benefit of the
holders of the Senior Indebtedness, as their interest may appear, for
application against the payment of all Senior Indebtedness remaining unpaid
until all such Senior Indebtedness shall have been paid in full.
(e) If any Holder does not file a proper claim or proof of
debt or other document or amendment thereof in the form required in any
proceeding under the Bankruptcy Code prior to thirty (30) days before the
expiration of time to file such claim or other document or amendment thereof,
then the Agent shall have the right (but not the obligation) in such proceeding,
and hereby irrevocably is appointed lawful attorney of such Holder for the
purpose of enabling the Agent to demand, sue for, collect, receive and give
receipt for the payments and distributions in respect of the Subordinated
Indebtedness owing to such Holder that are made in such proceeding and that are
required to be paid or delivered to the holders of the Senior Indebtedness as
provided in subsection (d), and to file and prove all claims therefor and to
execute and deliver all documents in such proceeding in name of such Holder or
otherwise in respect of such claims, as the Agent reasonably may determine to be
necessary or appropriate.
Each Holder agrees that it will not enter into any amendment or
modification of the provisions of this Agreement or the Subordinated Notes,
without having first obtained the prior written consent of the Required Lenders,
if the effect thereof would be to amend or modify in any way (a) the interest
rate or principal amount or schedule of payments of principal and interest with
respect to any of the Subordinated Obligations, other than to reduce the
interest rate thereon or principal amount thereof or extend the schedule of
payments with respect thereto, (b) the subordination provisions set forth in
this Section 5 or any of the Subsidiary Guarantees, or (c) the Events of Default
set forth herein, other than to make such covenants or Events of Default less
restrictive or to issue a waiver in respect thereof.
No right of any present or future holder of Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Seller,
or by any non-compliance by the Seller or by any Holder with the terms,
provisions, and covenants of this Agreement or the Subordinated Notes,
regardless of any knowledge thereof any such holder of Senior Indebtedness may
have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders, without incurring
responsibility to the Holders, and without impairing or releasing the
subordination provided in this Section 5 or the obligations of the Holders to
the holders of the Senior Indebtedness, do any one or more of the following: (a)
change the manner, place, or terms of payment (including any change in the rate
of interest), or extend the time of payment of,
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or renew, amend, modify, alter, or grant any waiver or release with respect to,
or consent to any departure from, any Senior Indebtedness or any instrument
evidencing the same or any agreement evidencing, governing, creating,
guaranteeing or securing any Senior Indebtedness; (b) sell, exchange, release,
or otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (c) release any Person liable under or in respect of the
Senior Indebtedness; (d) fail or delay in the perfection of Liens securing the
Senior Indebtedness; (e) exercise or refrain from exercising any rights against
the Seller and any other Person; or (f) amend, or grant any waiver or release
with respect to, or consent to any departure from, any guarantee for all or any
of the Senior Indebtedness.
The provisions of this Section 5.1 are for the purpose of defining the
relative rights of the holders of Senior Indebtedness, on the one hand, and the
Holders, on the other hand, and nothing herein shall impair, as between the
Seller and the Holders, the obligation of the Seller, which is unconditional and
absolute, to pay to the Holders thereof the principal thereof and premium, if
any, and interest thereon in accordance with their terms and the provisions
hereof. Upon payment in full of the Senior Indebtedness and the termination of
all obligations of the Senior Lenders under the Credit Agreement (or any
refinancing agreement in respect thereof), the Holders shall be subrogated
(without any representation or warranty on the part of Agent or any holder of
Senior Indebtedness) to the rights of the holders of the Senior Indebtedness to
receive payments or distributions of Assets of the Seller made on Senior
Indebtedness (and any security therefor) until the Subordinated Obligations
shall be paid in full, and, for the purposes of such subrogation, no payments to
the holders of Senior Indebtedness of any cash, Assets, stock, or obligations to
which the Holders would be entitled except for the provisions of subsection (e)
above shall, as between the Seller, its creditors (other than the holders of the
Senior Indebtedness), and the Holders, be deemed to be a payment by the Seller
to or on account of Senior Indebtedness.
The agreements contained in this Section 5.1 shall continue to be
effective or shall be automatically reinstated, as the case may be, if at any
time any payment (or any part of any payment) on the Senior Indebtedness shall
be returned by any holder of Senior Indebtedness: (a) under any state or federal
law upon or following the insolvency, bankruptcy, or reorganization of the
Seller or otherwise; or (b) by reason of any settlement or compromise of any
claim against such holder for repayment or recovery of any amount on account of
any Senior Indebtedness; in each case, as though such payment had not been made.
5.2 Right of Holder to Hold Senior Indebtedness. Any Holder that is
also a Senior Lender shall be entitled to the benefit of the rights set forth in
this Section 5 in respect of any Senior Indebtedness at any time held by it to
the same extent as any other holder of Senior Indebtedness, and nothing in this
Agreement shall be construed to deprive such Holder of any of its rights as a
holder of Senior Indebtedness.
5.3 Designated Representative. Within sixty (60) days of the date of
this Agreement, the Required Holders shall select a Designated Representative,
who may (but need not) be a Holder and provide written notice to the Agent of
such selection; provided, however, that if no
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Designated Representative is selected within such sixty (60) day period, the
Agent may select a Designated Representative (who shall be a Holder), and
provide written notice to the Holders of such selection. Each Holder shall
execute and deliver to the Designated Representative any agency agreement the
Designated Representative shall reasonably request; it being understood that the
protections and indemnities afforded the Agent under the Credit Agreement are
hereby deemed reasonable for this purpose. The Company hereby agrees to pay the
reasonable fees and expenses of the Designated Representative within 30 days of
invoice therefor. The Designated Representative may be changed from time to time
by written consent of the Required Holders, but at all times after the original
selection of a Designated Representative, the Holders shall maintain a
Designated Representative under this Agreement. This Section 5.3 is,
notwithstanding any other provision herein to the contrary, made for the benefit
of the Agent and the Senior Lenders (and their successors and assigns under the
Senior Loan Documents), who are hereby entitled to rely on and enforce this
covenant.
The foregoing provisions of this Section 5 shall constitute a
continuing offer to all Persons who, in reliance upon such provisions, become
holders of Senior Indebtedness, and such provisions are made for the benefit of,
and may be enforced directly by, holders of Senior Indebtedness, who hereby are
expressly stated to be intended beneficiaries of this Section 5, notwithstanding
any rescission of this Agreement by the parties hereto.
SECTION 6
GUARANTEE
6.1 Guarantee. Each Guarantor hereby jointly and severally
unconditionally guarantees to each Holder, (i) the due and punctual payment of
the principal of, and premium, if any, Liquidated Damages, if any, and interest
on each Note, when and as the same shall become due and payable, subject to any
applicable grace period, if any, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest (including default interest)
on the overdue principal of, and premium, Liquidated Damages, if any, and
interest on the Notes, to the extent lawful, and the due and punctual
performance of all other Obligations of the Seller to the Holders all in
accordance with the terms of such Note and this Agreement, subject, however, to
the limitations set forth in Section 5, and (ii) in the case of any extension of
time of payment or renewal of any Notes or any of such other Obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, at stated maturity, by acceleration or
otherwise. Each Guarantor hereby agrees that its obligations thereunder and
hereunder shall be absolute and unconditional, irrespective of, and shall be
unaffected by, any invalidity, irregularity or unenforceability of any such Note
or this Agreement, any failure to enforce the provisions of any such Note or
this Agreement, any waiver, modification or indulgence granted to the Seller
with respect thereto by the Holder of such Note, or any other circumstances
which may otherwise constitute a legal or equitable discharge of a surety or
such Guarantor.
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Each Guarantor hereby waives diligence, presentment, demand for
payment, filing of claims with a court in the event of merger or bankruptcy of
the Seller, any right to require a proceeding first against the Seller, protest
or notice with respect to any such Note or the Indebtedness evidenced thereby
and all demands whatsoever, and will covenant that this Guarantee will not be
discharged as to any such Note except by payment in full of the principal
thereof, premium if any, and interest thereon and as provided in Section 6
hereof. Each Guarantor further agrees that, as between such Guarantor, on the
one hand, and the Holders, on the other hand, (i) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Section 10
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Section 10 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Section 10 hereof,
the Holders are hereby deemed to have made a demand for payment on the Notes
under the Guarantee provided for in this Section 6.
The guaranty set forth in this Section is a continuing guaranty and
shall (a) remain in full force and effect until the later of the cash payment in
full of the Obligations (other than indemnification obligations as to which no
claim has been made) and all other amounts payable under this Section and the
maturity date of the Notes, (b) be binding upon each Guarantor, its successors
and assigns, and (c) inure to the benefit of and be enforceable by the Holders
and their successors, pledgees, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Holders may pledge, assign or
otherwise transfer all or any portion of their rights and obligations under this
Agreement and the other Subordinated Note Documents (including, without
limitation, all or any portion of its Note) to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted the Holders herein or otherwise, in each case as provided in Section
14.9(a).
6.2 Limitation of Guarantee. Notwithstanding any term or provision of
this Agreement to the contrary, the maximum aggregate amount of the obligations
guaranteed hereunder by any Guarantor shall not exceed the maximum amount that
can be guaranteed hereunder by such Guarantor without rendering the Guarantee,
as it relates to such Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
6.3 Additional Guarantors. The Seller covenants and agrees that it
shall cause any Person which becomes obligated under Section 7.13 hereof, to
guarantee the Notes, pursuant to the terms of Section 6 hereof, to execute
either a (i) joinder to this Agreement and the Suretyship Agreement or (ii) a
guarantee, satisfactory in form and substance to the Purchasers, pursuant to
which such Subsidiary shall guarantee the obligations of the Seller under the
Notes and this Agreement in accordance with this Section with the same effect
and to the same extent as if such Person had been named herein as a Guarantor.
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6.4 Release of Guarantor. A Guarantor shall be released from all of
its obligations under its Subsidiary Guarantee if:
(i) the Guarantor has sold all or substantially all
of its assets or the Seller and its Subsidiaries have sold all of the
Capital Stock of the Guarantor owned by them, in each case in a
transaction in compliance with this Agreement; or
(ii) the Guarantor merges with or into or
consolidates with, or transfers all or substantially all of its assets
to, the Seller or another Guarantor in a transaction in compliance
with this Agreement;
and in each such case, such Guarantor has delivered to the Holders an Officers'
Certificate and an opinion of counsel reasonably acceptable to the Holders, each
stating that all conditions precedent herein provided for relating to such
transactions have been complied with.
The Holders shall, at the sole cost and expense of the Seller, at its
request and upon receipt of the documents mentioned in the preceding paragraph,
deliver an appropriate instrument evidencing such release, and take such other
actions as may be reasonably necessary or desirable.
6.5 Guarantee Obligations Subordinated to Senior Indebtedness. Each
Guarantor hereby covenants and agrees, and each Holder of a Note, by its
acceptance thereof, likewise covenants and agrees, that to the extent and in the
manner hereinafter set forth in Section 5, the Indebtedness represented by the
Subsidiary Guarantee and the payment of principal, premium, if any, and interest
and Liquidated Damages, if any, on the Notes pursuant to the Subsidiary
Guarantee by such Guarantor are hereby expressly made subordinate and subject in
right of payment as provided in Section 5 (substituting, for purposes of this
Guarantee, the Guarantor's Indebtedness for the Seller's Indebtedness) to the
prior indefeasible payment and satisfaction in full of all Senior Indebtedness
of such Guarantor, mutatis mutandis. In furtherance and not in limitation of the
foregoing, in the event the Holders (or the Designated Representative, as
applicable) shall have received a Payment Default Notice or a Non-Payment
Default Notice from or on behalf of the Agent, during the Standstill Period
applicable thereto each Holder shall be prohibited from accelerating the
Indebtedness evidenced by the Subsidiary Guarantee and shall be prohibited from
enforcing any of its default remedies (other than application of the Default
Rate and the default rate of accretion and the accrual (but not the payment) of
Liquidated Damages, if any, but including the right to accelerate such
Indebtedness and exercise set-off rights) with respect thereto (including any
right to sue the Guarantor or to file or participate in the filing of an
involuntary bankruptcy proceeding against the Guarantor) until such Standstill
Period shall cease to be in effect; provided, however, that if a Holder had
initiated an enforcement action prior to the commencement of such Standstill
Period at a time when such Holder was entitled to do so, then such Holder shall
not be prevented during such Standstill Period from taking those steps, but no
others, with respect to such pending enforcement action as are required by a
mandatory provision of law. The failure by any Guarantor to make a payment in
respect of its obligations on its Subsidiary Guarantee by reason of any
provision of Section 5
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or this Section 6.5 shall not be construed as preventing the occurrence of a
Default or any Event of Default hereunder.
This Section 6.5 constitutes a continuing offer to all Persons who, in
reliance upon such provisions, become holders of or continue to hold Senior
Indebtedness of any Guarantor; and such provisions are made for the benefit of
the holders of Senior Indebtedness of each Guarantor; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
6.6 Suretyship Agreement. The agreements and waivers set forth in this
Section 6 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.
SECTION 7
AFFIRMATIVE COVENANTS
The Seller hereby covenants and agrees that, during such time as any
Holder owns any Notes or any shares of Common Stock issued upon conversion of
the Notes:
7.1 Financial Information. The Seller will furnish the following
reports to each Holder so long as the Holder is a holder of any Notes, or Common
Stock issued upon conversion of any Notes that, in the aggregate, represent
ownership of one percent (1%) or more, of the issued and outstanding voting
securities of the Seller:
(a) As soon as practicable after the end of each fiscal year
of the Seller, and in any event within ninety (90) days thereafter, a
consolidated and consolidating balance sheets of the Seller and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of operations and retained earnings and consolidated and
consolidating statements of cash flows of the Seller and its subsidiaries, if
any, for such year, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
certified by independent public accountants from one of the five largest
national accounting firms by the Seller, which opinion shall be without (A) a
"going concern" or like qualification or exception or (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 default under Indebtedness of the Seller.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Seller, and in
any event within forty-five (45) days thereafter, a consolidated and
consolidating balance sheets of the Seller and its subsidiaries, if
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any, as of the end of each such quarterly period, and consolidated statements of
operations and retained earnings and consolidated and consolidating statements
of cash flows of the Seller and its subsidiaries for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in comparative form
the figures for the corresponding periods of the previous fiscal year, subject
to changes resulting from year-end audit adjustments, all in reasonable detail
and certified by the principal financial or accounting officer of the Seller.
(c) So long as the Seller is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and in lieu of the financial information required pursuant to paragraphs
7.1(a) and (b), copies of its Annual and Quarterly Reports on Form 10-K and
10-Q, respectively, or any similar successor forms, as shall be filed on a
timely basis with the Securities and Exchange Commission.
7.2 Additional Information. Seller will permit representatives of the
Holders to whom Paragraph 7.1 applies to visit and inspect any of the properties
of the Seller and its Subsidiaries, including its books of account, and to
discuss its affairs, finances and accounts with the Seller's officers and its
independent public accountants, all at such reasonable times and as often as a
Holder may reasonably request, and the Seller hereby consents to such
discussions. If at any time the Seller is no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, or (ii) quotations for
the Common Stock of the Seller are no longer reported by the Nasdaq National
Market System, or by an equivalent quotations system or stock exchange, the
Seller will deliver the reports described below in this paragraph 7.2 to each
Purchaser entitled to receive financial information pursuant to Section 7.1:
(a) As soon as practicable after the end of each month and in
any event within thirty (30) business days thereafter, a consolidated and
consolidating balance sheets of the Seller and its Subsidiaries, if any, as at
the end of such month, and consolidated statements of operations and retained
earnings and consolidated and consolidating statements of cash flows of the
Seller and its Subsidiaries, for each month and for the current fiscal year of
the Seller to date, prepared in accordance with generally accepted accounting
principles consistently applied, and certified, subject to changes resulting
from year-end audit adjustments, by the principal financial or accounting
officer of the Seller.
(b) With reasonable promptness, such other information and
data with respect to the Seller and any subsidiaries as a Holder may from time
to time reasonably request.
(c) The foregoing provisions of this paragraph 7.2 shall not
be in limitation of any rights which a Holder may have to the books and records
of the Seller and any Subsidiaries, or to inspect their properties or discuss
their affairs, finances and accounts, under the laws of the jurisdictions in
which they are incorporated.
7.3 Notice of Litigation, Adverse Claims, etc. Seller will promptly deliver
to each Holder, but in any event within five (5) days after the discovery,
notice of any material adverse
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event or circumstance affecting the Seller (including, but not limited to, the
filing of any litigation or administrative claim against the Seller, any officer
of the Seller, or any of its Subsidiaries involving a claim in excess of
$1,000,000 or which, if concluded adversely, could reasonably be expected to
materially adversely affect the business or assets of the Seller, such officer,
or any of its Subsidiaries or the existence of any dispute with any person which
involves a reasonable likelihood of litigation being filed or any investigation
or proceeding instituted or threatened by any federal or state regulatory
agency).
7.4 Notice of Default, Event of Default or Acceleration of the Notes.
Seller will deliver to each Holder the notices described herein immediately, and
in any event within one (1) day after a Responsible Officer becoming aware of:
(i) the existence of any Default or Event of Default or that any Person has
given any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to a
claimed default of the type referred to in Section 9.1(f), a written notice
specifying the nature and period of existence thereof and what action the Seller
is taking or proposes to take with respect thereto, (ii) the acceleration of any
Note pursuant to Section 10.1 hereof, a written notice setting forth the
principal amount of each Note so accelerated, the name of the holder thereof and
the circumstances surrounding such acceleration and (iii) the existence of a
default or event of default under any Senior Indebtedness or other indebtedness
of the Seller in an amount of $1,000,000 or more, and any concurrent or
subsequent acceleration of such indebtedness, a written notice describing such
default or acceleration.
7.5 Prompt Payment of Taxes, etc. Seller will, and will cause its
Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Seller or
any Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Seller shall have set aside on its
books adequate reserves with respect thereto, and provided, further, that the
Seller will pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien which may have attached as
security therefor.
7.6 Maintenance of Properties and Leases. Seller will and will cause
its Subsidiaries to, keep its properties and those of its Subsidiaries in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Seller and any Subsidiaries will at
all times comply with each provision of all leases to which any of them is a
party or under which any of them occupies property if the breach of such
provision might have a material adverse affect on the condition, financial or
otherwise, or operations of the Seller and its Subsidiaries, taken as a whole.
7.7 Insurance. Seller will keep its business and assets and those of
its Subsidiaries which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, extended coverage
and explosion in reasonable and adequate amounts and
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the Seller will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.
7.8 Account and Records. Seller will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
7.9 Independent Accountants. Seller will retain independent public
accountants from one of the five largest national accounting firms who shall
certify the Seller's financial statements as of the end of each fiscal year. In
the event the services of the independent public accountants, so selected, or
any firm of independent public accountants hereafter employed by the Seller are
terminated, the Seller will immediately, and within one (1) day, thereafter
notify the Holders and will request the firm of independent public accountants
whose services are terminated to deliver to the Purchasers a letter of such firm
setting forth the reasons for the termination of their services. In the event of
such termination, the Seller will promptly thereafter engage another one of the
five largest national accounting firms. In its notice to the Holders the Seller
shall state whether the change of accountants was recommended or approved by the
Board of Directors or any committee thereof.
7.10 Compliance with Requirements of Governmental Authorities. Seller
shall, and cause all of its Subsidiaries to, duly observe and conform to all
valid requirements of governmental authorities relating to the conduct of their
businesses or to their property or assets, and shall comply in all material
respects to all laws and regulations applicable to Seller, its Subsidiaries or
their business.
7.11 Maintenance of Corporate Existence, etc. Seller shall, and shall
cause its Subsidiaries to, maintain in full force and effect their corporate
existence, rights and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights owned or
possessed by them and deemed by the Seller to be necessary to the conduct of
their business. Seller shall at all times maintain the listing of its Common
Stock on the Nasdaq National Market, the New York Exchange, or an equivalent
nationally recognized exchange.
7.12 Availability of Common Stock for Conversion. Seller will, from
time to time, in accordance with the laws of the state of its incorporation,
increase the authorized amount of Common Stock prior to such time as the failure
to do so would cause the number of shares of Common Stock remaining authorized
and unissued to be insufficient to permit conversion of all the then outstanding
Notes. No later than the first to occur of (i) the date a Shelf Registration
with respect to the Common Stock issuable upon conversion of the Notes is filed
with the SEC pursuant to the Registration Rights Agreement or (ii) ninety (90)
days from the date hereof, the Board of Directors of the Seller shall
specifically reserve for issuance 602,534 shares of Common Stock to be issued
upon conversion of the Notes. Upon any adjustment in the number
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of shares of Common Stock that become issuable upon conversion of the Notes,
whether due to the antidilution provisions of the Notes, a reset of the
Conversion Price (as defined in the Notes), or a default rate of accretion or
default rate of interest or Liquidated Damages becoming due and available for
conversion into shares of Common Stock, or otherwise, Seller shall reserve such
shares for issuance upon conversion and maintain an adequate number of shares so
reserved until all of the Notes have been converted or paid in full. Seller will
cause any additional shares of Common Stock that become issuable upon conversion
of the Notes as a result of an adjustment to the Conversion Price (as defined in
the Notes) to be listed, as of the effective time of such adjustment, on the
Nasdaq National Market or other exchange on which the Common Stock is then
listed.
7.13 Subsidiary Guarantee. At such time as any Person becomes a
Subsidiary of the Seller, to cause such Person to deliver either (i) a joinder
to this Agreement and the Suretyship Agreement and thereby become a Guarantor
hereunder or (ii) a Guarantee of the Notes, in either case in form and substance
satisfactory to the Holders.
7.14 Registration Rights.
(a) Pursuant to the terms of the Registration Rights
Agreement, the Seller shall register the Common Stock issuable upon conversion
of the Notes for re-sale by the Holders.
(b) The Seller and the Purchaser agree that the Holders of the
Notes will suffer damages if the Seller fails to fulfill its obligations
pursuant to the Registration Rights Agreement and that it would not be possible
to ascertain the extent of such damages. Accordingly, in the event of a failure
by the Seller to fulfill its obligation to register the Common Stock for resale
pursuant to the terms of the Registration Rights Agreement on or prior to the
Effectiveness Target Date, the Seller hereby agrees to pay liquidated damages
("Liquidated Damages") to each Purchaser or Holder of a Note under the
circumstances and to the extent set forth below. If the Seller's Shelf
Registration (as defined in the Registration Rights Agreement) is not declared
effective by the SEC on or prior to the Effectiveness Target Date, or the Shelf
Registration has been declared effective by the SEC and such Shelf Registration
ceases to be effective or the prospectus ceases to be usable at any time during
Effectiveness Period for a period of time which shall exceed 30 days in the
aggregate during any 365-day period (any of the foregoing, a "Registration
Default") then the Seller shall pay Liquidated Damages in cash on the first
Business Day of each month to each Purchaser immediately following the
occurrence of such Registration Default in an amount equal to $10.00 per month
per $1,000 principal amount of Notes for each month (computed the basis of a
30-day month) or portion thereof that the Registration Default continues.
Following the cure of all Registration Defaults relating to any breach of the
Registration Rights Agreement, the accrual of Liquidated Damages with respect to
such Registration Default shall cease. The Registration Default shall be deemed
cured on a date that either the Shelf Registration is declared effective or, in
the case of a prospectus that has become unusable, the date the prospectus
contained therein again becomes usable consistent with applicable law.
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(c) The Seller shall notify the Holders on the date of, and on
a weekly basis during the pendency of, any Registration Default. The obligation
to pay Liquidated Damages shall be deemed to commence on the date of the
applicable Registration Default and to cease when all Registration Defaults have
been cured.
(d) For purposes of this Section 7.14 and the Registration
Rights Agreement, the Effectiveness Target Date shall be 180 days after the
Closing Date and the Effectiveness Period shall be five years.
(e) For purposes of determining the amount of Liquidated
Damages due hereunder, Common Stock acquired by a Holder upon conversion of a
Note and not disposed of shall be treated as if it were not converted and was
still held as Notes by a Holder.
7.15 Use of Proceeds. Seller will use the proceeds from the sale of
the Notes to be issued to consummate the Ultradata Acquisition (including the
payment of expenses in connection therewith) and for working capital purposes.
7.16 Further Assurances. Seller shall take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at their sole cost and expense, such
agreements, instruments or other documents as the Holders may reasonably require
from time to time in order (i) to carry out more effectively the purposes of
this Agreement and the other Subordinated Note Documents, (ii) to establish and
maintain the validity and effectiveness of any of the Subordinated Note
Documents, and (iii) to better assure, convey, grant, assign, transfer and
confirm unto the Holders the rights now or hereafter intended to be granted to
the Holders under this Agreement or any other Subordinated Note Document.
SECTION 8
NEGATIVE COVENANTS
8.1 Employee Stock Purchases; Preferred Stock.
(a) Seller will not issue any of its Capital Stock, or grant
an option to purchase any of its Capital Stock, to any employee, officer,
director, consultant or independent contractor of the Seller or a subsidiary
except pursuant to the Seller's Stock Option Plans described in Schedule 5.01(e)
to the 1999 Credit Facility or any substantially similar plan approved by the
Board of Directors in the ordinary course of business and consistent with past
practices or approved by the Seller's shareholders, and except for up to 150,000
options or warrants issued at fair market value to an outside investor relations
firm.
(b) Seller will not (or cause any Subsidiary to) issue
any Prohibited Preferred Stock.
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8.2 Transactions with Affiliates. Neither Seller nor any Guarantor
shall 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 Seller, Guarantor or
such Subsidiary than would be obtainable in a comparable arm's length
transaction with a Person that is not an Affiliate thereof, and unless (i)
Seller or Guarantor has obtained the approval of a majority of the members of
the Board of Directors not interested in such Affiliate transaction and (ii) at
a time reasonably (and no less than five (5) days) prior to the submission of
such transaction to the disinterested directors for approval, notice of such
transaction has been given to the Holders.
8.3 Nature of Business. Seller will not, and will not permit any
Subsidiary to, make any fundamental or material change in the nature of its
business as described in Section 5.01(m) of the Credit Agreement.
8.4 Limitation on Restricted Payments. Seller, the Guarantors, and
their Subsidiaries shall not, directly or indirectly, (i) declare or pay any
dividend or other distribution, direct or indirect, on account of any Capital
Stock of Seller, Guarantors or any of their 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 Seller or any Guarantor, 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 Seller or any Guarantor,
now or hereafter outstanding, (iv) return any capital to any shareholders or
other equity holders of Seller, Guarantors or any of their Subsidiaries, or make
any other distribution of property, assets, shares of Capital Stock, warrants,
rights, options, obligations or securities thereto as such, (v) purchase, redeem
or otherwise acquire or retire for value prior to maturity Indebtedness that is
subordinated to or pari passu with the Notes or (vi) pay any management fees or
any other fees or expenses (including the reimbursement thereof by Seller,
Guarantors or any of their Subsidiaries) pursuant to any management, consulting
or other services agreement to any of the shareholders or other equityholders of
Seller, Guarantor or any of their Subsidiaries or other Affiliates, or to any
other Subsidiaries or Affiliates of Seller or any Guarantor; provided, however,
that:
(A) Subsidiaries that are wholly-owned directly or indirectly
by Seller may declare and pay cash and stock dividends, return capital and make
distributions of assets to Seller;
(B) Seller 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;
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(C) Seller may declare and pay dividends and distributions
payable solely in shares of Seller's Common Stock, subject to the adjustment
provisions of the Notes;
(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; and
(E) Seller may make payments to the holders of the Warrants
issued in connection with the 1999 Credit Facility under Sections 4(a)(2) or
4(a)(3) thereof in order to reduce the number of shares of Common Stock issuable
upon exercise of the Warrants, but the Seller may not amend such provisions to
increase the amounts paid thereunder without the consent of the Required
Holders.
8.5 Restriction On Fundamental Changes. Without the consent of the
Required Holders, Seller shall not (i) liquidate, wind-up or dissolve (or permit
or suffer any thereof), (ii) enter into any agreement that would impair or
restrict the Seller's ability to perform its obligations under this Agreement,
the Notes or the Registration Rights Agreement, (iii) amend its charter or
bylaws in any manner which would impair or restrict the Seller's ability to
perform its obligations under this Agreement, the Notes or the Registration
Rights Agreement, or (iv) agree to do any of the foregoing, provided, that any
wholly-owned Subsidiary of Seller or a Guarantor may be merged with any other
wholly-owned Subsidiary of Seller or a Guarantor, so long as (A) no other
provisions of this Agreement would be violated thereby, (B) Seller gives the
Holders 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, and (D) if the merger is between a Subsidiary
that is a Guarantor and another Subsidiary that is not a Guarantor, the
Subsidiary that is a Guarantor shall be the surviving entity of such merger or,
the party designated to survive the merger shall deliver a Guarantee prior to
the date of such merger.
8.6 Limitation on Dividend Payments by Subsidiaries. Neither Seller
nor any Subsidiary shall create or otherwise cause, incur, assume, suffer or
permit to exist or become effective any agreement restricting the payment of
dividends, or the transfer, loan or advance of funds or assets by or from any
Subsidiary of Seller to Seller, or the payment of any Note on behalf of Seller
(pursuant to the Guaranty or otherwise) unless otherwise required by (i) any
Senior Indebtedness or (ii) applicable laws and regulations, provided, that in
each case the Holders of the Notes are provided at least 30 days prior written
notice of the effectiveness of such restriction.
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SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default. A "Default" or an "Event of Default" shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the Seller defaults in the payment of any principal or
premium, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or acceleration or
otherwise; or
(b) the Seller defaults in the payment of any interest on any
Note when the same becomes due and payable; or
(c) the Seller defaults in the performance of or compliance
with any covenant contained in Sections 8.1 through 8.6, or Sections 7.12
through 7.14; or
(d) the Seller defaults in the performance of or compliance
with any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 9.1) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer of the Seller obtaining actual
knowledge of such default or (ii) the Seller receiving written notice of such
default from any holder of a Note (any such written notice to be identified as a
"notice of default" and to refer specifically to this Section 9); or
(e) any representation or warranty made in writing by or on
behalf of the Seller or by any officer of the Seller in this Agreement or in any
writing furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any respect on the date as of which made; or
(f) (i) (A) the Seller or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment, of any principal of
or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $1,000,000 beyond any
period of grace provided with respect thereto, or (B) the Seller or any
Subsidiary is in default in the performance of or compliance with any term of
any evidence of any Indebtedness in an aggregate outstanding principal amount of
at least $1,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and (ii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Indebtedness to convert such Indebtedness
into equity interests), the Seller or any Subsidiary has become obligated to
purchase or repay Indebtedness, or any Indebtedness has matured, or has become
or been declared due or payable before its regular maturity or before its
regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $1,000,000, provided, that the occurrence of a default of the
type described in clause (i) of this paragraph (f) shall entitle the Holders to
receive interest at the
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Default Rate or the default rate of accretion under the Notes (notwithstanding
that Seller is not in Default hereunder); or
(g) the Seller or any Subsidiary (i) is generally not paying,
or admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Seller or any of
its Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Seller or any of its
Subsidiaries, or any such petition, order or approval shall be filed against the
Seller or any of its Subsidiaries and such petition, order or approval shall not
be dismissed with prejudice within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 are rendered against one or more of the
Seller and its Subsidiaries and such judgments are not, within 30 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 30 days after the expiration of such stay; or
(j) if the amount of unfunded benefit liabilities of the
Seller under any employee benefit plan shall exceed $100,000, or the Seller or
any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Seller or any Subsidiary thereunder.
As used in Section 9.1(i), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
SECTION 10
REMEDIES ON DEFAULT
10.1 Acceleration. If an Event of Default with respect to the Seller
described in paragraph (g) or (h) of Section 9.1 has occurred, all the Notes
then outstanding shall automatically become immediately due and payable. Subject
to the subordination provisions set
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forth in Sections 5 and 6, if any other Event of Default has occurred and is
continuing, any Holder or Holders of more than 33-1/3% in principal amount of
the Notes at the time outstanding may at any time at its or their option, by
notice or notices to the Seller, declare all the Notes then outstanding to be
immediately due and payable. Upon any Note becoming due and payable under this
Section 10.1, whether automatically or by declaration, such Note will forthwith
mature and the entire unpaid principal amount of such Note, plus all accrued and
unpaid interest thereon, and Liquidated Damages, if any, shall immediately
become due and payable.
10.2 Other Remedies. If any Default or Event of Default has occurred
and is continuing, and irrespective of whether any Notes have become or have
been declared immediately due and payable under Section 10.1, the Holder of any
Note at the time outstanding may proceed to protect and enforce the rights of
such Holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
10.3 Rescission. At any time after any Notes have been declared due
and payable pursuant to the second sentence of Section 10.1, the Holders of not
less than 50% in principal amount of the Notes then outstanding, by written
notice to the Seller, may rescind and annul any such declaration and its
consequences if (a) the Seller has paid all overdue interest on the Notes, all
principal of and premium and Liquidated Damages, if any, on any Notes that are
due and payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and premium, if any, and (to the extent
permitted by applicable law) any overdue interest in respect of the Notes, (b)
all Events of Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been
waived pursuant to Section 14.1, and (c) no judgment or decree has been entered
for the payment of any monies due pursuant hereto or to the Notes. No rescission
and annulment under this Section 10.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
10.4 No Waivers or Election of Remedies, Expenses, etc. No course of
dealing and no delay on the part of any Holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any Holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Seller under Section 11.1, the Seller will pay to the Holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such Holder incurred in any enforcement or collection
under this Section 10, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
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SECTION 11
EXPENSES, ETC.
11.1 Transaction Expenses; Fees. The Seller will pay, on demand, all
Holder Group Expenses incurred by or on behalf of the Holders, 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 Holders, accounting, due diligence,
periodic field audits, physical counts, valuations, investigations, monitoring
of assets, environmental assessments, miscellaneous disbursements, examination,
travel, lodging and meals, arising from or relating to: the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement the Notes or any other related documents, (including, without
limitation, (a) any requested amendments, waivers or consents to this Agreement,
the Notes or any other related documents whether or not such documents become
effective or are given, (b) the preservation and protection of any of the
Holder's rights under this Agreement, the Notes or any other related documents,
(c) the defense of any claim or action asserted or brought against any Holder by
any Person that arises from or relates to this Agreement, the Notes or any other
related documents, the Holder's claims against the Seller or any Guarantor or
any and all matters in connection therewith, (d) the commencement or defense of,
or intervention in, any court proceeding arising from or related to this
Agreement, the Notes or any other related documents, (e) the filing of any
petition, complaint, answer, motion or other pleading by any Holder in
connection with this Agreement, the Notes or any other related documents, (f)
any attempt to collect from the Seller or any Guarantor, (g) the receipt by any
Holder of any advice from its professionals with respect to any of the
foregoing, (h) all liabilities and costs arising from or in connection with the
past, present or future operations of the Seller or any Guarantor 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, or 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 Seller and its Subsidiaries, or (i) any Environmental Liabilities and Costs
incurred in connection with any Environmental Lien. Without limitation of the
foregoing or any other provision of this Agreement, the Notes or any other
related documents: (x) the Seller 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, the Notes (or the
conversion thereof) or any related documents, and the Seller agrees to hold the
Holders 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 Seller agrees to
pay all broker fees that may become due in connection with the transactions
contemplated by this Agreement, and (z) if the Seller or any Guarantor fails to
perform any covenant or agreement contained herein or in the Notes or any
related documents, the Holders may perform or cause performance of such covenant
or agreement, and the Holder Group Expenses of the Holders incurred in
connection therewith shall be reimbursed on demand by the Seller.
26.
<PAGE>
11.2 Survival. The obligations of the Seller under this Section 11
will survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.
SECTION 12
INDEMNIFICATION
12.1 Losses. Whether or not the transactions contemplated by this
Agreement are consummated, the Seller and each Guarantor, jointly and severally,
shall indemnify and hold harmless each Purchaser and its Affiliates, employees,
partners, general partners, members, managers, officers, directors,
representatives, agents, attorneys, successors and assigns, (the "Indemnified
Parties") from and against any and all losses, claims, damages, liabilities,
expenses and costs, including, without limitation, attorneys' fees and other
fees and expenses incurred in, and the costs of preparing for, investigating or
defending any matter (collectively, "Losses"), incurred by such Indemnified
Party in connection with or arising from (i) any breach of any warranty or the
inaccuracy of any representation made by the Seller in, or the failure of the
Seller to fulfill any of its agreements or undertakings under, this Agreement,
any Note or any other agreement, instrument, or document contemplated hereby or
relating to the transactions contemplated hereby, (ii) any failure by the Seller
or its Subsidiaries to perform any their covenants hereunder or under any Note,
or (iii) any actions taken by the Seller or any of the Seller's Affiliates,
employees, officers, directors, representatives, agents or attorneys in
connection with the transactions contemplated by this Agreement. The Seller
shall either pay directly all Losses which it is required to pay hereunder or
reimburse any Indemnified Party within ten (10) days after any request for such
payment. The obligations of the Seller to the Indemnified Parties under this
Section 12.1 shall be separate obligations to each Indemnified Party, and the
liability of the Seller to such Indemnified Parties hereunder shall not be
extinguished solely because any Indemnified Party is not entitled to indemnity
hereunder. The obligations of the Seller and the Guarantors to the Indemnified
Parties under this Section 12.1
shall survive (a) the payment of any Note (whether at maturity, by prepayment
or acceleration or otherwise), (b) the conversion of all or a part of any Note,
(c) any transfer of any Note or any interest therein, (d) the termination of
this Agreement or any other agreement, instrument or document contemplated
hereby or relating hereto, (e) the termination, refinancing, restructuring or
repayment of the 1999 Credit Facility and (f) the sale of Common Stock acquired
upon conversion of any Note.
12.2 Indemnification Procedures. Any Person entitled to
indemnification under this Section 12 shall (a) give prompt written notice to
the Seller of any claim with respect to which it seeks indemnification and (b)
permit the Seller to assume the defense of such claim with counsel selected by
the Seller and reasonably acceptable to such Person; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the Seller has agreed to pay such fees or expenses; (ii) the
27.
<PAGE>
Seller has failed to notify such Person in writing within ten (10) days of its
receipt of such written notice of claim that it will assume the defense of such
claim and employ counsel reasonably satisfactory to such Person; or (iii) in the
judgment of any such Person, based upon the written advice of counsel, a
conflict of interest may exist between such Person and the Seller with respect
to such claims (in which case, if the Person notifies the Seller in writing that
such Person elects to employ separate counsel at the expense of the Seller, the
Seller shall not have the right to assume the defense of such claim on behalf of
such Person). The Seller and the Guarantors will not be subject to any liability
for any settlement made without the Seller's consent (but such consent may not
be unreasonably withheld). No Indemnified Party may, without the consent (which
consent will not be unreasonably withheld) of the Seller, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the Seller
of a release from all liability in respect of such claim or litigation.
12.3 Contribution. If the indemnification provided for in this Section
12 is unavailable to the Purchaser or any other Indemnified Party in respect of
any Losses, then the Seller, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Seller, on the one hand, and such Indemnified Party on the
other hand, in connection with the actions, statements or omissions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative fault of the Seller, on the one hand, and such Indemnified Party on
the other hand, shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, either the Seller or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 12.3 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
SECTION 13
SURVIVAL ETC.
13.1 Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by a
Purchaser of any Note or portion thereof or interest therein the payment of any
Note, and the termination, refinancing, restructuring, or repayment of the 1999
Credit Facility and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Purchasers or any
28.
<PAGE>
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Seller pursuant to this Agreement
shall be deemed representations and warranties of the Seller under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between the Purchasers and the
Seller and supersede all prior oral and written agreements and understandings
relating to the subject matter hereof, except that the letter agreement dated
July 29, 1999, by and between the Seller and Levine Leichtman Capital Partners,
Inc. shall survive the execution of this Agreement until the obligations set
forth therein have been fully performed.
SECTION 14
AMENDMENT AND WAIVER; MISCELLANEOUS
14.1 Requirements. This Agreement and the Notes may be amended, and
the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Seller and the Required Holders, (and, in the case of Section 5 and Section 6.5,
of the Agent and the Required Lenders) except that without the written consent
of each Holder affected, an amendment or waiver under this Section 14.1 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce or increase the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the prepayment
or redemption of the Notes;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes and
a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Agreement
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or interest or premium or Liquidated Damages,
if any, on the Notes;
(g) adversely affect the right of such Holder to convert
Notes, or the other rights of the Holders with respect to conversion under
Section 6 of the Notes; or
29.
<PAGE>
(h) impair the right to institute suit for the conversion of a
Note or for the enforcement of any payment (to the extent already permitted
under Section 5) on or after the due date thereof.
14.2 Solicitation of Holders of Notes.
(a) Solicitation. The Seller will provide each Holder of the
Notes (irrespective of the amount of Notes then owned by it) with a reasonably
sufficient amount of information, with reasonable (and at least five (5) days)
prior notice in advance of the date a decision is required, to enable such
Holder to make an informed and considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the provisions hereof or of
the Notes. The Seller will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of this Section
14 to each holder of outstanding Notes promptly (within two (2) Business Days)
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite Holders of Notes.
(b) Payment. The Seller will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any Holder of Notes as
consideration for or as an inducement to the entering into by any Holder of
Notes of any waiver or amendment of any of the terms and provisions hereof or of
the Notes unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each Holder of Notes then
outstanding whether or not such Holder consented to such waiver or amendment.
14.3 Binding Effect, etc. Any amendment or waiver consented to as
provided in this Section 14 applies equally to all Holders of Notes and is
binding upon them and upon each future Holder of any Note and upon the Seller
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Seller
and the Holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any Holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
14.4 Notes Held by Seller, etc. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Seller, any of its Affiliates or any Subsidiary shall be deemed not to be
outstanding.
30.
<PAGE>
14.5 "Required Holders". "Required Holders" shall mean the Holders of
50.1% of the principal amount of Notes then outstanding.
14.6 Notices. All notices and communications provided for hereunder
shall be in writing and sent (a) by telefacsimile, or (b) by registered or
certified mail with return receipt requested (postage prepaid), or (c) by a
recognized overnight delivery service (with charges prepaid). Any such notice
must be sent:
(a) if to a Purchaser, it at the address specified for such
communications in Exhibit A or at such other address as it shall have specified
to the Seller in writing,
(b) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Seller in writing, or
(c) if to the Seller or any Guarantor,
CFI Pro Services, Inc.
400 S.W. Sixth Avenue, Suite 200
Portland, Oregon 97204
Attention: Jeffrey P. Strickler, Esq.
Telephone: (503) 274-7280
Facsimile: (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
Facsimile: (503) 228-1741
Notices under this Section 14.6 will be deemed given only when actually
received, or three hours after confirmation of a successful telefacsimile
transmission.
14.7 Confidential Information. Each Holder agrees (on behalf of itself
and each of its affiliates, directors, officers, partners, general partners,
members, managers, and its or their 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 investors, the
Confidential Information and to prevent a Holder'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 Holder, (ii)
to counsel for such Holder on a "need to know" basis if such disclosure is
reasonably determined by the
31.
<PAGE>
disclosing party to be reasonably necessary to such Person in connection with
the Obligations or Notes or the transactions contemplated thereunder, or (iii)
to counsel for any other Holder 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 Notes or the transactions
contemplated thereunder, (c) to examiners, auditors or accountants 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 Notes or the transactions contemplated thereunder, (d) in connection with
any litigation to which the Holder 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
14.7 in all material respects, or (f) in connection with the exercise of the
Holder's remedies upon the occurrence and during the continuation of an Event of
Default. The Holder 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 Seller 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 Seller and the Guarantors acknowledge that the
Holders may make disclosure as required or requested by any governmental
authority or representative thereof and that the Holders may be subject to
review by 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 Seller shall be kept informed
reasonably of such requests and review of Confidential Information.
14.8 Registration of Notes. The Seller shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each Holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Seller shall not be affected by any notice or knowledge to the
contrary. The Seller shall give to any Holder of a Note promptly, and within one
(1) day, upon request therefor, a complete and correct copy of the names and
addresses of all registered Holders of Notes.
14.9 Miscellaneous.
(a) Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent Holder of a Note) whether so expressed or
not.
(b) Severability. Any provision of this Agreement that 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 provisions hereof, and any
32.
<PAGE>
such prohibition or unenforceability in any jurisdiction shall (to the full
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
(c) Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
(d) Legal Representation of LLCP. In connection with the
negotiation, drafting, and execution of Subordinated Note Documents or in
connection with future legal representation relating to administration,
amendments, modifications, waivers, or enforcement of remedies thereof, Riordan
& McKinzie, a Professional Law Corporation, ("R&M") only has represented and
only shall represent Levine Leichtman Capital Partners II, L.P., one of the
Purchasers. Each other Purchaser hereby acknowledges that R&M does not represent
any other Purchaser in connection with any such matters.
(e) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by fewer than all, but together signed by all, of the
parties hereto.
(f) Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
(g) CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY
OTHER RELATED DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN
THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT OR A
JOINDER HERETO, SELLER AND EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. SELLER AND EACH GUARANTOR 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 SELLER OR THE GUARANTOR AT ITS ADDRESS FOR NOTICES AS
SET FORTH IN SECTION 14.6, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS TO SERVICE OF
PROCESS IN ANY
33.
<PAGE>
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE SELLER OR ANY GUARANTOR IN ANY OTHER JURISDICTION. THE
SELLER AND EACH GUARANTOR 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 THE SELLER OR ANY GUARANTOR
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, THE SELLER AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THE NOTES OR ANY
OTHER RELATED DOCUMENTS.
(h) WAIVER OF JURY TRIAL, ETC. THE PARTIES HERETO AND ANY
SUBSEQUENT GUARANTOR OR HOLDER OF A NOTE 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 DOCUMENTS PREPARED IN CONNECTION HEREWITH, 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. SELLER AND EACH GUARANTOR CERTIFIES
THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASERS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE EVENT
OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. SELLER AND EACH GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE HOLDER'S ENTERING INTO THIS AGREEMENT.
Signature pages follow
34.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER: CFI PROSERVICES, INC.,
an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
GUARANTORS: ULTRADATA CORPORATION,
a Delaware corporation and successor
by merger to UFO Acquisition Co.
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
MECA SOFTWARE, L.L.C.,
a Delaware limited liability company
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
MONEYSCAPE HOLDINGS, INC.,
an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
Note Purchase Agreement
S-1
<PAGE>
PURCHASERS: LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership
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
Note Purchase Agreement
S-2
<PAGE>
BAY STAR CAPITAL, L.P.
By: Bay Star Management, LLC
By: /s/ Brian J. Stark
------------------
Name: Brian J. Stark
Title: Managing Member
Note Purchase Agreement
S-3
<PAGE>
U.S. BANCORP LIBRA,
a division of U.S. Bancorp Investments, Inc.
By: /s/ James B. Upchurch
--------------------
Name: James B. Upchurch
Title: President
Note Purchase Agreement
S-4
<PAGE>
SOUNDSHORE HOLDINGS LTD.
By: /s/ Andrew W. Gitlin
--------------------
Andrew W. Gitlin
Director of SoundShore Holdings Ltd.
Note Purchase Agreement
S-5
<PAGE>
SOUNDSHORE OPPORTUNITY HOLDING FUND
LTD.
By: /s/ Andrew W. Gitlin
--------------------
Andrew W. Gitlin
Director of SoundShore Opportunity
Holding Fund Ltd.
Note Purchase Agreement
S-6
<PAGE>
EXHIBIT A
PURCHASERS
<TABLE>
<CAPTION>
Purchaser Name, Address Original
and Tax I.D. No. Purchase Price Principal Amount
- ------------------------------------------- -------------- ----------------
<S> <C> <C>
Levine Leichtman Capital Partners II, L.P. $ 2,000,000 $2,680,193
335 N. Maple Drive
Suite 240
Beverly Hills, CA 90210
Tax ID No.
Bay Star Capital, L.P. $ 1,500,000 $2,010,145
1500 W. Market Street
Suite 200
Mequon, WI 53902
Tax ID No.
U.S. Bancorp Libra $ 1,050,000 $1,407,101
11766 Wilshire Boulevard
Suite 870
Los Angeles, CA 90025
Tax ID No.
SoundShore Holdings Ltd. $ 500,000 $670,048
Registered Address:
29 Richmond Road
Pembroke HMO8
Bermuda
Mailing Address:
1281 East Main Street
Stamford, CT 06902
Tax ID No. n/a
SoundShore Opportunity Holding Fund Ltd. $ 500,000 $670,048
Registered Address:
29 Richmond Road
Pembroke HMO8
Bermuda
Mailing Address:
1281 East Main Street
Stamford, CT 06902
Tax ID No. n/a
</TABLE>
<PAGE>
EXHIBIT C
SCHEDULE OF INDEBTEDNESS
See Schedule 6.02(b) to the Credit Agreement,
which is incorporated herein by this reference.
<PAGE>
TABLE OF CONTENTS (Continued)
TABLE OF CONTENTS
Page
SECTION 1 PURCHASE OF THE NOTES........................................2
1.1 Authorization................................................2
1.2 Purchase from Seller.........................................2
1.3 Closing......................................................2
1.4 Other Defined Terms..........................................2
SECTION 2 REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER.............2
2.1 Due Incorporation or Formation; Authorization of
Agreement....................................................2
2.2 No Conflict..................................................3
2.3 Investment Intent............................................3
2.4 Certificates to be Legended..................................3
2.5 Securities Will be "Restricted Securities"...................3
2.6 Sophistication of Purchasers; Accredited Investor Status.....3
2.7 Due Diligence................................................4
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
GUARANTORS...................................................4
3.1 Representations and Warranties Incorporated by Reference.....4
3.2 Shares Reserved..............................................4
3.3 Indebtedness.................................................5
SECTION 4 CONDITIONS TO CLOSING........................................5
4.1 Representations and Warranties Correct.......................5
4.2 Performance..................................................5
4.3 Opinion of Seller's Counsel..................................5
4.4 Legal Investment.............................................5
4.5 Compliance Certificate.......................................5
4.6 Proceedings and Documents....................................5
4.7 Qualification................................................5
4.8 Closing of Credit Agreement..................................6
4.9 Closing of Acquisition; Use of Proceeds......................6
4.10 Registration Rights Agreement................................6
4.11 Suretyship Agreement.........................................6
SECTION 5 SUBORDINATION................................................6
5.1 Subordination of the Subordinated Notes......................6
5.2 Right of Holder to Hold Senior Indebtedness.................11
5.3 Designated Representative...................................11
SECTION 6 GUARANTEE...................................................12
6.1 Guarantee...................................................12
i
<PAGE>
TABLE OF CONTENTS (Continued)
Page
6.2 Limitation of Guarantee.....................................13
6.3 Additional Guarantors.......................................13
6.4 Release of Guarantor........................................14
6.5 Guarantee Obligations Subordinated to Senior Indebtedness...14
6.6 Suretyship Agreement........................................15
SECTION 7 AFFIRMATIVE COVENANTS.......................................15
7.1 Financial Information.......................................15
7.2 Additional Information......................................16
7.3 Notice of Litigation, Adverse Claims, etc...................16
7.4 Notice of Default, Event of Default or Acceleration of
the Notes...................................................17
7.5 Prompt Payment of Taxes, etc................................17
7.6 Maintenance of Properties and Leases........................17
7.7 Insurance...................................................17
7.8 Account and Records.........................................18
7.9 Independent Accountants.....................................18
7.10 Compliance with Requirements of Governmental Authorities....18
7.11 Maintenance of Corporate Existence, etc.....................18
7.12 Availability of Common Stock for Conversion.................18
7.13 Subsidiary Guarantee........................................19
7.14 Registration Rights.........................................19
7.15 Use of Proceeds.............................................20
7.16 Further Assurances..........................................20
SECTION 8 NEGATIVE COVENANTS..........................................20
8.1 Employee Stock Purchases; Preferred Stock...................20
8.2 Transactions with Affiliates................................21
8.3 Nature of Business..........................................21
8.4 Limitation on Restricted Payments...........................21
8.5 Restriction On Fundamental Changes..........................22
8.6 Limitation on Dividend Payments by Subsidiaries.............22
SECTION 9 EVENTS OF DEFAULT...........................................23
9.1 Events of Default...........................................23
SECTION 10 REMEDIES ON DEFAULT.........................................24
10.1 Acceleration................................................24
10.2 Other Remedies..............................................25
10.3 Rescission..................................................25
10.4 No Waivers or Election of Remedies, Expenses, etc...........25
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SECTION 11 EXPENSES, ETC...............................................26
11.1 Transaction Expenses; Fees..................................26
11.2 Survival....................................................27
SECTION 12 INDEMNIFICATION.............................................27
12.1 Losses......................................................27
12.2 Indemnification Procedures..................................27
12.3 Contribution................................................28
SECTION 13 SURVIVAL ETC................................................28
13.1 Survival of Representations and Warranties; Entire
Agreement.................................................28
SECTION 14 AMENDMENT AND WAIVER........................................29
14.1 Requirements................................................29
14.2 Solicitation of Holders of Notes............................30
14.3 Binding Effect, etc.........................................30
14.4 Notes Held by Seller, etc...................................30
14.5 "Required Holders"..........................................31
14.6 Notices.....................................................31
14.7 Confidential Information....................................31
14.8 Registration of Notes.......................................32
14.9 Miscellaneous...............................................32
EXHIBIT
Exhibit A -- List of Purchasers
Exhibit B -- Form of 10% Convertible Subordinated Discount Note
Exhibit C -- Pro Forma Indebtedness Schedule
Exhibit D -- Forms of Opinions of Seller's and Guarantor's Counsel
Exhibit E -- Form of Registration Rights Agreement
Exhibit F -- Form of Suretyship Agreement
APPENDICES
Appendix A-1 -- Definition of Terms
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Appendix I
to Note Purchase Agreement
Definition of Terms
"1999 Credit Facility" has the meaning specified in the Recitals.
"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 of such Person or (ii) direct or cause the direction of
the management and policies of such Person whether by contract or otherwise,
including, without limitation, any officer or director of such Person or any
Person controlled by an officer or director. Notwithstanding anything herein to
the contrary, in no event shall a Holder be considered an "Affiliate" of any
Seller or Guarantor, except to the extent that a Holder qualifies under clause
(i) hereof.
"Agent" means Ableco Finance LLC, in its capacity as "Collateral Agent"
under the Credit Agreement for the Lender Group (as defined in the Credit
Agreement), and any successor thereto, if any, in such capacity as Collateral
Agent under the Credit Agreement. If any refinancing agreement is in effect with
respect to the Credit Agreement at any time, then "Agent" also shall mean the
collateral agent (or, if such refinancing agreement is not syndicated, the
lender thereunder) defined in such refinancing agreement (or any comparable term
of the refinancing agreement in respect thereof).
"Agreement" means this Note Purchase Agreement.
"Asset" means any interest in any kind of property or asset, whether
real, personal, or mixed, and whether tangible or intangible.
"Asset Sale" means any transaction, or series of related transactions,
pursuant to which Seller or any of its direct or indirect 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 (as such term is defined in the 1999
Credit Facility).
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"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as codified
under Title 11 of the United States Code, and the Bankruptcy Rules promulgated
thereunder, as the same may be in effect from time to time.
"Blockage Period" means a Non-Payment Blockage Period and/or a Payment
Blockage Period.
"Board of Directors" means the Board of Directors of the Seller.
"Business Day" means any day other than a Saturday, Sunday, or any day
that either is a legal holiday under the laws of the State of New York or is a
day on which banking institutions located in such State are authorized or
required by law or other governmental action to close.
"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.
"Closing" has the meaning specified in Section 1.3.
"Closing Date" means the date of the Closing.
"Common Stock" has the meaning specified in Section 3.2.
"Confidential Information" means any confidential, proprietary, or
non-public information supplied to Holders pursuant to this Agreement or the
other documents entered into in connection herewith which is identified in
writing by Seller as being confidential pursuant to this definition or otherwise
at, or reasonably concurrent with, the time the same is delivered to such Holder
(and which at the time is not, and does not thereafter become, publicly
available or available to such Holder from another source not known by the
Holder to be subject to a confidentiality obligation not to disclose such
information). The foregoing provision relative to timing of Seller'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 Seller as confidential for purposes of this
definition (subject to the same not being publicly available or available to
such Holder from another source not known by such Holder to be subject to a
confidentiality obligation not to disclose such information): all systems and
tools,
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object and source codes, procedure codes, software documentation, computer
software programs, subroutines, modules, modifications, upgrades, and interfaces
owned or developed by any of Seller or Guarantors; all non-public business and
marketing plans of Seller or Guarantors; and all customer lists, customer
agreements, customer specifications, and customer information of Seller or
Guarantors.
"Credit Agreement" means that certain Financing Agreement dated of even
date herewith by and among Seller, the Guarantors, the Senior Lenders, the Agent
and Foothill Capital Corporation, as administrative agent for the Senior
Lenders, as amended, supplemented, restated or otherwise modified from time to
time.
"Default" has the meaning specified in Section 9.1.
"Designated Representative" means any Person who is designated as the
"Designated Representative" pursuant to Section 5.3, or any successor thereto
who subsequently serves in such capacity.
"Effectiveness Period" has the meaning specified in Section 7.14(d).
"Effectiveness Target Date" has the meaning specified in Section 7.14(d).
"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 Seller or any of its Subsidiaries, or (ii) any facility
which received Hazardous Materials generated by any Seller or any of its
Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute or 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.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities and Exchange Act of 1934, 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.
"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.
"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.
"Holder" means the Purchasers and any subsequent holder of a Note.
"Holder Group Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by the Seller or any
Guarantor under this Agreement, the Notes or any related documents that are paid
or incurred by the Holders, (b) fees or charges paid or incurred by one or more
Holders in connection with this Agreement, the Notes or any related documents,
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, or the copyright office), filing, recording, publication,
appraisal (including periodic enterprise valuations), real estate surveys, real
estate title policies and endorsements, and environmental audits, (c) costs and
expenses
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incurred by one or more Holders in the disbursement of funds to the Seller (by
wire transfer or otherwise), (d) charges paid or incurred by one or more Holders
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or
incurred by one or more Holders to correct any default that has or may occur or
enforce any provision of this Agreement, the Notes or any related documents, (f)
reasonable costs and expenses paid or incurred by one or more Holders in
examining the books and records of the Seller or any Guarantor, (g) reasonable
costs and expenses of third party claims or any other suit paid or incurred by
one or more Holders in enforcing or defending the this Agreement, the Notes or
any related documents or in connection with the transactions contemplated by
these documents, and (h) reasonable fees and expenses (including attorneys fees)
incurred by one or more Holders 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 Insolvency Proceeding
concerning the Seller or any Guarantor), defending, or concerning this
Agreement, the Notes or any related documents, irrespective of whether suit is
brought or the forum of any suit.
"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 Holders and in accordance with accepted practice,
of such Person under Hedging Agreements; (viii) all Contingent Obligations (as
defined in the Credit Agreement); (ix) liabilities incurred under Title IV of
ERISA with respect to any plan (other than a Multiemployer Plan (as defined in
ERISA)) covered by Title IV of ERISA and maintained for employees of such Person
or any of its ERISA Affiliates (as defined in the Credit Agreement); (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 or security interest 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
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include the Indebtedness of any partnership of or joint venture in which such
Person is a general partner or a joint venturer.
"Indemnified Parties" has the meaning specified in Section 12.1.
"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.
"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.
"Liquidated Damages" has the meaning specified in Section 7.14.
"Losses" has the meaning specified in Section 12.1.
"Non-Payment Blockage Period" means, with respect to any Non-Payment
Default Event, the period from and including the date of receipt by each Holder
(or the Designated Representative, as applicable) of a Non-Payment Default
Notice relating thereto until the first to occur of (a) the 270th day after
receipt of such Non-Payment Default Notice; provided, however, that if, on or
before such date (i) the Senior Indebtedness is accelerated and (ii) the Agent
or the Required Lenders (as such term is defined in the Credit Agreement), as
the case may be, have commenced and diligently and in good faith are pursuing a
judicial proceeding to collect the Senior Indebtedness or diligently and in good
faith are pursuing material non-judicial remedies to effect the foreclosure and
sale of the collateral securing the Senior Indebtedness, then such period shall
continue unless and until the Agent or the Required Lenders, as applicable,
rescind such acceleration in writing, or abandon, terminate, or fail diligently
to pursue such judicial or non-judicial remedies, (b) the date on which the
Required Lenders shall have expressly waived or acknowledged the cure of such
Non-Payment Default Event, in each case, in writing, or (c) the date on which
the Required Lenders shall have expressly and irrevocably waived the application
of Sections 5.1(a) and (b) hereof in writing.
"Non-Payment Default Event" has the meaning specified in Section 5.2(b)
hereof.
"Non-Payment Default Notice" means a written notice from or on behalf
of the Agent (or a Representative under a refinancing agreement in respect of
the Credit Agreement) to each Holder (or the Designated Representative, as
applicable) of the existence of a Non-Payment Default Event and specifically
designating such notice as a "Non-Payment Default Notice."
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"Notes" has the meaning specified in the Recitals.
"Obligations" means (i) the obligations of the Seller 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 Notes or this Agreement, 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 the Bankruptcy Code, would have accrued),
indemnification payments, 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 Seller and the
Guarantors to perform or observe all of its obligations from time to time
existing under this Agreement, the Notes or any other related documents,
including, without limitation, the obligation of the Seller to deliver, upon
conversion of any Note, duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock.
"Officers' Certificate" means a certificate signed on behalf of the
Seller by two officers of the Seller, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Seller.
"Payment Blockage Period" means, with respect to any Payment Default
Event, the period from and including the date of receipt by each Holder (or the
Designated Representative, as applicable) of a Payment Default Notice relating
thereto until the first to occur of (a) the date on which the Required Lenders
shall have expressly waived or acknowledged the cure of such Payment Default
Event, in each case in writing, or (b) the date on which the Required Lenders
shall expressly and irrevocably waive the application of Sections 5.1(a) and (b)
hereof, in writing.
"Payment Default Event" has the meaning specified in Section 5.1(a) hereof.
"Payment Default Notice" means a written notice from or on behalf of
the Agent (or a Representative under a refinancing agreement in respect of the
Credit Agreement) to each Holder (or the Designated Representative, as
applicable) of the existence of a Payment Default and specifically designating
such notice as a "Payment Default Notice."
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
"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.
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"Prohibited Preferred Stock" means any Preferred Stock of Seller or any
Subsidiary the terms and conditions of issuance, and rights and preferences, of
which are not approved in writing by the Required Holders in their sole and
absolute discretion, including any Preferred Stock of Seller or any Subsidiary
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 earlier than February 28, 2005 or, on or
before a date earlier than February 28, 2005, 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),
provided that such February 28, 2005 date shall be extended day-for-day for any
extension of the maturity date of the Notes.
"Purchase Price" has the meaning specified in Section 1.2.
"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 closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including ambient
air, soil, surface or ground water.
"Registration Default" has the meaning specified in Section 7.14(b).
"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.
"Representative" means the agent, trustee, or other appointed
representative of a holder of Indebtedness.
"Required Holders" has the meaning specified in Section 14.5.
"Responsible Officer" means with respect to any Seller or Guarantor,
the Chief Executive Officer, the Chief Financial Officer, or any other officer,
of such Seller or Guarantor (or, in the case of any Seller or Guarantor that is
a partnership or a limited liability company, the managing partner or the
managing member thereof).
"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.
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"SEC" means the Securities and Exchange Commission or any other similar
or successor agency of the Federal government administering the Securities Act.
"Seller" means CFI ProServices, Inc., an Oregon corporation, or any of
its permitted successors or assigns.
"Senior Indebtedness" means all payment obligations (whether now
outstanding or hereafter incurred) of the Seller or any Guarantor in respect of
(a) principal (including reimbursement obligations in respect of letters of
credit) under the Credit Agreement or other Senior Loan Documents (or a
refinancing agreement entered into with respect thereto), (b) interest and
premium, if any, on the outstanding Indebtedness referred to in clause (a)
above, (c) all fees (including commitment, agency, and letter of credit fees)
payable pursuant to the Credit Agreement (or a refinancing agreement entered
into with respect thereto), (d) all other payment obligations (including costs,
expenses, or otherwise) of the Seller or any Guarantor to Agent or the Senior
Lender Group under or arising pursuant to the Credit Agreement or other Senior
Loan Documents (or to third Persons under comparable provisions of a refinancing
agreement entered into with respect thereto), including all costs and expenses
incurred by the Agent or the Senior Lender Group in connection with their
enforcement of any rights or remedies under the Senior Loan Documents, the
collection of any of the Senior Indebtedness, or the protection of, or
realization upon, any collateral after the occurrence and during the continuance
of a default under the Senior Loan Documents, including by way of example,
reasonable attorneys fees, court costs, appraisal and consulting fees,
auctioneers fees, rent, storage, insurance premiums, and like items, and
irrespective of whether allowable as a claim against the Seller or any Guarantor
in any Insolvency Proceeding, and (e) post-petition interest on the Indebtedness
referred to in clauses (a) through (d) above, at the rate provided for in the
instrument or agreements evidencing or creating such Indebtedness, accruing
subsequent to the commencement of an Insolvency Proceeding (whether or not such
interest is allowed as a claim in such Insolvency Proceeding).
"Senior Lender Group" means the "Lender Group" (as such term is defined
in the Credit Agreement or in any comparable term of a refinancing agreement in
respect thereof).
"Senior Lender Notes" means the promissory notes issued by Seller in
favor of the Senior Lenders pursuant to the Credit Agreement and shall include
any note or notes issued under any refinancing agreement in respect of the
Credit Agreement, as such promissory notes may be amended, supplemented,
restated, replaced, or otherwise modified, from time to time.
"Senior Lenders" means, collectively, the Lenders (as such term is
defined in the Credit Agreement or in any comparable term of a refinancing
agreement in respect thereof).
"Senior Loan Documents" means the Credit Agreement, the Senior Lender
Notes and the other Loan Documents (as such term is defined in the Credit
Agreement), or refinancing agreements entered into in connection with
Refinancing Indebtedness in respect thereof.
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"Shelf Registration" has the meaning as is given to the term "Note
Shares Shelf Registration" in the Registration Rights Agreement.
"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 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.
"Standstill Period" means, with respect to any Payment Default Event or
Non-Payment Default Event, as the case may be, the period from and including the
date of receipt by each Holder (or the Designated Representative, as applicable)
of a Payment Default Notice or Non-Payment Default Notice, as the case may be,
until the first to occur of (a) the termination of the applicable Blockage
Period, (b) the date on which the Required Lenders shall have expressly waived
or acknowledged the cure of such Payment Default Event or Non-Payment Default
Event, as applicable, in each case, in writing, (c) the date on which there is
commenced, either by or against the Seller or any Guarantor, any Insolvency
Proceeding, and (d) the date on which the Required Lenders shall expressly and
irrevocably waive the application of Sections 5.1(a) and (b) hereof in writing.
"Stock Option Plan" has the meaning specified in the 1999 Credit Facility.
"Subordinated Note Documents" means this Agreement, the Note, the
Registration Rights Agreement, the Suretyship Agreement and each other document
or agreement entered into or delivered in connection with any of them, all as
they may be amended, modified, supplemented, extended, restated or refinanced
from time to time.
"Subordinated Obligations" has the meaning specified in Section 5.1(a)
hereof.
"Subordinated Notes" means, for purposes of Sections 5 and 6, the Notes
issued pursuant to this Agreement, and shall include any additional Notes issued
in replacement thereof or in substitution therefor.
"Subsidiary Guarantee" or "Guarantee"means the guarantee set forth in
Section 6 of this Agreement, and any future guarantee executed by each Guarantor
in favor of Purchaser guaranteeing the obligations of the Seller under the
Subordinated Notes and this Agreement
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(which guarantee shall be subordinate in right of payment to any guarantee given
to the holders of the Senior Indebtedness).
"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.
"Term Loan A" has the meaning specified in the Recitals.
"Term Loan B" has the meaning specified in the Recitals.
"Ultradata Acquisition" means the acquisition of Ultradata Corporation
by the Seller pursuant to the Ultradata Acquisition Documents.
"Ultradata Acquisition Documents" means collectively, the Agreement and
Plan of Merger, dated as of May 17, 1999, by and among Seller, UFO Acquisition
Co., and Ultradata Corporation, and all documents and instruments to be executed
or delivered in connection therewith, in each case, as in effect on the date
hereof.
A-11
FORM OF
No. __________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN COMPLIANCE WITH SUCH ACT
AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS NOTE IS SUBORDINATE TO SENIOR INDEBTEDNESS UNDER THE TERMS OF THAT CERTAIN
NOTE PURCHASE AGREEMENT OF EVEN DATE HEREWITH BY AND AMONG THE BORROWER, THE
GUARANTORS, THE PURCHASER OF THIS NOTE AND THE OTHER NOTE PURCHASERS LISTED
THEREIN, A COPY OF WHICH MAY BE OBTAINED FROM BORROWER'S PRINCIPAL BUSINESS
OFFICE.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (OID). AS PROVIDED IN
SECTION 1275 OF THE INTERNAL REVENUE CODE AND THE TREASURY REGULATIONS
THEREUNDER, KURT W. RUTTUM, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, A
REPRESENTATIVE OF CFI PROSERVICES, INC., TELEPHONE NUMBER (800) 274-7280, WILL
MAKE AVAILABLE UPON REQUEST BEGINNING TEN DAYS AFTER THE ISSUE DATE THE
INFORMATION DESCRIBED IN TREASURY REGULATION 1.1275-3(b)(1)(i).
CFI PROSERVICES, INC.
10% CONVERTIBLE SUBORDINATED DISCOUNT NOTE
$_______________ August 13, 1999
FOR VALUE RECEIVED, CFI PROSERVICES, INC., an Oregon corporation (the
"Borrower" or the "Company"), hereby promises to pay to the order of
_______________ ("Purchaser", and together with any assignee or transferee of
Purchaser, the "Holder"), the principal sum of ____________________ DOLLARS
($__________) in immediately available funds and in lawful money of the United
States of America, all as provided below. This 10% Convertible Subordinated
Discount Note (this "Note"), due on the Maturity Date (as such term is defined
below) has been issued pursuant to the terms of that certain Note Purchase
Agreement between the Company, the Guarantors (as defined therein) and the
Purchasers (defined therein) dated as of August 13, 1999 (as it may be amended,
restated, supplemented, or otherwise modified from time to time, the "Purchase
Agreement"), is one of the Notes referred to therein, and is subject to and
entitled to the benefits of the Purchase Agreement. Capitalized terms used in
this Note which are not defined in this Note shall have the meanings given to
such terms in the Purchase Agreement.
The Indebtedness evidenced by this Note, including the payment of
principal, premium, if any, and interest on this Note, shall be subordinate and
subject in right of payment, to the extent and
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in the manner set forth in Section 5 of the Purchase Agreement, to the prior
payment in full of all Senior Indebtedness.
1. Payment of Principal. The Company shall pay in full the entire
outstanding principal balance of this Note, together with all premium or
Liquidated Damages, if any, accrued and unpaid interest on, and all other
amounts due under this Note on August 13, 2004. If all of the Notes issuable
under the Purchase Agreement are issued, the purchase price originally paid by
the Purchasers for these Notes of $5,550,000 will accrete in value in the manner
specified in Section 3(c) hereof to an aggregate principal amount of $7,437,535
on August 13, 2002, at a rate of 10% per annum, compounded semi-annually on
February 13, and August 13 of each year, or at the Default rate specified in
Section 3(c).
2. Interest.
(a) Deferral and Payment of Interest. Interest under this Note
shall accrue, commencing August 13, 2002, at a rate equal to 10% per annum,
payable in cash semi-annually in arrears on February 13 and August 13 of each
year (with the first such payment due February 13, 2003), to the Holder of
record on that date, with respect to the principal amount of the Note and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any interest which is in arrears until the
date the Note is indefeasibly repaid in full or converted into shares of the
Company's Common Stock as set forth herein and as provided for in the Purchase
Agreement, compounded semi-annually. Interest for any partial period shall be
computed on the basis of the actual number of days elapsed over a 360-day year,
including the first day and excluding the last day.
(b) Default Rate of Interest. If at any time (i) the Company
fails to make any payment of principal as and when due (whether at stated
maturity, upon acceleration or required prepayment or otherwise), (ii) the
Company fails to make any payment of interest, premium, if any, Liquidated
Damages, if any, fees, costs, expenses or other amounts due hereunder within one
(1) Business Day after the date when due, or (iii) any other Default or Event of
Default has occurred and is continuing, then, in addition to the rights and
remedies available to the Holder under the Purchase Agreement and applicable
laws, the outstanding principal balance of, premium, if any, Liquidated Damages,
if any, and accrued and unpaid interest on this Note shall bear interest at a
rate per annum equal to 12% (the "Default Rate") from the date on which such
Default or Event of Default is deemed to have first occurred (as provided in
Section 9 of the Purchase Agreement) until such time as such Default or Event of
Default is cured or waived.
3. Optional Prepayment.
(a) No Prepayment Period. Except as provided in Section 4
below, the Company shall have no right to redeem this Note on or prior to August
13, 2002. Thereafter, the Company may prepay the principal balance of this Note
at any time following thirty (30) days prior written notice to Holder, without
premium or penalty; provided, however, that Holder may, at its sole option at
any time prior to the expiration of such thirty (30) day notice period and in
lieu of such prepayment, require the Company to convert this Note in accordance
with the provisions of
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Section 6; provided, further, that with any prepayment, the Company shall also
prepay all accrued but unpaid interest and Liquidated Damages on the portion of
the outstanding and unpaid principal which is being prepaid.
(b) Stock Performance Prepayment. Notwithstanding the
provisions of this Section (a) above, if (i) on or after August 13, 2001, the
closing price (last trade, or if there is no trade, an average of the bid and
ask), of Common Stock on the Nasdaq National Market ("Closing Price") is greater
than 150% of the then applicable Conversion Price (as defined below) for each of
the twenty (20) consecutive trading days prior to the date a prepayment notice
is given, (ii) there is not then pending a Default or Event of Default, and
(iii) the Shelf Registration for the Common Stock issuable upon conversion of
the Note is then effective, and remains effective for the entire thirty (30) day
notice period referenced below, then the Company may offer to prepay the Note at
an amount equal to the then Accreted Value of the Note through the date of
Prepayment, following thirty (30) days prior written notice to Holder, without
premium or penalty; provided, however, that Holder may, at its sole option at
any time prior to the expiration of such thirty (30) day notice period and in
lieu of such prepayment, require the Company to convert this Note in accordance
with the provisions of Section 6; provided, further, that with any prepayment,
the Company shall also prepay all accrued but unpaid interest and Liquidated
Damages on the portion of the outstanding and unpaid principal which is being
prepaid.
(c) Definition of Accreted Value. For purposes of this Note,
"Accreted Value" means, as of any date of determination prior to August 13,
2002, with respect to any Note, the sum of (i) the initial purchase price, or
74.6215% of the original principal amount, of such Note, and (ii) the portion of
the excess of the principal amount of such Note over such initial offering price
which shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at a rate of 10% per annum of the initial purchase
price of the Note, compounded semi-annually on each February 13 and August 13
from the date of original issuance of the Notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day months;
provided, however, during any time when a Default or Event of Default has
occurred and is continuing, then in addition to the rights and remedies
available to the Holder under the Purchase Agreement and applicable laws, the
principal amount of the Note shall accrete at a rate of 12% per annum. The Notes
shall cease to accrete on August 13, 2002.
4. Mandatory Prepayments. The Company shall make mandatory prepayments
with respect to this Note as follows:
(a) Asset Sale Prepayments. If at any time the Company intends
to consummate any Asset Sale, it shall, within thirty (30) days prior to the
proposed date of consummation, notify the Holder in writing of the proposed
Asset Sale (including, without limitation, the subject matter and the material
terms thereof and the proposed date of consummation). Promptly following
consummation of the Asset Sale, any Net Cash Proceeds (as defined in the 1999
Credit Facility) not applied to reduce Senior Indebtedness shall be offered as a
prepayment on the Notes pursuant to Section (d) of this Section 4.
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<PAGE>
(b) Change in Control Prepayment. The Holder may require the
Company to prepay this Note, in whole or in part as requested by the Holder, at
any time during the 90-day period following the consummation of a transaction
which constitutes a Change in Control (as such term is defined in the 1999
Credit Facility), at the greater of the (i) Accreted Value together with all
accrued and unpaid interest and Liquidated Damages, if any, thereon or (ii) the
amount determined by multiplying the Closing Price of the Common Stock on the
date prior to the Change of Control by the number of shares that would have been
obtained had this Note been converted in full on that date.
The Company shall notify the Holder thirty (30) days in advance of the
date on which a Change in Control will occur or as soon as reasonably
practicable thereafter, and shall, in such notification, inform the Holder of
the Holder's right to require the Company to prepay this Note as provided in
this Section 4 and of the date on which such right shall terminate (which shall
be no less than 30 days after a Holder's receipt of notice). If the Holder
elects to require the Company to prepay this Note pursuant to this Section 4, it
shall furnish, prior to the date fixed in the Company's notice, written notice
to the Company advising the Company of such election and the amount of principal
of this Note to be prepaid. The Company shall prepay this Note in accordance
with this Section 4 within one (1) Business Day after receipt of the Holder's
election to require prepayment.
(c) Liquidation, Dissolution or Winding Up. Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the Company or any
sale, lease, transfer, assignment or other disposition of all or substantially
all of the assets of the Company on a consolidated basis, (a "Liquidation
Event") the Company shall be required to offer to pay the Accreted Value of this
Note through the date of prepayment, together with all accrued and unpaid
interest and Liquidated Damages, if any, thereon. The Company shall notify the
Holder thirty (30) days in advance of the date on which a Liquidation Event will
occur or as soon as reasonably practicable thereafter, and shall, in such
notification, inform the Holder of the Holder's right to require the Company to
prepay this Note as provided in this Section 4 and of the date on which such
right shall terminate (which shall be no less than 30 days after a Holder's
receipt of notice). If the Holder elects to require the Company to prepay this
Note pursuant to this Section 4, it shall furnish, prior to the date fixed in
the Company's notice, written notice to the Company advising the Company of such
election and the amount of principal of this Note to be prepaid. The Company
shall prepay this Note in accordance with this Section 4 within one (1) Business
Day after receipt of the Holder's election to require prepayment. If, upon any
Liquidation Event, the Notes will share equally and ratably (in proportion to
the respective amounts that would be payable on the Notes, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
Company to which all Indebtedness pari passu in rights to the Notes are
entitled.
(d) Prepayment Amount. The mandatory prepayments provided for
in this Section 4 shall be paid at the Accreted Value of the principal amount
required to be prepaid through the date of prepayment, plus premium and
Liquidated Damages, if any, and accrued and unpaid interest, all as provided for
above, provided that the Holder shall be given as much notice as possible, but
no less then thirty (30) days, prior to the date fixed for prepayment to permit
conversion of the Note as permitted by Section 6. To the extent that any payment
required by this Section 4 is not made because such payment is not permitted
under the terms of the Senior Indebtedness, the
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<PAGE>
obligation to make such payment shall be deferred until such time as the Senior
Indebtedness is no longer outstanding or such payment becomes permitted, and
such payment shall be made on the next following Business Day. Notwithstanding
the notice periods set forth herein, no payments due to the holders of Common
Stock, preferred stock or other equity securities of the Company, or to the
holders of indebtedness of the Company junior in right of payment to the Note,
shall be made without first making the payments due under this Section 4.
5. Manner of Payment. Payments of principal, interest and other amounts
due under this Note shall be made no later than 12:00 p.m. (noon) (Los Angeles
time) on the date when due and in lawful money of the United States of America
(by wire transfer in funds immediately available at the place of payment) to
such account as the Holder may designate in writing to the Company. Any payments
received after 12:00 p.m. (noon) (Los Angeles time) shall be deemed to have been
received on the next succeeding Business Day. Any payments due hereunder which
are due on a day which is not a Business Day shall be payable on the first
succeeding Business Day and such extension of time shall be included in the
computation.
6. Conversion.
(a) Voluntary Conversion. At the option of the Holder, at any
time, Holder shall have the right, at its option, to convert all or any portion
(of $10,000 or more) of the Accreted Value of the Note, plus accrued but unpaid
interest and accrued but unpaid Liquidated Damages, if any (the "Converted
Amount"), into that number of fully paid and nonassessable shares of Common
Stock of the Company, no par value per share ("Common Stock") at the Conversion
Price (as defined below) in effect at the time of conversion, as hereinafter
provided.
(b) Mechanics of Conversion. Upon written notice of conversion
of the Note pursuant to an Election to Convert in the form of Exhibit A attached
hereto, the Company will, as soon as practicable thereafter, but in no event
longer than three (3) business days, issue and deliver to the Holder (i) a
certificate for the number of shares of Common Stock to which the Holder shall
be entitled, and (ii) an amended and restated promissory note in substantially
the same form as this Note, but with the outstanding principal amount reduced by
the Converted Amount. Such conversion shall be deemed to have occurred as of the
close of business on the date of the surrender of this Note as provided for
above, and the Holder shall be treated as the record holder of the Common Stock
received upon conversion as of the close of business on such date.
(c) Payment of Taxes. The Company will pay all taxes that may
be payable in respect of the issue or delivery of Common Stock upon conversion
of this Note; provided, that Holder shall pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of Common Stock in a
name other than that in which this Note so converted was registered.
(d) Conversion Price. Each Note shall be convertible into the
number of shares of Common Stock that results from dividing the Accreted Value,
plus accrued but unpaid interest on such Note and accrued but unpaid Liquidated
Damages, if any, on the date of conversion by the Conversion Price per share in
effect at the time of the conversion. The initial Conversion Price shall be
$12.34375, equal to the average Closing Price over the ten (10) trading days
immediately
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preceding the original issuance of this Note. This initial Conversion Price
shall be subject to adjustment from time to time as provided below.
(e) One-Year Conversion Price Reset. On August 13, 2000, the
Conversion Price shall be adjusted to be equal to the lower of (i) the
Conversion Price in effect on the date of the original issuance of this Note (as
adjusted pursuant to Sections (f) through (k) below) or (ii) a price equal to
the average Closing Price over the ten (10) trading day period ending August 12,
2000.
(f) Adjustment for Stock Splits and Combinations. If the
Company, at any time or from time to time after the date hereof, effects a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased, and
conversely, if the Company, at any time or from time to time after the date
hereof, combines the outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 6(f) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(g) Adjustment for Certain Dividends and Distributions. If the
Company at any time or from time to time after the date hereof makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, without payment therefor, a dividend or other distribution payable in
Additional Shares of Common Stock, then and in each such event the Conversion
Price then in effect shall be decreased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on such record
date, by multiplying such Conversion Price then in effect by a fraction (i) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, such Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter such Conversion Price shall
be adjusted pursuant to this Section 6(g) as of the time of actual payment of
such dividends or distributions.
(h) Adjustments for Other Dividends and Distributions. In the
event the Company, at any time or from time to time after the date hereof,
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, without payment therefor, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then and
in each such event provision shall be made so that the holders of the Notes
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company or
cash that they would have received had their Notes been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 6 with
respect to the rights of the holders of the Notes.
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(i) Adjustment for Reclassification, Exchange and
Substitution. In the event that at any time or from time to time after the date
hereof, the Common Stock issuable upon the conversion of the Notes is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Section
6), then and in any such event each holder of a Note shall have the right
thereafter to convert such Note into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change, by holders of the maximum number of shares of Common Stock into
which such Note could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(j) Reorganization, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the date hereof, there is a
capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 6) or a merger or consolidation of the Company with or
into another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Notes shall thereafter be entitled to receive upon conversion
of the Notes the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 6 with respect to the
rights of the holders of the Notes after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section 6
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Notes) shall be applicable after that
event and be as nearly equivalent as may be practicable.
(k) Sale of Shares Below Fair Market Value.
(i) (1) If at any time or from time to time after the
date hereof, the Company issues or sells, or is deemed by the express
provisions of this Section 6(k) to have issued or sold, Additional
Shares of Common Stock (as defined in paragraph (v) below), other than
as a dividend or other distribution on any class of stock as provided
in Section (a) above and other than upon a subdivision or combination
of shares of Common Stock as provided in Section (f) above, for an
"Effective Price" (as defined in paragraph (v) below) less than the
Fair Market Value per share of Common Stock (as defined in paragraph
(v) below) in effect at the close of business on the day immediately
prior to such sale or issuance, then and in each such case the then
existing Conversion Price of the Notes shall be reduced, as of the
opening of business on the date of such issue or sale, to a price
determined by multiplying that Conversion Price by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock
outstanding at the close of business on the day immediately preceding
the date of such issue or sale, plus (B) the number of shares of Common
Stock that the aggregate consideration received (or by the express
provisions hereof deemed to have been received) by the Company for the
total number of Additional Shares
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of Common Stock so issued would purchase at such Fair Market Value per
share, and (ii) the denominator of which shall be the number of shares
of Common Stock outstanding at the close of business on the date of
such issue after giving effect to such issue of Additional Shares of
Common Stock; provided however, that for the purposes of this Section
(k), all shares of Common Stock then issuable upon conversion or
exercise of then outstanding rights or options to acquire Common Stock
or other stocks or securities convertible into Common Stock shall be
deemed to be outstanding. Such adjustment shall be made successively
whenever such an issuance is made. The foregoing notwithstanding, if
any such sale or issuance of Additional Shares of Common Stock, rights,
options, warrants or Convertible Securities (defined below) is effected
pursuant to the terms of a bona fide agreement, commitment or letter of
intent which is entered into or made prior to the date of such issuance
and which specifies the "price per share of Common Stock" (as such
phrase is used in this paragraph (i)) to be paid in such issuance, then
the determination of whether or not the "price per share of Common
Stock" in such issuance is "lower than the Fair Market Value per share
of Common Stock" required by this paragraph (i) shall be made as of
close of business on the date such agreement or letter of intent is
entered into or such commitment is made and shall not be made
"immediately prior to such sale and issuance" as provided above. (For
example, if the Company enters into an agreement to sell shares of
Common Stock in a private placement and the price per share of Common
Stock to be paid pursuant to such agreement is equal to or greater than
the Fair Market Value per share of Common Stock as of the close of
business on the date on which such agreement is entered into, then no
adjustment shall be required under this paragraph (i) even if such
price is less than the Fair Market Value per share of Common Stock on
the date such private placement is consummated.)
(2) In case the Company or any subsidiary thereof shall, at any time after
the date of this Note, make or agree to (i) any downward adjustment in the
exercise, exchange or conversion price of, (ii) any increase in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of, or
(iii) any change in the consideration payable for the exercise, conversion or
exchange of, any rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or acquire shares of Common
Stock, other than such adjustment that is specifically contemplated and required
under the terms of any such instrument as of the date of this Note, then the
Conversion Price shall be adjusted so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior thereto by a
fraction the numerator of which shall be the sum of (A) the number of shares of
Common Stock outstanding immediately prior thereto, plus (B) the number of
shares of Common Stock to be issued upon such exercise, conversion or exchange
immediately prior thereto, multiplied by the aggregate amount of the fair market
value of the consideration to be received by the Company upon such exercise,
conversion or exchange immediately thereafter, and the denominator shall be the
sum of (X) the number of shares of Common Stock outstanding immediately
thereafter, plus (Y) the number of shares of Common Stock to be issued upon such
exercise, conversion or exchange immediately thereafter, multiplied by the
aggregate amount of the fair market value of the consideration to be received by
the Company upon
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such exercise, conversion or exchange immediately prior thereto. Such
adjustment shall be made successively whenever such an issuance is
made.
(ii) For the purpose of making any adjustment
required under this Section (k), the consideration received by the
Company for any issue or sale of securities shall (i) to the extent it
consists of cash be computed at the net amount of cash received by the
Company after deduction of any expenses payable by the Company and any
underwriting or similar commissions, compensation, or concessions paid
or allowed by the Company in connection with such issue or sale, (ii)
to the extent it consists of property other than cash, be computed at
the fair value of that property as determined in good faith by the
Board of Directors, subject to paragraph (vi) below, and (iii) if
Additional Shares of Common Stock, Convertible Securities (as defined
in paragraph (iii) below) or rights, warrants, or options to purchase
either Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets
of the Company for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or
rights or options, subject to paragraph (vi) below.
(iii) For the purpose of the adjustment required
under this Section (k), if the Company issues or sells any rights,
warrants, or options for the purchase of, stock or other securities
convertible into, Additional Shares of Common Stock or rights, warrants
or options to purchase such convertible securities (such convertible
stock or securities hereinafter referred to as "Convertible
Securities") and if the Effective Price of such Additional Shares of
Common Stock is less than the Fair Market Value per share of Common
Stock at the close of business on the day immediately preceding the
date of such issuance, then in each case the Company shall be deemed to
have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights, warrants or options or
Convertible Securities, plus, in the case of such rights, warrants or
options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights, warrants or options, plus, in
the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such
Convertible Securities) upon the conversion thereof. No further
adjustment of the applicable Conversion Price, adjusted upon the
issuance of such rights, warrants, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares
of Common Stock on the exercise of any such rights, options or the
conversion of any such Convertible Securities. If any such rights,
warrants or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the
applicable Conversion Price adjusted upon the issuance of such rights,
warrants, options or Convertible Securities shall be readjusted to the
applicable Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of
Common Stock so
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issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights, warrants or options or
rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus
the consideration, if any, actually received by the Company for the
granting of all such rights, warrants or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if
any, actually received by the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) on
the conversion of such Convertible Securities.
(iv) (1) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Company after the date
hereof, whether or not subsequently reacquired or retired by the
Company, other than (A) shares of Common Stock issued upon conversion
of the Notes, and shares of Common Stock issued to employees or
directors of, or consultants and advisors to, the Company or any
subsidiary pursuant to any stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors and
approved by the Company's stockholders. The "Effective Price" of
Additional Shares of Common Stock shall mean the quotient determined by
dividing the total number of Additional Shares of Common Stock issued
or sold, or deemed to have been issued or sold by the Company under
this Section (k), into the aggregate consideration received, or deemed
to have been received by the Company for such issue under this Section
(k), for such Additional Shares of Common Stock.
(2) The "Fair Market Value" of a share
of Common Stock as of
a particular date shall mean (i) if the Common Stock is publicly traded
at the time of determination, the average of the closing prices on such
day of the Common Stock on all domestic securities exchanges on which
the Common Stock is then listed, or, if there have been no sales on any
such exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day or, if on any
such day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted on the Nasdaq system as of
4:00 P.M., New York time, on such day, or if on any day such security
is not quoted on the Nasdaq system, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of thirty (30) days consisting of the day as of which "fair
market value" is being determined and the twenty-nine consecutive
business days prior to such day (provided that, if fair market value is
being determined as of the date of a firm commitment public offering of
the Common Stock, fair market value as of such date shall be the
offering price for the Common Stock subject to such public offering);
or (ii) if the Common Stock is not publicly traded at the time of
determination, the Common Stock price per share determined by dividing
Market Value (as defined below) by the outstanding number of shares of
Common Stock calculated on a fully diluted basis using the treasury
stock method as contemplated by the Accounting Principles Board Opinion
No. 15 (as referred to in the Statement of Financial Accounting
Standards No. 128) (such shares as calculated on any date, "Fully
Diluted Shares"). "Market Value" means the highest price that would be
paid for the entire common
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<PAGE>
equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither
acting under compulsion), using valuation techniques then prevailing in
the securities industry (but without giving effect to any discount in
respect of a minority interest) and determined in accordance with the
"Valuation Procedure" (as defined below) and assuming full disclosure
and understanding of all relevant information and a reasonable period
of time for effectuating such sale. For the purposes of determining the
"Market Value", (a) the exercise price of options or warrants to
acquire Common Stock which are deemed to have been exercised for the
purpose of determining the issued and outstanding number of Fully
Diluted Shares of Common Stock, shall be deemed to have been received
by the Company, (b)(i) the liquidation preference or indebtedness, as
the case may be, represented by securities which are deemed exercised
for or converted into Common Stock for the purpose of determining the
issued and outstanding number of Fully Diluted Shares of Common Stock
and (ii) any contractual limitation in respect of the shares of Common
Stock relating to voting rights, shall be deemed to have been
eliminated or canceled and (c) full effect shall be given to any
discount that may arise as the result of the fact that the shares of
Common Stock are not publicly traded.
"Valuation Procedure" means, with respect to the determination
of any amount or value required to be determined in accordance with
such procedure, a determination (which shall be final and binding on
the Company and the holders) made (i) by agreement among the Company
and the Required Holders within twenty (20) days following the event
requiring such determination or (ii) in the absence of such an
agreement, by an Independent Financial Expert selected in accordance
with the further provisions of this definition. If required, an
Independent Financial Expert shall be selected within five (5) days
following the expiration of the twenty (20)-day period referred to
above, either by agreement among the Company and the Required Holders
or, in the absence of such agreement, by lot from a list of four
potential Independent Financial Experts remaining after the Company
nominates three, the Required Holders nominate three, and each side
eliminates one potential Independent Financial Expert. The Independent
Financial Expert shall be instructed by the Company and the Required
Holders to make its determination within twenty (20) days of its
selection. The fees and expenses of an Independent Financial Expert
selected hereunder shall be paid by the Company.
"Independent Financial Expert" means a nationally-recognized
investment banking firm (a) that does not (and whose directors,
officers, employees and Affiliates do not) have a direct or indirect
material financial interest in the Company or any holder, (b) that has
not been, and, at the time it is called upon to serve as an Independent
Financial Expert under this Agreement, is not (and none of whose
directors, officers, employees or Affiliates is not), a promoter,
director or officer of the Company or any Holder, (c) that has not been
retained during the preceding two years by the Company or the holder
for any purpose, and (d) that is otherwise qualified to serve as an
Independent Financial Advisor. Any such person or entity may receive
customary compensation and indemnification by the Company for opinions
or services it provides as an Independent Financial Expert.
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<PAGE>
(v) Adjustments to Anti-Dilution Rights; Limitations on Subsequent Grants
of Anti-Dilution Rights.
(1) Notwithstanding the foregoing
provisions of this Section 4, to
the extent that any holders of equity securities, or rights, warrants,
options or other securities convertible into or exchangeable for equity
securities, of the Company are entitled to anti-dilution rights that
are superior or more favorable to the holder of such equity securities,
or rights, warrants, options or other securities convertible into or
exchangeable for equity securities, than those granted pursuant to this
Section 6, the holder hereof shall be entitled to such anti-dilution
rights with respect to the Notes.
(2) From and after the Date of Grant,
the Company shall not,
without the prior written consent of the Required Holders, grant any
holders of equity securities, or rights, warrants, options or other
securities convertible into or exchangeable for equity securities, of
the Company anti-dilution rights with respect to such equity securities
that are superior or more favorable than those granted pursuant to this
Section 6.
6.1 Accountants' Certificate of Adjustment. In each case of an
adjustment or readjustment of the Conversion Price applicable to the Notes or
the number of shares of Common Stock or other securities issuable upon
conversion of the Notes, the Company, at its expense, shall cause independent
public accountants of recognized standing selected by the Company (who may be
the independent public accountants then auditing the books of the Company) to
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Notes at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or deemed to be received by the
Company for any Additional Shares of Common Stock issued or sold or deemed to
have been issued or sold, (ii) the Conversion Price as then in effect, (iii) the
number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property that at the time would be received upon conversion of the
Notes.
6.2 Notices of Record Date. In the event of (i) any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company, any merger or consolidation of the Company with or into any other
corporation, or any transfer of all or substantially all of the assets of the
Company to any other person or any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall mail to each holder
of a Note at least thirty (30) days prior to the record date specified therein,
a notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (C) the date, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or
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<PAGE>
other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
6.3 Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Notes. In lieu of any fractional share to
which the holder would otherwise be entitled, the Company shall pay cash equal
to the product of such fraction multiplied by the Fair Market Value of one share
of the Company's Common Stock on the date of conversion.
6.4 No Dilution or Impairment. The Company will not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all provisions of this Section 6 and in the taking of all such action as may
be reasonably necessary or appropriate in order to protect the conversion rights
of the holders of the Notes against dilution or other impairment.
6.5 Registration Rights; Liquidated Damages. The Holders of
the Notes are entitled to certain rights under the Registration Rights
Agreement, and to Liquidated Damages (as provided in the Purchase Agreement) for
the breach of the Registration Rights Agreement. Any Liquidated Damages shall be
paid pro rata in cash to the holders of the Notes on the first business day of
each month following accrual thereof. Shares not registered upon issuance shall
bear a legend in the form set forth on the face of this Note.
6.6 Limitation on Ownership. If this Note is held by U.S.
Bancorp Investments, Inc. ("USBI"), and not any other Holder, this Note may only
be converted if the total number of voting shares of Common Stock held by USBI
upon such conversion, when aggregated with any other voting shares held by
persons or entities required by Regulation Y of the Federal Reserve Board to be
aggregated with USBI's holdings, shall be less than 5.00% of the total shares of
voting stock outstanding immediately after such conversion.
7. Remedies upon Event of Default. Upon the acceleration of the
indebtedness under the Notes pursuant to the terms of the Purchase Agreement,
the principal of and all accrued and unpaid interest on this Note and Liquidated
Damages, if any, shall become immediately due and payable without any
declaration or other act on the part of the Holder and all without demand,
presentment, notice, or protest, all of which are hereby expressly waived, and
the Holder may exercise any right or power available to it under this Note or
the Purchase Agreement, at law or in equity, all of which rights and powers may
be exercised cumulatively and not alternatively. No delay or omission of the
Holder of this Note to exercise any right or power accruing upon any Default or
Event of Default occurring and continuing shall impair any such right or power
or shall be construed to be a waiver of any such Default or Event of Default or
an acquiescence therein, and every power and remedy given by this Note or by law
may be exercised from time to time, and as often as shall be deemed expedient,
by the Holder.
13
<PAGE>
8. Assignment and Transfer. Subject to applicable laws, the Holder may,
at any time and from time to time and without the consent of the Company, assign
or transfer to one or more Persons the entire outstanding principal balance of
this Note or any portion thereof (but not less than $100,000 in principal amount
in any single assignment (unless such lesser amount represents the entire
outstanding principal balance hereof)). Upon surrender of this Note at the
Company's principal executive office for registration of any such assignment or
transfer, accompanied by a duly executed instrument of transfer, the Company
shall, at its expense and within three (3) Business Days of such surrender,
execute and deliver one or more new notes of like tenor in the requested
principal denominations and in the name of the assignee or assignees and bearing
the legend set forth on the face of this Note, and this Note shall promptly be
canceled. Each assignment or transfer of this Note, in whole or in part, shall
be registered on the register maintained by the Company pursuant to the Purchase
Agreement immediately following the surrender of this Note. If the entire
outstanding principal balance of this Note is not being assigned, the Company
shall issue to the Holder hereof, within three (3) Business Days of the date of
surrender hereof, a new note which evidences the portion of such outstanding
principal balance not being assigned. Upon the request of any Holder, the
Company shall issue an amended and restated Note setting forth the then current
principal balance thereon.
9. Benefits Pro Rata. If the Notes issued under the Purchase Agreement
are held at any time by more than one Holder, any payments of principal of, or
premium, if any, on this Note, and any payments of interest or other amounts
which are not sufficient to pay all interest or other amounts due thereunder,
shall be made pro rata with respect to all such Notes in accordance with the
outstanding principal amounts thereof, respectively. Any Holder receiving any
payment or securities in excess of its pro rata portion hereby agrees to hold
such excess amount in trust for all other Holders, and upon discovery of any
over-payment pay such excess to the other Purchasers, within two (2) Business
Days, in order to comply with this Section.
10. Loss, Theft, Destruction or Mutilation of this Note. Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity agreement or other indemnity
reasonably satisfactory to the Company or, in the case of any such mutilation,
upon surrender and cancellation of such mutilated Note, the Company shall make
and deliver within three (3) Business Days a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note.
11. Costs of Collection. The Company agrees to pay all Holder Group
Expenses in connection with the enforcement of Holders' rights hereunder, all as
more fully provided in Section 11.1 of the Purchase Agreement.
12. Waiver of Default. Holders holding 50.1% may waive a Default or
Event of Default under this Note but may not, without the consent of the Holder,
waive a Default in payment of principal of or premium, if any, or interest or
Liquidated Damages, if any, on the Note (except a rescission of acceleration of
the maturity of the Note and a waiver of the payment default that resulted from
such acceleration).
14
<PAGE>
13. No Setoffs; Waivers, etc. The Company's obligations under this Note
shall be paid and performed by the Company without any defenses, claims,
setoffs, counterclaims, recoupments, reductions, limitations, impairments or
terminations which the Company may now have or hereafter has or could have
against Holder, and the Company hereby waives all of the same. The Company
hereby waives the benefit of all laws now or hereafter enacted affording any
right to any appraisement, any stay of execution or extension of time for
payment. Except as set forth herein, notice of demand, presentation for payment,
notice of non-payment or dishonor, protest and notice of protest are hereby
waived by the Company. The Company agrees that the granting, without notice of
any extension or extensions of time for payment of any sum or sums due
hereunder, or for the performance of any covenant, condition or agreement
contained herein, or the granting of any other indulgences to the Company, or
any other modification or amendment of this Note, or the acceptance, release or
substitution by Holder of any security, shall in no way release or discharge the
liability of the Company.
14. Highest Rate Permitted. Notwithstanding anything in this Note to
the contrary, no provision of this Note shall require the payment or permit the
collection of interest in excess of the highest rate permitted by applicable
law, and any portion of the interest otherwise payable under this Note which is
in excess of the highest rate permitted by applicable law shall be cancelled
automatically or (if heretofore paid) shall, at the option of the Company, be
either refunded to the Company or credited to the principal amount of this Note.
15. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default by the Company in the performance of or
compliance with any of the terms of this Note are not and will not be adequate,
and that such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
16. Covenant to Reserve Securities. The Company shall at all times
reserve, for the purpose of issuance upon the conversion into Common Stock, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to comply with the terms of this Note ("Reserved Common Stock"),
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient, the Company will take all action necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
17. Covenant To Take All Proper Legal Steps For Conversion. The Company
represents and covenants that it will at all times promptly do any and all
lawful things necessary to permit the conversion into Common Stock of the
principal and accrued but unpaid interest as provided herein and, among other
things, to that end will expeditiously and by proper action take all steps
necessary to have available to meet full conversion a sufficient number of
shares of Common Stock.
18. Miscellaneous.
(a) Notices. All notices and communications provided for
hereunder shall be in writing and sent (a) by telefacsimile, or (b) by
registered or certified mail with return receipt
15
<PAGE>
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Holder, at the address specified for such
communications in Exhibit B to the Purchase Agreement or at such other
address as it shall have specified to the Seller in writing, or
(ii) if to the Company or any Guarantor,
CFI Pro Services, Inc.
400 S.W. Sixth Avenue, Suite 200
Portland, Oregon 97204
Attention: Jeffrey P. Strickler, Esq.
Telephone: (503) 274-7280
Facsimile: (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
Facsimile: (503) 228-1741
Notices under this Section 18(a) will be deemed given only when actually
received, or three hours after confirmation of a successful telefacsimile
transmission.
(b) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflict of laws. The Company and the Purchasers
have each been represented by counsel in the negotiation and drafting of this
Note and neither the Company nor the Purchasers nor their respective counsel
shall be deemed the drafter of this Note for purposes of construing the
provisions of this Note, and all provisions of this Note shall be construed in
accordance with their fair meaning, and not strictly for or against the Company
or the Purchasers.
(c) Modification. Neither this Note nor any provision hereof
may be amended unless in an instrument in writing signed by the Holder and the
Company, provided, that any amendment to the Purchase Agreement approved by the
Required Holders shall be binding upon the Holder of this Note.
(d) Severability. If any provision of this Note is held to be
invalid, illegal, or unenforceable, such invalidity, illegality, and/or
unenforceability shall not affect any other provision of this Note.
16
<PAGE>
(e) Successors. Except as set forth to the contrary herein,
all the covenants, agreements, representations, and warranties contained in this
Note shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors, and assignees.
(f) CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE PURCHASE AGREEMENT, THE NOTES OR
ANY OTHER RELATED 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, THE COMPANY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY 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
THE COMPANY AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 14.6 OF THE
PURCHASE AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS TO SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY OR ANY GUARANTOR IN ANY OTHER
JURISDICTION. THE COMPANY AND EACH GUARANTOR 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 THE
COMPANY OR ANY GUARANTOR 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, THE COMPANY AND EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THE PURCHASE AGREEMENT, THE NOTES AND ANY OTHER RELATED DOCUMENT.
(h) WAIVER OF JURY TRIAL, ETC. THE PARTIES HERETO AND ANY SUBSEQUENT
GUARANTOR OR PURCHASER OF A NOTE HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THE PURCHASE
AGREEMENT, THE NOTES OR OTHER DOCUMENTS PREPARED IN CONNECTION HEREWITH, 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 THE PURCHASE
AGREEMENT AND THE NOTES, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE
17
<PAGE>
TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE COMPANY CERTIFIES THAT NO
OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASERS HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE HOLDERS WOULD NOT, IN THE EVENT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE COMPANY
HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
HOLDER'S ENTERING INTO THIS AGREEMENT.
(f) Headings. The section headings in this Note are inserted
for purposes of convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, CFI ProServices, Inc. has executed this Note on
August 13, 1999.
CFI PROSERVICES, INC.
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
18
<PAGE>
Exhibit A
NOTICE OF ELECTION TO CONVERT
The undersigned, as Holder of the 10% Convertible Subordinated Discount
Note (the "Note") issued by CFI ProServices, Inc. (the "Company"), hereby elects
to convert $__________ of the Accreted Value and accrued interest and Liquidated
Damages, if any, on this Note into that number of shares of Common Stock of the
Company, equal to $__________ divided by the Conversion Price (or __________
shares), plus $__________ in lieu of fractional shares.
Date: _______________
"Holder"
By:
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other Taxpayer
Identifying Number, as you wish them
to appear on a Certificate.
Name
Address
Taxpayer Identification Number
<PAGE>
SCHEDULE TO 10% DISCOUNTED CONVERTIBLE NOTES
--------------------------------------------
Holder Amount
- --------------------------------------- -----------
U.S. Bancorp Libra $1,050,000
Levine Leichtman Capital Partners II, L.P. $2,000,000
Soundshore Holdings, Ltd $ 500,000
Southshore Opportunity Holding Fund, Ltd $ 500,000
Bay Star Capital, L.P. $1,500,000
----------
Total $5,550,000
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of August 13, 1999 (this
"Agreement"), by and among CFI ProServices, Inc., an Oregon corporation (the
"Company"), and the Note Purchasers listed on the signature page hereof (each, a
"Note Purchaser" and collectively, the "Note Purchasers").
R E C I T A L S
WHEREAS, this Agreement is being entered into pursuant to that certain
Note Purchase Agreement (the "Note Purchase Agreement") of even date herewith by
and among the Company, the subsidiaries of the Company listed on Exhibit A
thereto ("Guarantors") and the Note Purchasers; and
WHEREAS, in connection with the Note Purchase Agreement the Company has
agreed to issue to the Note Purchasers 10% Convertible Subordinated Discount
Notes (the "Notes"), convertible into shares of Common Stock (as such term is
defined below), at an initial Conversion Price of $12.34375 per share (such
shares issued or issuable upon conversion are referred to as "Note Shares"); and
WHEREAS, in order to induce the Note Purchasers to purchase the Notes,
the Company has agreed to provide the registration rights set forth in this
Agreement; and
WHEREAS, in connection with services provided to the Company, the
Company has granted warrants to purchase Common Stock of the Company to its
investment advisor (also a Note Purchaser) or its designees and as additional
consideration for such services is agreeing to provide the registration rights
set forth in this Agreement.
NOW THEREFORE, in consideration of these premises, and the respective
promises and covenants contained herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
"Act" means the United States Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under the Act, as they each may, from time to time, be in effect.
"Commission" or "SEC" means the United States Securities and Exchange
Commission, or any other Federal agency at the time administering the Act.
<PAGE>
"Common Stock" means the shares of common stock, no par value per
share, of the Company.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under the Exchange Act, as they each may, from time to time,
be in effect.
"Holders" means the Note Purchasers, any person or entity to whom the
rights granted under this Agreement are validly transferred by any Note
Purchaser and their Permitted Transferees (as defined in Section 2.8 hereof).
"Indemnified Party" has the meaning described in Section 2.4(c) below.
"Indemnifying Party" has the meaning described in Section 2.4(c) below.
"Note Shares" means the (i) shares of Common Stock issuable or issued
to the Holders upon conversion of the Notes, as provided in the Notes, and any
such shares of Common Stock transferred in a private transaction (whether or not
Notes are also transferred therewith) to a Permitted Transferee, and (ii) the
shares of Common Stock issuable or issued upon exercise of the Warrants. Note
Shares shall include any warrants, shares of capital stock or other securities
of the Company issued as a dividend or other distribution with respect to or in
exchange for or in replacement for the then-existing Note Shares pursuant to any
recapitalization of the Company. As to any particular Note Shares, such
securities shall cease to be Note Shares when (a) a Registration Statement with
respect to the sale of such securities shall have become effective under the Act
and such securities shall have been sold, transferred, disposed of or exchanged
in accordance with such Registration Statement; (b) such securities shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration under the
Act or any state securities law, (c) such securities shall have ceased to be
outstanding or (d) upon any sale, transfer or other disposition in any manner to
a person or entity which, by virtue of Section 2.8 hereof, is not entitled to
the rights provided by this Agreement.
"Registration Statement" means a registration statement filed by the
Company with the Commission in compliance with the Securities Act and the rules
and regulations promulgated thereunder for a public offering and sale of its
Common Stock (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another entity).
"Warrants" means the 58,000 warrants to purchase shares of Common Stock
issued by the Company to U.S. Bancorp Libra, a division of U.S. Bancorp
Investments, Inc., pursuant to a warrant agreement dated of even date herewith.
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ARTICLE 2.
REGISTRATION RIGHTS
Section 2.1 Shelf Registration of Note Shares.
(a) The Company shall mail as soon as practicable a
questionnaire (the "Questionnaire"), soliciting the information required by
Items 507 and 508 of Regulation S-K, to each of the Note Purchasers, and shall
deliver a copy of such Questionnaire to any Note Purchaser or Holder within five
(5) days of it becoming available. As a condition to any Note Purchaser's or
Holder's Note Shares being included in the Registration Statement referred to
below, such Purchaser shall submit a Questionnaire and shall amend and submit to
the Company a revised Questionnaire any time the information contained therein
ceases to be accurate and complete.
(b) The Company shall use its reasonable best efforts to file
with the Commission, a Registration Statement (the "Note Shares Shelf
Registration") for an offering to be made on a continuous basis pursuant to Rule
415 covering all Note Shares held by the Holder, as soon as practicable from the
date hereof, but in no event more than 90 days from the date hereof. The Holders
shall be included as selling securityholders in such Registration Statement
promptly, and within two (2) Business Days, after they have fully completed and
returned to the Company the Questionnaire. The Note Shares Shelf Registration
shall be on Form S-3 under the Securities Act or another appropriate form
(including Form S-1, if applicable) permitting registration of such Note Shares
for resale by the Holders in the manner or manners reasonably designated by them
(including, without limitation, one or more underwritten offerings). The Company
shall use its reasonable best efforts to cause the Note Shares Shelf
Registration to be declared effective pursuant to the Securities Act on or prior
to the date that is 180 days after the date of the Closing under the Note
Purchase Agreement (the "Effectiveness Target Date") and to keep the Note Shares
Shelf Registration continuously effective under the Securities Act for 60 months
(the "Effectiveness Period") or such shorter period ending when there ceases to
be outstanding any Note Shares.
(c) The Company shall use all reasonable best efforts to keep
the Note Shares Shelf Registration continuously effective, for the period
described in Section 2.1(b) hereof, by supplementing and amending the Note
Shares Shelf Registration if required by the rules, regulations or instructions
applicable to the registration form used for such Note Shares Shelf
Registration, if required by the Securities Act or if reasonably requested by
the Holders of a majority in amount of Note Shares (determined on a fully
converted basis) covered by such Note Shares Shelf Registration.
(d) In the event any adjustment in the Conversion Price (as
defined in the Notes) would result in the issuance of additional Note Shares
upon conversion of the Notes, the Company shall promptly, and within ten (10)
Business Days, amend or supplement the Note Shares Shelf Registration in order
to effect a Shelf Registration of such additional Note Shares
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pursuant to the terms of Section 2.1(b), provided, that notwithstanding anything
to the contrary in Section 2.1(b) or the Note Purchase Agreement, the
Effectiveness Target Date shall be ninety (90) from the date of the effective
date of the adjustment to the Conversion Price resulting in additional Note
Shares becoming issuable to the Holders.
(e) Notwithstanding anything to the contrary in this Section
2.1, but subject to compliance with Section 7.14 of the Note Purchase Agreement,
the Company may, by delivering written notice to the Note Purchasers, prohibit
offers and sales of Note Shares pursuant to the Note Shares Shelf Registration
at any time if (A)(i) the Company is in possession of material non-public
information relating to the Company, (ii) the Company determines (based on
advice of counsel) that such prohibition is necessary in order to avoid a
requirement to disclose such material non-public information to the public and
(iii) the Company determines in good faith that public disclosure of such
material non-public information would not be in the best interests of the
Company and its stockholders, or (B)(i) the Company has made a public
announcement relating to an acquisition or business combination transaction
including the Company and/or one or more of its subsidiaries that is material to
the Company and its subsidiaries taken as a whole and (ii) the Company
determines in good faith that (x) offers and sales of Note Shares pursuant to
the Note Shares Shelf Registration prior to the consummation of such transaction
(or such earlier date as the Company shall determine) would not be in the best
interests of the Company and its stockholders or (y) it would be impracticable
at the time to obtain any financial statements relating to such acquisition or
business combination transaction that would be required to be set forth in the
Note Shares Shelf Registration; provided, however, that upon (i) the public
disclosure by the Company of the material non-public information described in
clause (A) of this paragraph or (ii) the consummation, abandonment or
termination of, or the availability of the required financial statements with
respect to, a transaction described in clause (B) of this paragraph, the
suspension of the use of the Note Shares Shelf Registration pursuant to this
Section 2.1(e) shall cease and the Company shall promptly, prior to the next
Business Day, comply with Section 2.2 hereof and notify the Note Purchasers that
dispositions of Note Shares may be resumed. In the event that during the
Effectiveness Period the prospectus under the Note Shares Shelf Registration
becomes not usable as a result of the Company's notification under this Section,
the Company shall use its reasonable best efforts to provide the Holders a
usable prospectus as soon as practicable, and in no event shall sales of Note
Shares under the Note Shares Shelf Registration be suspended for more than 30
days in any 365-day period.
(f) In the event that the Company shall (i) fail to cause the
Note Shares Shelf Registration to be declared effective on or prior to the
Effectiveness Target Date or (ii) fail to keep the Note Shares Shelf
Registration effective for the duration of the Effectiveness Period (subject to
the rights of the Company under the preceding Section (e)), the Company shall
pay the Holders Liquidated Damages for its breach hereof, in the amounts set
forth and defined in the Note Purchase Agreement.
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Section 2.2 Registration Procedures.
(a) The Company shall at its expense:
(i) file with the Commission within ninety (90)
days of the date hereof a Registration Statement with respect to Note Shares and
use its reasonable best efforts to cause that Registration Statement to become
and remain effective prior to the Effectiveness Target Date and for the duration
of the Effectiveness Period;
(ii) prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective for the period described in Section 2.2(a)(i)
above, and comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement;
(iii) furnish to each selling Holder such reasonable
numbers of copies of the Registration Statement, preliminary prospectus, final
prospectus, and any amendments and supplements, and such other documents as each
selling Holder may reasonably request in order to facilitate the public offering
of such securities;
(iv) promptly, and prior to the next Business
Day, furnish to each selling Holder written notice of any stop order or similar
notice issued by the SEC or any state agency charged with the regulation of
securities, and any notice from the Nasdaq National Market or other securities
exchange then listing Note Shares covered by such Registration Statement;
(v) register or qualify Note Shares covered by
the Registration Statement under the securities or Blue Sky laws of such states
as shall be reasonably appropriate for the distribution of the Note Shares
covered by such Registration Statement; provided, however, that the Company
shall not for any purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(vi) use its best efforts to make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 thereunder;
(vii) use its best efforts to comply with all rules
and regulations of the Nasdaq National Market, or such other principal
securities exchange on which the equity securities issued by the Company are
then quoted or listed and traded, to ensure that Note Shares are freely
tradeable thereon upon registration thereof under the Act;
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(viii) provide, if one has not already been appointed
by the Company, a transfer agent and registrar for all Note Shares covered by
such Registration Statement not later than the effective date of such
Registration Statement;
(ix) enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any;
(x) include in the Registration Statement filed
with the SEC all Note Shares; and promptly, and, within two (2) Business Days,
after filing of such a Registration Statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to each Holder copies of all such
documents so filed including, if requested, documents incorporated by reference
in the Registration Statement; and notify each selling Holder of any stop order
issued or threatened by the SEC and use its best efforts to prevent the entry of
such stop order or to remove it if entered;
(xi) notify each selling Holder, at any time when a
prospectus relating to such selling Holder's Note Shares is required to be
delivered under the Act, of the occurrence of any event as a result of which the
prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Note Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading;
(xii) cause all such Note Shares to be listed on the
Nasdaq National Market System (or on such other principal securities exchange on
which the equity securities issued by the Company are then quoted or listed and
traded);
(xiii) enter into an underwriting agreement in
customary form and take all such other actions that the selling Holders or their
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Note Shares;
(xiv) make available for inspection by each selling
Holder and one (1) counsel acting for them, any underwriter participating in any
disposition pursuant to such Registration Statement, and any counsel retained by
any such underwriter, all pertinent financial and other information and
corporate documents of the Company reasonably requested, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such selling Holder, underwriter or counsel in connection with such
Registration Statement and to participate in "road shows" or management
presentations as may be reasonably requested by any underwriter;
(xv) with respect to any underwritten offering,
use its reasonable best efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort"
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letters as the selling Holders or any underwriter may reasonably request;
(xvi) with respect to an underwritten offering,
obtain an opinion of counsel to the Company, addressed to the selling Holders
and any underwriter, in customary form including such matters as are customarily
covered by such opinions in underwritten registered offerings of equity
securities as the selling Holders or any underwriter may reasonably request,
such opinion to be reasonably satisfactory in form and substance to each selling
Holder;
(xvii) furnish to each selling Holder upon request of
such selling Holder, within three (3) Business Days, copies of all
correspondence between the Company, the SEC and any applicable state securities
regulatory agencies relating to such registration;
(xviii) during the period that the Company is
required to keep such Registration Statement effective, promptly, and prior to
the next Business Day, notify each selling Holder covered by such Registration
Statement at any time when a prospectus relating thereto is required to be
delivered under the Act, of the happening of any event as a result of which the
prospectus or any prospectus supplement included in such Registration Statement,
as then in effect, or any material incorporated by reference therein, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, or if it is necessary to
amend or supplement such prospectus or any prospectus supplement or Registration
Statement or material incorporated by reference therein to comply with the law,
and at the request of any such selling Holder, prepare and furnish to such
selling Holder a reasonable number of copies of a supplement to or an amendment
of such prospectus or any prospectus supplement or material incorporated by
reference therein as may be necessary so that, as thereafter delivered to the
purchasers of such Note Shares, such prospectus or any prospectus supplement or
material incorporated by reference therein shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing and so that such prospectus or prospectus
supplement or Registration Statement or material incorporated by reference
therein, as amended or supplemented, will comply with the law;
(xix) upon the reasonable request of any selling
Holder, to include in a prospectus supplement or an amendment to a Note Shares
Shelf Registration any change in the information provided to the Company
pursuant to Rules 507 or 508 under Registration S-K; and
(xx) upon delivery of the certificates with
respect to Note Shares to be registered pursuant hereto, issue to any
underwriter to which the selling Holder may sell such Note Shares in connection
with any such registrations (and to any direct or indirect transferee of any
such underwriter) certificates evidencing such Note Shares without any legend
restricting the transferability of Note Shares.
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(b) Each selling Holder of Note Shares, respectively, agrees
that, upon receipt of any written notice from the Company of (i) any request by
the Commission for amendments or supplements to a Registration Statement or
related prospectus covering any of such selling Holder's Note Shares, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of a
Registration Statement covering any of such selling Holder's Note Shares or the
initiation of any proceedings for that purpose, (iii) the receipt by the Company
of any notification with respect to the suspension of the qualification of any
Note Shares, for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose (iv) the happening of any event that requires
the making of any changes in the Registration Statement covering any of such
selling Holder's Note Shares so that it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or that any related
prospectus will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, and (v)
the Company's reasonable determination that a post-effective amendment to a
Registration Statement covering any of such selling Holder's Note Shares or a
supplement to any related prospectus is required under the Act; such selling
Holder will forthwith discontinue disposition of such Note Shares until it is
advised in writing by the Company that the use of the applicable prospectus (as
amended or supplemented, as the case may be) and disposition of Note Shares
covered thereby pursuant thereto may be resumed, provided, however, (x) that
such selling Holder shall not resume its disposition of Note Shares pursuant to
such Registration Statement or related prospectus unless it has received notice
from the Company that such Registration Statement or amendment has become
effective under the Act and has received a copy or copies of the related
prospectus (as then amended or supplemented, as the case may be) unless Note
Shares are then listed on a national securities exchange and the Company has
advised such selling Holder that the Company has delivered copies of the related
prospectus, as then amended or supplemented, in transactions effected upon such
exchange, subject to any subsequent receipt by such selling Holder from the
Company of written notice of any of the events contemplated by clauses (i)
through (v) of this paragraph, and, (y) if so directed by the Company, such
holder will deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Note Shares
current at the time of receipt of such notice. In the event the Holders are
required to refrain from disposition of Note Shares for more than 30 days in any
365-day period, the Company shall be in breach of this Agreement and shall pay
Liquidated Damages to the Holders pursuant to the Note Purchase Agreement.
Section 2.3 Registration Expenses. The Company shall bear all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all fees and expenses relating to the listing of
any Note Shares with the Nasdaq National Market System (or on such other
principal securities exchange on which the equity securities issued by the
Company are then quoted or listed and traded), fees and expenses of compliance
with securities or Blue Sky laws in jurisdictions reasonably requested by any
selling Holder or underwriter pursuant to Section 2.2(a)(v) (including
reasonable fees and disbursements of counsel in connection with Blue Sky
qualifications of Note Shares), all word processing, duplicating and printing
expenses, messenger and delivery expenses, fees and disbursements of
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counsel for the Company and one (1) counsel for the selling Holders (selected by
Holders holding a majority of the Note Shares), independent public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance) and underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable to the securities being
registered, which discounts, commissions or fees with respect to any selling
Holder's respective Note Shares shall be paid by such selling Holder), all the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
fees of the National Association of Securities Dealers, Inc., the expense of any
annual audit, the expense of any special audits incident to or required by any
registration, the expense of any liability insurance (if the Company determines
to obtain such insurance) and the reasonable fees and expenses of any special
experts (including attorneys) retained by the Company (if it so desires) in
connection with such registration and fees and expenses of other persons
retained by the Company.
Section 2.4 Indemnification.
(a) In the event of any registration of any Note Shares under
the Act pursuant to this Agreement, the Company will indemnify and hold harmless
the selling Holder of such Note Shares, each of its officers, directors,
employees, partners, legal counsel and accountants, each underwriter, if any,
and each other person, if any, who controls such selling Holder or such
underwriter within the meaning of the Act against any expenses, losses, claims,
damages or liabilities, joint or several, arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement under which such Note Shares were registered under
the Act, any preliminary prospectus, final prospectus or summary prospectus
contained in the Registration Statement, or any amendment or supplement to such
Registration Statement, or arising out of or based upon any omission (or alleged
omission) to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or any violation by the Company of
the Act or any rule or regulation promulgated thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration; and, subject to Section 2.4(c) below, the Company
will reimburse such selling Holder, each of its officers, directors, partners,
legal counsel and accountants, each underwriter, if any, and each such
controlling person for any legal and any other expenses reasonably incurred by
such selling Holder or controlling person in connection with investigating and
defending any such expense, loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such expense, loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, final prospectus, or summary prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by such selling Holder and stated to be
specifically for use therein.
(b) Each selling Holder of Note Shares will, severally, and
not jointly and severally, in the event that any Note Shares held by such
selling Holder are those as to which any
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registration is being effected under the Act pursuant to this Agreement,
indemnify and hold harmless the Company, each of its directors and officers and
each underwriter (if any), and each other person, if any, who controls the
Company or any such underwriter within the meaning of the Act, against any
expenses, losses, claims, damages or liabilities, joint or several, insofar as
such expenses, losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement of a material fact
contained in any Registration Statement under which such Note Shares were
registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission to state a material fact required to be stated therein or necessary to
make the statement therein not misleading, if the statement or omission was
based reliance upon and made in conformity with information furnished in writing
to the Company by such selling Holder and stated to be specifically for use
therein, and shall reimburse the Company, its directors and officers, and each
such controlling person for any legal or other expenses reasonably incurred by
any of them in connection with investigation or defending any such loss, claim,
damage, liability or action. This indemnity shall remain in full force and
effect for the applicable statute of limitation period regardless of any
investigation made by or on behalf of the Company or such controlling person and
shall survive the transfer of shares. No selling Holder shall be liable to the
Company and the other indemnified parties under this Section 2.4(b) for any
amount in excess of the net proceeds received from the Note Shares sold by it
pursuant to the Registration Statement.
(c) Each party entitled to indemnification under this Section
2.4 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any loss, claim, action, damage or liability as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided, that
counsel for the Indemnifying Party who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party whose approval shall
not be unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.4, except to the
extent that such failure to give notice prejudices the Indemnifying Party or
such Indemnifying Party is damaged by such delay. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense (but in no event shall the
Indemnifying Party be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Party or Parties) if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would, in
the reasonable judgment of the Indemnified Party, be inappropriate due to actual
or potential conflict of interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. If, in the Indemnified
Party's reasonable judgment, a conflict of interest between such Indemnified and
Indemnifying Parties may exist in respect of such claim, the Indemnified Party
may assume the defense of such claim, jointly with any other Indemnified Party
that reasonably determines such conflict of interest to exist, and the
Indemnifying Party shall be liable to such Indemnified Parties for the
reasonable legal fees and expenses of one counsel for all such Indemnified
Parties and for other expenses reasonably incurred in connection with the
defense
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thereof incurred by the Indemnified Party. No Indemnifying Party, in the defense
of any such claim or litigation shall, except with the consent of each
Indemnified Party (which consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
(d) If the indemnification provided for in this Section 2.4 is
finally determined by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein or contribution is required under the Act in circumstances
for which indemnification is provided under this Section 2.4, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other and also the
relative fault of the Indemnifying Party and the Indemnified Party as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact related to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case,
(A) no Holder will be required to contribute any amount in excess of the net
proceeds received from the Note Shares sold by it pursuant to such Registration
Statement, and (B) no person or entity guilty of fraudulent misrepresentation,
within the meaning of Section 11(f) of the Act, shall be entitled to
contribution from any person or entity who is not guilty of such fraudulent
misrepresentation.
(e) Indemnification and contribution similar to that specified
in this Section 2.4 (with appropriate modifications) shall be given by the
Company and each selling Holder with respect to any required registration or
other qualification of Note Shares under any Federal or state law or regulation
of any governmental authority, other than the Act.
(f) The indemnification required by this Section 2.4 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(g) The obligations under this Section 2.4 shall survive the
completion of any offering of Note Shares in a Registration Statement.
Section 2.5 Indemnification with Respect to Underwritten Offering.
(a) In the event that Note Shares are sold pursuant to a
Registration Statement in an underwritten offering, the Company agrees to enter
into an underwriting agreement
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containing customary representations and warranties with respect to the business
and operations of the Company and customary covenants and agreements to be
performed by the Company, including without limitation customary provisions with
respect to indemnification by the Company of the underwriters of such offering.
(b) No Holder may participate in any underwritten registration
pursuant to this Section 2.5 hereunder unless such Holder (i) agrees to sell
Note Shares which it proposes to sell in such underwritten registration on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, reasonable and customary indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and provides such other information and documentation
as the Company or the underwriters may reasonably request in connection with
such underwritten registration.
Section 2.6 Information by Holder. Each holder of Note Shares included
in any Registration shall furnish to the Company such information regarding such
holder and the distribution proposed by such holder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Article 2.
Section 2.7 Termination. All of the Company's obligations to register
Note Shares pursuant to this Agreement shall terminate thirty (30) days after
the end of the Effectiveness Period or any extension thereof.
Section 2.8 Transfer of Rights.
(a) The rights and obligations of each Note Purchaser (or
assignee thereof) under this Agreement may be transferred or assigned by such
Note Purchaser (or assignee thereof), in whole or in part, without the consent
of the Company or any other Note Purchaser, to (i) another person or entity that
is then a Holder of Note Shares or Notes, (ii) any affiliate of the Holder,
(iii) any person or entity acquiring an interest in a Note in a transaction
permitted under the Note, or (iv) any person or entity acquiring in a private
transaction, including a distribution by a partnership to its partners, 500 or
more Note Shares (as adjusted for stock splits, stock dividends,
recapitalization or similar events) (all of such parties, collectively, the
"Permitted Transferees"). The Company may not assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of each
Holder (which consent may be withheld for any reason in the sole discretion of
such Holder or Holders).
(b) Any transferee (other than a Holder who is already a party
to an agreement in form and substance similar to this Agreement) to whom rights
under this Agreement are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which such transferee identifies
itself, gives the Company notice of the transfer of such rights, indicates the
Note Shares owned by it and agrees to be bound by the obligations imposed upon
the Note Purchasers under this Agreement.
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(c) A transferee to whom rights or obligations are transferred
pursuant to this Section 2.8 may not again transfer such rights or obligations
to any other person or entity, other than as provided in this Section 2.8.
Section 2.9 Rule 144. The Company will file the reports required to be
filed by it under the Act and the Exchange Act, and will take such further
action as any Holder of Note Shares may reasonably request, all to the extent
required from time to time to enable such Holder to sell Note Shares without
registration under the Act within the limitations of the exemptions provided by
(a) Rule 144 under the Act, as such Rule may be amended from time to time, or
(b) any similar rule or regulation hereafter adopted by the SEC. Upon the
written request of any Holder of Note Shares, the Company will deliver to such
Holder, within five (5) days of delivery of such request, a written statement as
to whether it has complied with such filing requirements. In connection with any
sale of Note Shares that will result in such securities no longer being
"restricted securities" (as defined in Rule 144 promulgated under the Act), the
Company shall cooperate with the selling Holders and the underwriter(s), if any,
and facilitate the preparation and delivery of certificates representing such
securities to be sold which do not bear any restrictive legends to permit
delivery of such securities.
Section 2.10 Information Reports. The Company covenants that, except at
such times as the Company is a reporting company under Section 13 or 15(d) of
the Exchange Act, the Company shall, upon the written request of any Holder of
Note Shares, provide to any such Holder and to any prospective institutional
transferee of Note Shares designated by such Holder, within five (5) days of
delivery of such request, such financial and other information as is available
to the Company and as such Holder may reasonably determine is required to permit
a transfer of such Note Shares to comply with the requirements of Rule 144A
promulgated under the Act.
ARTICLE 3.
MISCELLANEOUS
Section 3.1 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
in the Note Purchase Agreement (or such other address as may be provided by one
party in a notice to the other). Notice delivered in accordance with the
foregoing shall be effective (i) when delivered, if delivered personally, (ii)
three hours after confirmation of receipt, if delivered by facsimile
transmission, or (iii) two days after being delivered in the United States
(properly addressed and all fees paid) by overnight delivery service to a
courier (such as Federal Express) which regularly provides such service and
regularly obtains executed receipts evidencing delivery. Notices shall not be
given via U.S. Mail.
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Section 3.2 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by (i) the parties hereto; (ii) the
Permitted Transferees; and (iii) the respective successors of the foregoing,
including those resulting by operation of law.
Section 3.3 Headings. Article and Section headings used in this
Agreement are for convenience of reference only and shall not constitute a part
of this Agreement for any purpose or affect the construction of this Agreement.
Section 3.4 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when so executed and delivered, shall be deemed to be an original
and all of which, taken together, shall constitute one and the same Agreement.
This Agreement shall become effective upon the execution of a counterpart hereof
by each of the parties hereto.
Section 3.5 Governing Law. This Agreement shall be deemed to have been
made in the State of New York and the validity of this Agreement, the
construction, interpretation and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law.
Section 3.6 Survival of Agreements, Representations and Warranties. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 3.7 WAIVER OF JURY TRIAL. THE COMPANY WAIVES THE RIGHT TO TRIAL
BY JURY (WHICH THE NOTE PURCHASERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT,
PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE NOTE OR THE NOTE PURCHASE AGREEMENT. THE COMPANY WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 3.8 Amendment and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company, and the Holders of a
majority in principal amount of the Notes (treating Note Shares held by a Holder
as if they had not been converted); provided, that this Agreement may be amended
with the consent of the Holders of less than all Notes (but not less than 51% of
such shares) only in a manner which affects all Holders, as the case may be, in
the same fashion. In no event may this Agreement be amended to (i) shorten the
Effectiveness Period, (ii) extend the Effectiveness Target Date, or (iii)
require a Holder to pay expenses otherwise borne by the Company under Section
2.3, without the Consent of each Holder affected thereby. No waivers of
14
<PAGE>
or exceptions to any term, condition or provision of this Agreement, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
Section 3.9 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE PURCHASE AGREEMENT, THE NOTES OR
ANY OTHER RELATED 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, THE COMPANY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY 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
THE COMPANY AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 14.6 OF THE
PURCHASE AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE HOLDERS TO SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY OR ANY GUARANTOR IN ANY OTHER
JURISDICTION. THE COMPANY AND EACH GUARANTOR 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 THE
COMPANY OR ANY GUARANTOR 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, THE COMPANY AND EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THE PURCHASE AGREEMENT, THE NOTES AND ANY OTHER RELATED DOCUMENT.
Section 3.10 Availability of Equitable Remedies. Each party
acknowledges that a breach of the provisions of this Agreement could not
adequately be compensated by money damages. Accordingly, any party shall be
entitled, in addition to any other right or remedy available to it, to an
injunction restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and in either case no bond
or other security shall be required in connection therewith, and the parties
hereby consent to such injunction and to the ordering of specific performance.
15
<PAGE>
Section 3.11 Entire Agreement. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof.
Section 3.12 Attorneys' Fees. Any holder of a Note, or Note Shares,
shall be entitled to recover from the Company the reasonable attorneys' fees and
expenses incurred by such holder in connection with enforcement by such holder
of any obligation of the Company hereunder or under the Note or the Note
Purchase Agreement.
Section 3.13 No Impairment of Rights. The Company will not, by
amendment of its Certificate of Incorporation or through any other means, avoid
or seek to avoid the observance or performance of any of the terms of this
Agreement, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Agreement
against impairment.
Section 3.14 No Inconsistent or Superior Registration Rights.
(a) From and after the date of this Agreement, the Company
shall not without the prior written consent of the Holders of a majority in
principal amount of Notes, (i) enter into any agreement granting registration
rights with respect to the Common Stock or other securities which are
inconsistent with, or superior to the rights granted to the Holders hereunder;
or (ii) amend any agreement, in effect as of the date hereof, so as to grant
registration rights to any other person or entity which causes such registration
rights to be inconsistent with those granted to the Holders hereunder or to
otherwise adversely affect the registration rights granted to the Holders
hereunder.
(b) Notwithstanding the foregoing, the Holders acknowledge and
agree that comparable registration rights have been granted concurrently
herewith to the holders of the Company's Warrants issued pursuant to that
certain Financing Agreement dated of even date herewith by and among the
Company, Ultradata corporation, MECA Software, L.L.C., Monescape Holdings, Inc.,
the Lenders (as such term is defined therein), Foothill Capital Corporation, as
administrative agent for the Lenders, and Ableco Finance LLC, as collateral
agent for the Lender Group (as such term is defined therein).
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: CFI PROSERVICES, INC.,
an Oregon corporation
By: /s/ Robert P. Chamness
----------------------
Name: Robert P. Chamness
Title: President
Registration Rights Agreement
S-1
<PAGE>
NOTE PURCHASERS: LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership
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
Registration Rights Agreement
S-2
<PAGE>
BAY STAR CAPITAL, L.P.
By: Bay Star Management, LLC
By: /s/ Brian J. Stark
------------------
Name: Brian J. Stark
Title: Managing Director
Registration Rights Agreement
S-3
<PAGE>
U.S. BANCORP LIBRA,
a division of U.S. Bancorp Investments, Inc.
By: /s/ James B. Upchurch
---------------------
Name: James B. Upchurch
Title: President
Registration Rights Agreement
S-4
<PAGE>
SOUNDSHORE HOLDINGS LTD.
By: /s/ Andrew W. Gitlin
--------------------
Andrew W. Gitlin
Director of SoundShore Holdings Ltd.
Registration Rights Agreement
S-5
<PAGE>
SOUNDSHORE OPPORTUNITY HOLDING FUND
LTD.
By: /s/ Andrew W. Gitlin
--------------------
Andrew W. Gitlin
Director of SoundShore Opportunity
Holding Fund Ltd.
Registration Rights Agreement
S-6
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) UNLESS PURSUANT TO AN EXEMPTION
THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR PROVISION) OF THE ACT.
August 13, 1999
CFI PROSERVICES, INC
WARRANT TO PURCHASE 58,000 SHARES
OF COMMON STOCK
CFI PROSERVICES, INC., an Oregon corporation (the "Company"),
hereby certifies that, for value received, U.S. BANCORP LIBRA, A DIVISION OF
U.S. BANCORP INVESTMENTS, INC., a Minnesota corporation (the "Initial Holder"),
or its registered transferees, successors or assigns (collectively, together
with the Initial Holder, the "holder" or the "holders"), is the registered
holder of warrants (the "Warrants") to subscribe for and purchase 58,000 shares
of the fully paid and nonassessable Common Stock (as adjusted pursuant to
Section 4 hereof, the "Warrant Shares") of the Company, at a purchase price per
share equal to $12.34375 (such price, as adjusted pursuant to Section 4 hereof,
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, (a) the term "Common Stock"
shall mean the Company's presently authorized Common Stock, no par value, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, and (b) the term "Date of Grant" shall mean August 13, 1999, the date
of this Warrant. The term "Warrant" as used herein shall be deemed to include
any warrant issued upon transfer or partial exercise of this Warrant, unless the
context clearly requires otherwise.
This Warrant is being issued pursuant to that certain letter
agreement dated May 14, 1999, as amended (the "Letter Agreement"), by and
between the Company and the Initial Holder. The holder is entitled to the rights
and benefits under the Registration Rights Agreement (the "Registration Rights
Agreement") of even date herewith by and among the Company and the Initial
Holder.
1. Term. This Warrant is exercisable, in whole or in part, at any time and
from time to time from the Date of Grant through and including the close of
business on the fifth
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anniversary of this Warrant (the "Expiration Date"); provided, however, that in
the event that any portion of this Warrant is unexercised as of the Expiration
Date, the terms of Section 2(b) below shall apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, this Warrant may be exercised by the holder hereof, in whole or in
part and from time to time, by the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
office of the Company, and, except as otherwise provided for herein, by the
payment to the Company of an amount equal to the then applicable Warrant Price
multiplied by the number of Warrant Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing shares of Common Stock
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised if exercised prior to the close of
business on such date; otherwise, the date of record shall be the next business
day. In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered by
the Company at its expense to the holder hereof as soon as possible and in any
event within ten (10) days after such exercise and, unless this Warrant has been
fully exercised (including without limitation, exercise pursuant to Section 2(b)
below), a new Warrant representing the portion of the Warrant Shares, if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder hereof as soon as possible and in any event within such
ten (10) day period.
b. Automatic Exercise. In the event that any portion of this Warrant
remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4.i. below) of one (1) share of Common
Stock as of the Expiration Date is greater than the applicable Warrant Price as
of the Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of record of such
Warrant Shares as of the close of business on such Automatic Exercise Date. This
Warrant shall be deemed to be surrendered to the Company on the Automatic
Exercise Date by virtue of this Section 2.b. and without any action by the
holder of this Warrant or any other person, and payment to the Company of the
then applicable Warrant Price multiplied by the number of Warrant Shares then
being purchased shall be deemed to be made as of the Automatic Exercise Date
pursuant to the conversion provisions of Section 2(c) below (without payment by
the holder of any cash exercise price). As promptly as practicable on or after
the Automatic Exercise Date and in any event within ten (10) days thereafter,
the Company at its expense shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
Warrant Shares issuable upon such exercise.
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c. Cashless Right to Convert Warrant into Common Stock; Net Issuance.
(1) Right to Convert. In addition to and without limiting the rights of the
holder hereof under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Common Stock as provided in this Section 2.c. at any time or from time
to time during the term of this Warrant, including upon the Automatic Exercise
Date. Upon exercise of the Conversion Right with respect to all or a specified
portion of Warrant Shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without payment by the holder
of any cash or other cash consideration) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Section 2(c)(2) hereof), which value shall be equal to (A) the
aggregate fair market value of the Converted Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Conversion
Date less (B) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right by (ii) the fair
market value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock to be issued
to the holder
Y = the fair market value ("FMV") of one (1) share of
Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant
Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant
Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of the Registration Rights
Agreement, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) Method of Exercise. The Conversion Right may be exercised by the holder
by the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and
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<PAGE>
indicating the number of shares subject to this Warrant which are being
surrendered (referred to in Section 2(c)(1) hereof as the Converted Warrant
Shares) in exercise of the Conversion Right. Such conversion shall be effective
upon receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within ten (10) days following the Conversion
Date.
(3) Determination of Fair Market Value. For purposes of this Section 2.c.,
"fair market value" of a share of Common Stock shall have the meaning set forth
in Section 4.i. below.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges, and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events as set forth below:
a. Adjustment for Initial Errors and the Happening of Certain Events.
(1) The Company hereby acknowledges that the initial number of Warrant
Shares purchasable upon the exercise of this Warrant (the "Exercise Quantity")
was calculated based upon the Company's representation that the number of
outstanding shares of Common Stock of the Company as of the Date of Grant,
calculated on a fully diluted basis using the treasury stock method as
contemplated by the Accounting Principles Board Opinion No. 15 (as referred to
in the Statement of Financial Accounting Standards No. 128) (such shares as
calculated on any date, being referred to as "Fully Diluted Shares"), and before
giving effect to the issuance of any of the Warrants or Warrant Shares, totaled
7,636,440 shares. If for any reason it shall hereafter be determined that the
number of Fully Diluted Shares as of the Date of Grant differed from such
initial number of Warrant Shares, then the Company or the holder (whichever
shall discover such error) shall notify the other of such determination in
writing and the Company shall forthwith (but in no event more than five (5) days
thereafter) reissue all of the outstanding Warrants with an appropriate
proportional adjustment in said number of Warrant Shares to be effective as of
and from the Date of Grant, provided that such adjustment shall be made only if
it results in an increase in the number of Warrant Shares hereunder.
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(2) Any adjustments to the Warrant Price and the number of Warrant Shares
issuable upon exercise of this Warrant pursuant to the other subsections of this
Section 4 prior to the date of any increase or decrease in the Exercise Quantity
pursuant to Section 4.a.(1) shall be recalculated as if such increased or
decreased Exercise Quantity had been the Exercise Quantity since the Date of
Grant, but no such adjustment shall affect the number of Warrant Shares issued
upon any exercise of this Warrant prior to the date any such adjustment is made.
b. Merger, Sale, Reclassification. In case of any (i) consolidation or
merger of the Company with or into another entity (other than a merger or
reorganization (A) in which the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or issuance of any dividend or other distribution of cash,
securities or property to holders of the then outstanding shares of Common
Stock, or (B) resulting solely in a change in par value, or from par value to no
par value, or from no par value to par value, or in a stock split, subdivision
or combination which is the subject of another paragraph in this Section 4),
(ii) sale or other disposition of all or substantially all of the Company's
assets or distribution of property to stockholders (other than distributions
payable out of earnings or retained earnings), or (iii) reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of any stock split, subdivision or
combination which is the subject of another paragraph in this Section 4), then
the Company shall take all necessary actions (including but not limited to
executing and delivering to the holder of this Warrant an additional Warrant or
other instrument, in form and substance mutually agreeable to the Company and
the holder of this Warrant) to ensure that the holder of this Warrant shall
thereafter have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon the effectiveness of such consolidation, merger, sale
or other disposition, reclassification, change or conversion by a holder of the
number of shares of Common Stock then purchasable under this Warrant (which, in
the case of such a transaction in which holders of Common Stock were entitled to
elect between different forms of consideration, shall be deemed to be the form
of consideration received by a plurality of the electing holders of Common
Stock). Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.b. shall similarly apply to successive
reclassifications, changes and conversions.
c. Split, Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall split, subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination, effective at the close
of business on the date the split, subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, or (ii) make any other
distribution with respect to Common Stock
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<PAGE>
(except any distribution specifically provided for in Section 4.b. or Section
4.c. hereof) of Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of Fully Diluted Shares
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of Fully Diluted Shares immediately after such
dividend or distribution.
e. Rights Offerings. In case the Company shall, at any time after the Date
of Grant, issue to holders of shares of the capital stock of the Company (solely
as a result of such holders' status as stockholders of the Company) any rights,
options or warrants entitling them to subscribe for or purchase shares of Common
Stock (or securities convertible or exchangeable into Common Stock) at a price
per share of Common Stock (or having a conversion or exchange price per share of
Common Stock if a security convertible or exchangeable into Common Stock) less
than the fair market value per share of Common Stock on the record date for such
issuance (or the date of issuance, if there is no record date), the Warrant
Price to be in effect on and after such record date (or issuance date, as the
case may be) shall be adjusted so that it shall equal the price determined by
multiplying the Warrant Price in effect immediately prior to such record date
(or issuance date, as the case may be) by a fraction (i) the numerator of which
shall be the number of Fully Diluted Shares on such record date (or issuance
date, as the case may be) plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of such Common Stock so
to be offered (or the aggregate initial exchange or conversion price of the
exchangeable or convertible securities so to be offered) would purchase at such
fair market value on such record date (or issuance date, as the case may be) and
(ii) the denominator of which shall be the number of Fully Diluted Shares on
such record date (or issuance date, as the case may be) plus the number of
additional shares of Common Stock to be offered for subscription or purchase (or
into which the convertible securities to be offered are initially exchangeable
or convertible). In case such subscription price may be paid in part or in whole
in a form other than cash, the fair market value of such consideration shall be
determined by the Board of Directors of the Company in good faith as set forth
in a duly adopted board resolution certified by the Company's Secretary or
Assistant Secretary, provided, that in the event the Board of Directors is
unable to make such a determination or holders of at least fifty-one percent
(51%) of the Warrant Shares disagree in writing with such determination, then
the fair market value of such consideration shall be determined in the same
manner as a Valuation Procedure under Section 4(i) below. Such adjustment shall
be made successively whenever such an issuance occurs; and in the event that
such rights, options, warrants, or convertible or exchangeable securities are
not so issued or are canceled, expire or cease to be convertible or exchangeable
before they are exercised, converted, or exchanged (as the case may be), then
the Warrant Price shall again be adjusted to be the Warrant Price that would
then be in effect if such issuance had not occurred, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment is made.
f. Other Special Distributions. In case the Company shall fix a record date
for the making of a distribution (other than dividends, distributions or
issuances referred to in Section 4(c), Section 4(d) or Section 4(e) above) to
all holders of shares of Common Stock
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<PAGE>
(including any such distribution made in connection with a consolidation or
merger in which the Company is the surviving corporation) of cash, evidences of
indebtedness, assets or subscription rights, options, warrants, or exchangeable
or convertible securities containing the right to subscribe for or purchase
shares of any class of equity securities of the Company, the Warrant Price to be
in effect on and after such record date shall be adjusted by multiplying the
Warrant Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the fair market value per share of Common Stock
on such record date (determined in accordance with Section 4(i) below), less the
cash and/or the fair market value (as determined by the Board of Directors of
the Company in good faith as set forth in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary) of the portion of
the assets or evidences of indebtedness so to be distributed or of such
subscription rights, options, warrants, or exchangeable or convertible
securities applicable to one (1) share of the Common Stock outstanding as of
such record date, provided, that in the event the Board of Directors is unable
to make such a determination or holders of at least fifty-one percent (51%) of
the Warrant Shares disagree in writing with such determination, then the fair
market value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below, and (ii) the denominator of which
shall be such fair market value per share of Common Stock as determined in the
manner set forth under Section 4(i) below. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Warrant Price shall again be adjusted to be the
Warrant Price which would then be in effect if such record date had not been
fixed, but such subsequent adjustment shall not affect the number of Warrant
Shares issued upon any exercise of this Warrant prior to the date such
subsequent adjustment was made.
g. Other Issuances and Adjustments.
(1) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock (excluding (i) shares, rights, options, warrants,
or convertible or exchangeable securities outstanding on the Date of Grant, or
issued in any of the transactions described in Sections 4(b), 4(c), 4(d), 4(e)
or 4(f) above, (ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or exchangeable
securities, and (iii) up to One Million Nine Hundred Eighty-Nine Thousand
Ninety-One (1,989,091) shares of Common Stock (subject to adjustment for splits,
recapitalizations or similar events) issued, issuable or reserved for issuance
to directors, officers, employees or consultants of the Company or any
subsidiary of its subsidiaries in connection with their services as directors,
officers, employees or consultants pursuant to any stock grant, stock option,
warrant or other similar right issued by the Company and approved by the Board
of Directors of the Company under a stock option or incentive plan duly adopted
and approved by the shareholders of the Company and in existence on the date
hereof), at a price per share of Common Stock (determined in the case of such
rights, options, warrants, or convertible or exchangeable securities by dividing
(x) the total amount received and/or receivable by the Company in consideration
of the sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number
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of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) less than the fair market value per
share of Common Stock (determined in accordance with Section 4(i) below and in
the case of rights, options, warrants or convertible or exchangeable securities,
determined at the time of issuance of such securities rather than upon exercise
thereof), in each case on the date the Company fixes the offering price of such
shares, rights, options, warrants, or convertible or exchangeable securities,
then the Warrant Price shall be adjusted so that it shall equal the price
determined by multiplying the Warrant Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A) the number of
Fully Diluted Shares immediately prior to such sale and issuance plus (B) the
number of shares of Common Stock which the aggregate consideration received or
receivable (determined as provided herein) in connection with such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
immediately after such sale and issuance. Such adjustment shall be made
successively whenever such an issuance is made.
(2) In case the Company or any subsidiary thereof shall, at any time after
the Date of Grant, make or agree to (i) any downward adjustment in the exercise,
exchange or conversion price of, (ii) any increase in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of, or (iii) any
change in the consideration payable for the exercise, conversion or exchange of,
any rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or acquire shares of Common Stock, other
than such adjustment that is specifically contemplated and required under the
terms of any such instrument as of the Date of Grant, then the Warrant Price
shall be adjusted so that it shall equal the price determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction the numerator of
which shall be the sum of (A) the number of Fully Diluted Shares immediately
prior thereto, plus (B) the number of shares of Common Stock to be issued upon
such exercise, conversion or exchange immediately prior thereto, multiplied by
the aggregate amount of the fair market value of the consideration to be
received by the Company upon such exercise, conversion or exchange immediately
thereafter, and the denominator shall be the sum of (X) the number of shares of
Fully Diluted Shares immediately thereafter, plus (Y) the number of shares of
Common Stock to be issued upon such exercise, conversion or exchange immediately
thereafter, multiplied by the aggregate amount of the fair market value of the
consideration to be received by the Company upon such exercise, conversion or
exchange immediately prior thereto. Such adjustment shall be made successively
whenever such an issuance is made.
(3) For the purposes of an adjustment under this Section 4(g), the maximum
number of shares of Common Stock which the holder of any right, option, warrant
or convertible or exchangeable security shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding; furthermore, the
consideration received by the Company therefor shall be deemed to be equal to
the price per share of Common Stock (determined in the case of such rights,
options, warrants, or convertible or exchangeable securities by dividing (x) the
total amount received and/or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration
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payable to the Company upon exercise, conversion, or exchange thereof by (y) the
total maximum number of shares of Common Stock covered by such rights, options,
warrants, or convertible or exchangeable securities) multiplied by the number of
shares deemed issued and outstanding in the previous sentence. In case the
Company shall issue shares of Common Stock, or issue or make an adjustment to
the exercise, exchange or conversion price of rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock for a consideration consisting, in whole or in
part, of consideration other than cash or its equivalent, then in determining
the price per share of Common Stock and the consideration received by the
Company, the Board of Directors of the Company shall determine, in good faith,
the fair market value of said property, and such determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, provided, that in the event the Board of
Directors is unable to make such a determination or holders of at least
fifty-one percent (51%) of the Warrant Shares disagree in writing with such
determination, then the fair market value of such consideration shall be
determined in the same manner as a Valuation Procedure under Section 4(i) below.
In case the Company shall issue shares of Common Stock, or issue or make an
adjustment to the exercise or conversion price of rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock, together with one (1) or more other security as
a part of a unit at a price per unit, then in determining the price per share of
Common Stock and the consideration received or to be by the Company, the Board
of Directors of the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, the fair market value of the rights, options,
warrants, or convertible or exchangeable securities then being sold as part of
such unit, provided, that in the event the Board of Directors is unable to make
such a determination or holders of at least fifty-one percent (51%) of the
Warrant Shares disagree in writing with such determination, then the fair market
value of such consideration shall be determined in the same manner as a
Valuation Procedure under Section 4(i) below.
h. Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Warrant Shares purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Warrant Shares purchasable immediately prior to such adjustment in the Warrant
Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
i. Determination of Fair Market Value. For purposes of those provisions of
this Warrant requiring a determination in accordance with this Section 4.i.,
"fair market value" as of a particular date (the "Determination Date") shall
mean (i) if the Common Stock is publicly traded at the time of determination,
the average of the closing prices on such day of the Common Stock on all
domestic securities exchanges on which the Common Stock is then listed, or, if
there have been no sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such day
or, if on any such day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ system as of 4:00 P.M.,
New York time, on such day, or if on any day such security is not quoted on the
Nasdaq system, the average of the highest bid and lowest asked prices on such
day in the
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<PAGE>
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of ten (10) days consisting of the day as of which "fair market
value" is being determined and the nine consecutive business days prior to such
day (provided that, if fair market value is being determined as of the date of a
firm commitment public offering of the Common Stock, fair market value as of
such date shall be the offering price for the Common Stock subject to such
public offering); or (ii) if the Common Stock is not publicly traded at the time
of determination, the Common Stock price per share determined by dividing Market
Value (as defined below) by the number of Fully Diluted Shares. "Market Value"
means the highest price that would be paid for the entire common equity of the
Company on a going-concern basis in an arm's-length transaction between a
willing buyer and a willing seller (neither acting under compulsion), using
valuation techniques then prevailing in the securities industry (but without
giving effect to any discount in respect of a minority interest) and determined
in accordance with the "Valuation Procedure" (as defined below) and assuming
full disclosure and understanding of all relevant information and a reasonable
period of time for effectuating such sale. For the purposes of determining the
Market Value, (a) the exercise price of options or warrants to acquire Common
Stock which are deemed to have been exercised for the purpose of determining the
number of Fully Diluted Shares, shall be deemed to have been received by the
Company, (b)(i) the liquidation preference or indebtedness, as the case may be,
represented by securities which are deemed exercised for or converted into
Common Stock for the purpose of determining the issued and outstanding number of
Fully Diluted Shares of Common Stock and (ii) any contractual limitation in
respect of the shares of Common Stock relating to voting rights, shall be deemed
to have been eliminated or canceled and (c) full effect shall be given to any
discount that may arise as the result of the fact that the shares of Common
Stock are not publicly traded.
"Valuation Procedure" means, with respect to the determination of any
amount or value required to be determined in accordance with such procedure, a
determination (which shall be final and binding on the Company and the holders)
made (i) by agreement among the Company and the holders of at least fifty-one
percent (51%) of the Warrant Shares (collectively, the "Requesting Holders")
within twenty (20) days following the event requiring such determination or (ii)
in the absence of such an agreement, by an Independent Financial Expert selected
in accordance with the further provisions of this definition. If required, an
Independent Financial Expert shall be selected within five (5) days following
the expiration of the twenty (20)- day period referred to above, either by
agreement among the Company and the Requesting Holders or, in the absence of
such agreement, by lot from a list of four potential Independent Financial
Experts remaining after the Company nominates three (3), the Requesting Holders
nominate three (3), and each side eliminates one potential Independent Financial
Expert. The Independent Financial Expert shall be instructed by the Company and
the Requesting Holders to make its determination within twenty (20) days of its
selection. The fees and expenses of an Independent Financial Expert selected
hereunder shall be paid by the Company.
"Independent Financial Expert" means a nationally-recognized investment
banking firm (a) that does not (and whose directors, officers, employees and
Affiliates do not) have a direct or indirect material financial interest in the
Company or any holder, (b) that has not been,
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<PAGE>
and, at the time it is called upon to serve as an Independent Financial Expert
under this Agreement, is not (and none of whose directors, officers, employees
or Affiliates is not), a promoter, director or officer of the Company or any
Holder, (c) that has not been retained during the preceding two years by the
Company or the holder for any purpose, and (d) that is otherwise qualified to
serve as an Independent Financial Advisor. Any such person or entity may receive
customary compensation and indemnification by the Company for opinions or
services it provides as an Independent Financial Expert.
j. Adjustments to Anti-Dilution Rights; Limitations on Subsequent Grants of
Anti-Dilution Rights.
(1) Notwithstanding the foregoing provisions of this Section 4, to the
extent that any holders of equity securities of the Company are entitled to
anti-dilution rights that are superior or more favorable to the holder of such
equity securities than those granted pursuant to this Section 4, the holder
hereof shall be entitled to such anti-dilution rights with respect to the
Warrant Shares.
(2) From and after the Date of Grant, the Company shall not, without the
prior written consent of the holders of at least fifty-one percent (51%) of the
Warrant Shares, grant any holders of equity securities of the Company
anti-dilution rights with respect to such equity securities that are superior or
more favorable than those granted pursuant to this Section 4.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4
hereof, the Company shall deliver to holder a certificate, signed by its chief
financial officer, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which certificate
shall be mailed (without regard to Section 11 hereof, by first class mail,
postage prepaid) to the holder within five (5) days of the date of determination
of such adjustment.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value
(as determined in accordance with Section 4.i. above) of a share of Common Stock
on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
Shares.
a. Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof, are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant or the Warrant
Shares except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act"). Upon exercise of this Warrant,
unless the Warrant Shares to be received upon such exercise are intended to be
included
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<PAGE>
in a registration statement under the Act, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that
the shares of Common Stock so received are being acquired for investment and not
with a view toward distribution or resale in violation of the Act. All shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act shall be stamped or imprinted with a legend in substantially the following
form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES), (iv) UNLESS PURSUANT
TO AN EXEMPTION THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR
PROVISION) OF THE ACT OR (v) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY.
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for resale in connection with any "distribution" thereof for
purposes of the Act in violation of the Act. The holder acknowledges that such
holder, or such holder's representatives, if any, has been given access to
information about the Company, through written material provided in or attached
to the Financing Agreement of even date herewith (the "Financing Agreement") by
and among the Company, UltraData Corporation, Meca Software, L.L.C., MoneyScape
Holdings, Inc., the Lenders (as such term is defined in the Financing
Agreement), Foothill Capital Corporation, as administrative agent for the
Lenders, and Ableco Holdings LLC, as collateral agent for the Lender Group (as
such term is defined in the Financing Agreement), and through meetings with
representatives of the Company, and has had an opportunity to verify the
accuracy of such information, to ask questions of the Company's officers and
directors, and has received answers to such holder's satisfaction. The holder
understands that the valuation and terms of this Warrant has been made solely
through and upon negotiations between the Company and the holder, and not by an
independent accountant, auditor, investment banker or third party. The holder
represents that such holder has evaluated the fairness of the terms and
conditions of this Warrant to the extent he, she or it has deemed necessary. In
making a decision to purchase this Warrant, the holder has relied solely on the
information contained or referred to herein
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<PAGE>
and upon independent investigations made by such holder in its discretion. In
addition, the holder is not purchasing the Warrant as a result or subsequent to:
(1) any advertisement, article, notice, or other publication published in any
newspaper, magazine, or similar broadcast media over the internet, television,
or radio; or (2) any seminar or meeting whose attendees, including the holder,
were invited as a result of, subsequent to, or pursuant to, any general
solicitation.
(2) The holder understands that this Warrant and the Warrant Shares have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein.
(3) The holder understands that this Warrant and the Warrant Shares may be
held indefinitely unless subsequently registered under the Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 promulgated under the
Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three (3)-month
period not exceeding the specified limitations stated therein.
(5) The holder understands that at the time such holder wishes to sell this
Warrant and the Warrant Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144, and
that, in such event, the holder may be precluded from selling this Warrant and
the Warrant Shares under Rule 144 even if the one (1)-year minimum holding
period had been satisfied.
b. Disposition of Warrant or Warrant Shares. With respect to any offer,
sale or other disposition of this Warrant, or any Warrant Shares acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or Warrant Shares, the holder hereof and each subsequent holder of this Warrant
agrees to deliver, prior to the registration of any such transfer, a written
opinion of such holder's counsel (which may be in-house counsel for such
holder), if reasonably requested by the Company, to the effect that the sale or
other disposition of this Warrant or the Warrant Shares, as the case may be, may
be effected without registration under the Act. If a determination has been made
pursuant to this Section 7.b. that the opinion of counsel for the holder is not
reasonably satisfactory to the Company, the Company shall so notify the holder
in writing promptly after such determination has been made (but in any event no
more than two business days thereafter). The foregoing notwithstanding, this
Warrant or the Warrant Shares, as the case may be,
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<PAGE>
may, as to such federal laws, be offered, sold or otherwise disposed of in
accordance with Rule 144 under the Act, provided that the Company shall have
been furnished with such information as the Company may reasonably request to
provide a reasonable assurance that the provisions of Rule 144 have been
satisfied. Each certificate representing this Warrant or the Warrant Shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to ensure compliance
with such laws, unless based on the aforesaid opinion of counsel for the holder,
such legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent or, if acting
as its own transfer agent, the Company may stop transfer on its corporate books,
in connection with such restrictions.
8. Rights as Stockholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise, until this Warrant shall have been exercised and the Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, the Company will transmit to the
holder of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the stockholders.
9. Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by the Company and is
a valid and binding obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and the rules of law or principles at equity governing
specific performance, injunctive relief and other equitable remedies;
b. The Warrant Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable and are not subject to any
preemptive right of any stockholder of the Company;
c. The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the holders thereof are as set forth in the
certificate of incorporation of the Company, as amended to the Date of Grant (as
so amended, the "Charter"), a true and complete copy of which has been delivered
by the Company to the original holder of this Warrant;
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<PAGE>
d. The execution and delivery of this Warrant are not, and the issuance and
delivery of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the charter or by-laws of the
Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company, do
not and will not conflict with or contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any Federal, state or local government
authority or agency or other person, except for the filing of notices pursuant
to federal and state securities laws, which filings will be effected. This
Warrant and the Warrant Shares are not and will not, be subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding to which the Company is a party, including such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof, other than the Registration Rights Agreement;
e. There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant;
f. As of the Date of Grant, the authorized capital stock of the Company (of
all classes and series, including Common Stock and preferred stock), the par
value thereof, and the issued and outstanding amounts thereof, are as set forth
on Schedule 9.f. hereof. The issuance and sale of all such interests was in
compliance with all applicable federal and state securities laws, and all issued
and outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid, and non-assessable. Other than the Warrants, and
other than as specified on Schedule 9.f. hereof, as of the Date of Grant there
are no preemptive rights or any outstanding subscriptions, options, warrants,
rights, convertible securities, calls or other agreements, arrangements or
commitments (including, without limitation, registration rights agreements and
anti-dilution rights) relating to the issued or unissued shares of the Company's
capital stock or other securities, including any right of conversion or exchange
under any outstanding security or other instrument. Other than the Registration
Rights Agreement, the Warrants and any shares of Common Stock issued upon
exercise of the Warrants are not and will not be subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or understanding
to which the Company is a party, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to the voting or
disposition thereof. There are not any outstanding bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth on Schedule
9.f., as of the Date of Grant, there are not any securities, options, warrants,
calls, rights, convertible or exchangeable securities or commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its subsidiaries is a party or by which any of them is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell or create, or cause
to be issued, delivered or sold or created, additional shares of capital stock
or other voting securities or stock equivalents of the Company or
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<PAGE>
any of its subsidiaries or obligating the Company or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or understanding. As of the Date of
Grant, other than as specified on Schedule 9.f. hereof, the Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock.
10. Modification and Waiver. Subject to Section 20, this Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
11. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to a number provided to a party specifically for such
purposes, and facsimile confirmation of receipt is obtained promptly after
completion of transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after mailing, if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such holder or to the Company at the address indicated therefor on the
signature page of this Warrant. Any party hereto may change its address for
purposes of this Section 11 by giving the other party written notice of the new
address in the manner set forth herein.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; provided, however, that the failure of the holder hereof to make any
such request shall not affect the continuing obligation of the Company to the
holder hereof in respect of such rights.
13. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will promptly
(but in no event more than three business days) make and deliver a new Warrant
or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
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14. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
15. Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by, and construed in accordance with, the laws of the
State of New York applicable to contracts made and to be performed entirely
within such State, regardless of the law that might be applied under principles
of conflicts of law.
16. Survival of Representations, Warranties and Agreements. Each of the
respective representations and warranties of the Company and the holder hereof
contained herein shall survive the Date of Grant, the exercise or conversion of
this Warrant (or any part hereof) and the termination or expiration of any
rights hereunder. Each of the respective agreements of each of the Company and
the holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
17. Remedies. In case any one (1) or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
18. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
19. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
20. Amendment. This Warrant may be amended by the signed, written agreement
of the Company and holders of holding at least fifty-one percent (51%) of the
Warrant Shares, collectively and on an as-exercised basis, and such amendment
shall be binding on all holders of this Warrant or Warrant Shares; provided,
however, that the consent of all holders of Warrants affected by any amendment
will be required for an amendment pursuant to which (i) the Warrant Price is
increased, (ii) the number of Warrant Shares purchasable upon exercise of this
Warrant is decreased (other than pursuant to any adjustments provided herein),
(iii) the Expiration Date is changed, or (iv) any right of the holder is
adversely impacted in a manner different than the other holders of the Warrants
or Warrant Shares.
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21. Registration Rights Agreement. The Company shall provide to the holder
hereof, upon written request at any time, a true copy of the Registration Rights
Agreement, as amended and modified to date.
[Signature page follows.]
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<PAGE>
[SIGNATURE PAGE TO WARRANT]
IN WITNESS WHEREOF, the Company has executed this Warrant as
of the day and year first above written.
COMPANY:
CFI PROSERVICES, INC., an Oregon corporation
By: /s/ Kurt W. Ruttum
------------------
Name: Kurt W. Ruttum
Title: Vice President and Chief Financial
Officer
Address: 400 SW Sixth Avenue
Portland, OR 97204
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EXHIBIT A
NOTICE OF EXERCISE
To: CFI ProServices, Inc.
1. The undersigned hereby elects to purchase _____ shares of
Common Stock of ______________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name or names as are
specified below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares in
violation of the Securities Act of 1933, as amended. In support thereof, the
undersigned has executed an Investment Representation Statement attached hereto
as Schedule 1.
(Signature) (Date)
4. Please issue a new Warrant for the unexercised portion of
the attached Warrant in the name of the undersigned or in such other name as is
specified below:
5. I elect to convert this Warrant pursuant to the cashless
Conversion Right described in Section 2.c. of the Warrant Agreement for
____________ Warrant Shares (as such term is defined therein). |_| (check here)
(Date) By: (Warrantholder)
Name (print):
Its:
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Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: CFI ProServices, Inc.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "Registrable Securities"), the undersigned (the "Purchaser") represents to
the Company as follows:
(a) The Purchaser is aware of the Company's business affairs
and financial condition, and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Registrable Securities. The Purchaser is purchasing the Registrable Securities
for its own account for investment purposes only and not with a view to, or for
the resale in connection with, any "distribution" thereof for purposes of the
Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Registrable Securities
have not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein.
(c) The Purchaser further understands that the Registrable
Securities may be held indefinitely unless subsequently registered under the Act
or unless an exemption from registration is otherwise available. In addition,
the Purchaser understands that the certificate evidencing the Registrable
Securities will be imprinted with the legend referred to in the Warrant under
which the Registrable Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and
144A, promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: The availability of certain public information about the
Company, the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the
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<PAGE>
amount of securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it
wishes to sell the Registrable Securities there may be no public market upon
which to make such a sale, and that, even if such a public market then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Purchaser may be precluded from selling
the Registrable Securities under Rule 144 even if the one-year minimum holding
period had been satisfied.
Purchaser:
By:
Title:
Date:
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<PAGE>
Schedule 9.f
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
The information contained in Schedule 5.01(e) of the Financing
Agreement is incorporated into this schedule.
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of August 13, 1999
(this "Agreement"), by and among CFI ProServices, Inc., an Oregon corporation
(the "Company"), and U.S. Bancorp Libra, a Division of U.S. Bancorp Investments,
Inc., a Minnesota corporation (the "Investor").
R E C I T A L S
WHEREAS, this Agreement is being entered into pursuant to that
certain letter agreement dated May 14, 1999, as amended (the "Letter
Agreement"), of even date herewith by and between the Company and the Investor;
and
WHEREAS, in connection with the Letter Agreement, the Company
has agreed to issue to the Investor warrants (the "Warrants") to purchase in the
aggregate 58,000 shares of Common Stock representing one percent (1%) of shares
of the Company as of the date hereof on a fully diluted basis.
NOW, THEREFORE, in consideration of these premises and the
respective promises and covenants contained herein, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
"Act" means the United States Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under the Act, as they each may, from time to time, be in
effect.
"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.
"Commission" means the United States Securities and Exchange
Commission, or any other Federal agency at the time administering the Act.
"Common Stock" means the shares of common stock, no par value,
of the Company.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under the Exchange Act, as they each may,
from time to time, be in effect.
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<PAGE>
"Holder" means the Investor who holds Registrable Securities
and any person or entity who holds Registrable Securities and to whom the rights
granted under this Agreement have been transferred in compliance with this
Agreement, and their Permitted Transferees (as defined in Section 2.9 hereof).
"Indemnified Party" has the meaning described in Section 2.5
(c) below.
"Indemnifying Party" has the meaning described in Section 2.5
(c) below.
"Registration Statement" means a registration statement filed
by the Company with the Commission in compliance with the Act and the rules and
regulations promulgated thereunder for a public offering and sale of its Common
Stock (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another entity).
"Registrable Securities" means shares of Common Stock issued
or issuable pursuant to the exercise of the Warrants. Registrable Securities
shall include any warrants, shares of capital stock or other securities of the
Company issued as a dividend or other distribution with respect to or in
exchange for or in replacement of such shares of Common Stock. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (a) a Registration Statement with respect to the sale of such
securities shall have become effective under the Act and such securities shall
have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement, (b) such securities shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration under the Act, (c) such
securities shall have ceased to be outstanding or (d) upon any sale, transfer or
other disposition in any manner to a person or entity which, by virtue of
Section 2.9 hereof, is not entitled to the rights provided by this Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Shelf Registration of Registrable Securities.
(a) The Company shall mail as soon as practicable a
questionnaire (the "Questionnaire"), soliciting the
information required by Items 507 and 508 of
Regulations S-K under the Act, to each of the
Holders, and shall deliver a copy of such
Questionnaire to any Holder within five (5) days of
it becoming available. As a condition to any
Registrable Securities being included in the
Registration Statement referred to below, such Holder
shall submit a Questionnaire and shall amend and
submit to the Company a revised
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<PAGE>
Questionnaire any time the information contained
therein ceases to be accurate and complete.
(b) The Company agrees to file with the Commission, a
Registration Statement (the "Shelf Registration") for an
offering to be made on a continuous basis pursuant to Rule
415 under the Act covering all Registrable Securities held
by the Holder, as soon as practicable from the date hereof,
but in no event more than ninety (90) days from the date
hereof. The Holders shall be included as selling
securityholders in such Registration Statement promptly, and
within two (2) Business Days, after they have fully
completed and returned to the Company the Questionnaire. The
Shelf Registration shall be on Form S-3 under the Act or
another appropriate form (including Form S-1, if applicable)
permitting registration of such Registrable Securities for
resale by the Holders in the manner or manners reasonably
designated by them (including, without limitation, one or
more underwritten offerings). The Company shall cause the
Shelf Registration to be declared effective pursuant to the
Act on or prior to the date that is one hundred eighty (180)
days after the date of this Agreement (the "Effectiveness
Target Date") and to keep the Shelf Registration
continuously effective under the Act for sixty (60) months
(the "Effectiveness Period") or such shorter period ending
when there ceases to be outstanding any Registrable
Securities.
(c) The Company shall use all reasonable best efforts to keep
the Shelf Registration continuously effective, for the
period described in Section 2.1(b) hereof, by supplementing
and amending the Shelf Registration if required by the
rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if
required by the Act or if reasonably requested by the
Holders of a majority in amount of Registrable Securities
(determined on a fully converted basis) covered by such
Shelf Registration.
(d) In the event any adjustment in the Exercise Quantity (as
defined in the Warrants) would result in the issuance of
additional Registrable Securities upon exercise of the
Warrants, the Company shall promptly, and within ten (10)
Business Days, amend or supplement the Shelf Registration in
order to effect a Shelf Registration of such additional
Registrable Securities pursuant to the terms of Section
2.1(b), provided, that notwithstanding anything to the
contrary in Section 2.1(b), the Effectiveness Target Date
shall be ninety (90) days from the date of the effective
date of the adjustment to the Exercise Quantity resulting in
additional Registrable Securities becoming issuable to the
Holders.
(e) Notwithstanding anything to the contrary in this Section
2.1, the Company may, by delivering written notice to the
Holders, prohibit offers and sales of Registrable Securities
pursuant to the Shelf Registration at any time
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<PAGE>
if (A)(i) the Company is in possession of material
non-public information relating to the Company, (ii)
the Company determines (based on advice of counsel)
that such prohibition is necessary in order to avoid
a requirement to disclose such material non-public
information to the public and (iii) the Company
determines in good faith that public disclosure of
such material non-public information would not be in
the best interests of the Company and its
stockholders, or (B)(i) the Company has made a public
announcement relating to an acquisition or business
combination transaction including the Company and/or
one or more of its subsidiaries that is material to
the Company and its subsidiaries taken as a whole and
(ii) the Company determines in good faith that (x)
offers and sales of Registrable Securities pursuant
to the Shelf Registration prior to the consummation
of such transaction (or such earlier date as the
Company shall determine) would not be in the best
interests of the Company and its shareholders or (y)
it would be impracticable at the time to obtain any
financial statements relating to such acquisition or
business combination transaction that would be
required to be set forth in the Shelf Registration;
provided, however, that upon (i) the public
disclosure by the Company of the material non-public
information described in clause (A) of this paragraph
or (ii) the consummation, abandonment or termination
of, or the availability of the required financial
statements with respect to, a transaction described
in clause (B) of this paragraph, the suspension of
the use of the Shelf Registration pursuant to this
Section 2.1(e) shall cease and the Company shall
promptly comply, prior to the next Business Day, with
Section 2.3 hereof and notify the Holders that
dispositions of Registrable Securities may be
resumed. In the event that during the Effectiveness
Period the prospectus under the Shelf Registration
becomes not usable as a result of the Company's
notification under this Section, the Company shall
use its reasonable best efforts to provide the
Holders a usable prospectus as soon as practicable,
and in no event shall sales of Registrable Securities
under the Shelf Registration be suspended for more
than thirty (30) days in any three hundred sixty-five
(365) day period.
Section 2.2 [Reserved]
Section 2.3 Registration Procedures.
(a) The Company shall, at its expense:
(i) file with the Commission within ninety (90)
days a Registration Statement with respect
to such Registrable Securities and use its
best efforts to cause that Registration
Statement to become and remain effective
prior to the Effectiveness Target Date and
for the duration of the Effectiveness
Period;
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<PAGE>
(ii) prepare and file with the Commission any
amendments and supplements to the
Registration Statement and the prospectus
included in the Registration Statement as
may be necessary to keep the Registration
Statement effective for the period described
in Section 2.3(a)(i) above and comply with
the provisions of the Act with respect to
the disposition of all securities covered by
such Registration Statement;
(iii) furnish to each selling Holder such
reasonable numbers of copies of the
Registration Statement, preliminary
prospectus, final prospectus and any
amendments and supplements and such other
documents as each selling Holder may
reasonably request in order to facilitate
the public offering of such securities;
(iv) promptly and prior to the next Business Day,
furnish to each selling Holder written
notice of any stop order or similar notice
issued by the Commission or any state agency
charged with the regulation of securities
and of any notice from the Nasdaq National
Market or other securities exchange then
listing the Registrable Securities covered
by such Registration Statement;
(v) register or qualify the Registrable
Securities covered by the Registration
Statement under the securities or Blue Sky
laws of such states as shall be reasonably
appropriate for the distribution of the
Registrable Securities; provided, however,
that the Company shall not for any purpose
be required to qualify to do business as a
foreign corporation in any jurisdiction
wherein it is not so qualified;
(vi) use its best efforts to make available to
its security holders, as soon as reasonably
practicable, an earnings statement covering
the period of at least twelve (12) months,
but not more than eighteen (18) months,
beginning with the first month after the
effective date of the Registration
Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of
the Act and Rule 158 thereunder;
(vii) use its best efforts to comply with all
rules and regulations of the Nasdaq National
Market, or such other principal securities
exchange on which the equity securities
issued by the Company are then quoted or
listed and traded, to ensure that the
Registrable Securities are freely tradeable
thereon upon registration thereof under the
Act;
(viii) provide, if one has not already been
appointed by the Company, a transfer agent
and registrar for all Registrable Securities
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<PAGE>
covered by such Registration Statement not
later than the effective date of such
Registration Statement;
(ix) enter into a cross-indemnity agreement, in
customary form, with each underwriter, if
any;
(x) include in the Registration Statement filed
with the Commission, all Registrable
Securities; and promptly, within two (2)
Business Days after filing of such a
registration statement or prospectus or any
amendments or supplements thereto, the
Company shall furnish to each Holder copies
of all such documents so filed including, if
requested, documents incorporated by
reference in the registration statement; and
notify each selling Holder of any stop order
issued or threatened by the Commission and
use its best efforts to prevent the entry of
such stop order or to remove it if entered;
(xi) notify each selling Holder, at any time when
a prospectus relating to such selling
Holder's Registrable Securities is required
to be delivered under the Act, of the
occurrence of any event as a result of which
the prospectus included in such registration
statement contains an untrue statement of a
material fact or omits to state any material
fact necessary to make the statements
therein not misleading, and as soon as
practicable prepare a supplement or
amendment to such prospectus so that, as
thereafter delivered to the purchasers of
such Registrable Securities, such prospectus
will not contain an untrue statement of a
material fact or omit to state any material
fact necessary to make the statements
therein not misleading;
(xii) cause all such Registrable Securities to be
listed on the Nasdaq National Market System
(or on such other principal securities
exchange on which the equity securities
issued by the Company are then quoted or
listed and traded);
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<PAGE>
(xiii) enter into an underwriting agreement in
customary form and take all such other
actions that the selling Holders or their
underwriters, if any, reasonably request in
order to expedite or facilitate the
disposition of such Registrable Securities;
(xiv) make available for inspection by each
selling Holder and one (1) of its counsel
acting for them, any underwriter
participating in any disposition pursuant to
such registration statement, and any counsel
retained by any such underwriter, all
pertinent financial and other information
and corporate documents of the Company
reasonably requested, and cause the
Company's officers, directors and employees
to supply all information reasonably
requested by any such selling Holder,
underwriter or counsel in connection with
such registration statement and to
participate in "road shows" or management
presentations as may be reasonably requested
by any underwriter;
(xv) with respect to any underwritten offering,
use its reasonable best efforts to obtain a
"cold comfort" letter from the Company's
independent public accountants in customary
form and covering such matters of the type
customarily covered by "cold comfort"
letters as the selling Holders or any
underwriter may reasonably request;
(xvi) with respect to an underwritten offering,
obtain an opinion of counsel to the Company,
addressed to the selling Holders and any
underwriter, in customary form and including
such matters as are customarily covered by
such opinions in underwritten registered
offerings of equity securities as the
selling Holders or any underwriter may
reasonably request, such opinion to be
reasonably satisfactory in form and
substance to each selling Holder;
(xvii) furnish to each selling Holder upon request
of such selling Holder within three (3)
Business Days, copies of all correspondence
between the Company, the Commission and any
applicable state securities regulatory
agencies relating to such registration;
(xviii) during the period that the Company is
required to keep such Registration Statement
effective, promptly and prior to the next
Business Day, notify each selling Holder of
Registrable Securities covered by such
Registration Statement at any time when a
prospectus relating thereto is required to
be delivered under the Act, of the happening
of any event as a result of which the
prospectus or any prospectus supplement
included in such registration statement, as
then in effect, or any material incorporated
by reference therein, includes an untrue
statement of a material fact or omits to
state any material fact required to be
stated therein or necessary to make the
statements therein not misleading in light
of the circumstances then existing, or if it
is necessary to amend or supplement such
prospectus or any prospectus supplement or
registration statement or material
incorporated by reference therein to comply
with the law, and at the request of any such
selling Holder, prepare and furnish to such
selling Holder a reasonable number of copies
of a supplement to or an amendment of such
prospectus or any prospectus supplement or
material incorporated by reference therein
as may be necessary so that, as thereafter
delivered to the purchasers of such
Registrable Securities, such prospectus or
any prospectus supplement or material
incorporated by reference therein shall not
include an untrue statement of a material
fact or omit to state a material fact
required to be stated therein or necessary
to make the
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<PAGE>
statements therein not misleading in light
of the circumstances then existing and so
that such prospectus or prospectus
supplement or registration statement or
material incorporated by reference therein,
as amended or supplemented, will comply with
the law;
(xix) upon the reasonable request of any selling
Holder, to include in a prospectus
supplement or an amendment to a Registrable
Securities Shelf Registration any change in
the information provided to the Company
pursuant to Rules 507 or 508 under
Regulation S-K under the Act; and
(xx) upon delivery of the certificates with
respect to the Registrable Securities to be
registered pursuant hereto, issue to any
underwriter to which the selling Holder may
sell such Registrable Securities in
connection with any such registrations (and
to any direct or indirect transferee of any
such underwriter) certificates evidencing
such Registrable Securities without any
legend restricting the transferability of
the Registrable Securities.
(b) Each selling Holder of Registrable Securities agrees that,
upon receipt of any written notice from the Company of (i) any request by the
Commission for amendments or supplements to a Registration Statement or related
prospectus covering any of such selling Holder's Registrable Securities, (ii)
the issuance by the Commission of any stop order suspending the effectiveness of
a Registration Statement covering any of such selling Holder's Registrable
Securities or the initiation of any proceedings for that purpose, (iii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (iv) the happening
of any event that requires the making of any changes in the Registration
Statement covering any of such selling Holder's Registrable Securities so that
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that any related prospectus will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (v) the Company's reasonable
determination that a post-effective amendment to a Registration Statement
covering any of such selling Holder's Registrable Securities or a supplement to
any related prospectus is required under the Act; such selling Holder will
forthwith discontinue disposition of such Registrable Securities until it is
advised in writing by the Company that the use of the applicable prospectus (as
amended or supplemented, as the case may be) and disposition of the Registrable
Securities covered thereby pursuant thereto may be resumed, provided, however,
(x) that such selling Holder shall not resume its disposition of Registrable
Securities pursuant to such Registration Statement or related prospectus unless
it has received notice from the Company that such Registration Statement or
amendment has become effective under the Act and has received a copy or copies
of the related prospectus (as then amended or supplemented. as the case may be)
unless the Registrable Securities are then listed on a national securities
exchange and the Company has advised such selling Holder that the Company has
delivered copies of the related prospectus, as then amended or supplemented, in
transactions effected upon such exchange, subject to any subsequent receipt by
such selling Holder from the Company of written notice of any of the events
contemplated by clauses (i) through (v) of this paragraph, and, (y) if so
directed by the Company,
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<PAGE>
such holder will deliver to the Company all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Holders are required to refrain from disposition of Registrable
Securities for more than thirty (30) days in any three hundred sixty-five (365)
day period, the Company shall be deemed in breach of this Agreement.
Section 2.4 Registration Expenses. The Company shall bear all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all fees and expenses relating to the listing of
any Registrable Securities with the Nasdaq National Market System (or on such
other principal securities exchange on which the equity securities issued by the
Company are then quoted or listed and traded), fees and expenses of compliance
with securities or Blue Sky laws in jurisdictions reasonably requested by any
selling Holder or underwriter pursuant to Section 2.3(b) (including reasonable
fees and disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Securities), all word processing, duplicating and printing
expenses, messenger and delivery expenses, fees and disbursements of counsel for
the Company and one (1) counsel for the selling Holders (selected by Holders
holding a majority of the Registrable Securities), independent public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance) and underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals attributable to the securities
being registered, which discounts, commissions or fees with respect to any
selling Holder's respective Registrable Securities shall be paid by such selling
Holder), all the Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), fees of the National Association of Securities Dealers,
Inc., the expense of any annual audit, the expenses of any special audit
incident to or required by any registration, the expense of any liability
insurance (if the Company determines to obtain such insurance) and the
reasonable fees and expenses of any special experts (including attorneys)
retained by the Company (if it so desires) in connection with such registration
and fees and expenses of other persons retained by the Company.
Section 2.5 Indemnification.
(a) In the event of any registration of any of the Registrable
Securities under the Act pursuant to this Agreement, the Company will indemnify
and hold harmless the selling Holder of such Registrable Securities, each of its
officers, directors, partners, legal counsel and accountants, each underwriter
(if any) and each other person, if any, who controls such selling Holder or such
underwriter within the meaning of the Act, against any expenses, losses, claims,
damages or liabilities, joint or several, arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement under which such Registrable Securities were
registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arising out of or based upon any
omission (or alleged omission) to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Act or any rule or regulation promulgated
thereunder applicable to the Company and relating to action or inaction required
of the Company in
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connection with any such registration; and, subject to Section 2.5(c) below, the
Company will reimburse such selling Holder, each of its officers, directors,
partners, legal counsel and accountants, each underwriter, if any, and each such
controlling person for any legal and any other expenses reasonably incurred by
such selling Holder or controlling person in connection with investigating and
defending any such expense, loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such expense, loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, final prospectus, or summary prospectus, or any such
amendment or supplement, made in reliance upon and in conformity with
information furnished to the Company, in writing, by such selling Holder and
stated to be specifically for use therein.
(b) Each selling Holder of Registration Securities will,
severally, and not jointly and severally, in the event that any Registrable
Securities held by such selling Holder as to which any registration is being
effected under the Act pursuant to this Agreement, indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if any),
and each other person, if any, who controls the Company or any such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Securities were registered under the Act, any
preliminary prospectus, final prospectus or summary prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission to state a material
fact required to be stated therein or necessary to make the statement therein
not misleading, if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by such selling
Holder and stated to be specifically for use therein, and shall reimburse the
Company, its directors and officers, and each such controlling person for any
legal or other expenses reasonably incurred by any of them in connection with
investigation or defending any such loss, claim, damage, liability or action.
This indemnity shall remain in full force and effect for the applicable statute
of limitation period regardless of any investigation made by or on behalf of the
Company or such controlling person and shall survive the transfer of shares. No
selling Holder shall be liable to the Company and the other indemnified parties
under this Section 2.5(b) for any amount in excess of the net proceeds received
from the Registrable Securities sold by it pursuant to the Registration
Statement.
(c) Each party entitled to indemnification under this Section
2.5 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any loss, claim, action, damage or liability as to which
indemnity may be sought, and shall permit the Indemnified Party to assume the
defense of any such claim or any litigation resulting therefrom; provided, that
counsel for the Indemnifying Party who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party whose approval shall
not be unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnified Party of its obligations under this Section 2.5, except to the
extent that such failure to give notice prejudices the Indemnifying Party or
such Indemnifying Party
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is damaged by such delay. The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
pay such expense (but in no event shall the Indemnifying Party be obligated to
pay the fees and expenses of more than one counsel for the Indemnified Party or
Parties) if representation of such Indemnified Party by the counsel retained by
the Indemnifying Party would, in the reasonable judgment of the Indemnified
Party, be inappropriate due to actual or potential conflict of interests between
the Indemnified Party and any other party represented by such counsel in such
proceeding. If, in the Indemnified Party's reasonable judgment, a conflict of
interest between such Indemnified and Indemnifying Parties may exist in respect
of such claim, the Indemnified Party may assume the defense of such claim,
jointly with any other Indemnified Party that reasonably determines such
conflict of interest to exist, and the Indemnifying Party shall be liable to
such Indemnified Parties for the reasonable legal fees and expenses of one
counsel for all such Indemnified Parties and for other expenses reasonably
incurred in connection with the defense thereof incurred by the Indemnified
Parties. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party (which consent shall
not be unreasonably withheld), consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
(d) If the indemnification provided for in this Section 2.5 is
finally determined by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein or contribution is required under the Act in circumstances
for which indemnification is provided under this Section 2, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other and also the
relative fault of the Indemnifying Party and the Indemnified Party as well as
any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact related to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case,
(A) no Holder will be required to contribute any amount in excess of the net
proceeds received from the Registrable Securities sold by it pursuant to such
Registration Statement, and (B) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Act, shall be
entitled to contribution from any person or entity who is not guilty of such
fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified
in this Section 2.5(e) (with appropriate modifications) shall be given by the
Company and each selling Holder with respect to any required registration or
other qualification of Registrable Securities under any Federal or state law or
regulation of any governmental authority, other than the Act.
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(f) The indemnification required by this Section 2.5 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(g) The obligations under this Section 2.5 shall survive the
completion of any offering of Registrable Securities in a Registration
Statement.
Section 2.6 Indemnification with Respect to Underwritten Offering.
(a) In the event that Registrable Securities are sold pursuant
to a Registration Statement in an underwritten offering, the Company agrees to
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
(b) No Holder may participate in any underwritten registration
pursuant to Section 2 hereunder unless such Holder (i) agrees to sell the
Registrable Securities which it proposes to sell in such underwritten
registration on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, reasonable and customary
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements and provides such other information and
documentation as the Company or the underwriters may reasonably request in
connection with such underwritten registration.
Section 2.7 Information by Holder. Each holder of Registrable
Securities included in any Registration shall furnish to the Company such
information regarding such holder and the distribution in proposed by such
holder as the Company may reasonably request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Article 2.
Section 2.8 Termination. All of the Company's obligations to register
Registrable Securities under this Agreement pursuant to this Agreement shall
terminate on the earlier of (x) when there are no Registrable Securities as
defined herein and (y) seven years from the date hereof.
Section 2.9 Transfer of Rights.
(a) The rights and obligations of each Holder (or assignee
thereof) under this Agreement may be transferred or assigned by such Holder (or
assignee thereof), in whole or in part, without the consent of the Company or
any other Holder, (i) to any Affiliate of the Holder or (ii) any person or
entity acquiring at least two hundred fifty (250) Registrable Securities (as
adjusted for stock splits, stock dividends, recapitalization or similar events)
(all of such parties, collectively, the "Permitted Transferees"). The Company
may not assign this Agreement or any of its rights or obligations hereunder or
under the Warrant without the prior written consent of each Holder and
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each Warrant holder (which consent may be withheld for any reason in the sole
discretion of such Holder or Holders).
(b) Any transferee (other than a Holder who is already a party
to an agreement in form and substance similar to this Agreement) to whom rights
under this Agreement are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which such transferee identifies
itself, gives the Company notice of the transfer of such rights, indicates the
Registrable Securities owned by it and agrees to be bound by the obligations
imposed upon the Investor under this Agreement.
(c) A transferee to whom rights or obligations are transferred
pursuant to this Section 2.9 may not again transfer such rights or obligations
to any other person or entity, other than as provided in this Section 2.9.
Section 2.10 Rule 144. The Company will file the reports required to be
filed by it under the Act and the Exchange Act, and will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Act within the limitations of the
exemptions provided by (a) Rule 144 under the Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the written request of any Holder of Registrable
Securities, the Company will deliver to such Holder, within five (5) days of
delivery of such request, a written statement as to whether it has complied with
such filing requirements. In connection with any sale of Registrable Securities
that will result in such securities no longer being "restricted securities" (as
defined in Rule 144 promulgated under the Act), the Company shall cooperate with
the selling Holders and the underwriter(s), if any, and facilitate the
preparation and delivery of certificates representing such securities to be sold
which do not bear any restrictive legends to permit delivery of such securities.
Section 2.11 Information Reports. The Company covenants that, except at
such times as the Company is a reporting company under Section 13 or 15(d) of
the Exchange Act, the Company shall, upon the written request of any Holder of
Registrable Securities, provide to any such Holder and to any prospective
institutional transferee of Registrable Securities designated by such Holder,
within five (5) Business Days after delivery of such written request, such
financial and other information as is available to the Company and as such
Holder may reasonably determine is required to permit a transfer of such
Registrable Securities to comply with the requirements of Rule 144A promulgated
under the Act.
Section 2.12 Investor Representations. In connection with the
acquisition of the Warrants, the Investor hereby represents that it has such
knowledge and experience in financial and business matters that the Investor is
capable of evaluating the merits and risks of its investment contemplated by
this Agreement and has the capacity to protect its own interests. The Investor
acknowledges that investment in the Warrant and the shares of Company common
stock issuable upon exercise of such Warrant ("Warrant Shares") is highly
speculative and involves a substantial and high degree of risk of loss of the
entire investment. The Investor has adequate means of providing for current and
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anticipated financial needs and contingencies, is able to bear the economic risk
of its investment in the Warrant and Warrant Shares and could afford complete
loss of such investment. The Investor is an "accredited investor" (as such term
is defined in Rule 501 of Regulation D under the Act).
Section 2.13 Market Stand-off Agreement. Each Holder agrees, in
connection with any underwritten public offering that, upon request of the
Company or the underwriters managing any underwritten public offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Common Stock of the
Company (other than those shares of Common Stock included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred twenty (120)
days) from the effective date of such registration as may be requested by the
underwriters. The Company may impose stop-transfer instructions with respect to
the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
ARTICLE 3
MISCELLANEOUS
Section 3.1 Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
on the signature page hereof (or such other address as may be provided by one
party in a notice to the other). Notice delivered in accordance with the
foregoing shall be effective (i) when delivered, if delivered personally, (ii)
three (3) hours after confirmation of receipt, if delivered by facsimile
transmission, or (iii) two (2) days after being delivered in the United States
(properly addressed and all fees paid) for by overnight delivery service to a
courier (such as Federal Express) which regularly provides such service and
regularly obtains executed receipts evidencing delivery. Notices shall not be
given via U.S. Mail.
Section 3.2 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by (i) the parties hereto; (ii) the
Permitted Transferees; and (iii) the respective successors of the foregoing,
including those resulting by operation of law.
Section 3.3 Headings. Article and Section headings used in this
Agreement are for convenience of reference only and shall not constitute a part
of this Agreement for any purpose or affect the construction of this Agreement.
Section 3.4 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
one and the same Agreement. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
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Section 3.5 Governing Law. This Agreement shall be deemed to have been
made in the State of New York and the validity of this Agreement, the
construction, interpretation and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law.
Section 3.6 Survival of Agreements, Representations and Warranties. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
Section 3.7 WAIVER OF JURY TRIAL. THE COMPANY WAIVES (A) THE RIGHT TO
TRIAL BY JURY (WHICH INVESTOR HEREBY ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE WARRANT OR THE WARRANT CERTIFICATE. THE COMPANY WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 3.8 Amendment and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 51% of the Registrable Securities; provided, that this Agreement may be
amended with the consent of the holders of less than all Registrable Securities
(but not less than 51% of such shares) only in a manner which affects all
Registrable Securities in the same fashion. In no event may this Agreement be
amended to (i) shorten the Effectiveness Period, (ii) extend the Effectiveness
Target Date or (iii) require a Holder to pay expenses otherwise borne by the
Company under Section 2.4, without the prior written consent of each Holder
affected thereby. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
Section 3.9 Availability of Equitable Remedies. Each party acknowledges
that a breach of the provisions of this Agreement could not adequately be
compensated by money damages. Accordingly, any party shall be entitled, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance of
any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and the parties hereby
consent to such injunction and to the ordering of specific performance.
Section 3.10 Entire Agreement. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter hereof.
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Section 3.11 Attorney's Fees. Any holder of the Warrant shall be
entitled to recover from the Company the reasonable attorney's fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Company hereunder or under the Warrant.
Section 3.12 No Impairment Rights. The Company will not, by amendment
of its Certificate of Incorporation or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Agreement, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Agreement against impairment.
Section 3.13 No Inconsistent or Superior Registration Rights.
(a) From and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of a majority in
principal amount of Registrable Securities, (i) enter into any agreement
granting registration rights with respect to the Common Stock or other
securities which are inconsistent with or superior to the rights granted to the
Holders hereunder; or (ii) amend any agreement, in effect as of the date hereof,
so as to grant registration rights to any other person or entity which causes
such registration rights to be inconsistent with those granted to the Holders
hereunder or to otherwise adversely affect the registration rights granted to
the Holders hereunder.
(b) Notwithstanding the foregoing, the Investor acknowledges
and agrees that comparable registration rights have been granted concurrently
herewith to (i) the holders of the Company's warrants issued pursuant to that
certain Financing Agreement dated of even date herewith by and among the
Company, Ultradata Corporation, MECA Software, L.L.C., MoneyScape Holdings,
Inc., the Lenders (as such term is defined in the Financing Agreement), Foothill
Capital Corporation, as administrative agent for the Lenders, and Ableco Finance
LLC, as collateral agent for the Lender Group (as such term is defined in the
Financing Agreement) and (ii) the holders of the 10% Convertible Subordinated
Discount Notes issued pursuant to that certain Note Purchase Agreement dated of
even date herewith by and among the Company, the subsidiaries of the Company
listed on Exhibit A thereto, and the purchasers of such notes listed on the
signature page thereof.
[Signature Page Follows.]
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COMPANY: CFI PROSERVICES, INC.
By: /s/ Kurt W. Ruttum
------------------
Name: Kurt W. Ruttum
Title: Vice President and Chief
Financial Officer
Address: 400 SW Sixth Avenue
Portland, OR 97204
INVESTOR: U.S. BANCORP LIBRA, A DIVISION OF U.S.
BANCORP INVESTMENTS, INC.
By: /s/ Eben Perison
----------------
Name: Eben Perison
Title: General Counsel
Address:
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CONCENTREX INCORPORATED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP
PLAN
(As Amended and Restated Effective January 1, 1999)
<PAGE>
TABLE OF CONTENTS
CONTENTS
INTRODUCTION..................................................................1
ARTICLE 1 DEFINITIONS.................................................2
Section 1.1 Account.................................................2
Section 1.2 Acquisition Loan........................................2
Section 1.3 Administrative Committee................................2
Section 1.4 Affiliate...............................................2
Section 1.5 Allocable Income........................................2
Section 1.6 Annuity Starting Date...................................2
Section 1.7 Beneficiary.............................................3
Section 1.8 Board...................................................3
Section 1.9 Bonus Contributions.....................................3
Section 1.10 Bonus Period............................................3
Section 1.11 Capital Accumulation....................................3
Section 1.12 Code....................................................3
Section 1.13 Company.................................................3
Section 1.14 Company Stock...........................................3
Section 1.15 Company Stock Account...................................3
Section 1.16 Compensation............................................3
Section 1.17 Culverin After-Tax Account..............................4
Section 1.18 Culverin Plan...........................................4
Section 1.19 Culverin Supplemental Account...........................4
Section 1.20 Disability..............................................4
Section 1.21 Elective Deferrals......................................4
Section 1.22 Elective Deferrals Account..............................5
Section 1.23 Eligible Employee.......................................5
Section 1.24 Eligibility Computation Period..........................5
Section 1.25 Employee................................................5
Section 1.26 Employer................................................6
Section 1.27 Employer Contributions..................................6
Section 1.28 ERISA...................................................6
Section 1.29 ESOP....................................................6
Section 1.30 Financed Shares.........................................6
Section 1.31 401(k) Portion..........................................6
Section 1.32 Highly Compensated Employee.............................6
Section 1.33 Hour of Service.........................................7
Section 1.34 Investment Fund.........................................8
Section 1.35 Leased Employee.........................................8
Section 1.36 Matching Contributions..................................8
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Section 1.37 Maternity or Paternity Leave............................9
Section 1.38 Non-Highly Compensated Employee.........................9
Section 1.39 Normal Retirement Age...................................9
Section 1.40 One-Year Break in Service...............................9
Section 1.41 Other Investments Account..............................10
Section 1.42 Participant............................................10
Section 1.43 Period of Service......................................10
Section 1.44 Period of Severance....................................10
Section 1.45 Plan...................................................10
Section 1.46 Plan Year..............................................10
Section 1.47 Pre-1999 Matching Contributions Account................11
Section 1.48 Rollover Account.......................................11
Section 1.49 Rollover Contribution..................................11
Section 1.50 Service................................................11
Section 1.51 Severance Date.........................................11
Section 1.52 Trust..................................................12
Section 1.53 Trustee................................................12
Section 1.54 Trust Fund.............................................12
Section 1.55 Valuation Date.........................................12
Section 1.56 Year of Eligibility Service............................12
Section 1.57 Year of Participation..................................12
Section 1.58 Year of Service........................................13
ARTICLE 2 PARTICIPATION..............................................14
Section 2.1 Participation Date.........................................14
Section 2.2 Reemployment and Change in Employment Classification.......14
Section 2.3 Termination of Participation...............................15
Section 2.4 Qualified Military Service.................................15
ARTICLE 3 PARTICIPANT CONTRIBUTIONS..................................16
Section 3.1 Elective Deferrals.....................................16
Section 3.2 Election Procedure and Amendments......................17
Section 3.3 Rollovers..............................................17
Section 3.4 Average Deferral Percentage Test.......................17
ARTICLE 4 EMPLOYER CONTRIBUTIONS.....................................21
Section 4.1 Matching Contributions.................................21
Section 4.2 Employer Bonus Contribution............................21
Section 4.3 Contribution of Stock..................................21
Section 4.4 Average Contribution Percentage Test...................22
ARTICLE 5 MAINTENANCE OF PARTICIPANT ACCOUNTS........................25
Section 5.1 Participant Accounts...................................25
Section 5.2 Allocation of Contributions............................26
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Section 5.3 Financed Shares........................................26
Section 5.4 Allocation of Investment Gains and Losses..............27
Section 5.5 Dividends on Company Stock.............................28
Section 5.6 Accounting for Allocations.............................28
Section 5.7 Account Statements.....................................29
Section 5.8 Limitations Imposed by Code Section 415................29
ARTICLE 6 INVESTMENT OF TRUST ASSETS.................................31
Section 6.1 Investment of 401(k) Portion...........................31
Section 6.2 Investment of ESOP.....................................32
Section 6.3 Purchases of Company Stock.............................32
Section 6.4 Sales of Company Stock.................................32
Section 6.5 Acquisition Loans......................................32
ARTICLE 7 VOTING OF COMPANY STOCK....................................34
Section 7.1 Voting.................................................34
Section 7.2 Tender Offers..........................................34
Section 7.3 Furnishing of Information..............................34
ARTICLE 8 VESTING....................................................35
Section 8.1 Vesting................................................35
Section 8.2 Forfeitures............................................35
ARTICLE 9 IN-SERVICE DISTRIBUTIONS...................................37
Section 9.1 Cash Dividends.........................................37
Section 9.2 ESOP Diversification...................................37
Section 9.3 Hardship Withdrawals...................................38
Section 9.4 Loans..................................................40
Section 9.5 Special Rules..........................................40
ARTICLE 10 PAYMENT OF BENEFITS........................................42
Section 10.1 Time of Distribution...................................42
Section 10.2 Amount and Form of Distribution........................43
Section 10.3 Special Rules for Death Benefits.......................43
Section 10.4 Notice to Participant..................................44
Section 10.5 Minimum Distribution and Incidental Benefit
Requirements........................................45
Section 10.6 Post-Termination Withdrawals...........................45
Section 10.7 Special Rules for Amounts Transferred from Culverin
Plan................................................45
Section 10.8 Direct Rollovers.......................................45
Section 10.9 Incompetent Participant or Beneficiary.................46
Section 10.10 Beneficiary Dispute.....................................47
ARTICLE 11 ADMINISTRATION.............................................48
Section 11.1 Administrative Committee...............................48
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Section 11.2 Organization and Procedure.............................48
Section 11.3 Authority of the Administrative Committee..............49
Section 11.4 Actions Conclusive.....................................49
Section 11.5 Use of Professional Services...........................50
Section 11.6 Fees and Expenses......................................50
Section 11.7 Liability and Indemnification..........................50
Section 11.8 Furnishing of Information..............................51
Section 11.9 Claims Procedure.......................................51
Section 11.10 Agent for Service of Process............................52
Section 11.11 Authority to Act for Company............................52
ARTICLE 12 TRUST......................................................53
Section 12.1 Trust Agreement........................................53
Section 12.2 Expenses...............................................53
ARTICLE 13 AMENDMENT OR TERMINATION OF PLAN...........................54
Section 13.1 Amendment of Plan......................................54
Section 13.2 Termination of Plan....................................55
ARTICLE 14 MERGER AND AFFILIATE PARTICIPATION.........................56
Section 14.1 General Rules..........................................56
Section 14.2 Special Rules When Plan Is Survivor....................56
Section 14.3 Affiliate Participation................................57
Section 14.4 Action Binding on Participating Affiliates.............57
Section 14.5 Termination of Participation of Affiliate..............57
ARTICLE 15 TOP-HEAVY PROVISIONS.......................................59
Section 15.1 Applicability..........................................59
Section 15.2 Definitions............................................59
Section 15.3 Minimum Allocation.....................................60
Section 15.4 Modifications to Code Section 415 Limitations..........61
Section 15.5 Uniform Determination of Accrued Benefit...............61
ARTICLE 16 GENERAL PROVISIONS.........................................62
Section 16.1 Exclusive Benefit......................................62
Section 16.2 No Rights..............................................62
Section 16.3 Fiduciary Liability....................................62
Section 16.4 Missing Participant or Beneficiary.....................62
Section 16.5 Antialienation Rule....................................63
Section 16.6 Qualified Domestic Relations Orders....................63
Section 16.7 Contribution Amounts Returnable to Employers...........64
Section 16.8 Word Usage.............................................64
Section 16.9 Applicable Law.........................................65
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APPENDIX A SURVIVOR ANNUITY REQUIREMENTS.....................................66
Section A.1 Applicability..........................................66
Section A.2 Definitions............................................66
Section A.3 Retirement Annuity Payments............................66
Section A.4 Qualified Preretirement Survivor Annuity...............68
Section A.5 Optional Forms of Payment..............................69
Section A.6 In-Service Withdrawals.................................70
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CONCENTREX INCORPORATED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
INTRODUCTION
The Plan was originally known as the "CFI ProServices, Inc. 401(k) Profit
Sharing Plan" and was originally established as a profit sharing plan with a
cash or deferred arrangement. The purpose of the Plan, as originally adopted,
was to enable eligible employees to save for their retirement on a tax-deferred
basis. Effective January 1, 1999 (or such earlier date as is set forth herein
with respect to a particular provision hereof), the Plan is renamed the
"Concentrex Incorporated Savings and Stock Ownership Plan" and is amended and
restated as set forth herein to add an employee stock ownership plan so that
Eligible Employees can share in the growth and prosperity of the Company by
acquiring an ownership interest in the Company. Accordingly, the Plan now
consists of two parts. The first part (the "401(k) Portion"), which consists of
Elective Deferrals, Matching Contributions made for Plan Years commencing prior
to January 1, 1999, Rollover Contributions, amounts transferred to the Plan from
the Culverin Corporation 401(k) Savings Profit Sharing Plan and investment gains
and losses attributable thereto, is a profit sharing plan with a qualified cash
or deferred arrangement that is intended to be qualified under Code Sections
401(a) and 401(k). The second part (the "ESOP"), which consists of Matching
Contributions and Bonus Contributions made for Plan Years commencing after
December 31, 1998 and investment gains and losses attributable thereto, is
effective January 1, 1999, and is intended to be a stock bonus plan qualified
under Code Section 401(a) and an employee stock ownership plan under Code
Section 4975(e)(7). The ESOP is designed to be invested primarily in Company
Stock.
The Trust that holds the Plan's assets is intended to be exempt from
taxation under Code Section 501(a). All Trust Fund assets held under the Plan
shall be administered, distributed and otherwise governed by the provisions of
this Plan and the related Trust Agreement, which constitutes a part of this
Plan.
Except as specifically provided otherwise herein, the provisions contained
herein apply to any person who completes an Hour of Service as an Eligible
Employee on or after January 1, 1999. Except as specifically provided otherwise
herein, the rights and benefits of any person who does not complete an Hour of
Service as an Eligible Employee on or after January 1, 1999 will be governed by
the terms of the Plan as in effect at the time such person ceased to be an
Eligible Employee.
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ARTICLE 1 DEFINITIONS
Whenever capitalized herein, the following terms shall have the respective
meanings set forth below, unless a different meaning is clearly required by the
context.
Section 1.1 Account
"Account" means any of the accounts established for a Participant pursuant
to Section 5.1 or 14.2 hereof.
Section 1.2 Acquisition Loan
"Acquisition Loan" means a loan (or other extension of credit) used by the
Trust to finance the acquisition of Company Stock, which loan may constitute an
extension of credit to the Trust from a party in interest (as defined in Section
3(14) of ERISA).
Section 1.3 Administrative Committee
"Administrative Committee" means the committee described in Article 11
hereof (or, if no such committee has been appointed, the Company).
Section 1.4 Affiliate
"Affiliate" means (i) a member of a controlled group of corporations as
defined in Code Section 414(b) (as modified by Code Section 415(h) for purposes
of the limitations described in Section 5.8 hereof) of which an Employer is also
a member, (ii) an unincorporated trade or business which is under common control
with an Employer as determined in accordance with Code Section 414(c) (as
modified by Code Section 415(h) for purposes of the limitations described in
Section 5.8 hereof), (iii) a member of an affiliated service group (as defined
in Code Section 414(m)) of which an Employer is also a member, and (iv) any
other entity that must be treated as a single employer with an Employer under
Code Section 414(o).
Section 1.5 Allocable Income
"Allocable Income" means net income or net loss. To calculate Allocable
Income for the Plan Year, the Administrative Committee will use a uniform
nondiscriminatory method that reasonably reflects the manner used by the Plan to
allocate income to the Participant's Accounts. Allocable Income will not be
determined for the period between the end of the Plan Year and the date of
distribution.
Section 1.6 Annuity Starting Date
"Annuity Starting Date" means the first day of the first period for which
an amount is payable as an annuity or in any other form.
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Section 1.7 Beneficiary
"Beneficiary" means the person(s), trust(s) or other entity(ies) designated
by a Participant pursuant to Section 10.3(c) hereof who is or may become
entitled to receive a benefit under the Plan in the event of the Participant's
death.
Section 1.8 Board
"Board" means the Board of Directors of the Company.
Section 1.9 Bonus Contributions
"Bonus Contributions" means amounts contributed to the Plan by the
Employers pursuant to Section 4.2 hereof. Bonus Contributions are part of the
ESOP.
Section 1.10 Bonus Period
"Bonus Period" means a six-month period ending on June 30 or December 31 of
each Plan Year.
Section 1.11 Capital Accumulation
"Capital Accumulation" means a Participant's vested interest in his
Accounts.
Section 1.12 Code
"Code" means the Internal Revenue Code of 1986, as amended, and, should the
context so require, any predecessor or successor Internal Revenue Code.
Section 1.13 Company
"Company" means Concentrex Incorporated, an Oregon corporation, and any
successor thereto that assumes sponsorship of the Plan.
Section 1.14 Company Stock
"Company Stock" means the common stock of the Company.
Section 1.15 Company Stock Account
"Company Stock Account" means the Account that reflects a Participant's
interest in Company Stock held under the ESOP.
Section 1.16 Compensation
Except as provided otherwise herein, "Compensation" means an Employee's
"wages" as defined in Code Section 3401(a), determined without regard to any
rules under Code
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Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed, increased by the
amount of (1) any Elective Deferrals, (2) any other elective deferrals within
the meaning of Code Section 402(g)(3), and (3) any other amount that is
contributed or deferred by an Employer at the election of the Participant and
that is not includible in the gross income of the Participant by reason of Code
Section 125. Notwithstanding the foregoing, a Participant's Compensation for a
Plan Year shall not exceed the limitation in effect for such Plan Year under
Code Section 401(a)(17). Compensation for any Plan Year will be limited to
Compensation paid to a Participant while he is eligible to make Elective
Deferrals.
Section 1.17 Culverin After-Tax Account
"Culverin After-Tax Account" means the Account that reflects a
Participant's interest under the Plan attributable to employee after-tax
contributions made under the Culverin Plan and transferred to this Plan. All
Culverin After-Tax Accounts are held under the 401(k) Portion.
Section 1.18 Culverin Plan
"Culverin Plan" means the Culverin Corporation 401(k) Savings Profit
Sharing Plan, as in effect on December 31, 1995.
Section 1.19 Culverin Supplemental Account
"Culverin Supplemental Account" means the Account that reflects a
Participant's interest under the Plan attributable to employer discretionary
contributions made under the Culverin Plan and transferred to this Plan. All
Culverin Supplemental Accounts are held under the 401(k) Portion.
Section 1.20 Disability
"Disability" means the inability to engage in the further performance of
the Participant's normal employment activity(ies) with the Employers and
Affiliates by reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months, or by reason of a
permanent loss of a member or function of the body or permanent disfigurement.
The permanence and degree of such impairment shall be supported by medical
evidence. The Administrative Committee will determine the existence of
Disability and may rely upon advice from a physician or other medical examiner
satisfactory to it in making such determination.
Section 1.21 Elective Deferrals
"Elective Deferrals" means amounts designated by a Participant pursuant to
Section 3.1 hereof that are contributed by the Participant's Employer to the
Plan in lieu of
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payment of an equal amount directly to the Participant in cash. Elective
Deferrals are part of the 401(k) Portion.
Section 1.22 Elective Deferrals Account
"Elective Deferrals Account" means the Account that reflects a
Participant's interest under the Plan attributable to Elective Deferrals. All
Elective Deferrals Accounts are held under the 401(k) Portion.
Section 1.23 Eligible Employee
Except as provided otherwise in an Employer's Participation Agreement,
"Eligible Employee" means an Employee of an Employer other than an Employee (a)
who is a member of a unit of employees covered by a collective bargaining
agreement that does not provide for participation in the Plan, (b) who is a
nonresident alien with no U.S.-source earned income (within the meaning of Code
Section 911(d)(2)) from the Employers or their Affiliates, (c) who is not
treated by an Employer as an employee for payroll tax purposes, but who is
subsequently determined by a government agency, by the conclusion or settlement
of threatened or pending litigation, or otherwise to be or have been an Employee
of an Employer (unless and until determined otherwise by the Board), or (d) any
Employee who would be a Leased Employee were he not a common law employee of an
Employer. Notwithstanding the foregoing, (a) an Employee who is a temporary or
seasonal employee will not become an Eligible Employee prior to his completion
of on Year of Eligibility Service, and (b) an Employee of a business that is
merged or liquidated into, or whose assets or equity interests are acquired by,
an Employer will become an Eligible Employee at such time as is determined by
the Board.
Section 1.24 Eligibility Computation Period
"Eligibility Computation Period" means a 12-consecutive-month period
beginning on the date the Employee first completes an Hour of Service or any
anniversary of such date; provided, however, that the "Eligibility Computation
Period" of any Employee who incurs a One-Year Break in Service prior to becoming
a Participant and who is subsequently rehired by an Employer or an Affiliate
will commence on the date on which he again performs an Hour of Service
following his rehire.
Section 1.25 Employee
"Employee" means an individual while his status, on or after January 1,
1999, is that of a common law employee of an Employer or an Affiliate. The term
"Employee" shall not refer to individuals (a) serving an Employer or an
Affiliate as Directors while not otherwise employed by it, (b) engaged only in
an advisory or consulting capacity on a retainer or fee basis, (c) engaged only
in a capacity determined by the Administrative Committee to be that of an
independent contractor, or (d) who are Leased Employees. Such individuals are
not eligible to participate in the Plan.
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Section 1.26 Employer
"Employer" means the Company or any Affiliate that, with the consent of the
Board, adopts the Plan.
Section 1.27 Employer Contributions
"Employer Contributions" means Matching Contributions and Bonus
Contributions.
Section 1.28 ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
Section 1.29 ESOP
"ESOP" means the portion of the Plan made up of the Company Stock Accounts
and Other Investment Accounts of Participants, and any contributions, earnings
and losses that are allocated to such Accounts, which portion is intended to
constitute an employee stock ownership plan, within the meaning of Code Section
4975(e)(7).
Section 1.30 Financed Shares
"Financed Shares" means shares of Company Stock acquired by the Trust with
the proceeds of an Acquisition Loan.
Section 1.31 401(k) Portion
"401(k) Portion" means the portion of the Plan made up of the Elective
Deferral Accounts, Pre-1999 Matching Contributions Accounts, Rollover Accounts,
Culverin After-Tax Accounts and Culverin Supplemental Accounts of Participants,
and any contributions, earnings and losses that are allocated to such Accounts,
which portion is intended to constitute a profit sharing plan with a qualified
cash or deferred arrangement.
Section 1.32 Highly Compensated Employee
(a) "Highly Compensated Employee" means an Employee who:
(1) was a more-than-5% owner of an Employer (applying the constructive
ownership rules of Code Section 318) during the Plan Year or during the
preceding 12-month period; or
(2) for the preceding Plan Year:
(i) had compensation, as defined in Section 5.8(a) hereof, in excess of
$80,000 (as adjusted by the Commissioner of Internal Revenue for the relevant
year), and
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(ii) if the Company so elects, was part of the top-paid 20% group of
employees (based on Compensation for such Plan Year).
(b) Solely for purposes of this Section 1.31, "Employee" includes a Leased
Employee (to the extent required by Section 1.34 hereof).
(c) The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of the top-paid 20% group and the
relevant compensation (as defined in Section 5.8(a) hereof), will be made in a
manner consistent with Code Section 414(q) and regulations issued thereunder.
Section 1.33 Hour of Service
"Hour of Service" means each hour for which the Employee is directly or
indirectly paid, or entitled to be paid, by an Employer or an Affiliate for the
performance of duties for an Employer or an Affiliate. In addition, for purposes
of determining whether an Employee has completed a Year of Eligibility Service,
"Hour of Service" will also include each hour for which the Employee is directly
or indirectly paid, or entitled to be paid, by an Employer or an Affiliate on
account of:
(a) A period of time during which the Employee performs no duties
(irrespective of whether the employment relationship has terminated), such as
paid vacation or sick benefits; provided, however, that unless such hours would
be credited by an Employer or an Affiliate under its established practices:
(1) No more than 501 Hours of Service will be credited under this paragraph
to an Employee on account of any single, continuous period during which the
Employee performs no duties (whether or not such period occurs in a single
computation period);
(2) An hour for which an Employee is directly or indirectly paid, or
entitled to payment, on account of a period during which no duties are performed
will not be credited to the Employee if such payment is made or due under a plan
maintained solely for the purpose of complying with applicable workers'
compensation or unemployment compensation or disability insurance laws; and
(3) Hours of Service will not be credited for a payment which solely
reimburses an Employee for medical or medically related expenses incurred by the
Employee.
(b) Back pay, irrespective of mitigation of damages, which is either
awarded or agreed to by an Employer or an Affiliate.
An Employee will not be credited with an Hour of Service for the same hour
under more than one of the foregoing categories. The determination of Hours of
Service for reasons
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other than the performance of duties, and the crediting of
Hours of Service to computation periods, will be in accordance with Department
of Labor Regulationsss. 2530.200b-2(b) and (c).
Section 1.34 Investment Fund
"Investment Fund" means a separate portion of the Trust Fund established at
the direction of the Administrative Committee under the Trust to provide
investment options for Participants under the 401(k) Portion.
Section 1.35 Leased Employee
"Leased Employee" means any person (other than an employee of an Employer)
who pursuant to an agreement between an Employer and any other person ("leasing
organization") has performed services for the Employer (or for the Employer and
related persons determined in accordance with Code Section 414(n)(6)) on a
substantially full-time basis for a period of at least one year, and which
services are performed under primary direction and control by the Employer.
Solely for purposes of determining the number or identity of Highly Compensated
Employees or for purposes of testing whether the Plan satisfies the requirements
of Code Section 414(n)(3)(A) and (B), Leased Employees will be included as
Employees. Contributions or benefits provided to a Leased Employee by the
leasing organization which are attributable to services performed for an
Employer will be treated as provided by the Employer. But a Leased Employee will
not be considered an Employee of an Employer for these testing purposes if: (i)
su
Leased Employee is covered by a money purchase pension plan providing: (A) a
nonintegrated employer contribution rate of at least 10% of compensation (within
the meaning of Code Section 414(n)(5)(C)(iii)), but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the leased employee's gross income under Code Section 125, 402(e)(3), 402(h) or
403(b), (B) immediate participation, and (C) full and immediate vesting; and
(ii) Leased Employees do not constitute more than 20% of the Employer's (and its
Affiliates') non-highly compensated workforce. If a Leased Employee (or an
individual who would be a Leased Employee but for the fact that he has not
performed services for an Employer for at least one year) is hired by an
Employer as an Employee, then such individual will receive credit for
eligibility and vesting purposes for his service for an Employer as a Leased
Employee as if such service had been performed as an Employee.
Section 1.36 Matching Contributions
"Matching Contributions" means amounts contributed to the Plan by the
Employers pursuant to Section 4.1 hereof. Matching Contributions made for Plan
Years commencing prior to January 1, 1999 are part of the 401(k) Portion.
Matching Contributions made for Plan Years commencing after December 31, 1998
are part of the ESOP.
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Section 1.37 Maternity or Paternity Leave
"Maternity or Paternity Leave" means a period during with the Employee is
absent from work due to (1) the pregnancy of such Employee, (2) the birth of a
child of such Employee, (3) the placement of a child with such Employee in
connection with the adoption of such child by such Employee, or (4) caring for a
child of such Employee immediately following the birth or adoption of such
child.
Section 1.38 Non-Highly Compensated Employee
"Non-Highly Compensated Employee" means any Employee who is not a Highly
Compensated Employee.
Section 1.39 Normal Retirement Age
"Normal Retirement Age" means age 65.
Section 1.40 One-Year Break in Service
(a) "One-Year Break in Service" means a 12-consecutive-month period
beginning on an Employee's Severance Date or any anniversary thereof during
which the Employee does not perform an Hour of Service; provided, however, that
solely for purposes of determining whether an Employee has completed a Year of
Eligibility Service, "One-Year Break in Service" means an Eligibility
Computation Period in which the Employee does not complete more than 500 Hours
of Service.
(b) Solely for purposes of determining whether an Employee has incurred a
One-Year Break in Service for eligibility reasons, an Employee who is absent
from active Service on account of a Maternity or Paternity Leave (whether paid
or unpaid) will be credited with up to 501 Hours of Service during such absence.
The Administrative Committee will credit Hours of Service during the absence
period on the basis of:
(a) The number of Hours of Service with which the Employee would normally
have been credited but for such absence; or
(b) If the Administrative Committee cannot determine the number of Hours of
Service with which the Employee would have been credited under subparagraph (a)
above, on the basis of eight hours per day during the absence period.
The Administrative Committee will credit only the number of Hours of
Service (not exceeding five hundred one (501)) necessary to prevent an
Employee's One-Year Break in Service. The Committee will credit all Hours of
Service described in this subsection (b) to the Eligibility Computation Period
in which the absence period begins or, if the Employee does not need these Hours
of Service to prevent a One-Year Break in Service in such Eligibility
Computation Period, to the immediately following Eligibility Computation Period.
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Section 1.41 Other Investments Account
"Other Investments Account" means the Account that reflects a Participant's
interest under the ESOP attributable to Trust Fund assets other than Company
Stock.
Section 1.42 Participant
"Participant" means an Eligible Employee who has satisfied the eligibility
requirements of Section 2.1 hereof and who is participating in the Plan.
Section 1.43 Period of Service
"Period of Service" means a period of time beginning on the date an
Employee first completes an Hour of Service following his hire or rehire, as
applicable, and ending on his Severance Date. To the extent required by law, or
to the extent provided in an Employer's Participation Agreement, an Employee's
Period of Service will include Service with such Employer prior to the time such
Employer became an Affiliate. In addition, Service with the following employers
prior to the time they became Affiliates will also be treated as part of a
Participant's Period of Service:
Genesys Solutions, Inc.
Texas Southwest Technology Group, Inc.
Culverin Corporation
OnLine Financial Communications Systems
Coin Financial Systems
Input Creations, Inc.
Halcyon Group, Inc.
Pathways Software, Inc.
Mortgage Dynamics, Inc.
Section 1.44 Period of Severance
"Period of Severance" means the period of time beginning on an Employee's
Severance Date and ending on the date he again performs an Hour of Service.
Section 1.45 Plan
"Plan" means the "Concentrex Incorporated Employee Savings and Stock
Ownership Plan," as set forth herein, together with any amendments hereto.
Section 1.46 Plan Year
"Plan Year" means the 12-consecutive-month period coinciding with the
calendar year.
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Section 1.47 Pre-1999 Matching Contributions Account
"Pre-1999 Matching Contributions Account" means the Account that reflects a
Participant's interest under the Plan attributable to Employer Matching
Contributions made for Plan Years commencing prior to January 1, 1999. All
Pre-1999 Matching Contributions Accounts are held under the 401(k) Portion.
Section 1.48 Rollover Account
"Rollover Account" means the Account that reflects a Participant's interest
under the 401(k) Portion attributable to Rollover Contributions. All Rollover
Accounts are held under the 401(k) Portion.
Section 1.49 Rollover Contribution
"Rollover Contribution" means (i) all or any portion of an eligible
rollover distribution, within the meaning of Section 10.8(b)(4) hereof, that is
transferred to the Plan either on or before the 60th day after the day on which
it was received by the Eligible Employee or as a direct rollover, within the
meaning of Section 10.8(b)(4) hereof, or (ii) the amount transferred to the Plan
by an Eligible Employee who, having received the entire amount in an individual
retirement account or the entire value of an individual retirement annuity which
was wholly attributable to a rollover contribution from a qualified trust and
any subsequent earnings thereon, transfers the entire such amount on or before
the 60th day after the day on which the Eligible Employee received the amount.
Rollover Contributions are part of the 401(k) Portion.
Section 1.50 Service
"Service" means employment as a common law employee with any Employer or
Affiliate.
Section 1.51 Severance Date
(a) "Severance Date" means the earlier of:
(1) the date on which the Employee's Service terminates on account of his
quit, discharge, retirement, Disability or death; and
(2) the first anniversary of the date on which an Employee commences a
continuous absence from active service with the Employers and the Affiliates for
any other reason, such as vacation, holiday, sickness, disability, leave of
absence or layoff.
(b) Notwithstanding the foregoing, solely for purposes of determining
whether a One-Year Break in Service has occurred for vesting purposes, the
"Severance Date" of any Employee who is continuously absent from active service
with the Employers and the
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Affiliates on account of Maternity or Paternity Leave
(whether paid or unpaid) will be the second anniversary of the date on which
such Employee's absence from the Employers' and Affiliates' service began. The
period between the first and second anniversaries of the first day of such
absence will not be considered to be a Period of Service or a Period of
Severance.
Section 1.52 Trust
"Trust" means the trust established pursuant to this Plan for the purposes
of holding the assets of the Plan. The terms of the Trust are set forth in the
Trust Agreement by and between the Company and the Trustee. Said Trust Agreement
constitutes a part of the Plan and its terms are incorporated herein by
reference.
Section 1.53 Trustee
"Trustee" means the person(s) or entity(ies) designated by the Board to
serve as trustee of the Trust Fund.
Section 1.54 Trust Fund
"Trust Fund" means the Company Stock and all other property held in the
Trust.
Section 1.55 Valuation Date
"Valuation Date" means the last day of each Plan Year and such other dates
as the Administrative Committee and the Trustee may agree upon.
Section 1.56 Year of Eligibility Service
"Year of Eligibility Service" means an Eligibility Computation Period in
which the Employee completes at least 1,000 Hours of Service. An Employee who
incurs a One-Year Break in Service prior to becoming a Participant will be
treated as a new hire if he again performs an Hour of Service. Hours of Service
completed by an Employee with an Affiliate prior to the date on which it became
an Affiliate will be taken into account, to the extent they were completed
during a period of time taken into account in determining such Employee's Period
of Service under Section 1.42 hereof, in determining whether the Employee has
completed a Year of Eligibility to Service.
Section 1.57 Year of Participation
"Year of Participation" means a Plan Year, commencing after December 31,
1998, in which the Participant is entitled to receive an allocation of Matching
Contributions, Bonus Contributions or forfeitures under the ESOP.
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Section 1.58 Year of Service
"Year of Service" means a 12-consecutive-month Period of Service. Solely
for purposes of determining a Participant's Years of Service, all of the
Participant's Periods of Service will be treated as if they had been consecutive
and any Period of Severance of less than 12 months in duration will be treated
as a Period of Service. For purposes of the preceding sentence, a Period of
Severance will be considered to be of less than 12 months in duration only if
the Employee again performs an Hour of Service within 12 months of the date on
which he is first absent from active service with the Employers and Affiliates.
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ARTICLE 2 PARTICIPATION
Section 2.1 Participation Date
(a) Each Eligible Employee who was a Participant in the Plan on
December 31, 1998 will continue as a Participant hereunder on January 1, 1999
for purposes of making Elective Deferrals and sharing in Matching Contributions.
Except as provided otherwise in an Employer's Participation Agreement, each
other Eligible Employee will become a Participant in the Plan for purposes of
making Elective Deferrals and sharing in Matching Contributions on the latest of
(1) January 1, 1999, (2) the first da of the first calendar quarter commencing
on or after the date on which he first completes an Hour of Service as an
Eligible Employee, or (3) the first day of the first calendar quarter commencing
after the date on which he attains age 21 (age 18, effective June 1, 1999),
provided that he is an Eligible Employee on such date.
(b) Except as provided otherwise in an Employer's Participation
Agreement, each Eligible Employee will become a Participant in the Plan for
purposes of sharing in Bonus Contributions on the later of January 1, 1999 or
the January 1 or July 1 coinciding with or next following the date on which he
first completes an Hour of Service as an Eligible Employee, provided that he is
an Eligible Employee on such date. Notwithstanding the foregoing, Employees
employed by the Company as salespersons shall not be eligible to share in Bonus
Contributions.
Section 2.2 Reemployment and Change in Employment Classification
(a) Reemployment. A Participant or a former Participant whose Service has
terminated and who is later reemployed as an Eligible Employee will resume
active participation in the Plan (to the same extent as he was participating as
of his Severance Date) as of his reemployment date or as soon as
administratively practicable thereafter.
(b) Transfer to Ineligible Status. A Participant who ceases to be an
Eligible Employee due to his transfer to an ineligible class of Employees will
cease to be an active Participant (i.e., will cease to be eligible to make
Elective Deferrals or to share in Employer Contributions with respect to periods
following his transfer). If such a Participant again becomes an Eligible
Employee, then he will again become an active Participant on the date he again
becomes an Eligible Employee or as soon as administratively practicable
thereafter.
(c) Transfer from Ineligible Status. An Employee who has met the
requirements for participation, but who is not employed as an Eligible Employee
on the date he would otherwise become a Participant, will become a Participant
(to the extent he would have become a Participant had he been employed as an
Eligible Employee on such date) on the date he becomes (or again becomes) an
Eligible Employee or as soon as administratively practicable thereafter.
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Section 2.3 Termination of Participation
A Participant will remain a Participant until his entire vested
interest under the Plan has been distributed.
Section 2.4 Qualified Military Service
Notwithstanding anything herein to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with Code Section 414(u).
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ARTICLE 3 PARTICIPANT CONTRIBUTIONS
Section 3.1 Elective Deferrals
(a) Amount of Elective Deferrals. Subject to the limitations set forth in
Sections 3.1(c), 3.4 and 5.8 hereof, an Eligible Employee may elect, effective
as of the date he becomes a Participant for purposes of making Elective
Deferrals (see Section 2.1 hereof) (or as soon as administratively practicable
thereafter), to have any whole percentage (up to such maximum percentage as may
be specified by the Administrative Committee) of his Compensation withheld by
his Employer and contributed to the Trust as Elective Deferrals in lieu of
receiving such amounts in cash. Elective Deferrals will be deducted from the
Participant's Compensation prior to the imposition of any federal or state
income taxes.
(b) Timing of Contribution. The Employers will pay any Elective Deferrals
to the Trust within 12 months after the end of the Plan Year in which such
amounts are withheld from the Participant's Compensation.
(c) Annual Deferral Limitation. The amount of Elective Deferrals made on
behalf of a Participant for a calendar year may not exceed the limitation in
effect for such calendar year under Code Section 402(g) (the "402(g) limit"). If
the Administrative Committee determines that the Elective Deferrals made to the
Plan for a calendar year on behalf of a Participant would exceed the 402(g)
limit for the calendar year, the Participant's Employer will not make any
additional Elective Deferrals o behalf of that Participant for the remainder of
that calendar year, paying in cash to the Participant any amounts that would
result in the Elective Deferrals made on behalf of the Participant for the
calendar year exceeding the 402(g) limit. If the Administrative Committee
determines that the Elective Deferrals already contributed to the Plan for a
calendar year on behalf of a Participant exceed the 402(g) limit, the
Administrative Committee will direct the Trustee to distribute the amount in
excess of the 402(g) limit (the "excess deferrals"), adjusted for Allocable
Income, to the Participant no later than the April 15 following the end of the
calendar year in which the excess deferrals were made.
If a Participant participates in another plan under which he makes elective
deferrals pursuant to a Code Section 401(k) arrangement, elective deferrals
under a simplified employee pension plan, elective deferrals under a simple
retirement account plan or salary reduction contributions to a tax-sheltered
annuity, irrespective of whether an Employer or an Affiliate maintains the other
plan, he may provide the Administrative Committee with a written claim for
excess deferrals made for a calendar year. The Participant must submit the claim
no later than the March 1 following the close of the calendar year in which the
excess deferrals were made, and the claim must specify the amount of the
Participant's elective deferrals under the Plan that are excess deferrals. If
the Administrative Committee receives a timely claim, it will distribute the
excess deferrals (adjusted for Allocable Income) that the Participant has
assigned to the Plan no later than the April 15 following the end of the
calendar year in which the excess deferrals were made.
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The Administrative Committee will reduce the amount of excess deferrals for
a calendar year distributable to a Participant by the amount of excess
contributions, within the meaning of Section 3.4(e) hereof, if any, previously
distributed to the Participant for the Plan Year beginning with or within that
calendar year.
(d) Elective Deferrals Treated as Employer Contributions. For purposes of
Code Section 401 and other applicable Code requirements, Elective Deferrals will
be considered employer contributions.
Section 3.2 Election Procedure and Amendments
A Participant's election to make Elective Deferrals under the Plan must be
made by notice to the Administrative Committee or its designee in such manner
and pursuant to such rules as the Administrative Committee shall establish, and
will remain in effect until changed by the Participant. A Participant may elect
to change the percentage of his Elective Deferrals effective as of the first day
of any calendar quarter (or as soon as administratively practicable thereafter),
subject to such rules as the Administrative Committee may establish. A
Participant may make Elective Deferrals only with respect to Compensation paid
for service as an Eligible Employee.
Section 3.3 Rollovers
An Eligible Employee may, by application to the Administrative Committee,
request that the Trustee accept a Rollover Contribution and the Trustee will be
authorized to do so with the Administrative Committee's approval. The
application will state the amount of the Rollover Contribution, and such other
information as the Administrative Committee may require in order to determine
that the amount is in fact a Rollover Contribution. No Employee has any right to
have a Rollover Contribution transferred to the Trust, and the Administrative
Committee may, in its sole and absolute discretion, approve or deny an
application for any reason that it deems sufficient. A Rollover Contribution may
be accepted for an Eligible Employee who has not yet met the requirements for
eligibility under Article 2 hereof for participation, or who has not elected to
contribute and, thus, has no other Account under the Plan. If an Eligible
Employee makes a Rollover Contribution before he has satisfied the participation
requirements in Section 2.1 hereof, then the Eligible Employee will be deemed to
be a Participant for all purposes of the Plan, except that he will not be deemed
to be a Participant for purposes of making Elective Deferrals or for purposes of
sharing in Matching Contributions, Bonus Contributions or forfeitures under the
Plan until he satisfies the relevant participation requirements in Section 2.1
hereof.
Section 3.4 Average Deferral Percentage Test
(a) Definitions. For purposes of this Section 3.4, the following terms
shall have the respective meanings set forth below:
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(1) "Average Deferral Percentage" means the average (expressed as a
percentage) of the Deferral Percentages for the Participants in the relevant
group.
(2) "Deferral Percentage" means the ratio (expressed as a percentage) of
Elective Deferrals contributed on behalf of the Participant for the relevant
Plan Year to the Participant's compensation, as defined in any manner permitted
under Code Section 414(s) (as elected from time to time by the Administrative
Committee), for such Plan Year; provided, however, that the Administrative
Committee may (but need not) limit a Participant's compensation to compensation
paid while such Participant is eligible to make Elective Deferrals. The Deferral
Percentage for a Participant who is eligible to, but who does not elect to, make
Elective Deferrals for a Plan Year shall be zero.
(b) Average Deferral Percentage Tests. In order to meet the limitations of
this Section 3.4, the Administrative Committee shall limit the amount of
Elective Deferrals made by Highly Compensated Employees each Plan Year to the
extent necessary to satisfy one of the Average Deferral Percentage tests
described in (1), (2) or (3) below:
(1) If the Average Deferral Percentage of Non-Highly Compensated Employees
for the prior Plan Year is less than 2%, then the Average Deferral Percentage of
Highly Compensated Employees for the current Plan Year shall not exceed 2 times
the Average Deferral Percentage of the Non-Highly Compensated Employees for the
prior Plan Year.
(2) If the Average Deferral Percentage of Non-Highly Compensated Employees
for the prior Plan Year is between 2% and 8%, then the Average Deferral
Percentage of Highly Compensated Employees for the current Plan Year shall not
exceed the Average Deferral Percentage of the Non-Highly Compensated Employees
for the prior Plan Year plus 2%.
(3) If the Average Deferral Percentage of Non-Highly Compensated Employees
for the prior Plan Year is greater than 8%, then the Average Deferral Percentage
of Highly Compensated Employees for the current Plan Year shall not exceed 1.25
times the Average Deferral Percentage of the Non-Highly Compensated Employees
for the prior Plan Year.
(c) Rules to be Followed in Applying Tests. The following rules shall be
followed in applying the tests set forth in subsection (b) immediately above:
(1) If a Highly Compensated Employee is eligible to participate in two or
more cash or deferred arrangements maintained by the Employers or an Affiliate,
then all elective deferrals under such arrangements shall be aggregated for
purposes of determining that Participant's Average Deferral Percentage. If the
plans containing the Code Section 401(k) arrangements have different plan years,
the Administrative Committee will determine the combined deferral contributions
on the basis of the pla years ending in the same calendar year.
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(2) If two or more plans that include cash or deferred arrangements are
considered a single plan for purposes of Code Sections 401(a)(4) and 410(b),
then all elective deferrals under such arrangements shall be aggregated for
purposes of determining a Participant's Average Deferral Percentage. An
aggregation of plans under this paragraph (2) does not apply to plans which have
different plan years. The Administrative Committee may not aggregate an ESOP (or
the ESOP portion of a plan) with non-ESOP plan (or the non-ESOP portion of a
plan).
(3) If elected by the Administrative Committee for a Plan Year, the Average
Deferral Percentage tests may be calculated with reference to the Average
Deferral Percentage of Non-Highly Compensated Employees for the current Plan
Year; provided, however, that such election may not be changed without
regulatory or other published guidance from the Secretary of the Treasury or its
designee. The Average Deferral Percentage test for the Plan Year commencing on
January 1, 1997 was performed using the Average Deferral Percentage of
Non-Highly Compensated Employees for such Plan Year and the Average Deferral
Percentage test for the Plan Year commencing on January 1, 1998 was performed
using the Average Deferral Percentage of Non-Highly Compensated Employees for
the immediately preceding Plan Year.
(4) Matching Contributions shall not be payable with respect to any
Elective Deferrals that are distributed to Participants pursuant to Section
3.4(d) or 5.8 hereof, and to the extent that any such Matching Contributions
have been allocated, they will be forfeited.
(d) Excess Contributions. If the Plan is projected to fail one or more of
the Average Deferral Percentage Tests for a Plan Year, the Administrative
Committee may prospectively limit the amount of Elective Deferrals to be made by
Highly Compensated Employees for that Plan Year. Alternatively, the
Administrative Committee shall determine the respective shares of excess
contributions in the manner described below, which excess will be distributed,
together with Allocable Income thereon, to the Participant during the
12-consecutive-month period following the Plan Year in which the excess
contributions were made:
First -- The Deferral Percentage of the Highly Compensated Employee(s) with
the highest Deferral Percentage shall be reduced until it equals that of the
Highly Compensated Employee(s) with the next highest Deferral Percentage. This
process shall be repeated until one of the Average Deferral
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Percentage tests is passed. The aggregate dollar amount of excess Elective
Deferrals resulting from these reductions shall be determined.
Next -- The aggregate dollar amount of excess Before-Tax Contributions that
are to be distributed shall be allocated among Highly Compensated Employees.
Excess Elective Deferrals shall be allocated first to the Highly Compensated
Employee(s) with the highest dollar amount of Elective Deferrals. Excess
Elective Deferrals shall be allocated to such Highly Compensated Employee(s)
until the dollar amount of his (their) Elective Deferrals has been reduced to
equal that of the Highly Compensated Employee(s) with the next highest dollar
amount. This process shall be repeated until the aggregate dollar amount of
excess Elective Deferrals has been allocated.
The Administrative Committee will reduce the amount of excess contributions
by the amount of any excess deferrals previously distributed to the Employee for
the Employee's taxable year ending with or within the Plan Year.
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ARTICLE 4 EMPLOYER CONTRIBUTIONS
Section 4.1 Matching Contributions
(a) Amount of Matching Contribution. Subject to the limitations set forth
in Sections 4.4 and 5.8 hereof, for each Plan Year quarter, the Employers will
make a Matching Contribution to the Trust in such amount and subject to such
dollar limit as the Company will determine, which amount may be zero.
(b) Allocation of Matching Contribution. The Administrative Committee will
allocate the Employers' Matching Contribution for a Plan Year quarter among the
Participants who made Elective Deferrals during such Plan Year quarter in
proportion to such Participants' year-to-date Elective Deferrals (not in excess
of six percent of year-to-date Compensation), determined as of the last day of
such Plan Year quarter; provided, however, that the total Matching Contributions
allocated to a Participant's Matching Contributions Account for any Plan Year
shall not exceed the dollar limit (if any) established by the Company for such
Plan Year.
(c) Timing of Matching Contribution. The Employers will pay their Matching
Contributions for a Plan Year quarter to the Trust not later than the due date
(including extensions thereof) for their federal income tax return for the
taxable year in which the relevant Plan Year ends.
Section 4.2 Employer Bonus Contribution
(a) Amount of Bonus Contribution. Subject to the limitations set forth in
Section 5.8 hereof, for each Bonus Period, the Employers will make a Bonus
Contribution to the Trust in such amount as the Company will determine, which
amount may be zero.
(b) Allocation of Bonus Contribution. The Administrative Committee will
allocate the Employers' Bonus Contribution for a Bonus Period among the
Participants who were Eligible Employees on the last day of such Bonus Period.
Each such Participant's share of the Bonus Contribution for a Bonus Period will
be determined by dividing such Bonus Contribution by the number of Participants
who are eligible to share in such Bonus Contribution.
(c) Timing of Bonus Contribution. The Employers will pay their Bonus
Contribution for a Bonus Period to the Trust not later than the due date
(including extensions thereof) for their federal income tax return for the
taxable year in which the relevant Plan Year ends.
Section 4.3 Contribution of Stock
The Company may require the Employers to pay all or any portion of their
Employer Contributions in Company Stock, rather than in cash, in which case such
Company Stock will
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be valued at the average of the closing prices of the Company
Stock on the NASDAQ on each day during the relevant period that the NASDAQ is
open for trading. For purposes of the Matching Contribution for a Plan Year
quarter, the relevant period is such Plan Year quarter. For purposes of the
Bonus Contribution for a Bonus Period, the relevant period is such Bonus Period.
Section 4.4 Average Contribution Percentage Test
(a) Definitions. For purposes of this Section 4.4, the following terms
shall have the respective meanings set forth below:
(1) "Average Contribution Percentage" means the average (expressed as a
percentage) of the Contribution Percentages for the Participants in the relevant
group.
(2) "Contribution Percentage" means the ratio (expressed as a percentage)
of the sum of the Matching Contributions allocated to the Participant's Accounts
for the relevant Plan Year to the Participant's "compensation," as defined in
any manner permitted under Code Section 414(s) (as elected from time to time by
the Administrative Committee), for such Plan Year; provided, however, that the
Administrative Committee may (but need not) limit a Participant's compensation
to compensation paid while such Participant is eligible to make Elective
Deferrals. The Contribution Percentage for a Participant who is eligible to, but
who does not elect to, make Elective Deferrals for a Plan Year shall be zero.
(b) Average Contribution Percentage Tests. In order to meet the limitations
of this Section 4.4, the Administrative Committee shall limit the amount of
Elective Deferrals made by Highly Compensated Employees each Plan Year to the
extent necessary to satisfy one of the Average Contribution Percentage tests
described in (1), (2) or (3) below:
(1) If the Average Contribution Percentage of Non-Highly Compensated
Employees for the prior Plan Year is less than 2%, then the Average Deferral
Percentage of Highly Compensated Employees for the current Plan Year shall not
exceed 2 times the Average Contribution Percentage of the Non-Highly Compensated
Employees for the prior Plan Year.
(2) If the Average Contribution Percentage of Non-Highly Compensated
Employees for the prior Plan Year is between 2% and 8%, then the Average
Deferral Percentage of Highly Compensated Employees for the current Plan Year
shall not exceed the Average Contribution Percentage of the Non-Highly
Compensated Employees for the prior Plan Year plus 2%.
(3) If the Average Contribution Percentage of Non-Highly Compensated
Employees for the prior Plan Year is greater than 8%, then the Average
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Contribution Percentage of Highly Compensated Employees for the current Plan
Year shall not exceed 1.25 times the Average Contribution Percentage of the
Non-Highly Compensated Employees for the prior Plan Year.
(c) Rules to be Followed in Applying Tests. The following rules shall be
followed in applying the tests set forth in subsection (b) immediately above:
(1) If a Highly Compensated Employee is eligible to make after-tax
contributions or receive matching contributions under two or more plans
maintained by the Employers or an Affiliate, then all after-tax and matching
contributions under such arrangements shall be aggregated for purposes of
determining that Participant's Average Contribution Percentage. If such plans
have different plan years, the Administrative Committee will determine the
combined contributions on the basis of the plan years ending in the same
calendar year.
(2) If two or more plans that include after-tax or matching contributions
are considered a single plan for purposes of Code Sections 401(a)(4) and 410(b),
then all after-tax and matching contributions under such arrangements shall be
aggregated for purposes of determining a Participant's Average Contribution
Percentage. An aggregation of plans under this paragraph (2) does not apply to
plans which have different plan years. The Administrative Committee may not
aggregate an ESOP (or the ESOP portion of a plan) with a non-ESOP plan (or the
non-ESOP portion of a plan).
(3) If elected by the Administrative Committee for a Plan Year, the Average
Contribution Percentage tests may be calculated with reference to the Average
Contribution Percentage of Non-Highly Compensated Employees for the current Plan
Year; provided, however, that such election may not be changed without
regulatory or other published guidance from the Secretary of the Treasury or its
designee. The Average Contribution Percentage test for the Plan Year commencing
on January 1, 1997 was performed using the Average Contribution Percentage of
Non-Highly Compensated Employees for such Plan Year, and the Average
Contribution Percentage test for the Plan Year commencing on January 1, 1998 was
performed using the Average Contribution Percentage of Non-Highly Compensated
Employees for the immediately preceding Plan Year.
(d) Excess Aggregate Contributions. The Administrative Committee shall
determine the respective shares of excess aggregate contributions in the manner
described below, which excess will be forfeited (to the extent the Participant
is not vested in the Matching Contributions allocated to his Accounts) or
distributed (to the extent the Participant is vested in the Matching
Contributions allocated to his Accounts), together with Allocable Income
thereon:
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First -- The Contribution Percentage of the Highly Compensated Employee(s)
with the highest Contribution Percentage shall be reduced until it equals that
of the Highly Compensated Employee(s) with the next highest Contribution
Percentage. This process shall be repeated until one of the Average Contribution
Percentage tests is passed. The aggregate dollar amount of excess aggregate
contributions resulting from these reductions shall be determined.
Next -- The aggregate dollar amount of excess aggregate contributions that
are to be distributed shall be allocated among Highly Compensated Employees.
Excess aggregate contributions shall be allocated first to the Highly
Compensated Employee(s) with the highest dollar amount of aggregate
contributions. Excess aggregate contributions shall be allocated to such Highly
Compensated Employee(s) until the dollar amount of his (their) aggregate
contributions has been reduced to equal that of the Highly Compensated
Employee(s) with the next highest dollar amount. This process shall be repeated
until the aggregate dollar amount of excess aggregate contributions has been
allocated.
The Administrative Committee will reduce the amount of excess contributions
by the amount of any excess deferrals previously distributed to the Employee for
the Employee's taxable year ending with or within the Plan Year.
(e) Multiple Use Limitation. The Administrative Committee shall limit
further the amount of Matching Contributions allocated to the Accounts of Highly
Compensated Employees for each Plan Year to the extent necessary to cause the
Average Contribution Percentage test to satisfy the multiple use limitation set
forth in Section 1.401(m)-2(c) of the Treasury Regulations.
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ARTICLE 5 MAINTENANCE OF PARTICIPANT ACCOUNTS
Section 5.1 Participant Accounts
(a) In General. The Administrative Committee will establish and maintain
(to the extent necessary) in the name of each Participant an Elective Deferrals
Account, a Pre-1999 Matching Contribution Account, a Rollover Account, a
Culverin After-Tax Account and a Culverin Supplemental Account to reflect such
Participant's interest under the 401(k) Portion and a Company Stock Account and
an Other Investments Account to reflect such Participant's interest under the
ESOP. Separate subaccounts within each Account will be established as necessary
to reflect the type of contributions (i.e., Matching Contributions or Bonus
Contributions), the Investment Funds in which such Account is invested or for
such other reasons as the Administrative Committee may deem necessary or
advisable for the proper administration of the Plan.
(b) Company Stock Account. The Company Stock Account maintained for each
Participant will be credited with (1) his share of Company Stock (including
fractional shares) purchased and paid for by the Trust or contributed in-kind to
the Trust as an Employer Contribution, (2) his share of any forfeitures of
Company Stock, and (3) any stock dividends on Company Stock allocated to his
Company Stock Account.
(c) Other Investments Account. The Other Investments Account maintained
for each Participant will be credited with (1) his allocable share of Employer
Contributions under the ESOP that are not in the form of Company Stock, (2) any
cash dividends on Company Stock allocated to his Company Stock Account (other
than currently distributed dividends) and (3) his allocable share of any net
income of the Trust. Such Account will be debited with the Participant's share
of (1) any cash payments made by the Trustee for the acquisition of Company
Stock, (2) any payment of any principal and/or interest on an Acquisition Loan
and (3) any net loss of the Trust.
(d) Elective Deferrals Account. The Elective Deferrals Account maintained
for each Participant will be credited with the Elective Deferrals made on behalf
of such Participant during the Plan Year. It will also be credited (or debited)
with its share of the net income (or loss) of the Trust attributable thereto.
(e) Pre-1999 Matching Contributions Account. The Pre-1999 Matching
Contributions Account maintained for each Participant will be credited with the
Matching Contributions made on behalf of such Participant for Plan Years
commencing prior to January 1, 1999. It will also be credited (or debited) with
its share of the net income (or loss) of the Trust attributable thereto.
(f) Rollover Account. The Rollover Account maintained for a Participant
will be credited with the Rollover Contribution made by such Participant. It
will also be credited (or debited) with its share of the net income (or loss) of
the Trust attributable thereto.
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(g) Culverin After-Tax Account. The Culverin After-Tax Account maintained
for a Participant will be credited with employee after-tax contributions made by
such Participant under the Culverin Plan. It will also be credited (or debited)
with its share of the net income (or loss) of the Trust attributable thereto.
(h) Culverin Supplemental Account. The Culverin Supplemental Account
maintained for a Participant will be credited with the employer discretionary
contributions made on behalf of such Participant under the Culverin Plan. It
will also be credited (or debited) with its share of the net income (or loss) of
the Trust attributable thereto.
Section 5.2 Allocation of Contributions
(a) Elective Deferrals. A Participant's Elective Deferrals for a Plan Year
quarter will be allocated to his Elective Deferrals Account as soon as
administratively practicable after they are paid to the Trust.
(b) Matching Contributions. A Participant's share of the Matching
Contribution for a Plan Year quarter will be allocated to his Company Stock
Account or Other Investments Account, as applicable, as soon as administratively
practicable after such Matching Contribution is paid to the Trust; provided,
however, that Matching Contributions made on behalf of a Participant for Plan
Years commencing prior to January 1, 1999 will be allocated to his Pre-1999
Matching Contributions Account.
(c) Bonus Contributions. A Participant's share of the Bonus Contribution
for a Bonus Period will be allocated to his Company Stock Account or Other
Investments Account, as applicable, as soon as administratively practicable
after such Bonus Contribution is paid to the Trust.
(d) Rollover Contributions. A Participant's Rollover Contribution will be
allocated to his Rollover Account as soon as administratively practicable after
it is paid to the Trust.
Section 5.3 Financed Shares
(a) Loan Suspense Account. Any Financed Shares acquired by the Trust will
initially be credited to a "Loan Suspense Account" and will be released from
such Loan Suspense Account and allocated to the Company Stock Accounts of
Participants only as payments are made on the related Acquisition Loan. A
separate Loan Suspense Account shall be established and maintained for each
separate Acquisition Loan.
(b) Release of Shares. The number of Financed Shares to be released from a
Loan Suspense Account for allocation to Participants' Company Stock Accounts for
each Plan Year will be equal to the number of shares held in the Loan Suspense
Account immediately before the release multiplied by whichever of the following
fractions is applicable, as determined by the Administrative Committee at the
time the Financed Shares are acquired (or as provided in the Acquisition Loan):
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(1) Principal-and-Interest Method. The numerator of the fraction is the
amount of principal and interest paid on the Acquisition Loan for that Plan Year
and the denominator of the fraction is the sum of the numerator and the total
principal and interest on that Acquisition Loan projected to be paid for all
future Plan Years. For this purpose, the interest to be paid in future years is
to be computed by using the interest rate in effect as of the last day of the
current Plan Year.
(2) Principal-Only Method. The numerator of the fraction is the amount of
principal paid on the Acquisition Loan for that Plan Year and the denominator of
the fraction is the outstanding principal balance due on the Acquisition Loan at
the beginning of that Plan Year (or on the date of the Acquisition Loan, if made
after the beginning of that Plan Year); provided, however, that this fraction
may be used only to the extent that: (A) the Acquisition Loan provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for ten years; (B)
interest included in any payment on the Acquisition Loan is disregarded only to
the extent that it would be determined to be interest under standard loan
amortization tables; and (C) the entire duration of the Acquisition Loan
repayment period (considering any new loan resulting from the renewal, extension
or refinancing of the initial loan as being part of the same Acquisition Loan)
does not exceed ten years.
(c) Allocation of Released Shares. The Financed Shares released from a Loan
Suspense Account for a Plan Year will be allocated as of the last day of each
Plan Year (and at such other times as the Administrative Committee may
determine) among the Company Stock Accounts of Participants in the manner
determined by the Administrative Committee based upon the source of funds (i.e.,
Matching Contributions, Discretionary Contributions, earnings attributable to
such Matching Contributions or Bonu Contributions, cash dividends on Financed
Shares allocated to Participants' Company Stock Accounts and cash dividends on
Financed Shares credited to the Loan Suspense Account) used to make payments on
the Acquisition Loan. Notwithstanding the foregoing, if cash dividends on
Financed Shares allocated to a Participant's Company Stock Account are used to
make payments on an Acquisition Loan during a Plan Year, then Financed Shares
released as a result of such payments, and having a fair market value at leas
equal to the amount of such dividends, will be allocated to the Participant's
Company Stock Account for such Plan Year.
Section 5.4 Allocation of Investment Gains and Losses
(a) As of each Valuation Date, the net income (or loss) of the Trust since
the immediately preceding Valuation Date shall be determined. Net income (or
loss) of the Trust includes the increase (or decrease) in the fair market value
of Trust Fund assets other than Company Stock, interest income, dividends and
other income and gains (or losses) attributable to Trust Fund assets (other than
any dividends on allocated Company Stock) since the immediately preceding
Valuation Date, reduced by any expenses charged to the
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Trust fund for the period since the immediately preceding Valuation Date.
The determination of the net income (or loss) of the Trust shall not take into
account any interest paid by the Trust under an Acquisition Loan.
(b) The net income (or loss) of the Trust attributable to the 401(k)
Portion will be determined separately for each Investment Fund and allocated
among the Elective Deferral Accounts, Pre-1999 Matching Contributions Accounts,
Rollover Accounts, Culverin After-Tax Accounts and Culverin Supplemental
Accounts of the Participants in proportion to the respective balances of such
Accounts invested in each such Investment Fund.
(c) Prior to the allocation of Matching Contributions, Bonus Contributions
and forfeitures, each Participant's share of any net income (or loss) under the
ESOP will be allocated to his Other Investments Account in the ratio that the
total balances of both his Company Stock Account and his Other Investments
Account on the preceding Valuation Date (reduced by any distribution from such
Accounts since the preceding Valuation Date) bear to the sum of such Account
balances for all Participants as of that Valuation Date.
Section 5.5 Dividends on Company Stock
(a) Cash Dividends. Any cash dividends received on shares of Company Stock
allocated to Participants' Company Stock Accounts will be allocated to the
respective Other Investments Accounts of such Participants. Any cash dividends
received on unallocated shares of Company Stock (including any Financed Shares
credited to a Loan Suspense Account) shall be included in the computation of the
net income (or loss) of the Trust. Any cash dividends that are currently
distributed to Participants (or their Beneficiaries) under Section 9.1 hereof
shall not be credited to such Participants' Other Investments Accounts.
(b) Stock Dividends. Any stock dividends received on Company Stock shall be
credited to the Accounts (including any Loan Suspense Account) to which such
Company Stock was allocated.
Section 5.6 Accounting for Allocations
The Administrative Committee will establish accounting procedures for the
purpose of making the allocations to Participants' Accounts provided for in this
Article 5. The Administrative Committee will maintain adequate records of the
aggregate cost basis of Company Stock allocated to each Participant's Company
Stock Account. The Administrative Committee will also keep separate records of
Financed Shares and of Matching Contributions, Bonus Contributions and earnings
thereon made for the purpose of enabling the Trust to repay any Acquisition
Loan. From time to time, the Administrative Committee may modify the accounting
procedures for the purposes of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants in accordance with the general
concepts of the Plan, the provisions of this Article 5 and the requirements of
the Code and ERISA.
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Section 5.7 Account Statements
The Administrative Committee will provide each Participant with a statement
of his Accounts not less frequently than once a year.
Section 5.8 Limitations Imposed by Code Section 415
(a) General Limitation. Notwithstanding anything herein to the contrary,
the Plan is subject to the limitations imposed by Code Section 415 and the
regulations issued thereunder, which limitations are incorporated herein by
reference. The limitation year is the Plan Year. Accordingly, the annual
additions allocated to any Participant's Accounts with respect to a Plan Year
shall not exceed the lesser of $30,000 and 25% of the Participant's
"compensation" for such Plan Year. For purposes of this Section 5.8, "annual
additions" means the sum of the Elective Deferrals, Matching Contributions,
Bonus Contributions and forfeitures (if any) allocated to the Participant's
Accounts for the Plan Year, and "compensation" means wages within the meaning of
Code Section 3401(a) and all other payments of compensation to an Employee by
the Employers and their Affiliates (in the course of an Employer's or an
Affiliate's trade or business) for which an Employer or an Affiliate is required
to furnish the Employee a written statement under Code Section 6041(d), 6051(d)
or 6052 (increased by the amount of (1) any Elective Deferrals, (2) any other
elective deferrals within the meaning of Code Section 402(g)(3), and (3) any
other amount that is contributed or deferred by an Employer at the election of
the Participant and that is not includible in the gross income of the
Participant by reason of Code Section 125).
(b) Special Acquisition Loan Rules. Any Employer Contributions that are
used by the Trust (not later than the due date, including extensions, for filing
the Company's federal income tax return for that Plan Year) to pay interest on
an Acquisition Loan, and any Financed Shares that are allocated as forfeitures,
will not be included as annual additions under subsection (a) immediately above;
provided, however, that the provisions of this subsection (b) shall be
applicable for any Plan Year only if not more than one-third (1/3) of the
Employer Contributions applied to pay principal and/or interest on an
Acquisition Loan are allocated to Participants who are Highly Compensated
Employees.
(c) Correction of Excess Annual Additions. If, as a result of the
allocation of forfeitures, a reasonable error in estimating a Participant's
annual compensation, or a reasonable error in determining the amount of elective
deferrals that may be made with respect to any individual under the limits of
Code Section 415, or if under other facts and circumstances as are found by the
Internal Revenue Service to justify the availability of the rules set forth in
this subsection (c), the annual additions to a Participant's Accounts for a
limitation year would cause the limitations of Code Section 415(c) applicable to
that Participant for the limitation year to be exceeded, then the excess amounts
will be eliminated in the following manner:
First -- The Participant's Elective Deferrals for the limitation year,
together with any income attributable to such contributions, will be repaid to
the Participant (and any related Matching Contributions will be forfeited) to
the extent necessary to eliminate such excess. Any amounts returned will be
disregarded for purposes of applying the limitation set forth in Section 3.4
hereof.
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Second-- If, after the application of the immediately preceding paragraph,
an excess still exists, then, to the extent necessary to eliminate such excess,
the Employers' Bonus Contributions under Section 4.2 hereof will be allocated to
a suspense account and held therein, without adjustment for any investment
increase or decrease, until it can be allocated and reallocated in a subsequent
Plan Year among all Participants as an additional Bonus Contribution under
Section 4.2 hereof. The excess may also be used to reduce the Employers' Bonus
Contribution for the next Plan Year (and succeeding Plan Years, if necessary)
for all Participants. In the event of termination of the Plan, the suspense
account will revert to the Employers to the extent it has not been allocated to
Participant Accounts.
(d) Combined Limit. For Plan Years beginning prior to January 1, 2000, if a
Participant in the Plan is or was a participant in a defined benefit plan, as
defined in Code Section 414(j), maintained by any Employer or any Affiliate,
then the Participant's annual benefit under the defined benefit plan will be
limited to the extent necessary to comply with the limitation set forth in Code
Section 415(e).
(e) Multiple Plans. In applying the limitations of this Section 5.8, all
defined contribution plans maintained by the Employers and their Affiliates will
be treated as a single plan and all defined benefit plans will be treated as a
single plan. If an excess amount is allocated to a Participant's Accounts on an
allocation date under this Plan that coincides with an allocation date under any
other defined contribution plan maintained by the Employers or their Affiliates,
then the total excess amount allocated as of such date will be attributed to
this Plan. Any annual additions attributable to a welfare benefit fund will be
treated as allocated first, irrespective of the actual allocation date under the
welfare benefit plan.
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ARTICLE 6 INVESTMENT OF TRUST ASSETS
Section 6.1 Investment of 401(k) Portion
(a) Investment Funds. The Trustee shall invest all amounts credited to a
Participant's Elective Deferrals Account, Pre-1999 Matching Contributions
Account, Rollover Account, Culverin After-Tax Account and Culverin Supplemental
Account in such Investment Funds as the Participant shall direct from among the
Investment Funds authorized by the Administrative Committee from time to time.
The Administrative Committee may change the characteristics of any Investment
Fund and/or add or eliminate Investment Funds at any time and in any way it
deems appropriate. The Administrative Committee shall promptly inform the
Trustee, the applicable investment manager, if any, and the Participants of the
objectives of each Investment Fund and of any changes thereto.
(b) Initial Investment Direction. A Participant shall direct, as of the
date he becomes a Participant, the percentage of the future contributions to his
Elective Deferrals Account and Pre-1999 Matching Contributions Account that will
be invested in each of the Investment Funds available at that time in such
increments, in such manner and subject to such other rules as the Administrative
Committee may prescribe. If a Participant fails to direct the investment of any
portion of the future contributions to his Elective Deferrals Account and
Pre-1999 Matching Contributions Account, such contributions will be invested in
a money market (or an equivalent) fund.
(c) Initial Investment Direction for Amounts Transferred From Another Plan.
A Participant shall direct, as of the date of transfer or rollover of amounts
from another plan to the Plan, the percentage of such amounts that will be
invested in each of the Investment Funds available at that time in such
increments, in such manner and subject to such other rules as the Administrative
Committee may prescribe. If a Participant fails to direct the investment of any
portion of such transferred amounts, such amounts will be invested in a money
market (or an equivalent) fund.
(d) Change in Investment Direction. A Participant's direction of investment
for future contributions will remain in effect until changed by the Participant.
A Participant may change his investment direction for future contributions to
his Elective Deferrals Account and Pre-1999 Matching Contributions Account at
such times, in such increments and subject to such rules as the Administrative
Committee shall establish. In addition, each Participant may direct that the
amounts allocated to his Elective Deferrals Account, Pre-1999 Matching
Contributions Account, Rollover Account, Culverin After-Tax Account and Culverin
Supplemental Account be reallocated among the Investment Funds then available at
such times, in such increments and subject to such rules as the Administrative
Committee shall establish.
(e) Participant Liable for Consequences of Investment Direction. Each
Participant shall bear the sole responsibility for the investment of his
Elective Deferrals
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Account, Pre-1999 Matching Contributions Account, Rollover
Account, Culverin After-Tax Account and Culverin Supplemental Account, and none
of the Trustee, the Administrative Committee, or any of the Employers will be
liable for any loss that may occur in connection with the investment of such
Accounts.
Section 6.2 Investment of ESOP
The portion of the Trust Fund attributable to the ESOP will be invested
primarily (or exclusively) in Company Stock in accordance with directions from
the Administrative Committee. The Administrative Committee may direct the
Trustee to invest up to 100% of the Trust Fund in Company Stock. To the extent
directed by the Administrative Committee, the Trustee may also invest the Trust
Fund in such other prudent investments as the Administrative Committee deems to
be desirable for the Trust, or hold suc assets temporarily in cash.
Section 6.3 Purchases of Company Stock
At the direction of the Administrative Committee, the Trustee may use
Employer Contributions and other assets of the Trust Fund to acquire shares of
Company Stock from any Company shareholder or from the Company. Any such
purchase from a party in interest (as defined in Section 3(14) of ERISA) must be
made at a price that does not exceed adequate consideration (as defined in
Section 3(18) of ERISA) for the Company Stock acquired. No commission may be
charged in connection with any purchase of Company Stock from a party in
interest (as defined in Section 3(14) of ERISA).
Section 6.4 Sales of Company Stock
Subject to the approval of the Board, or as may be required to comply with
Participant (or Beneficiary) directions under Section 9.2 or 10.2 hereof, the
Administrative Committee may direct the Trustee to sell shares of Company Stock
to any person (including the Company), provided that any such sale to a party in
interest (as defined in Section 3(14) of ERISA) must be made at a price that is
not less than adequate consideration (as defined in Section 3(18) of ERISA) for
the Company Stock sold. No commission may be charged in connection with any sale
of Company Stock to a party in interest (as defined in Section 3(14) of ERISA).
Section 6.5 Acquisition Loans
(a) Incurrence of Acquisition Loans. The Administrative Committee may
direct the Trustee to incur Acquisition Loans under the ESOP from time to time
to finance the acquisition of Company Stock or to repay a prior Acquisition
Loan. An installment obligation incurred in connection with the purchase of
Company Stock shall be treated as an Acquisition Loan. An Acquisition Loan shall
be for a specified term, shall bear a reasonable rate of interest and shall not
be payable on demand except i the event of default. An Acquisition Loan may be
secured by a pledge of the Financed Shares acquired with the
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proceeds thereof (or acquired with the proceeds of a prior Acquisition Loan
which is being refinanced). No other assets of the Trust Fund may be pledged as
collateral for an Acquisition Loan, and no lender shall have recourse against
any assets of the Trust Fund other than any Financed Shares remaining subject to
pledge. Any pledge of Financed Shares must provide for the release of the shares
s pledged as such shares are released from the related Loan Suspense Account, in
accordance with Section 5.3(c) hereof, for allocation to Participants' Company
Stock Accounts. If the lender is a party in interest (as defined in Section
3(14) of ERISA), the Acquisition Loan must provide for a transfer of assets from
the Trust Fund to the lender on default only upon and to the extent of the
failure of the Trust to meet the payment schedule of the Acquisition Loan.
(b) Payments on Acquisition Loans. Payments of principal and/or interest on
any Acquisition Loan shall be made by the Trustee only from (1) Employer
Contributions paid in cash to enable the Trust to repay such Acquisition Loan,
(2) earnings attributable to such Employer Contributions, and (3) any cash
dividends received by the Trust on the Financed Shares (whether allocated or
unallocated); and the payments made with respect to an Acquisition Loan for a
Plan Year must not exceed the sum o such Employer Contributions, earnings and
dividends for that Plan Year (and prior Plan Years), less the amount of such
payments for prior Plan Years. If the Company is the lender with respect to an
Acquisition Loan, Employer Contributions may be paid in the form of cancellation
of indebtedness under the Acquisition Loan. If the Company is not the lender
with respect to an Acquisition Loan, the Company may elect to make payments on
the Acquisition Loan directly to the lender and to treat such payments as
Employer Contributions.
(c) Special Circumstances. Notwithstanding the provisions of subsection (b)
immediately above, in the event of a sale or other disposition of Financed
Shares allocated to a Loan Suspense Account, the Administrative Committee may
direct the Trustee to apply the proceeds of such sale or disposition to the
repayment of the Acquisition Loan used to acquire such Financed Shares (or to
refinance such Acquisition Loan) and the excess proceeds shall be allocated to
Participants' Other Investments Accounts pro rata in relation to the balance in
each such Account. The immediately preceding sentence will not apply to a sale
or disposition of Financed Shares exchanged for other stock in a transaction
described in Code Section 402(j), provided that there is a successor employer
that, with the Company's consent, agrees to adopt and continue the Plan as an
employee stock ownership plan, within the meaning of Code Section 4975(e)(7). If
the Trustee is unable to make payments of principal and/or interest on an
Acquisition Loan when due, then the Administrative Committee (with the approval
of the Board) may direct the Trustee to sell any Financed Shares that have not
been allocated to Participants' Company Stock Accounts or to obtain an
Acquisition Loan in an amount sufficient to make such payments.
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ARTICLE 7 VOTING OF COMPANY STOCK
Section 7.1 Voting
Each Participant (or Beneficiary, as applicable) shall have the right, with
respect to the shares of Company Stock allocated to his Company Stock Account,
to direct the Trustee as to the manner in which to vote such Company Stock in
any matter put to a shareholder vote. Upon receipt of timely and proper
directions from a Participant (or Beneficiary), the Trustee will vote the shares
of Company Stock allocated to such Participant's (or Beneficiary's) Company
Stock Account in accordance therewith. Th Trustee will not vote any allocated
shares of Company Stock with respect to which the Trustee does not receive
timely and proper direction. The Trustee will vote any shares of Company Stock
that are not then allocated to Participant Accounts in the manner directed by
the Administrative Committee (or by such other person as may be appointed by the
Board to direct the Trustee in such matter).
Section 7.2 Tender Offers
Each Participant (or Beneficiary, if applicable) shall have the right, with
respect to the shares of Company Stock allocated to his Company Stock Account,
to direct the Trustee as to whether to tender such shares in any tender (or
other purchase or exchange) offer made with respect to such shares. Upon receipt
of timely and proper directions from a Participant (or Beneficiary), the Trustee
will tender or not tender the shares of Company Stock allocated to such
Participant's (or Beneficiary's) Compan Stock Account in accordance therewith.
The Trustee will tender or not tender any shares of Company Stock with respect
to which the Trustee does not receive timely and proper directions from the
Participant (or Beneficiary) to whose Company Stock Account such shares are
allocated, and any shares of Company Stock that are not then allocated to
Participant Accounts, as directed by the Administrative Committee (or such other
person as may be appointed by the Board to direct the Trustee in such matter).
Notwithstanding the first sentence of Section 6.4, Board approval shall not be
required with respect to any tender of Company Stock made pursuant to this
Section 7.2, even if such tender is directed by the Administrative Committee.
Section 7.3 Furnishing of Information
On any matter in which a Participant (or Beneficiary) is entitled to direct
the Trustee under Section 7.1 or 7.2 hereof, the Trustee will solicit such
directions by distributing to each Participant and Beneficiary to whose Company
Stock Account Company Stock has been allocated, such information as shall be
distributed to shareholders of Company Stock generally in connection with a
shareholder vote, together with any additional information as the Trustee deems
appropriate for each Participant (or Beneficiary) to give proper directions to
the Trustee. The directions received from any Participant will be held in
confidence by the Trustee, and will not be individually divulged or released to
the Employers, the
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Administrative Committee or any other person, except to the
extent required by law or as may be unavoidable in complying with Section 7.2
hereof.
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ARTICLE 8 VESTING
Section 8.1 Vesting
(a) Elective Deferrals and Bonus Contributions. A Participant will at all
times be 100% vested in his Elective Deferrals Account, Pre-1999 Matching
Contributions Account, Rollover Account and Culverin After-Tax Account, and in
the portion of his Company Stock Account and Other Investments Account that is
attributable to Bonus Contributions.
(b) Matching Contributions. A Participant who has completed three or more
Years of Service as of July 1, 1999 will at all times be 100% vested in the
portion of his Company Stock Account and Other Investments Account that is
attributable to Matching Contributions. Any other Participant will become vested
in the portion of his Company Stock Account and Other Investments Account that
is attributable to Matching Contributions in accordance with the following
schedule, based upon his Years of Service:
Year of Service Vested Percentage
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
(c) Culverin Supplemental Accounts. A Participant will vest in his Culverin
Supplemental Account in accordance with the terms of the Plan as in effect on
December 31, 1998.
(d) Vesting upon Death, Disability or Attainment of Normal Retirement Age.
Notwithstanding subsections (b) and (c) immediately above, a Participant will
become 100% vested in his Culverin Supplemental Account and in that portion of
his Company Stock Account and Other Investments Account that is attributable to
Matching Contributions upon the Participant's death, Disability or attainment of
Normal Retirement Age, provided that he is an Employee on the date such event
occurs.
Section 8.2 Forfeitures
(a) Timing of Forfeitures. Any amounts in a Participant's Accounts that are
not vested on his Severance Date will be maintained in such Accounts and will
continue to share in allocations under Section 5.4 hereof until the first to
occur of (1) the distribution of the Participant's entire Capital Accumulation,
or (ii) the Participant's incurrence of five consecutive One-Year Breaks in
Service, whereupon such amounts will be forfeited and used to reestablish the
forfeited Account balances o Participants rehired during such Plan Year (as
provided in subsection (b) immediately below) or to reduce the amount that the
Employers
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would otherwise have to contribute as Employer Contributions for the
current Plan Year or future Plan Years. Forfeitures will first be charged
against a Participant's Other Investments Account, with any balance charged
against his Company Stock Account (at the fair market value). Financed Shares
will be forfeited only after other shares of Company Stock have been forfeited.
A Participant who has no vested interest will be deemed to have received a
distribution of his entire Capital Accumulation on his Severance Date. A
Participant whose entire Capital Accumulation has been distributed from the Plan
or who has no vested interest will be deemed cashed out from the Plan.
(b) Restoration of Forfeitures. If a Participant whose unvested interest in
his Accounts has been forfeited pursuant to subsection (a) immediately above is
reemployed by an Employer or an Affiliate prior to incurring five consecutive
One-Year Breaks in Service, then the amount forfeited will be restored to the
relevant Account(s), unadjusted for gains or losses occurring prior to
restoration, if the Participant repays to the Plan the full amount of his prior
distributions attributable to employer contributions under the Plan before the
earlier of (i) the end of the five-year period commencing on the Employee's
reemployment date, and (ii) the date on which the Employee incurs five
consecutive One-Year Breaks in Service. Such restoration will be made as of the
last day of the Plan Year in which repayment occurs and will be made from
forfeitures of other Participants for such Plan Year, and if such forfeitures
are not sufficient for that purpose, from a special Employer contribution.
Restoration of the Participant's Accounts will include restoration of all Code
Section 411(d)(6) protected benefits with respect to such Accounts, in
accordance with applicable Treasury regulations. If a Participant who was deemed
to have received a distribution pursuant to the fourth sentence of subsection
(a) immediately above resumes employment as an Employee before the date he
incurs five consecutive One-Year Breaks in Service, then such Employee will be
deemed to have repaid all distributions as of his reemployment date.
(c) Vested Interest. If a Participant is reemployed by an Employer or an
Affiliate prior to incurring five consecutive One-Year Breaks in Service, but
after receiving a distribution of all or a part of his Capital Accumulation,
then such Participant's vested interest in the remaining amounts allocated to
his Accounts will not be less than an amount "X" determined by the formula
"X=P(AB)+D)-D," where "P" is the vested percentage at the relevant time, "AB" is
the aggregate Account balances at the relevant time, and "D" is the amount of
the distribution.
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ARTICLE 9 IN-SERVICE DISTRIBUTIONS
Section 9.1 Cash Dividends
If so determined by the Board, any cash dividends paid during a Plan Year
on shares of Company Stock allocated to a Participant's Company Stock Account
may be paid in cash directly to such Participant (or his Beneficiary) or may be
paid in cash to the Trustee and distributed by the Trustee (or its agent) to the
Participant (or his Beneficiary) no later than 90 days after the close of the
Plan Year in which such dividends are received by the Trustee.
Section 9.2 ESOP Diversification
(a) A Participant who has attained age 55 and completed at least ten Years
of Participation in the ESOP may elect to "diversify" a portion of the balance
in his Company Stock Account in accordance with such rules as the Administrative
Committee shall establish. The rules established by the Administrative Committee
shall, at a minimum, permit a qualifying Participant to diversify the balance in
his Company Stock Account in accordance with the following provisions:
(1) Such Participant shall be permitted to elect to diversify the balance
in his Company Stock Account during the 90-day period immediately following the
close of each Plan Year during the election period. For purposes of this Section
9.2, "election period" means the period of six consecutive Plan Years beginning
with the Plan Year immediately following the Plan Year in which the Participant
attains age 55 or completes ten Years of Participation in the Plan, whichever
occurs later.
(2) For each of the first five Plan Years in the election period, such
Participant shall be permitted to diversify not less than 25% of the balance in
his Company Stock Account (less any amounts that such Participant diversified
previously under this Section 9.2(a)). For the sixth Plan Year in the election
period, such Participant shall be allowed to diversify 50% of the balance in his
Company Stock Account (less any amounts that such Participant diversified
previously under this Section 9.2(a)). Notwithstanding the foregoing, no
"diversification" election shall be permitted if the fair market value of a
Participant's Company Stock Account (as of the last day of the first Plan Year
in the election period) is $500 or less, unless and until the fair market value
of his Company Stock Account as of the last day of a subsequent Plan Year in the
election period exceeds such amount.
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(b) "Diversification" may be effected by either of the following methods,
as determined by the Administrative Committee:
(1) By distributing to the Participant (in cash or in Company Stock, as
determined by the Administrative Committee) the portion of the Participant's
Company Stock Account that the Participant elected to diversify; or
(2) If the Plan allows Participants to direct the investment of their
interest under the 401(k) Portion among at least three investment options, by
transferring such amount to the 401(k) Portion, where it will be invested in
accordance with the Participant's directions, subject to such rules as the
Administrative Committee may establish, in the Investment Funds then available
under the 401(k) Portion.
(c) Any distribution or transfer under this Section 9.2 shall occur no
later than 90 days after the end of the 90-day period during which the
Participant made his diversification election.
Section 9.3 Hardship Withdrawals
(a) General. If a Participant experiences a "hardship" (as defined below),
he may elect to withdraw an amount from his Elective Deferrals Account that does
not exceed the amount required to relieve the financial need (which amount may
include any amounts necessary to pay any federal, state, or local income taxes
or penalties reasonably anticipated to result from the withdrawal); provided,
however, that a Participant may not withdraw any earnings credited to his
Elective Deferrals Account as of a date that is later than December 31, 1988.
(b) Hardship Defined. A withdrawal is on account of hardship only if the
withdrawal (1) is made on account of an immediate and heavy financial need of
the Participant and (2) is necessary to satisfy such need.
(1) Immediate and Heavy Financial Need. A withdrawal will be deemed to be
made on account of an immediate and heavy financial need of the Participant if
the withdrawal is on account of:
(i) uninsured medical expenses described in Code Section 213(d) previously
incurred by the Participant, the Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152), or necessary for these persons to
obtain medical care described in Code Section 213(d);
(ii) costs directly related to the purchase (excluding mortgage payments)
of a principal residence of the Participant;
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(iii) payment of tuition, related educational fees and room and board for
the next 12 months of post-secondary education for the Participant or the
Participant's spouse, children or dependents (as defined in Code Section 152);
(iv) the need to prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of the Participant's principal
residence; or
(v) any need prescribed by the Internal Revenue Service in a revenue
ruling, notice or other document of general applicability that satisfies the
safe harbor definition of hardship.
(2) Withdrawal Necessary to Satisfy Need. A withdrawal will be treated as
being necessary to satisfy the need if the requested withdrawal does not exceed
the amount of the Participant's immediate and heavy financial need, which may
include any amounts necessary to pay any federal, state, or local income taxes
or penalties reasonably anticipated to result from the withdrawal, and the
requirements of subsection (3) immediately below are satisfied. Prior to
obtaining a hardship withdrawal, a Participant must have obtained all
distributions, other than hardship distributions, and all nontaxable loans
(determined at the time of the loan) currently available under this Plan and all
other qualified plans maintained by the Employer.
(3) Restrictions. The following restrictions apply to a Participant who
receives a hardship withdrawal:
(i) Such Participant may not make elective deferrals or employee
contributions to the Plan or any other qualified plan or nonqualified plan of
deferred compensation (but not including a health or welfare benefit plan),
other than any mandatory employee contribution portion of a defined benefit
plan, maintained by the Company for the 12-consecutive-month period following
the date of the hardship withdrawal; and
(ii) The Participant's elective deferrals under the Plan and any other
qualified plan maintained by the Company for the Participant's taxable year
immediately following the taxable year of the hardship withdrawal shall be
limited to the Code Section 402(g) limitation (as described in Section 3.1(c)
hereof), reduced by the amount of the Participant's elective deferrals
(including Basic Contributions) made in the taxable year of the hardship
withdrawal.
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Section 9.4 Loans
(a) Loan Policy. The Administrative Committee, in its discretion, may adopt
(or having adopted, may revoke) a nondiscriminatory policy that the Trustee must
observe in making loans to Participants. Such policy must be a written document
and must include: (1) the identity of the person or positions authorized to
administer the participant loan program; (2) a procedure for applying for the
loan; (3) the criteria for approving or denying a loan; (4) the limitations, if
any, on the types an amounts of loans available; (5) the procedure for
determining a reasonable rate of interest; (6) the types of collateral that may
secure the loan; and (7) the events constituting default and the steps the Plan
will take to preserve Plan assets in the event of default. Any written loan
policy shall be deemed to be a part of the Plan.
(b) Trustee Authorization. This Section 9.4 specifically authorizes the
Trustee to make loans on a nondiscriminatory basis to a Participant in
accordance with the loan policy established by the Administrative Committee,
provided: (1) the loan policy satisfies the foregoing requirements of subsection
(a) immediately above; (2) loans may be made only from a Participant's interest
under the 401(k) Portion; (3) loans are available to all Participants on a
reasonably equivalent basis and are not available in a greater amount for Highly
Compensated Employees than for other Employees; (4) loans are limited to 50% of
the Participant's Capital Accumulation as of the dates on which the loans are
processed; (5) any loan is adequately secured and bears a reasonable rate of
interest; (6) the loan provides for repayment within a specified time; (7) the
default provisions of the note prohibit offset of the Participant's vested
Account balances prior to the time the Trustee otherwise would distribute th
Participant's vested Account balances; (8) the amount of the loan does not
exceed (at the time the Plan extends the loan) the present value of the
Participant's Capital Accumulation under the 401(k) Portion; and (9) the loan
otherwise conforms to the exemption provided by Code Section 4975(d)(1).
(c) Deemed Distribution Upon Default. If a Participant defaults on a loan
made pursuant to the loan policy described in subsection (a) immediately above,
the Plan will treat the default as a distributable event. The Trustee, at the
time of the default or at such later time as the Administrative Committee may
determine, will reduce the Participant's vested Account balances by the lesser
of the amount in default (plus accrued interest thereon) or the Plan's security
interest in the Participant's vested Account balances; provided, however, that
to the extent the loan is secured by the Participant's Elective Deferrals
Account, the Trustee will not reduce the Participant's vested Account balances
unless the Participant has incurred a Severance Date or has attained age 59 1/2.
1/2.
Section 9.5 Special Rules
Notwithstanding the foregoing Sections of this Article 9, the following
provisions will apply to all withdrawals and loans made under this Article 9:
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(a) A hardship withdrawal under Section 9.3 hereof or a loan under Section
9.4 hereof requested by a married Participant who is subject to Appendix A
hereto shall not be granted by the Administrative Committee unless the
Participant's spouse consents in writing to such withdrawal or loan in a manner
similar to that described in Section A.3(b) of Appendix A hereto after receiving
notice, similar to that described in Section A.3(c) of Appendix A hereto, of the
spouse's rights.
(b) Withdrawal and loan amounts shall be distributed as soon as
administratively practicable after the date on which the Administrative
Committee receives the Participant's application (provided that such application
is made in accordance with such rules as may be established by the
Administrative Committee). Withdrawals and loans shall be charged pro rata to
all of the Participant's applicable Investment Funds unless the Administrative
Committee, in its sole discretion, determines otherwise.
(c) The Participant shall not be entitled to make a withdrawal under this
Article 9 to the extent that such withdrawal requires distribution of a portion
of his Accounts then outstanding in the form of loans.
(d) In the event of the Participant's death prior to a withdrawal or loan
pursuant to this Article 9, the Participant's withdrawal election or loan
request, as applicable, shall be deemed to have been revoked.
(e) The Administrative Committee shall establish such rules and
requirements as it deems necessary or advisable to administer this Article 9 so
as to satisfy the applicable Code requirements. In addition, the Administrative
Committee may establish such other rules and requirements as it deems
appropriate or desirable with respect to the terms and conditions of a
withdrawal or loan under this Article 9, including, but not limited to, rules
limiting the number of withdrawals and loans a Participant may make or have
outstanding in any Plan Year or at any time and the minimum amount that a
Participant must withdraw or borrow on any single occasion.
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ARTICLE 10 PAYMENT OF BENEFITS
Section 10.1 Time of Distribution
(a) In General. Except as provided otherwise in this Section 10.1 or in
Section 10.3 hereof, a Participant's Capital Accumulation will be distributed or
commence to be distributed to the Participant (or to the Participant's
Beneficiary in the case of a deceased Participant) as soon as administratively
practicable after the Participant's Severance Date; provided, however, that if
the Participant's Capital Accumulation exceeds $5,000, such Capital Accumulation
will not be distributed or commence to be distributed to the Participant prior
to the Participant's attainment of Normal Retirement Age without the
Participant's written consent.
(b) Earliest Distribution Date. Except as provided in Section 9.3 hereof, a
Participant's Capital Accumulation may not be distributed prior to the earliest
of:
(1) the Participant's separation from service, death or Disability;
(2) the termination of the Plan without the establishment or maintenance of
another defined contribution plan, other than an employee stock ownership plan
(within the meaning of Code Section 4975(e)(7));
(3) the disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Code Section 409(d)(2))
used in a trade or business of the corporation disposing of the assets if such
corporation continues to maintain the Plan after the disposition, but only with
respect to employees who continue employment with the corporation acquiring such
assets;
(4) the disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Code Section
409(d)(3)) if such corporation continues to maintain the Plan after the
disposition, but only with respect to employees who continue employment with the
subsidiary;
(5) the Participant's attainment of age 59 1/2; and
(6) the Participant's incurrence of a hardship, within the meaning of
Section 9.3 hereof.
(c) Latest Distribution Date Absent Participant Consent. Unless the
Participant (or, in the case of a deceased Participant, the Participant's
Beneficiary) elects otherwise, the Participant's Capital Accumulation will be
distributed or will commence to be distributed no later than 60 days after the
end of the Plan Year in which occurs the latest of (1) the Participant's
attainment of Normal Retirement Age, (2) the tenth anniversary of the date the
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Participant became a Participant, and (3) the Participant's termination of
Service. Notwithstanding the foregoing, in the case of a nonspouse Beneficiary,
Section 10.3 hereof may require that distribution be made or commence sooner.
(d) Required Beginning Date. Notwithstanding any provision of the Plan to
the contrary, a Participant's Capital Accumulation must be distributed or
commence to be distributed no later than April 1 of the calendar year following
the later of the calendar year in which such Participant's Service terminates or
the calendar year in which such Participant attains age 70 1/2; provided,
however, that if a Participant is a 5% owner (as defined in Code Section 416)
with respect to the calendar year in which such Participant attains age 70 1/2,
distribution to such Participant will be made or commence to be made by April 1
of the calendar year following such calendar year. year.
Section 10.2 Amount and Form of Distribution
(a) Amount. Except as provided in Appendix A hereto, the amount of a
Participant's Capital Accumulation for distribution purposes will be determined
as of the Valuation Date coinciding with or immediately preceding the date on
which the Participant's distribution is processed, and will not be adjusted for
investment earnings or losses occurring subsequent to such Valuation Date.
Distributions will be processed at such times as the Administrative Committee
shall establish, but in any even at least once each calendar month.
(b) Form. Except as provided in Appendix A hereto, a Participant's Capital
Accumulation will be distributed to the Participant (or, in the case of a
deceased Participant, the Participant's Beneficiary) in a single, lump sum
payment.
(c) Cash or Stock. Except as provided in Appendix A hereto, a Participant's
Capital Accumulation will be distributed in cash, unless the Participant (or, in
the case of a deceased Participant, the Participant's Beneficiary) elects to
receive that portion of his Capital Accumulation held under the ESOP in whole
shares of Company Stock (with cash for any fractional share). The Administrative
Committee will notify the Participant (or the Participant's Beneficiary) of his
right to receive stock with respect to that portion of his Capital Accumulation
held under the ESOP.
Section 10.3 Special Rules for Death Benefits
(a) Death After Benefit Commencement. If a Participant dies after
distribution of his Capital Accumulation has commenced, but before his entire
vested interest has been distributed, then the remainder of the Participant's
Capital Accumulation will be distributed to the Participant's Beneficiary at
least as rapidly as under the distribution method being used as of the date of
the Participant's death.
(b) Death Prior to Benefit Commencement. If a Participant dies before
distribution of his Capital Accumulation has commenced, then distribution to the
Participant's Beneficiary must be completed (i) by December 31 of the calendar
year
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containing the fifth anniversary of the Participant's death, or (ii) if
payment commences to a designated Beneficiary by December 31 of the calendar
year containing the first anniversary of the Participant's death, over a period
that does not exceed the designated Beneficiary's life expectancy.
Notwithstanding the preceding sentence, if the designated Beneficiary is the
Participant's spouse, then distribution of the Participant's Capital
Accumulation need not be made or commence to be made until the later of December
31 of the calendar year in which the Participant would have attained age 70 1/2
or December 31 of the year in which the Participant's Service terminates. If the
Participant's Beneficiary is his surviving spouse, and the spouse dies after the
the Participant but before distributions have begun to the spouse, then the
first sentence of this subsection (b) will be applied as if the surviving spouse
were the Participant.
(c) Beneficiary Designation. A Participant shall designate his Beneficiary
on such forms as are prescribed by and filed with the Administrative Committee.
A Participant may change his Beneficiary designation at any time by filing a new
Beneficiary designation with the Administrative Committee. The most recent
Beneficiary designation on file with the Administrative Committee will be
controlling. If a married Participant designates a Beneficiary other than his
spouse, that designation will be invalid, unless the Participant's spouse has
consented in writing to the designation of a different Beneficiary or it is
established to the satisfaction of a Plan representative that the Participant
has no spouse, the Participant's spouse cannot be located or the Participant is
excused from obtaining such consent because of other circumstances approved in
federal regulations. The spouse's written consent to the designation of a
different Beneficiary (1) must acknowledge the specific nonspouse Beneficiary
(including any class of Beneficiaries or any contingent Beneficiaries), which
may not be changed without spousal consent (unless the spouse's consent
expressly permits designations by the Participant without any requirement for
further consent by the spouse), (2) must acknowledge the effect of such consent,
and (3) must be witnessed by a Plan representative or a notary public. The
spouse's consent may not be revoked. However, the consent of one spouse will
have no effect with respect to any subsequent spouse.
If there is no valid Beneficiary designation on file with the
Administrative Committee, or if no designated Beneficiary survives the
Participant, then the Participant's Beneficiary will be the Participant's
surviving spouse or, if none, the Participant's surviving children in equal
shares, or, if none, the Participant's estate.
(d) Death of Beneficiary After Death of Participant. If the Participant's
Beneficiary dies after the Participant, but before the Participant's Capital
Accumulation has been completely distributed, then the remaining Capital
Accumulation will be distributed to the Beneficiary's estate, unless the
Participant's Beneficiary designation provides otherwise.
Section 10.4 Notice to Participant
Not more than 90 days and not less than 30 days before the Participant's
Annuity Starting Date, the Administrative Committee shall provide each
Participant whose Capital Accumulation exceeds $5,000 a written explanation of
the optional forms of benefit under
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the Plan, including the material features and relative values of those
options, when the Participant's benefits will be distributed if the Participant
fails to make an election, and the Participant's right to defer distribution
until the date distribution is required under Section 10.1(c) hereof. If the
Administrative Committee so elects for a Plan Year, distribution of a
Participant's Capital Accumulation may be made or commence to be made less than
30 days after such notice is given, provided that (1) the Administrative
Committee clearly informs the Participant that the Participant has a right to a
period of at least 30 days after receiving the notice to consider the decision
of whether or not to consent to a distribution (and, if applicable, a particular
distribution option), and (2) the Participant, after receiving the notice,
affirmatively elects a distribution.
Section 10.5 Minimum Distribution and Incidental Benefit Requirements
The provisions of the Plan are intended to comply with Code Section
401(a)(9), which prescribes certain rules regarding minimum distributions and
requires that death benefits be incidental to retirement benefits. All
distributions under the Plan will be made in conformity with Code Section
401(a)(9) and the regulations thereunder, including Treasury Regulation Sections
1.401(a)(9)-1 and 1.401(a)(9)-2, which are incorporated herein by reference. The
provisions of the Plan governing distributions are intended to apply in lieu of
any default provisions prescribed in the regulations; provided, however, that
Code Section 401(a)(9) and the regulations thereunder shall override any Plan
provisions inconsistent with such Code section and regulations.
Section 10.6 Post-Termination Withdrawals
Subject to such rules as the Administrative Committee may establish, a
Participant whose Service has terminated, and whose Capital Accumulation exceeds
$5,000, may withdraw all or any portion of his Capital Accumulation under the
401(k) Portion at any time. A distribution pursuant to this Section 10.6 will be
made as soon as administratively practicable after the Administrative Committee
receives the Participant's distribution request (provided that such request is
made in accordance with such rules as the Administrative Committee may have
established).
Section 10.7 Special Rules for Amounts Transferred from Culverin Plan
Notwithstanding the provisions in the preceding sections of this Article
10, all amounts transferred to the Plan from the Culverin Plan will be
distributed in accordance with the terms of the Plan as in effect on December
31, 1998.
Section 10.8 Direct Rollovers
(a) General Rule. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section 10.8, a
distributee may elect, at the time and in the manner prescribed by the
Administrative Committee, to have any
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portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions. For purposes of this Section 10.8, the following terms
shall have the respective meanings set forth below:
(1) "Direct rollover" means a payment by the Plan to the eligible
retirement plan specified by the distributee.
(2) "Distributee" means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code Section 414(p), are distributees
with regard to the interest of the spouse or former spouse.
(3) "Eligible retirement plan" means an individual retirement account
described in Code Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(4) "Eligible rollover distribution" means any distribution of all or any
portion of the balance to the credit of the distributee, except that an eligible
rollover distribution does not include the following: any distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated Beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution is required under Code
Section 401(a)(9); the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); effective for Plan Years
commencing after December 31, 1999, any hardship withdrawal pursuant to Section
9.3 hereof; and any other distribution identifie in the Code or in regulations,
notices or other materials promulgated by the Internal Revenue Service as not
constituting an eligible rollover distribution.
Section 10.9 Incompetent Participant or Beneficiary
Every person receiving or claiming a benefit under the Plan shall be
conclusively presumed to be mentally competent until the date on which the Plan
Administrator receives a written notice, in a form and manner acceptable to the
Plan Administrator, that such person is incompetent, and that a guardian,
conservator, or other person legally vested with the care of
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such person's person or estate has been appointed; provided, however, that
if the Administrative Committee is of the opinion, from informatio deemed by it
to be reliable, that a person entitled to benefits hereunder is unable for any
reason to attend to his affairs, the Administrative Committee may direct that
any benefits payable hereunder will be withheld until a guardian, conservator,
or other legal representative for such person has been duly appointed pursuant
to proceedings satisfactory to the Administrative Committee and that such
benefits be paid only to such guardian, conservator, or legal representative;
or, in the alternative, the Administrative Committee may direct that such
benefits be paid to (a) the person himself (unless the person is a minor)
directly, (b) any relative by blood or connection by marriage of such person
appearing to the Administrative Committee to be equitably entitled to same or
best qualified to apply same to the comfort, maintenance, and support of such
person, or (c) to any custodian under the Uniform Gifts to Minors Act or similar
statute. The Administrative Committee's decision on such matters will be
conclusive and binding on all persons and parties in interest. The
Administrative Committee will not be required to see to the proper application
of any payments made to any person pursuant to the provisions of this Section
10.9, and any such payment so made will be a complete discharge of the liability
of the Trust, the Trustee, the Employers, the Board and the Administrative
Committee therefor.
Section 10.10 Beneficiary Dispute
If at any time there is doubt as to the right of any Beneficiary to receive
any amount, the Trustee may retain such amount, without liability for any
earnings thereon, until the rights thereto are determined, or the Trustee may
pay such amount into any court of appropriate jurisdiction, in either of which
events none of the Trustee, any Employer, the Board or the Administrative
Committee will be under any further liability to anyone.
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ARTICLE 11 ADMINISTRATION
Section 11.1 Administrative Committee
The Plan shall be administered by the Administrative Committee, which will
be the plan administrator for purposes of ERISA. The Administrative Committee
shall consist of not less than three persons appointed by, and serving at the
pleasure of, the Board. Any member of the Administrative Committee may resign
by delivering his written resignation to the Secretary of the Board and to the
Secretary of the Administrative Committee and such resignation will become
effective on the date specified therein. In the case of a vacancy in the
membership of the Administrative Committee, the remaining members of the
Administrative Committee may exercise any and all powers, authority, duties,
and discretion conferred upon the Administrative Committee pending the filling
of the vacancy by the Board. Notwithstanding anything herein to the contrary,
the Company shall be the Administrative Committee until the Board has appointed
the individual members of such committee.
Section 11.2 Organization and Procedure
(a) The Board shall designate one of the members of the Administrative
Committee to serve as the chairman of the Administrative Committee. The members
of the Administrative Committee shall appoint a secretary (who may, but need
not, be a member of the Administrative Committee) and such other officers as
they may deem necessary. The Administrative Committee shall hold meetings of its
members at least annually and shall keep minutes of all such meetings. All
actions of the Administrative Committee shall be recorded in such minutes or in
other appropriate written form. Subject to such restrictions as the Board may
establish from time to time, the Administrative Committee may establish such
other rules for the transaction of its business and the administration of the
Plan as it deems appropriate.
(b) Any determination or action of the Administrative Committee may be made
or taken by vote of a majority of the members present at any meeting thereof
(provided there is a quorum at such meeting), or by unanimous written consent of
all members without a meeting. The majority of the members of the Administrative
Committee at the time in office will constitute a quorum for the transaction of
business. A member of the Administrative Committee shall not vote or act on any
matter relating solely to himself.
(c) The Chairman of the Administrative Committee, the Secretary of the
Administrative Committee and any other individual or individuals authorized by
the Administrative Committee in writing may execute or deliver any notices,
applications, certificates, instruments, consents, requests, directions,
requisitions, orders for monies, instructions, or other documents on its behalf
and may represent the Administrative Committee in any matters or dealings
involving the Administrative Committee.
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(d) The Administrative Committee may delegate to one or more of its members
or to any other person(s) or organization(s) any of its rights, powers, duties,
and responsibilities as it deems appropriate and as may be so delegated under
ERISA. Any such delegation shall be set forth in writing, shall be reviewed
periodically by the Administrative Committee and shall be terminable upon such
notice as the Administrative Committee in its discretion deems reasonable and
proper under the circumstances.
Section 11.3 Authority of the Administrative Committee
The Administrative Committee shall have and exercise all discretionary and
other authority to control and manage the operation and administration of the
Plan, except such authority as may be specifically allocated otherwise under the
terms of the Plan, and shall have the power to take any action(s) necessary or
appropriate to carry out such authority. Without limiting the foregoing, and in
addition to the authority and duties specified elsewhere herein, the
Administrative Committee shall have the exclusive right and discretionary
authority to:
(a) construe and interpret the terms and provisions of the Plan;
(b) determine the eligibility of any person for benefits under this Plan,
the amount of any such benefits and all other questions pertaining to the rights
of Participants and their Beneficiaries hereunder;
(c) take all steps deemed necessary or advisable by the Administrative
Committee to correct mistakes in administering the Plan;
(d) formulate, issue, and apply such rules and regulations as it deems
necessary or appropriate for the proper and efficient administration of the
Plan, provided that such rules are not inconsistent with the terms of the Plan;
(e) prescribe and require the use of appropriate forms;
(f) direct the Trustee concerning all payments to be made pursuant to the
provisions of the Plan;
(g) determine the existence of a Disability and, in this connection, may
require any Participant to submit to a physical examination by a licensed
physician, in accordance with uniform rules and procedures consistently applied
to similarly situated individuals; and
(h) determine and resolve any and all questions arising under this Plan or
in connection with the administration thereof or the applicability thereof to
any and all individuals, and remedy possible ambiguities or omissions.
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Section 11.4 Actions Conclusive
All determinations, conclusions, interpretations, corrections, and
decisions of the Administrative Committee in respect of any matter or question
relating to the Plan or the administration thereof, and any action taken with
respect to the Plan at the direction of the Trustee, the Board, the
Administrative Committee or any of the Employers, shall be final, conclusive,
and binding on all persons affected thereby unless found by a court of competent
jurisdiction to have been arbitrary and capricious.
Section 11.5 Use of Professional Services
The Administrative Committee may engage the services of or consult with any
legal counsel, actuary, independent public accountant or other person as it
deems necessary or desirable in connection with the administration of the Plan.
Such persons may be persons who render advice to the Employers or the Trustee.
The Administrative Committee and any person to whom it may delegate any duty or
power in connection with the administration of the Plan shall be entitled to
rely conclusively upon, and shall b fully protected by the Employers in any
prudent action taken by it (or him) in reliance on, the advice of such
professionals.
Section 11.6 Fees and Expenses
No employee of the Employers or any of their Affiliates shall receive any
compensation for services rendered as an Administrative Committee member. Any
other person serving as an Administrative Committee member shall be entitled to
such reasonable compensation therefor as is mutually agreed upon with the
Company. Each Administrative Committee member, whether or not an employee, shall
be reimbursed for all reasonable expenses incurred by him in his capacity as an
Administrative Committee member. Where services are utilized as provided in
Section 11.5 hereof, the Administrative Committee shall review and approve fees
and other costs for those services. All expenses incurred for brokerage and
similar services, or for investment advice and the evaluation thereof, shall be
paid from the assets of the Trust Fund. All other expenses shall be paid from
the assets of the Trust Fund, unless voluntarily paid by the Employers.
Section 11.7 Liability and Indemnification
The members of the Administrative Committee shall use ordinary care and
diligence in the performance of their duties, but no member shall be personally
liable by virtue of any contract, agreement, or other instrument made or
executed by him or on his behalf as a member of the Administrative Committee,
nor for any mistake of judgment made by himself or any other member, nor for any
loss, except insofar as liability may be imposed by ERISA or other applicable
law. No member shall be liable for the neglect, omission, or wrongdoing of any
other Administrative Committee members or of the agents or counsel of the
Administrative Committee, except insofar as liability may be imposed by ERISA or
other applicable law. The Employers, the members of the Board, the Trustee, the
members of the
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Administrative Committee, and the officers, agents and representatives of
any or all of them shall be entitled to rely upon all tables, annual or other
valuations, computations, certificates, and reports furnished by an actuary
selected or approved by the Company, upon all certificates and reports made by
any accountant selected or approved by the Company and upon all opinions given
by any legal counsel selected or approved by the Company. The Employers shall
indemnify each member of the Administrative Committee against, and save him
harmless from, any and all expenses, costs and liabilities, including attorneys'
fees, arising out of any act or omission to act as a member or officer of the
Administrative Committee, except such liabilities and expenses as are due to his
willful misconduct or failure to exercise good faith.
Section 11.8 Furnishing of Information
Any person claiming benefits under this Plan must furnish the
Administrative Committee such documents, evidence, data, or other information as
the Administrative Committee deems necessary or desirable for the purpose of
administering this Plan or to protect the Employers, the Board, the
Administrative Committee or the Trustee and the provisions of this Plan for each
such person are upon the condition that each will furnish promptly full, true
and complete data, evidence, and information when requeste by the Administrative
Committee or its delegate. The Employers, the Board, the Administrative
Committee and the Trustee are fully protected in acting and relying upon any
information furnished by any person pursuant to the immediately preceding
sentence.
Section 11.9 Claims Procedure
(a) Filing Claim. A Participant or a Beneficiary, or the authorized
representative of either (the "Claimant"), who believes that he is then entitled
to benefits hereunder in an amount greater than he is receiving or has received
may file a written claim for such benefits with the Secretary of the
Administrative Committee. The Administrative Committee may prescribe a form for
filing such claims, and, if it does so, a claim will not be deemed properly
filed unless such form is used, but the Secretary of the Administrative
Committee shall provide a copy of such form to any person whose claim for
benefits is improper solely for this reason.
(b) Claim Review. Every claim that is properly filed will be decided and
answered by the Secretary of the Administrative Committee in writing within 90
days (or within 180 days, if additional time is needed and the Claimant is so
notified prior to the commencement of the extension) of the claim's receipt by
the Secretary of the Administrative Committee. If the claim is wholly or
partially denied, the specific reasons for the denial and reference to the
pertinent Plan provisions will be set forth in the written response to the
Claimant. Such response will also describe any information necessary for the
Claimant to perfect his claim (and why such information is necessary) and an
explanation of the Plan's claim appeal procedure, as set forth in subsection (c)
immediately below.
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(c) Appeal. Within 90 days of the Claimant's receipt of the notice that his
claim has been denied, in whole or in part, the Claimant may file a written
appeal with the Secretary of the Administrative Committee. Such written appeal
may include any comments, statements or documents that the Claimant wishes to
provide. Appeals will be considered by the entire Administrative Committee,
which will make its decision with respect to such appeal, and notify the
Participant in writing of such decision, no later than 60 days (or no later than
120 days, if additional time is needed and the Claimant is so notified prior to
the commencement of the extension) after such appeal is timely filed. In the
event the claim is denied on appeal, the Administrative Committee will set forth
the reasons for the denial and the pertinent Plan provisions in its written
notice to the Claimant. The Administrative Committee will comply with any
reasonable request from a Claimant for documents or information relevant to his
claim prior to his filing an appeal.
(d) Standard of Review. Any further review, judicial or otherwise, of the
Administrative Committee's decision on the Claimant's claim will be limited to
whether, in the particular instance, the Administrative Committee acted
arbitrarily and capriciously in the exercise of its discretion. In no event will
such further review, judicial or otherwise, be on a de novo basis, as the
Administrative Committee has discretionary authority to determine eligibility
for benefits and to construe and interpret the terms of the Plan.
Section 11.10 Agent for Service of Process
The Chairman of the Administrative Committee is designated as the agent for
service of legal process with respect to all matters pertaining to the Plan. If
no Chairman has been designated, service may be made on any Administrative
Committee member. Service may be made at the Company's corporate offices.
Section 11.11 Authority to Act for Company
Any power or authority reserved to the Company hereunder will be exercised
by the Board, except that the Board may delegate such power and authority to any
person(s), committee(s), or organization(s) it deems appropriate. The Board or
the board of directors of an Employer will have no administrative or investment
authority or functions, and no member of the Board or the board of directors of
an Employer shall be a fiduciary of the Plan solely because of such membership.
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ARTICLE 12 TRUST
Section 12.1 Trust Agreement
The Plan will be funded through the Trust. All contributions will be paid
to the Trustee. The Trustee will hold, invest and distribute the funds in the
Trust in accordance with the terms of the Trust Agreement and this Plan. The
Trustee will not be liable or responsible for determining the amount of any
contributions to the Trust or for enforcing payment of such contributions.
Section 12.2 Expenses
All fees and other expenses of the Trustee, the Plan and the Trust will be
paid from the Trust Fund, to the extent not paid by the Employers.
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ARTICLE 13 AMENDMENT OR TERMINATION OF PLAN
Section 13.1 Amendment of Plan
(a) Subject to the remaining subsections of this Section 13.1, the Board
may modify or amend the Plan at any time, in any way, and for any reason, and
the Administrative Committee may modify or amend the Plan, if such modifications
or amendments are administrative in nature or are required by law or regulation
to maintain the qualified status of the Plan under the Code. Amendments may be
retroactively effective to the extent permitted by applicable law and
regulations.
(b) Except as may be permitted by ERISA, the Code or regulations or other
guidance issued under ERISA or the Code, no modification or amendment of the
Plan may reduce or eliminate Code Section 411(d)(6) protected benefits
determined immediately prior to the adoption date (or, if later, the effective
date) of the amendment. An amendment reduces or eliminates Code Section
411(d)(6) protected benefits if the amendment (1) reduces the amount credited to
any Participant's Accounts, (2) eliminates or reduces an early retirement
benefit or a retirement-type subsidy (as defined in Treasury regulations), or
(3) eliminates an optional form of benefit. Furthermore, no modification or
amendment of the Plan may cause or permit any part of the Trust to be diverted
to purposes other than for the exclusive benefit of Participants and their
Beneficiaries and for defraying the reasonable expenses of administering the
Plan or Trust, or to revert to or become the property of the Employers, unless
it shall have first been determined by the Internal Revenue Service that the
Plan with the proposed modification or amendment will continue to be a qualified
plan under Code Section 401 or any statute of similar import. No amendment or
modification of this Plan may increase the duties of the Trustee without its
consent. The Administrative Committee shall disregard an amendment to the extent
application of the amendment would fail to satisfy this paragraph.
(c) If the Plan is amended to change a vesting schedule, such amendment
shall not be applied to reduce the nonforfeitable percentage of any
Participant's accrued benefit derived from Employer contributions (determined as
of the later of the date the Employer adopts the amendment or the date the
amendment becomes effective) to a percentage less than the nonforfeitable
percentage computed under the Plan without regard to the amendment. Unless
expressly provided otherwise, the amended vestin schedule will apply to a
Participant only if the Participant is credited with at least one Hour of
Service after the new vesting schedule becomes effective.
(d) If the Board or Administrative Committee makes a permissible amendment
to the vesting schedule, each Participant whose nonforfeitable percentage of his
accrued benefit is determined under such schedule, and who has completed at
least three Years of Service at the time of the amendment to the vesting
schedule may elect to have the percentage of his nonforfeitable accrued benefit
computed under the Plan without regard to the amendment. The Participant must
file his election with the Administrative Committee
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within sixty days after the latest of (1) the date the amendment is
adopted; (2) the effective date of the amendment; or (3) the date the
Participant is issued written notice of the amendment. The Administrative
Committee shall forward a true copy of any amendment to the vesting schedule to
each affected Participant, together with an explanation of the effect of the
amendment, the appropriate form upon which the Participant may make an election
to remain under the vesting schedul provided under the Plan prior to the
amendment and notice of the time within which the Participant must make an
election to remain under the prior vesting schedule. Notwithstanding the
foregoing, the election described in this paragraph does not apply to a
Participant if the amended vesting schedule provides for vesting at least as
rapid at all times as the vesting schedule in effect prior to the amendment.
Section 13.2 Termination of Plan
(a) The Board may terminate the Plan or order the discontinuance of
contributions to the Plan at any time and for any reason. Upon a complete or
partial termination of this Plan, or a complete discontinuance of employer
contributions hereto, the interests of the Participants in their Accounts (or,
in the case of a partial termination, the interests of those Participants for
whom the Plan has terminated) shall become fully vested and nonforfeitable. Upon
termination, the Company may continue the Trust as it relates to the Plan or
distribute that portion of the Trust Fund relating to the Plan. If the Trust
Fund is liquidated, the Administrative Committee will allocate the net assets
thereof among Participants and Beneficiaries in proportion to their interests.
(b) If the Company Stock held in the Trust is sold in connection with the
termination of the Plan or the amendment of the Plan to become a qualified
employee plan that is not a stock bonus plan, then all Capital Accumulations
will be distributed in cash.
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ARTICLE 14 MERGER AND AFFILIATE PARTICIPATION
Section 14.1 General Rules
In the event of any merger or consolidation of the Plan with, or transfer
in whole or in part of the assets and liabilities of the Trust to, another trust
fund held under any other plan of deferred compensation maintained or to be
established for the benefit of all or some of the Participants, the assets of
the Trust applicable to such Participants shall be transferred to another trust
fund only if:
(a) each Participant (if either this Plan or the other plan then
terminated) receives a benefit immediately after the merger, consolidation, or
transfer that is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation, or transfer
(if this Plan had then terminated);
(b) resolutions of the Board, and of any new or successor employer of the
affected Employees, authorize such transfer of assets, and, in the case of the
new or successor employer of the affected Participants, its resolutions shall
include an assumption of liabilities with respect to such Participants'
inclusion in the new employer's plan; and
(c) such other plan and trust are qualified under Code Sections 401(a) and
501(a).
Section 14.2 Special Rules When Plan Is Survivor
The Company may approve the merger of other qualified plans with and into
the Plan as the survivor, and may also approve the acceptance of assets under
other forms of plan-to-plan transfers in appropriate cases. The assets received
from the merger or other transfer may be accounted for as part of the
Participant's existing Accounts to the extent appropriate and consistent with
the character of the former accounts under the merged or transferor plan, or may
be accounted for separately in order to giv effect to special matters,
including, but not limited to, the following:
(a) Vesting. A merger shall not be deemed to be a termination or partial
termination of the merging plan. The accounts of the merging plan shall not
become fully vested solely as a result of the merger. Unless the terms of the
merger provide otherwise, the transferred assets shall remain subject to the
former plan's vesting schedule subject to such modifications as may be required
by law.
(b) Survivor Annuity Requirements. If, through a plan merger or other type
of transfer, assets subject to the survivor annuity requirements of Code
Sections 401(a)(11) and 417 are received by the Plan, such assets shall
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remain subject to such requirements in the same manner and to the same
extent as they were prior to the transfer.
(c) Code Section 411(d)(6) Protected Benefits. As provided by the Treasury
regulations under Code Section 411(d)(6), the prohibition against the reduction
or elimination of already-accrued "Code Section 411(d)(6) protected benefits"
applies to a plan merger or other type of transfer. Accordingly, any Code
Section 411(d)(6) protected benefits shall continue to be available with respect
to the transferred assets (and amounts attributable thereto), but not to any
contributions (other than the transferred amounts) made to a Participants'
Accounts under the Plan.
(d) Withdrawals. No withdrawals may be made from an Account attributable to
a transfer to the Plan from a money purchase pension plan. Withdrawals from an
Account attributable to Code Section 401(k) elective deferrals must meet the
requirements of Code Section 401(k)(2)(B).
Section 14.3 Affiliate Participation
Subject to the approval of the Board, any Affiliate desiring to become an
Employer may elect to become a party to the Plan by adopting this Plan for the
benefit of any specified group of its Employees, with such modification of the
terms of the Plan with respect to such Employees as the Board and the Affiliate
may approve, effective as of the date specified in such adoption. Such adoption
shall be evidenced by such Participation Agreement, and/or such other documents
or instruments, as the Administrative Committee may require.
Section 14.4 Action Binding on Participating Affiliates
As long as the Company is a party to the Plan or the Trust Agreement, it
(and the Board) shall be empowered to act hereunder and/or thereunder for any
Employer in all matters respecting the Plan and/or the Trust and any action
taken by the Company or the Board with respect thereto shall automatically
include, and be binding upon, any Employer.
Section 14.5 Termination of Participation of Affiliate
(a) Termination of Participation by Board. The Board reserves the right, in
its sole discretion and at any time, to terminate the participation in the Plan
of any or all Employers. Any such termination shall be effective immediately
upon notice of such termination from the Board to the Trustee and the Employer
being terminated or, if later, on the date specified in such notice.
(b) Termination of Participation by Affiliate. Any Affiliate may withdraw
from the Plan and end its status as an Employer hereunder, by action of its
Board of Directors, subject to the Board's approval. Such termination shall be
effective as soon as administratively practicable after approved by the Board or
on such other date as the Board may specify.
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(c) Post-Termination Treatment. If an Affiliate's participation in the Plan
terminates under subsection (a) or (b) immediately above, the Plan shall not
terminate, but the portion of the Plan that is attributable to the terminated
Affiliate shall become a separate plan, and the Company shall inform the Trustee
of the portion of the Trust Fund that is then attributable to the participation
of the terminated Affiliate. Such portion shall, as soon as administratively
practicable after such termination, be set apart by the Trustee as a separate
trust which shall be a part of the separate plan of the terminated Affiliate.
Following any such termination, the administration, control, and operation of
the Plan with respect to the terminated Affiliate shall be on a separate basis
in accordance with the terms hereof, or as such terms may be amended by
appropriate action of the terminated Affiliate in accordance with the provisions
of this Article 14.
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ARTICLE 15 TOP-HEAVY PROVISIONS
Section 15.1 Applicability
Notwithstanding any other provision of the Plan to the contrary, the
provisions of this Article 15 shall apply for a Plan Year in which the Plan is a
Top-Heavy Plan, as defined in Code Section 416(g).
Section 15.2 Definitions
For purposes of this Article 15, the following terms shall be defined as
follows:
(a) "Aggregation Group" means each plan maintained by the Employers in
which a Key Employee participates and each other plan maintained by the
Employers that enables any plan in which a Key Employee participates to meet the
requirements of Code Section 401(a)(4) or 410. In addition, the Employers may
elect to include other plans in the Aggregation Group that satisfy the
requirements of Code Sections 401(a)(4) and 410 when considered together with
the plans that are required to be aggregated. However, a plan that is or may be
included in the Aggregation Group only upon an election by the Employers shall
not be subject to the provisions of this Article 15.
(b) "Determination Date" means the last day of the preceding Plan Year;
provided that, for a Plan's initial Plan Year, the last day of such year shall
be the Determination Date. Where more than one plan is aggregated, the present
value of accrued benefits is determined separately for each plan (as of each
plan's determination date that falls in the same calendar year) and then added
together.
(c) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, at any time during the
Plan Year (which includes the Determination Date) or during the preceding four
Plan Years, is an officer (having annual Compensation in excess of 50% of the
Code Section 415(b)(1)(A) limitation in effect for any such Plan Years) of an
Employer, one of the Employees (having annual Compensation in excess of the Code
Section 415(c)(1)(A) limitation in effect for any such Plan Years) owning the
ten largest interests in an Employer, a more-than-5% owner of an Employer, or a
more-than-1% owner of an Employer who has annual Compensation in excess of
$150,000. The constructive ownership rules of Code Section 318 (or the
principles of that section, in the case of an unincorporated employer) will
apply to determine ownership in an Employer. The Administrative Committee will
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make the determination of who is a Key Employee in accordance with Code Section
416(i) and the regulations issued thereunder.
(d) "Non-Key Employee" means an employee who is not a Key Employee.
(e) "Top-Heavy Ratio" means the ratio determined in accordance with Section
416 of the Code for the plans in the Aggregation Group. Reasonable actuarial
assumptions may be used for determining the present value of accrued benefits
under a defined benefit plan maintained by the Employers. In determining the
Top-Heavy Ratio:
(1) reasonable actuarial assumptions may be used for determining the
present value of accrued benefits under a defined benefit plan maintained by the
Employers;
(2) the Plan incorporates the rules of Code Section 416(g)(4)(A)
(concerning rollovers);
(3) the Plan incorporates the rules of Code Section 416(g)(4)(B)
(concerning disregard of the accrued benefit of a Key Employee who is no longer
a Key Employee);
(4) the Plan incorporates the rules of Code Section 416(g)(4)(E)
(concerning employees who have not performed services for an Employer during the
five-year period ending on the Determination Date); and
(5) The Plan incorporates the rules of Code Section 416(g)(3) (concerning
distributions from terminated plans).
(f) Top-Heavy. This Plan shall be considered to be Top-Heavy for a Plan
Year if, on the Determination Date for such Plan Year, the Top-Heavy Ratio
exceeds 60%.
(g) Super Top-Heavy. This Plan shall be considered to be Super Top-Heavy
for a Plan Year if, on the Determination Date for such Plan Year, the Top-Heavy
Ratio exceeds 90%.
Section 15.3 Minimum Allocation
For a year in which this Plan is a Top-Heavy Plan, the Employer
contribution allocated to a Participant who is a Non-Key Employee, who is
employed on the last day of the Plan Year, and who does not accrue the minimum
benefit under Code Section 416(c)(1)(B) or 416(h)(2)(A)(ii)(I) (whichever is
applicable for such Plan Year for any defined benefit plan maintained by the
Employers), whether or not such Employee (i) failed to complete 1,000 Hours of
Service (or the equivalent); (ii) declined to make
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mandatory contributions to
the Plan; or (iii) was excluded from the Plan because such individual's
compensation was less than a stated amount, shall be no less than the lesser of:
(a) 3% of the Participant's Compensation; and
(b) the percentage at which contributions are made under this Plan for the
Key Employee for whom such percentage is the highest for the year. This
percentage shall be determined for such Key Employee by dividing the
contributions for such Participant by so much of his compensation (within the
meaning of Code Section 415(c)(3)) for the year as does not exceed the maximum
amount determined for that year pursuant to Code Section 401(a)(17).
Section 15.4 Modifications to Code Section 415 Limitations
In a Plan Year in which this Plan is Top-Heavy, paragraphs (2)(B) and
(3)(B) of Code Section 415(e) shall be applied by substituting 1.0 for 1.25
unless the following conditions are met:
(a) the Plan is not Super Top-Heavy; and
(b) the accrued benefit of a Non-Key Employee is at least equal to the
amount set forth in Section 15.3 hereof calculated by substituting 4% for 3% in
Section 15.3(a).
Section 15.5 Uniform Determination of Accrued Benefit
Solely for the purpose of determining if the Plan, or any other plan
included in a required Aggregation Group of which this Plan is a part, is
Top-Heavy, the accrued benefit of an Employee other than a Key Employee shall be
determined under (a) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employers and their Affiliates, or
(b) if there is no such method, as if such benefit accrued not more rapidly than
the slowest accrual rate permitted under the fractional accrual rate of Code
Section 411(b)(1)(C).
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ARTICLE 16 GENERAL PROVISIONS
Section 16.1 Exclusive Benefit
No part of the Trust shall be used for, or diverted to, purposes other than
the exclusive benefit of Participants and their Beneficiaries under the Plan,
and for defraying the reasonable expenses of administering the Plan.
Section 16.2 No Rights
Neither the establishment of the Plan, nor any modification thereof, nor
any provisions hereof, nor any payment of benefits hereunder shall be deemed to
give any Employee or any other person whomsoever any legal or equitable right
against the Board, the Administrative Committee, the Trustee or any Employer, or
to give any Employee or other person whomsoever the right to be retained in the
service of any Employer or to interfere with the Employers' right to terminate
any Employee at any time. No Employee prior to the time he becomes entitled to
receive benefits in accordance with this Plan shall have any right or interest
in or to any portion of the assets of the Plan, and no Employee or other
individual shall have any right to benefits, except to the extent provided
herein.
Section 16.3 Fiduciary Liability
None of the Employers, the Board, the Administrative Committee, the Trustee
or any other person shall be liable for any act or failure to act unless such is
a breach of duty under ERISA. No fiduciary shall be responsible for any act or
failure to act of another fiduciary, except as otherwise specifically provided
under ERISA.
Section 16.4 Missing Participant or Beneficiary
Each person eligible to receive benefits under this Plan must file with the
Administrative Committee in writing his mailing address and each change of
address until payment of his benefit is made. Any communication, statement, or
notice addressed to such person at his last mailing address filed with the
Administrative Committee or Trustee (or if no mailing address was filed with the
Administrative Committee or Trustee, then his last mailing address shown by the
Employers' payroll records) will be binding upon such person for all purposes of
this Plan, and neither the Trustee nor the Administrative Committee shall be
obligated to search for or ascertain the whereabouts of any such person. If the
Administrative Committee sends notice to such address, addressed to such person,
stating that he is entitled to payment under the Plan, and in such notice states
the provisions of this subparagraph, and such person fails to claim his benefits
or fails to make his whereabouts known in writing to the Administrative
Committee within two years after the date such notice is sent, the amount held
for such person shall be forfeited and applied as if such amount were an
additional Matching Contribution for the Plan Year in which it is forfeited to
be allocated among all Employees eligible to share in the Employers' Matching
Contributions for such Plan Year. The benefit will be reinstated from
forfeitures for the Plan Year in which
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reinstatement occurs, or to the extent that such forfeitures are
insufficient, from a special Employer contribution, if at any later date claim
is made therefor by such person or his Beneficiary.
Section 16.5 Antialienation Rule
No Account or benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment (either at law or in
equity), pledge, encumbrance, garnishment, levy, execution, charge, or other
legal or equitable process and any attempt to do so shall be void, nor shall any
such Accounts or benefits be in any way liable for or subject to the debts,
contracts, liabilities, engagements, or torts of any person entitled to such
Accounts or benefits, except as provided in a qualified domestic relations
order, as defined in Code Section 414(p).
Section 16.6 Qualified Domestic Relations Orders
(a) Notwithstanding Section 16.5 hereof, nothing contained herein shall
prevent the Trustee, in accordance with the direction of the Administrative
Committee, from complying with the provisions of a qualified domestic relations
order (as defined in Code Section 414(p)). This Plan specifically permits
distribution to an alternate payee under a qualified domestic relations order at
any time, irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment of his
earliest retirement age is available only if (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution, and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $5,000, and if
the order so requires, the alternate payee consents to any distribution
occurring prior to the Participant's attainment of earliest retirement age.
Nothing in this Section 16.6 gives a Participant a right to receive distribution
at a time otherwise not permitted under the Plan nor does it permit the
alternate payee to receive a form of payment not otherwise permitted under the
Plan.
(b) The Administrative Committee shall establish reasonable procedures to
determine the qualified status of a domestic relations order. Within a
reasonable period of time after receiving the domestic relations order, the
Administrative Committee must determine the qualified status of the order and
must notify the Participant and each alternate payee of its determination. If
any portion of the Participant's Capital Accumulation is payable during the
period the Administrative Committee is making its determination of the qualified
status of the domestic relations order, the Administrative Committee must direct
the Trustee to make a separate accounting of the amounts payable. If the
Administrative Committee determines the order is a qualified domestic relations
order within 18 months of the date amounts first are payable following receipt
of the order, the Administrative Committee will direct the Trustee to distribute
the payable amounts in accordance with the order. If the Administrative
Committee does not make its determination of the qualified status of the order
within the 18-month determination period, the Administrative Committee will
direct the Trustee to distribute the payable amounts in the manner the Plan
would
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distribute if the order did not exist and will apply the order
prospectively if the Administrative Committee later determines the order is a
qualified domestic relations order.
(c) The Trustee will make any payments or distributions required under this
Section 16.6 by separate benefit checks or other separate distribution to the
alternate payee(s).
Section 16.7 Contribution Amounts Returnable to Employers
(a) Mistake of Fact and Nondeductibility. The Employers contribute to the
Plan on the condition that their contributions are not due to a mistake of fact
and are deductible under Code Section 404. The Trustee, upon written request
from the Company, will return to an Employer the amount of the Employer's
contribution made by the Employer by mistake of fact or the amount of the
Employer's contribution disallowed by the Internal Revenue Service as a
deduction under Code Section 404; provided, however, that the Trustee will not
return any portion of an Employer's contribution under the provisions of this
Section 16.7 more than one year after the Employer made the contribution by
mistake of fact or the deduction is disallowed, whichever is applicable. The
Trustee will not increase the amount of an Employer's contribution returnable
under subsection (a) immediately above for any earnings attributable to the
contribution, but the Trustee will decrease an Employer's contribution
returnable for any losses attributable to it. The Trustee may require the
Company or the Employer to furnish it whatever evidence the Trustee deems
necessary to enable the Trustee to confirm that the amount the Company has
requested to be returned is properly returnable under ERISA.
(b) IRS Approval. Notwithstanding any other provision herein to the
contrary, the effectiveness of the ESOP is subject to the condition subsequent
that the Company receive a determination from the Internal Revenue Service that
the ESOP meets the requirements for qualification contained in Code Section
401(a) and constitutes an employee stock ownership plan within the meaning of
Code Section 4975(e)(7) and that the Trust is exempt from federal income tax
under Code Section 501(a). If the Internal Revenue Service fails to provide such
a determination following the Company's request therefor, then upon written
notice from the Company, the Trustee shall return all of the Trust Fund's assets
held under the ESOP to the Employers; provided, however, that the Trustee must
return such assets within one year of the final disposition of the Company's
request for such determination. The ESOP will terminate upon the Trustee's
return of the Employers' contributions.
Section 16.8 Word Usage
Whenever any words are used herein in the masculine, they shall be
construed as though they were used in the feminine in all cases where they would
so apply; and wherever any words are used herein in the singular or plural, they
shall be construed as though they were used in the plural or singular, as the
case may be. The words "hereof," "herein," "hereunder" and other similar
compounds of the word "here" shall mean and refer to this entire document and
not to any particular article or section. Titles of articles and sections
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hereof are for general information only, and this document is not to be
construed by reference thereto.
Section 16.9 Applicable Law
The 401(k) Portion is intended to be a profit sharing plan with a cash or
deferred arrangement qualified under Code Sections 401(a) and 401(k). The ESOP
is intended to be a stock bonus plan qualified under Code Section 401(a) and an
employee stock ownership plan within the meaning of Code Section 4975(e)(7). The
Plan is also intended to be an individual account plan under ERISA Section
407(d)(3). The Plan shall be interpreted so as to be in compliance with the
requirements of such sections. The Plan shall be construed, and its validity
determined, in accordance with the laws of the State of Oregon to the extent
such laws are not preempted by federal law. In case any provision of the Plan is
held to be illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining parts of the Plan, but the Plan shall be
construed and enforced as if said illegal or invalid provisions had never been
inserted herein.
* * * * *
TO RECORD THE ADOPTION of this amendment and restatement of the Plan, the
Company has caused it to be executed on this 1st day of July, 1999.
CONCENTREX INCORPORATED
By: /s/ Kurt W. Ruttum
------------------
Name: Kurt W. Ruttum
Its: Vice President and
Chief Financial Officer
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CONCENTREX INCORPORATED
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
APPENDIX A
SURVIVOR ANNUITY REQUIREMENTS
Section A.1 Applicability
This Appendix A shall apply to, and only to, a Participant whose Capital
Accumulation exceeded $3,500 on April 1, 1996 (or as of the date of any
distribution with respect to such Participant occurring under the Plan prior to
April 1, 1996) and exceeds $5,000 on the date of distribution (or exceeded such
amount on the date of any prior distribution under the Plan to such
Participant), notwithstanding any provision of the Plan to the contrary.
Section A.2 Definitions
For purposes of this Appendix A the following terms shall have the
respective meanings set forth below:
(a) "Qualified Joint and Survivor Annuity" means the immediate and
nontransferable annuity that is purchasable with the Participant's Capital
Accumulation under the 401(k) Portion and that provides an annuity for the life
of the Participant and a survivor annuity for the remaining life of the
Participant's surviving spouse equal to 100% of the amount of the annuity
payable during the life of the Participant; provided, however, that the
Participant may elect a 50% survivor benefit in lieu o a 100% survivor benefit.
(b) "Qualified Preretirement Survivor Annuity" means the immediate and
nontransferable annuity that is purchasable with the Participant's Capital
Accumulation under the 401(k) Portion and that provides an annuity payable for
the life of the Participant's surviving spouse.
(c) "Single Life Annuity" means the immediate and nontransferable annuity
that is purchasable with the Participant's Capital Accumulation under the 401(k)
Portion and that provides an annuity for the life of the Participant, with
benefits ceasing upon the Participant's death.
Section A.3 Retirement Annuity Payments
(a) Requirement. If a Participant survives until his Annuity Starting Date,
distribution of the Participant's Capital Accumulation under the 401(k) Portion
will be made in the form of a Qualified Joint and Survivor Annuity, if the
Participant is married as of his
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Annuity Starting Date, or in the form of a Single Life Annuity, if the
Participant is not married as of his Annuity Starting Date.
(b) Waiver. Notwithstanding subsection (a) immediately above, a Participant
may elect, at any time during the 90-day period ending on his Annuity Starting
Date, to waive the Qualified Joint and Survivor Annuity or the Single Life
Annuity form of payment, as applicable. The Participant may also revoke a prior
waiver election at any time during such period. The number of elections and
revocations will not be limited. However, an election to waive the Qualified
Joint and Survivor Annuity by a Participant who is married on his Annuity
Starting Date will be invalid unless:
(1) (A) the Participant's spouse consents in writing to such election
during the 90-day period ending on the Participant's Annuity Starting Date, (B)
the election designates a specific Beneficiary (and optional form of benefit)
that cannot be changed without the spouse's consent (or the spouse's consent
expressly permits designations by the Participant without any requirement of
further consent by the spouse), and (C) the spouse's consent acknowledges the
effect of the election and is witnessed by a Plan representative or a notary
public; or
(2) the Participant establishes to the satisfaction of a Plan
representative that the Participant has no spouse, the Participant's spouse
cannot be located or the Participant is excused from obtaining such consent
because of other circumstances approved in federal regulations.
The spouse's consent may not be revoked. However, the consent of one spouse
will not be valid with respect to any other spouse.
(c) Notice. The Administrative Committee will provide to each Participant
to whom this Appendix A applies, no less than 30 days and no more than 90 days
before the Participant's Annuity Starting Date, a written explanation of:
(1) The terms and conditions of the Qualified Joint and Survivor Annuity or
the Single Life Annuity, as applicable;
(2) The Participant's right to make, and the effect of, an election to
waive the applicable annuity form of payment;
(3) The rights of the Participant's spouse; and
(4) The right to make, and the effect of, a revocation of previous election
to waive the applicable annuity form of payment.
(d) Annuity Starting Date. Notwithstanding the foregoing, a Participant's
Annuity Starting Date can be less than 30 days after the notice described in
Section A.3(c) hereof is provided to such Participant, if the following
requirements are satisfied:
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(1) the Administrative Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider whether to waive the Qualified Joint and Survivor Annuity or
the Single Life Annuity, as applicable, and to consent to a form of distribution
other than a Qualified Joint and Survivor Annuity or Single Life Annuity;
(2) the Participant, after receiving the notice, affirmatively elects a
distribution in a form other than the Qualified Joint and Survivor Annuity (and
the Participant's spouse consents to that form of distribution) or the Single
Life Annuity, as applicable;
(3) the Participant is permitted to revoke an affirmative distribution
election at least until the Annuity Starting Date or, if later, at any time
prior to the expiration of the 7-day period that begins the day after the notice
is provided to the Participant;
(4) the Annuity Starting Date is after the date that the notice is provided
to the Participant; provided, however, that the Annuity Starting Date can be
before the date that any affirmative distribution election is made by the
Participant and before the date that distribution is permitted to commence under
Section A.3(d)(5) hereof; and
(5) distribution in accordance with the affirmative election does not
commence before the expiration of the 7-day period that begins the day after the
notice is provided to the Participant.
Section A.4 Qualified Preretirement Survivor Annuity
(a) Requirement. The Capital Accumulation under the 401(k) Portion of a
married Participant who dies before his Annuity Starting Date will be
distributed in the form of a Qualified Preretirement Survivor Annuity.
(b) Waiver. Notwithstanding Section A.4(a) hereof, a Participant may elect
to waive the Qualified Preretirement Survivor Annuity (and may revoke any such
waiver) at any time during the period commencing on the first day of the Plan
Year during which the Participant attains age 35 (or, if earlier, the date on
which the Participant's Service terminates, but only with respect to benefits
accrued at such date) and ending on the date of the Participant's death. The
number of elections and revocations will not be limited. However, an election by
a married Participant to waive the Qualified Survivor Preretirement Annuity will
be invalid unless:
(1) (A) the Participant's spouse consents in writing to such election, (B)
the election designates a specific Beneficiary that cannot be changed without
the spouse's consent (or the spouse's consent expressly permits designations by
the Participant without any requirement of further consent by the spouse),
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and (C) the spouse's consent acknowledges the effect of the election and is
witnessed by a Plan representative or a notary public; or
(2) the Participant establishes to the satisfaction of a Plan
representative that the Participant has no spouse, the Participant's spouse
cannot be located or the Participant is excused from obtaining such consent
because of other circumstances approved in federal regulations.
The spouse's consent may not be revoked. However, the consent of one spouse
will not be valid with respect to any other spouse.
(c) Notice. The Administrative Committee will provide to each Participant
to whom this Appendix A applies, within the "applicable period" defined below, a
written explanation with respect to the Qualified Preretirement Survivor Annuity
comparable to that required under Section A.3(c) hereof with respect to the
Qualified Joint and Survivor Annuity. For purposes of this Section A.4(c), the
"applicable period" is the period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35; provided,
however, that in the case of a Participant whose Service terminates prior to his
attainment of age 35, the "applicable period" is the period commencing one year
before and ending one year after the date of such termination. If an Employee
first becomes a Participant after attaining age 34, the "applicable period" is
the period ending one year after the date on which such Employee became a
Participant.
(d) Waiver by Surviving Spouse. Notwithstanding the foregoing, following
the Participant's death, but before the commencement of the Qualified
Preretirement Survivor Annuity, the Participant's surviving spouse may elect to
waive the Qualified Preretirement Survivor Annuity and to have such benefit
distributed in one of the forms set forth in Section 10.2(b) of the Plan.
Section A.5 Optional Forms of Payment
If payment in the form of the Qualified Joint and Survivor Annuity, Single
Life Annuity or Qualified Preretirement Survivor Annuity is properly waived,
payment of the Participant's Capital Accumulation under the 401(k) Portion may
be made in any of the following forms, as elected by the Participant (or, in the
case of a deceased Participant, the Participant's Beneficiary):
(a) A single, lump sum distribution;
(b) Substantially equal monthly, quarterly, semi-annual or annual
installments over a fixed period of time designated by the Participant (or, in
the case of a deceased Participant, the Participant's Beneficiary); provided,
however, that such period may not extend beyond the joint life expectancy of the
Participant and his Beneficiary (or, in the case of a deceased Participant, the
life
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expectancy of the Participant's Beneficiary). If this option is elected,
then the Participant's Accounts will continue to be adjusted for net income (or
loss) in accordance with Section 5.4 of the Plan through the Valuation Date
coinciding with or immediately preceding the date on which the final installment
payment is processed;
(c) A Life Annuity with ten years certain (available only to Participants
who were also participants in the Culverin Plan);
(d) A 50% or 100% joint and survivor annuity for the Participant and his or
her designated beneficiary (available only to Participants who were also
participants in the Culverin Plan); or
(e) A 50% or 100% joint and survivor annuity with period certain (available
only to Participants who were also participants in the Culverin Plan).
Section A.6 In-Service Withdrawals
A Participant may elect to withdraw all or a portion of the balance in his
or her Culverin After-Tax Account at any time. A Participant who was also a
participant in the Culverin Plan may elect to withdraw all or any portion of his
vested Accrued Benefit at any time after attaining age 59 1/2. Any such
withdrawals are further subject to the provisions of this Appendix A.
71
[Letterhead of ULTRADATA Corporation]
October 17, 1996
Mr. Robert J. Majteles
2529 Irving Ave. South
MINNEAPOLIS, MN 55404
- - ---------------------
Dear Robert,
On behalf of ULTRADATA Corporation, I am pleased to extend this offer of
employment for the position of President/Chief Operating Officer. This position
reports to the CEO/Chairman of the Board, as his only direct report. You will
be appointed as a member of the Board of Directors, but shall receive no
additional director-related compensation. This letter is to formally document
the terms of your employment contract with ULTRADATA Corporation. If you accept
this offer you will begin employment as of October 17, 1996.
You will receive an initial base salary of $250,000 per annum, paid semi-monthly
at a rate of $10,416.67. Your base salary will be reviewed January 1, 1998.
Additionally, you will be eligible for cash bonus compensation up to 30% of base
salary, according to the bonus plan approved by the compensation committee.
This bonus plan will be established to commence at the start of the 1997
calendar year. No bonus shall be paid for 1996.
Upon board approval, you will receive Non-Qualified stock options representing
the right to purchase 600,000 shares of ULTRADATA Corporation common stock under
ULTRADATA's 1994 Equity Incentive Plan or outside of the Plan as ULTRADATA deems
appropriate. The options will be priced at Fair Market Value on the later of
date of hire or board approval. The number of option shares will be equal to
$150,000 divided by the fair market value per share on the date of grant.
ULTRADATA Corporation agrees to pay $93,000 for relocation related expenses.
Should you leave ULTRADATA prior to 3 years from date of hire, you will be asked
to repay the amount according to the signed agreement.
Please refer to the attached "General Terms and Conditions of Employment" for
additional information.
You will be eligible for health insurance and other ULTRADATA Corporation-
provided benefits in accordance with the terms of these benefit plans. You will
also be eligible for vacation and sick pay consistent with our policies for
employees in your job classification. You may receive such other benefits that
ULTRADATA Corporation may make available.
<PAGE>
Your employment with ULTRADATA Corporation will be subject to proof of your
legal right to work in the United States, and to completing the Immigration and
Naturalization Service Employment Eligibility Verification Form I-9.
I am very pleased to extend this offer of employment to you, and am sure that
your association with ULTRADATA Corporation will be successful and rewarding for
us all. Please indicate your acceptance of this offer by signing this letter
and the enclosed Confidentiality Agreement and returning them to me. Copies of
this letter and the Confidentiality Agreement is enclosed for your records.
This offer is good for 7 days, after which it will become null and void.
Sincerely,
ULTRADATA CORPORATION Read, Understood and Agreed:
- - ---------------------
/s/ Robert J. Majteles
----------------------
Robert J. Majteles
Nigel P. Gallop 11/6/96
- ---------------- -------
CEO/Chairman of the Board Date
-2-
<PAGE>
GENERAL TERMS AND CONDITIONS OF EMPLOYMENT
------------------------------------------
These General Terms and Conditions of Employment are applicable to, and are
incorporated by reference into, that certain letter agreement between Ultradata
Corporation, a Delaware Corporation (the "Company") and Robert Majteles
-------
("Employee") dated October 17, 1996.
- - ----------
In consideration of the promises and the terms and conditions set forth in
the letter agreement and these General Terms and Conditions of Employment (this
"Agreement"), the parties agree as follows:
---------
1. DUTIES. Employee will have the duties specified in the letter
------
agreement. Employee will comply with and be bound by Company's operating
policies, procedures, and practices from time to time in effect during
Employee's employment. Employee will perform his duties under this Agreement at
the offices of Company, provided, that Employee may be required to do extensive
--------
traveling in connection with the performance of his duties hereunder. Employee
hereby represents and warrants that he is free to enter into and fully perform
this Agreement and the agreements referred to herein without breach of any
agreement or contract to which he is a party or by which he is bound.
2. EXCLUSIVE SERVICE. Employee will devote his full time and efforts
-----------------
exclusively to this employment and apply all his skill and experience to the
performance of his duties and advancing the Company's interests in accordance
with Employee's experience and skills. In addition, Employee will not engage in
any consulting activity except with the prior written approval of Company, or at
the direction of Company, and Employee will otherwise do nothing inconsistent
with the performance of his duties hereunder.
3. EXPENSES. The Company will reimburse Employee for all reasonable and
--------
necessary expenses incurred by Employee in connection with the Company's
business, provided that such expenses are deductible to the Company, are in
accordance with the Company's applicable policy and are properly documented and
accounted for in accordance with the requirements of the Internal Revenue
Service.
4. PROPRIETARY RIGHTS. Employee hereby agrees to execute the Company's
------------------
standard Employee Invention Assignment and Confidentiality Agreement with the
Company. The provisions of such agreement will survive any termination or
expiration of this Agreement.
5. TERM AND TERMINATION.
--------------------
5.1 TERM. This Agreement will remain in effect until the close of
----
business on October 17, 2000, unless terminated earlier as provided herein.
5.2 EVENTS OF TERMINATION. Employee's employment with the Company
---------------------
and this Agreement shall terminate upon any one of the following:
(a) the Company's determination made in good faith that it is
terminating Employee for "cause" as defined under Section 5.2 below
("Termination for Cause"); or
- - -----------------------
(b) the effective date of a written notice sent to Employee
stating that the Company is terminating his employment, without cause, which
notice can be given by the Company at any time after the Effective Date at the
Company's sole discretion, for any reason or for no reason ("Termination Without
-------------------
Cause");
- - -----
<PAGE>
(c) the effective date of a written notice sent to the Company
from Employee stating that Employee is electing to terminate his employment with
the Company but not for Constructive Termination Event ("Voluntary
---------
Termination"); or
- - -----------
(d) the effective date of a written notice sent to the Company
from Employee stating that Employee is terminating his employment with the
Company as a result of a Constructive Termination Event.
5.3 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for
---------------
Employee's termination will exist at any time after the happening of one or more
of the following events:
(a) a failure or a refusal to comply in any material respect
with the reasonable policies, standards or regulations of the Company;
(b) a failure or a refusal in any material respect, faithfully
or diligently, to perform his duties determined by the Company in accordance
with this Agreement or the customary duties of Employee's employment (whether
due to ill health, disability or otherwise);
(c) unprofessional, unethical or fraudulent conduct or conduct
that materially discredits the Company or is materially detrimental to the
reputation, character or standing of the Company;
(d) dishonest conduct or a deliberate attempt to do an injury to
the Company;
(e) Employee's material breach of a term of this Agreement or
the Employee Invention Assignment and Confidentiality Agreement, including,
without limitation, Employee's theft of the Company's proprietary information;
(f) an unlawful or criminal act which would reflect badly on the
Company in the Company's reasonable judgment; or
(g) Employee's death.
5.4 CONSTRUCTIVE TERMINATION DEFINED. For purposes of this
--------------------------------
Agreement, a "Constructive Termination Event" will be deemed to have occurred at
------------------------------
the Company's close of business on the fourteenth (14th) day after, and
including, the first day, that any of the following actions is taken by the
Company and such action is not reversed in full by the Company within such
fourteen-day period unless prior to the expiration of such fourteen-day period
Employee have otherwise agreed to the specific relevant event in writing: (i)
Employee's duties and/or authority within the Company are materially decreased
or increased from those in effect immediately prior to such Constructive
Termination Event, in a way that is adverse to Employee, as such materiality and
adverse nature is determined by customary practice within the software industry
within the State of California and/or (ii) Employee's title is changed to a
title that, under customary practice within the software industry within the
State of California, would be considered to be a lower-level title than
Employee's prior title.
-2-
<PAGE>
6. EFFECT OF TERMINATION.
---------------------
6.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of
----------------------------------------------
any termination of this Agreement pursuant to Sections 5.2(a) or 5.2(c), the
Company shall pay Employee the compensation and benefits otherwise payable to
Employee under Section 5 through the date of termination. Employee's rights
under the Company's benefit plans of general application shall be determined
under the provisions of those plans.
6.2 TERMINATION WITHOUT CAUSE. In the event of any termination of
-------------------------
this Agreement pursuant to Section 5.2(b) or 5.2(d),
(a) the Company shall pay Employee the compensation and benefits
otherwise payable to Employee under the letter agreement through the date of
termination,
(b) the Company shall pay Employee an amount equal to 100% of
Employee's then-current base salary plus 30% of such base salary (which
represents the full amount of the bonus to which Employee would be entitled upon
satisfaction of all conditions precedent to such bonus in such year).
(c) Employee's rights under the Company's benefit plans of
general application shall be determined under the provisions of those plans.
7. ACCELERATION OF OPTIONS.
-----------------------
7.1 CORPORATE TRANSACTION. Immediately prior to the closing of a
---------------------
Corporate Transaction, the exerciseability of each option granted to you to
purchase shares of the Company's Common Stock that is outstanding immediately
prior to the closing of such Corporate Transaction, will be automatically
accelerated so that each such option will, immediately prior to the closing date
for the Corporate Transaction, become fully exerciseable with respect to the
total number of shares issuable upon exercise thereof and may be exercised prior
to the closing of such Corporate Transaction for all or any portion of such
shares. For purposes of this Section 7, a "Corporate Transaction" is defined as
(i) a merger or acquisition in which the Company is not the surviving entity
(except for a merger of the Company into a wholly-owned subsidiary, and except
for a transaction the purpose of which is to change the State in which the
Company is incorporated), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (iii) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
7.2 PAYMENT. In the event of a Corporate Transaction, in addition to
-------
the acceleration of options as set forth in Section 7.1, the Company shall pay
Employee an amount equal to 290% of Employee's then-current "base amount" as
calculated under Internal Revenue Code ("IRC") Section 280G (i.e., annual
---
compensation including then-current salary and bonus actually received in the
applicable tax year(s)), less applicable withholding taxes, payable within
thirty (30) days following the date of the closing of such Corporate
Transaction.
8. MISCELLANEOUS.
-------------
8.1 ARBITRATION. Employee and the Company shall submit to mandatory
-----------
binding arbitration in any controversy or claim arising out of, or relating to,
this Agreement or any breach hereof,
-3-
<PAGE>
provided, however, that the Company retains its right to, and shall not be
- - -------- -------
prohibited, limited or in any other way restricted from, seeking or obtaining
equitable relief from a court having jurisdiction over the parties. Such
arbitration shall be conducted in accordance with the commercial arbitration
rules of the American Arbitration Association in effect at that time, and
judgment upon the determination or award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
8.2 SEVERABILITY. If any provision of this Agreement shall be found
------------
by any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the extent that
it is found to be invalid or unenforceable and to the extent that to do so would
not deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the other
provisions continuing in full force and effect.
8.3 REMEDIES. The Company and Employee acknowledge that the service
--------
to be provided by Employee is of a special, unique, unusual, extraordinary and
intellectual character, which gives it peculiar value the loss of which cannot
be reasonably or adequately compensated in damages in an action at law.
Accordingly, Employee hereby consents and agrees that for any breach or
violation by Employee of any of the provisions of this Agreement including,
without limitation, Section 3), a restraining order and/or injunction may be
issued against Employee, in addition to any other rights and remedies the
Company may have, at law or equity, including without limitation the recovery of
money damages.
8.4 NO WAIVER. The failure by either party at any time to require
---------
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against whom such waiver is sought to be enforced.
8.5 ASSIGNMENT. This Agreement and all rights hereunder are personal
----------
to Employee and may not be transferred or assigned by Employee at any time. The
Company may assign its rights, together with its obligations hereunder, to any
parent, subsidiary, affiliate or successor, or in connection with any sale,
transfer or other disposition of all or substantially all of its business and
assets, provided, however, that any such assignee assumes the Company's
-------- -------
obligations hereunder.
8.6 WITHHOLDING. All sums payable to Employee hereunder shall be
-----------
reduced by all federal, state, local and other withholding and similar taxes and
payments required by applicable law.
8.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and
----------------
only agreement between the parties relating to employment of Employee with the
Company, and this Agreement supersedes and cancels any and all previous
contracts, arrangements or understandings with respect thereto.
8.8 AMENDMENT. This Agreement may be amended, modified, superseded,
---------
cancelled, renewed or extended only by an agreement in writing executed by both
parties hereto.
8.9 NOTICES. All notices and other communications required or
-------
permitted under this Agreement shall be in writing and hand delivered, sent by
telecopier, sent by certified first class mail,
-4-
<PAGE>
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by telecopier, five (5) days after mailing if sent by mail,
and one (l) day after dispatch if sent by express courier, to the addresses set
forth in the letter agreement, or such other addresses as any party shall notify
the other parties.
8.10 BINDING NATURE. This Agreement shall be binding upon, and inure
--------------
to the benefit of, the successors and personal representatives of the respective
parties hereto.
8.11 HEADINGS. The headings contained in this Agreement are for
--------
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the plural, the
plural included the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
8.12 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement.
8.13 GOVERNING LAW. This Agreement and the rights and obligations of
-------------
the parties hereto shall be construed in accordance with the laws of the State
of California, without giving effect to the principles of conflict of laws.
November 6, 1998
Cindy Cooper
648 Vivian Drive
Livermore, CA 94550
Re: Your Employment With ULTRADATA Corporation
Dear Cindy:
This letter will set forth the binding agreement of employment (the
"Agreement"), effective as of November 6, 1998 (the "Effective Date"), between
you and ULTRADATA Corporation, a Delaware corporation ("ULTRADATA").
1. Employment and Duties. During the Employment Term, as defined in
Section 3 below, you will serve as Vice President, Product Development of
ULTRADATA. You will have such duties and authority as are customary for, and
commensurate with such position, and such other reasonable duties and authority
as the Board of Directors of ULTRADATA (the "Board") or the President of
ULTRADATA prescribes from time to time.
2. COMPENSATION.
(a) Salary. For your services hereunder, ULTRADATA will pay as
salary to you the amount of $11,250.00 per month during the Employment Term, as
defined in Section 3 below. Such salary will be paid in conformity with
ULTRADATA's normal payroll period. Your salary will be reviewed by the Board
from time to time at its discretion, and you will receive such salary increases,
if any, as the Board in its sole discretion determines. For purposes of this
Agreement, your salary shall include any increases approved by the Board.
(b) Bonus. In addition to the salary set forth in Section 2(a)
hereof, you will be eligible for an annual bonus pursuant to a formula, and
determined in accordance with criteria, in each case to be established by the
Board of Directors and/or its Compensation Committee, which formula and criteria
will be communicated to you in writing reasonably in advance of the commencement
of the performance period to which such bonus will relate.
(c) Other Benefits. You will be entitled to participate in and
receive benefits under ULTRADATA's standard ULTRADATA benefits plans as in
effect from time to time, including medical insurance, sick leave, and vacation
time, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and ULTRADATA policies.
<PAGE>
Cooper, Cindy
November 6, 1998
(d) Expenses. During the term of your employment hereunder, you will
be entitled to receive prompt reimbursement from the ULTRADATA for all
reasonable business-related expenses incurred by you, in accordance with
ULTRADATA's policies and procedures as in effect from time to time, provided
that you will properly account for such business expenses in accordance with
ULTRADATA's policy.
(e) Deductions and Withholding. All amounts payable or which become
payable under any provision of this Agreement will be subject to any deductions
authorized in writing by you and any deductions and withholdings required by
law.
3. TERM OF EMPLOYMENT.
(a) Term. This Agreement will continue in full force and effect from
and including the Effective Date unless sooner terminated as hereinafter
provided (the "Employment Term") or replaced by another such agreement as may be
mutually agreed upon in writing by all parties.
(b) Early Termination. Your employment with ULTRADATA under this
Agreement may be terminated by ULTRADATA at any time during the Employment Term
by the President or the Board, for any reason and with or without cause, upon
delivery of written notice by ULTRADATA. ULTRADATA is not required to give you
any advance notice of termination which, in the sole discretion of ULTRADATA,
may be effective immediately upon delivery of written notice to you. You may
terminate this Agreement at any time by giving ULTRADATA written notice of your
resignation at least 30 days in advance; provided, however, that the Board may
determine upon receipt of such notice that the effective date of such
resignation will be immediate or some time prior to the expiration of the notice
period stated in your written notice to ULTRADATA.
(c) Termination for Cause. Prior to the expiration of the Employment
Term, your employment may be terminated for Cause by the Board, immediately upon
delivery of termination notice thereof to you. For these purposes, termination
for "Cause" will include, without limitation, termination because of your (a)
failure or a refusal to comply in any material respect with the reasonable
policies, standards or regulations of the Company; (b) failure or a refusal in
any material respect, faithfully or diligently, to perform your duties
determined by the Company in accordance with this Agreement or the customary
duties of Employee's employment (whether due to ill health, disability or
otherwise); (c) unprofessional, unethical or fraudulent conduct or conduct that
materially discredits the Company or is materially detrimental to the
reputation, character or standing of the Company; (d) dishonest conduct or a
deliberate attempt to do an injury to the Company; (e) material breach of a term
of this Agreement or the Employee Invention Assignment and Confidentiality
Agreement, including, without limitation, Employee's
2
<PAGE>
Cooper, Cindy
November 6, 1998
theft of the Company's proprietary information; or (f) an unlawful or criminal
act which would reflect badly on the Company in the Company's reasonable
judgment.
(d) Termination Due to Death or Disability. Your employment
hereunder will terminate immediately upon your death. In the event that by
reason of injury, illness or other physical or mental impairment you are (i)
completely unable to perform your services hereunder for more than two
consecutive months, or (ii) unable in the good faith judgment of the Board to
perform your services hereunder for 50% or more of the normal working day
throughout six consecutive months, then ULTRADATA may terminate your employment
hereunder at the end of such two-month or six-month period, as applicable, by
delivery to you of written notice of such termination.
4. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT IN
THE ABSENCE OF A CORPORATE TRANSACTION
(a) Termination For Cause, Death or Disability, or Voluntary
Termination. Upon termination of your employment by ULTRADATA under Section 3(c)
or Section 3(d) above, but subject to the provisions of Section 5 below, or upon
your voluntary termination of employment pursuant to Section 3(b) above, all
salary and benefits hereunder will cease immediately.
(b) Involuntary Termination except for Cause, Death or Disability.
Except as provided in Section 5 below, following involuntary termination of your
employment by ULTRADATA under Section 3(b) above, you will receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for six (6) months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for six (6) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) Continued vesting of any stock options granted to you by
ULTRADATA for six (6) months, followed by a 90 day period during which such
options may be exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
3
<PAGE>
Cooper, Cindy
November 6, 1998
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
5. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT FOLLOWING A
CORPORATE TRANSACTION
(a) Definitions. For purposes of this Section 5:
(i) A "Corporate Transaction" is defined as (A) a merger or
acquisition in which the Company is not the surviving entity (except for a
merger of the Company into a wholly-owned subsidiary, and except for a
transaction the purpose of which is to change the State in which the Company is
incorporated), (B) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (C) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
(ii) The "Post-Transaction Period" is defined as the period
commencing on the date of the closing or effectiveness of a Corporate
Transaction.
(iii) A "Constructive Termination Event" will be deemed to
have occurred at ULTRADATA's close of business on the fourteenth (14th) day
after any of the following action(s) are taken by ULTRADATA and such action(s)
is not reversed in full by ULTRADATA within such fourteen-day period unless
prior to the expiration of such fourteen-day period you have otherwise agreed to
the specific relevant event in writing: (A) your aggregate benefits are
materially reduced (as such reduction and materiality are determined by
customary practice within the software industry within the State of California)
below those in effect immediately prior to the effective date of such
Constructive Termination Event, and/or (B) your duties and/or authority are
materially decreased or increased from those in effect immediately prior to such
Constructive Termination Event, in a way that is adverse to you, as determined
by customary practice within the software industry within the State of
California and/or (C) you are required to perform your employment obligations
(other than routine travel consistent with that prior to the effective date of
such Constructive Termination Event) at a location more than twenty-five (25)
miles away from your principal place of work for ULTRADATA as such place of work
was in effect immediately prior to the effective date of such Constructive
Termination Event.
(b) Severance Pay For Termination After Commencement of the Post
Transaction Period. If at any time after the commencement of the Post
Transaction Period your employment is terminated by ULTRADATA except for Cause,
Death or Disability as stated in
4
<PAGE>
Cooper, Cindy
November 6, 1998
Sections 3(c) and 3(d) above, or if a Constructive Termination Event as defined
above occurs and you voluntarily terminate your employment, then you will
receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for twelve (12)
months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for twelve (12) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) In addition to the accelerated vesting of existing stock
options as provided in Section 6 below, continued vesting of any stock options
granted to you after the commencement of the Post Transaction Period for twelve
(12) months, followed by a 90 day period during which such options may be
exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
(c) Cooperation. After any such termination of your employment,
except to the extent you are not able to do so by reason of your death or
disability, you will cooperate with ULTRADATA in providing for the orderly
transition of your duties and responsibilities to other individuals, as is
reasonably requested by ULTRADATA.
6. ACCELERATION OF STOCK OPTIONS FOLLOWING A CORPORATE TRANSACTION.
Immediately upon the occurrence of a Corporate Transaction as defined above, all
stock options which have been granted to you as of the date of such occurrence
shall become 100% vested and shall be exercisable pursuant to the terms of your
stock option agreement.
7. PROPRIETARY RIGHTS. You hereby acknowledge and confirm that you have
executed the Company's standard Employee Invention Assignment and
Confidentiality Agreement with the Company, which agreement is in full force and
effect. The provisions of such agreement will survive any termination or
expiration of this Agreement.
5
<PAGE>
Cooper, Cindy
November 6, 1998
8. MISCELLANEOUS. This Agreement contains the entire understanding and sole and
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, negotiations and discussions
between the parties hereto with respect to the subject matter covered hereby and
may only be modified by an agreement in writing signed by ULTRADATA and you, and
which states the intent of the parties to amend this Agreement. If any provision
of this Agreement is held to be invalid or otherwise unenforceable, in whole or
in part, the remainder of such provision and the remainder of this Agreement
will not be affected thereby and will be enforced to the fullest extent
permitted by law. Neither this Agreement nor the rights or obligations hereunder
will be assignable by you. ULTRADATA may assign this Agreement to any successor
of ULTRADATA, and upon such assignment any such successor will be deemed
substituted for ULTRADATA upon the terms and subject to the conditions hereof.
This Agreement will be binding upon the successors and assigns of the parties
hereof and upon your heirs, executors and administrators. This Agreement has
been negotiated and executed in, and will be governed by and construed with the
laws of, the State of California. Any notice, request, demand or other
communication required or permitted hereunder will be deemed to be properly
given when personally served in writing, or when deposited in the United States
mail, postage pre-paid, addressed to ULTRADATA at the address shown at the
beginning of this letter, or to you at the address shown below, or by facsimile
upon confirmation of receipt. Each party hereto may change its address by
written notice in accordance with this Section 8.
Sincerely,
/s/ Robert J. Majteles
----------------------
Robert J. Majteles
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ Cindy Cooper
- ----------------
Cindy Cooper
Date signed: November 11, 1998
November 6, 1998
David J. Robbins
204 Chestnut Court
San Ramon, CA 94583
Re: Your Employment With ULTRADATA Corporation
Dear Dave:
This letter will set forth the binding agreement of employment (the
"Agreement"), effective as of November 6, 1998 (the "Effective Date"), between
you and ULTRADATA Corporation, a Delaware corporation ("ULTRADATA").
1. Employment and Duties. During the Employment Term, as defined in
Section 3 below, you will serve as Vice President, Customer Services of
ULTRADATA. You will have such duties and authority as are customary for, and
commensurate with such position, and such other reasonable duties and authority
as the Board of Directors of ULTRADATA (the "Board") or the President of
ULTRADATA prescribes from time to time.
2. COMPENSATION.
(a) Salary. For your services hereunder, ULTRADATA will pay as
salary to you the amount of $11,250.00 per month during the Employment Term, as
defined in Section 3 below. Such salary will be paid in conformity with
ULTRADATA's normal payroll period. Your salary will be reviewed by the Board
from time to time at its discretion, and you will receive such salary increases,
if any, as the Board in its sole discretion determines. For purposes of this
Agreement, your salary shall include any increases approved by the Board.
(b) Bonus. In addition to the salary set forth in Section 2(a)
hereof, you will be eligible for an annual bonus pursuant to a formula, and
determined in accordance with criteria, in each case to be established by the
Board of Directors and/or its Compensation Committee, which formula and criteria
will be communicated to you in writing reasonably in advance of the commencement
of the performance period to which such bonus will relate.
(c) Other Benefits. You will be entitled to participate in and
receive benefits under ULTRADATA's standard ULTRADATA benefits plans as in
effect from time to time, including medical insurance, sick leave, and vacation
time, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and ULTRADATA policies.
<PAGE>
Robbins, David
November 6, 1998
(d) Expenses. During the term of your employment hereunder, you will
be entitled to receive prompt reimbursement from the ULTRADATA for all
reasonable business-related expenses incurred by you, in accordance with
ULTRADATA's policies and procedures as in effect from time to time, provided
that you will properly account for such business expenses in accordance with
ULTRADATA's policy.
(e) Deductions and Withholding. All amounts payable or which become
payable under any provision of this Agreement will be subject to any deductions
authorized in writing by you and any deductions and withholdings required by
law.
3. TERM OF EMPLOYMENT.
(a) Term. This Agreement will continue in full force and effect from
and including the Effective Date unless sooner terminated as hereinafter
provided (the "Employment Term") or replaced by another such agreement as may be
mutually agreed upon in writing by all parties.
(b) Early Termination. Your employment with ULTRADATA under this
Agreement may be terminated by ULTRADATA at any time during the Employment Term
by the President or the Board, for any reason and with or without cause, upon
delivery of written notice by ULTRADATA. ULTRADATA is not required to give you
any advance notice of termination which, in the sole discretion of ULTRADATA,
may be effective immediately upon delivery of written notice to you. You may
terminate this Agreement at any time by giving ULTRADATA written notice of your
resignation at least 30 days in advance; provided, however, that the Board may
determine upon receipt of such notice that the effective date of such
resignation will be immediate or some time prior to the expiration of the notice
period stated in your written notice to ULTRADATA.
(c) Termination for Cause. Prior to the expiration of the Employment
Term, your employment may be terminated for Cause by the Board, immediately upon
delivery of termination notice thereof to you. For these purposes, termination
for "Cause" will include, without limitation, termination because of your (a)
failure or a refusal to comply in any material respect with the reasonable
policies, standards or regulations of the Company; (b) failure or a refusal in
any material respect, faithfully or diligently, to perform your duties
determined by the Company in accordance with this Agreement or the customary
duties of Employee's employment (whether due to ill health, disability or
otherwise); (c) unprofessional, unethical or fraudulent conduct or conduct that
materially discredits the Company or is materially detrimental to the
reputation, character or standing of the Company; (d) dishonest conduct or a
deliberate attempt to do an injury to the Company; (e) material breach of a term
of this Agreement or the Employee Invention Assignment and Confidentiality
Agreement, including, without limitation, Employee's
2
<PAGE>
Robbins, David
November 6, 1998
theft of the Company's proprietary information; or (f) an unlawful or criminal
act which would reflect badly on the Company in the Company's reasonable
judgment.
(d) Termination Due to Death or Disability. Your employment
hereunder will terminate immediately upon your death. In the event that by
reason of injury, illness or other physical or mental impairment you are (i)
completely unable to perform your services hereunder for more than two
consecutive months, or (ii) unable in the good faith judgment of the Board to
perform your services hereunder for 50% or more of the normal working day
throughout six consecutive months, then ULTRADATA may terminate your employment
hereunder at the end of such two-month or six-month period, as applicable, by
delivery to you of written notice of such termination.
4. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT IN
THE ABSENCE OF A CORPORATE TRANSACTION
(a) Termination For Cause, Death or Disability, or Voluntary
Termination. Upon termination of your employment by ULTRADATA under Section 3(c)
or Section 3(d) above, but subject to the provisions of Section 5 below, or upon
your voluntary termination of employment pursuant to Section 3(b) above, all
salary and benefits hereunder will cease immediately.
(b) Involuntary Termination except for Cause, Death or Disability.
Except as provided in Section 5 below, following involuntary termination of your
employment by ULTRADATA under Section 3(b) above, you will receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for six (6) months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for six (6) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) Continued vesting of any stock options granted to you by
ULTRADATA for six (6) months, followed by a 90 day period during which such
options may be exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
3
<PAGE>
Robbins, David
November 6, 1998
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
5. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT FOLLOWING A
CORPORATE TRANSACTION
(a) Definitions. For purposes of this Section 5:
(i) A "Corporate Transaction" is defined as (A) a merger or
acquisition in which the Company is not the surviving entity (except for a
merger of the Company into a wholly-owned subsidiary, and except for a
transaction the purpose of which is to change the State in which the Company is
incorporated), (B) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (C) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
(ii) The "Post-Transaction Period" is defined as the period
commencing on the date of the closing or effectiveness of a Corporate
Transaction.
(iii) A "Constructive Termination Event" will be deemed to
have occurred at ULTRADATA's close of business on the fourteenth (14th) day
after any of the following action(s) are taken by ULTRADATA and such action(s)
is not reversed in full by ULTRADATA within such fourteen-day period unless
prior to the expiration of such fourteen-day period you have otherwise agreed to
the specific relevant event in writing: (A) your aggregate benefits are
materially reduced (as such reduction and materiality are determined by
customary practice within the software industry within the State of California)
below those in effect immediately prior to the effective date of such
Constructive Termination Event, and/or (B) your duties and/or authority are
materially decreased or increased from those in effect immediately prior to such
Constructive Termination Event, in a way that is adverse to you, as determined
by customary practice within the software industry within the State of
California and/or (C) you are required to perform your employment obligations
(other than routine travel consistent with that prior to the effective date of
such Constructive Termination Event) at a location more than twenty-five (25)
miles away from your principal place of work for ULTRADATA as such place of work
was in effect immediately prior to the effective date of such Constructive
Termination Event.
(b) Severance Pay For Termination After Commencement of the Post
Transaction Period. If at any time after the commencement of the Post
Transaction Period your employment is terminated by ULTRADATA except for Cause,
Death or Disability as stated in
4
<PAGE>
Robbins, David
November 6, 1998
Sections 3(c) and 3(d) above, or if a Constructive Termination Event as defined
above occurs and you voluntarily terminate your employment, then you will
receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for twelve (12)
months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for twelve (12) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) In addition to the accelerated vesting of existing stock
options as provided in Section 6 below, continued vesting of any stock options
granted to you after the commencement of the Post Transaction Period for twelve
(12) months, followed by a 90 day period during which such options may be
exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
(c) Cooperation. After any such termination of your employment,
except to the extent you are not able to do so by reason of your death or
disability, you will cooperate with ULTRADATA in providing for the orderly
transition of your duties and responsibilities to other individuals, as is
reasonably requested by ULTRADATA.
6. ACCELERATION OF STOCK OPTIONS FOLLOWING A CORPORATE TRANSACTION.
Immediately upon the occurrence of a Corporate Transaction as defined above, all
stock options which have been granted to you as of the date of such occurrence
shall become 100% vested and shall be exercisable pursuant to the terms of your
stock option agreement.
7. PROPRIETARY RIGHTS. You hereby acknowledge and confirm that you have
executed the Company's standard Employee Invention Assignment and
Confidentiality Agreement with the Company, which agreement is in full force and
effect. The provisions of such agreement will survive any termination or
expiration of this Agreement.
5
<PAGE>
Robbins, David
November 6, 1998
8. MISCELLANEOUS. This Agreement contains the entire understanding and sole and
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, negotiations and discussions
between the parties hereto with respect to the subject matter covered hereby and
may only be modified by an agreement in writing signed by ULTRADATA and you, and
which states the intent of the parties to amend this Agreement. If any provision
of this Agreement is held to be invalid or otherwise unenforceable, in whole or
in part, the remainder of such provision and the remainder of this Agreement
will not be affected thereby and will be enforced to the fullest extent
permitted by law. Neither this Agreement nor the rights or obligations hereunder
will be assignable by you. ULTRADATA may assign this Agreement to any successor
of ULTRADATA, and upon such assignment any such successor will be deemed
substituted for ULTRADATA upon the terms and subject to the conditions hereof.
This Agreement will be binding upon the successors and assigns of the parties
hereof and upon your heirs, executors and administrators. This Agreement has
been negotiated and executed in, and will be governed by and construed with the
laws of, the State of California. Any notice, request, demand or other
communication required or permitted hereunder will be deemed to be properly
given when personally served in writing, or when deposited in the United States
mail, postage pre-paid, addressed to ULTRADATA at the address shown at the
beginning of this letter, or to you at the address shown below, or by facsimile
upon confirmation of receipt. Each party hereto may change its address by
written notice in accordance with this Section 8.
Sincerely,
/s/ Robert J. Majteles
----------------------
Robert J. Majteles
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ David J. Robbins
- --------------------
David J. Robbins
Date signed: November 11, 1998
6
November 6, 1998
James R. Berthelsen
30 De Sabla Road
San Mateo, CA 94402
Re: Your Employment With ULTRADATA Corporation
Dear Jim:
This letter will set forth the binding agreement of employment (the
"Agreement"), effective as of November 6, 1998 (the "Effective Date"), between
you and ULTRADATA Corporation, a Delaware corporation ("ULTRADATA").
1. Employment and Duties. During the Employment Term, as defined in
Section 3 below, you will serve as Vice President, Business Development of
ULTRADATA. You will have such duties and authority as are customary for, and
commensurate with such position, and such other reasonable duties and authority
as the Board of Directors of ULTRADATA (the "Board") or the President of
ULTRADATA prescribes from time to time.
2. COMPENSATION.
(a) Salary. For your services hereunder, ULTRADATA will pay as
salary to you the amount of $11,250.00 per month during the Employment Term, as
defined in Section 3 below. Such salary will be paid in conformity with
ULTRADATA's normal payroll period. Your salary will be reviewed by the Board
from time to time at its discretion, and you will receive such salary increases,
if any, as the Board in its sole discretion determines. For purposes of this
Agreement, your salary shall include any increases approved by the Board.
(b) Bonus. In addition to the salary set forth in Section 2(a)
hereof, you will be eligible for an annual bonus pursuant to a formula, and
determined in accordance with criteria, in each case to be established by the
Board of Directors and/or its Compensation Committee, which formula and criteria
will be communicated to you in writing reasonably in advance of the commencement
of the performance period to which such bonus will relate.
(c) Other Benefits. You will be entitled to participate in and
receive benefits under ULTRADATA's standard ULTRADATA benefits plans as in
effect from time to time, including medical insurance, sick leave, and vacation
time, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and ULTRADATA policies.
<PAGE>
Berthelsen, James
November 6, 1998
(d) Expenses. During the term of your employment hereunder, you will
be entitled to receive prompt reimbursement from the ULTRADATA for all
reasonable business-related expenses incurred by you, in accordance with
ULTRADATA's policies and procedures as in effect from time to time, provided
that you will properly account for such business expenses in accordance with
ULTRADATA's policy.
(e) Deductions and Withholding. All amounts payable or which become
payable under any provision of this Agreement will be subject to any deductions
authorized in writing by you and any deductions and withholdings required by
law.
3. TERM OF EMPLOYMENT.
(a) Term. This Agreement will continue in full force and effect from
and including the Effective Date unless sooner terminated as hereinafter
provided (the "Employment Term") or replaced by another such agreement as may be
mutually agreed upon in writing by all parties.
(b) Early Termination. Your employment with ULTRADATA under this
Agreement may be terminated by ULTRADATA at any time during the Employment Term
by the President or the Board, for any reason and with or without cause, upon
delivery of written notice by ULTRADATA. ULTRADATA is not required to give you
any advance notice of termination which, in the sole discretion of ULTRADATA,
may be effective immediately upon delivery of written notice to you. You may
terminate this Agreement at any time by giving ULTRADATA written notice of your
resignation at least 30 days in advance; provided, however, that the Board may
determine upon receipt of such notice that the effective date of such
resignation will be immediate or some time prior to the expiration of the notice
period stated in your written notice to ULTRADATA.
(c) Termination for Cause. Prior to the expiration of the Employment
Term, your employment may be terminated for Cause by the Board, immediately upon
delivery of termination notice thereof to you. For these purposes, termination
for "Cause" will include, without limitation, termination because of your (a)
failure or a refusal to comply in any material respect with the reasonable
policies, standards or regulations of the Company; (b) failure or a refusal in
any material respect, faithfully or diligently, to perform your duties
determined by the Company in accordance with this Agreement or the customary
duties of Employee's employment (whether due to ill health, disability or
otherwise); (c) unprofessional, unethical or fraudulent conduct or conduct that
materially discredits the Company or is materially detrimental to the
reputation, character or standing of the Company; (d) dishonest conduct or a
deliberate attempt to do an injury to the Company; (e) material breach of a term
of this Agreement or the Employee Invention Assignment and Confidentiality
Agreement, including, without limitation, Employee's
2
<PAGE>
Berthelsen, James
November 6, 1998
theft of the Company's proprietary information; or (f) an unlawful or criminal
act which would reflect badly on the Company in the Company's reasonable
judgment.
(d) Termination Due to Death or Disability. Your employment
hereunder will terminate immediately upon your death. In the event that by
reason of injury, illness or other physical or mental impairment you are (i)
completely unable to perform your services hereunder for more than two
consecutive months, or (ii) unable in the good faith judgment of the Board to
perform your services hereunder for 50% or more of the normal working day
throughout six consecutive months, then ULTRADATA may terminate your employment
hereunder at the end of such two-month or six-month period, as applicable, by
delivery to you of written notice of such termination.
4. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT IN
THE ABSENCE OF A CORPORATE TRANSACTION
(a) Termination For Cause, Death or Disability, or Voluntary
Termination. Upon termination of your employment by ULTRADATA under Section 3(c)
or Section 3(d) above, but subject to the provisions of Section 5 below, or upon
your voluntary termination of employment pursuant to Section 3(b) above, all
salary and benefits hereunder will cease immediately.
(b) Involuntary Termination except for Cause, Death or Disability.
Except as provided in Section 5 below, following involuntary termination of your
employment by ULTRADATA under Section 3(b) above, you will receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for six (6) months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for six (6) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) Continued vesting of any stock options granted to you by
ULTRADATA for six (6) months, followed by a 90 day period during which such
options may be exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
3
<PAGE>
Berthelsen, James
November 6, 1998
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
5. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT FOLLOWING A
CORPORATE TRANSACTION
(a) Definitions. For purposes of this Section 5:
(i) A "Corporate Transaction" is defined as (A) a merger or
acquisition in which the Company is not the surviving entity (except for a
merger of the Company into a wholly-owned subsidiary, and except for a
transaction the purpose of which is to change the State in which the Company is
incorporated), (B) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (C) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
(ii) The "Post-Transaction Period" is defined as the period
commencing on the date of the closing or effectiveness of a Corporate
Transaction.
(iii) A "Constructive Termination Event" will be deemed to
have occurred at ULTRADATA's close of business on the fourteenth (14th) day
after any of the following action(s) are taken by ULTRADATA and such action(s)
is not reversed in full by ULTRADATA within such fourteen-day period unless
prior to the expiration of such fourteen-day period you have otherwise agreed to
the specific relevant event in writing: (A) your aggregate benefits are
materially reduced (as such reduction and materiality are determined by
customary practice within the software industry within the State of California)
below those in effect immediately prior to the effective date of such
Constructive Termination Event, and/or (B) your duties and/or authority are
materially decreased or increased from those in effect immediately prior to such
Constructive Termination Event, in a way that is adverse to you, as determined
by customary practice within the software industry within the State of
California and/or (C) you are required to perform your employment obligations
(other than routine travel consistent with that prior to the effective date of
such Constructive Termination Event) at a location more than twenty-five (25)
miles away from your principal place of work for ULTRADATA as such place of work
was in effect immediately prior to the effective date of such Constructive
Termination Event.
(b) Severance Pay For Termination After Commencement of the Post
Transaction Period. If at any time after the commencement of the Post
Transaction Period your employment is terminated by ULTRADATA except for Cause,
Death or Disability as stated in
4
<PAGE>
Berthelsen, James
November 6, 1998
Sections 3(c) and 3(d) above, or if a Constructive Termination Event as defined
above occurs and you voluntarily terminate your employment, then you will
receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for twelve (12)
months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for twelve (12) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) In addition to the accelerated vesting of existing stock
options as provided in Section 6 below, continued vesting of any stock options
granted to you after the commencement of the Post Transaction Period for twelve
(12) months, followed by a 90 day period during which such options may be
exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
(c) Cooperation. After any such termination of your employment,
except to the extent you are not able to do so by reason of your death or
disability, you will cooperate with ULTRADATA in providing for the orderly
transition of your duties and responsibilities to other individuals, as is
reasonably requested by ULTRADATA.
6. ACCELERATION OF STOCK OPTIONS FOLLOWING A CORPORATE TRANSACTION.
Immediately upon the occurrence of a Corporate Transaction as defined above, all
stock options which have been granted to you as of the date of such occurrence
shall become 100% vested and shall be exercisable pursuant to the terms of your
stock option agreement.
7. PROPRIETARY RIGHTS. You hereby acknowledge and confirm that you have
executed the Company's standard Employee Invention Assignment and
Confidentiality Agreement with the Company, which agreement is in full force and
effect. The provisions of such agreement will survive any termination or
expiration of this Agreement.
5
<PAGE>
Berthelsen, James
November 6, 1998
8. MISCELLANEOUS. This Agreement contains the entire understanding and sole and
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, negotiations and discussions
between the parties hereto with respect to the subject matter covered hereby and
may only be modified by an agreement in writing signed by ULTRADATA and you, and
which states the intent of the parties to amend this Agreement. If any provision
of this Agreement is held to be invalid or otherwise unenforceable, in whole or
in part, the remainder of such provision and the remainder of this Agreement
will not be affected thereby and will be enforced to the fullest extent
permitted by law. Neither this Agreement nor the rights or obligations hereunder
will be assignable by you. ULTRADATA may assign this Agreement to any successor
of ULTRADATA, and upon such assignment any such successor will be deemed
substituted for ULTRADATA upon the terms and subject to the conditions hereof.
This Agreement will be binding upon the successors and assigns of the parties
hereof and upon your heirs, executors and administrators. This Agreement has
been negotiated and executed in, and will be governed by and construed with the
laws of, the State of California. Any notice, request, demand or other
communication required or permitted hereunder will be deemed to be properly
given when personally served in writing, or when deposited in the United States
mail, postage pre-paid, addressed to ULTRADATA at the address shown at the
beginning of this letter, or to you at the address shown below, or by facsimile
upon confirmation of receipt. Each party hereto may change its address by
written notice in accordance with this Section 8.
Sincerely,
/s/ Robert J. Majteles
----------------------
Robert J. Majteles
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ James R. Berthelsen
- -----------------------
James R. Berthelsen
Date signed: November 11, 1998
6
November 6, 1998
Ronald H. Bissinger
1142 Mataro Court
Pleasanton, CA 94566
Re: Your Employment With ULTRADATA Corporation
Dear Ron:
This letter will set forth the binding agreement of employment (the
"Agreement"), effective as of November 6, 1998 (the "Effective Date"), between
you and ULTRADATA Corporation, a Delaware corporation ("ULTRADATA").
1. Employment and Duties. During the Employment Term, as defined in
Section 3 below, you will serve as Vice President, Chief Financial Officer of
ULTRADATA. You will have such duties and authority as are customary for, and
commensurate with such position, and such other reasonable duties and authority
as the Board of Directors of ULTRADATA (the "Board") or the President of
ULTRADATA prescribes from time to time.
2. COMPENSATION.
(a) Salary. For your services hereunder, ULTRADATA will pay as
salary to you the amount of $11,250.00 per month during the Employment Term, as
defined in Section 3 below. Such salary will be paid in conformity with
ULTRADATA's normal payroll period. Your salary will be reviewed by the Board
from time to time at its discretion, and you will receive such salary increases,
if any, as the Board in its sole discretion determines. For purposes of this
Agreement, your salary shall include any increases approved by the Board.
(b) Bonus. In addition to the salary set forth in Section 2(a)
hereof, you will be eligible for an annual bonus pursuant to a formula, and
determined in accordance with criteria, in each case to be established by the
Board of Directors and/or its Compensation Committee, which formula and criteria
will be communicated to you in writing reasonably in advance of the commencement
of the performance period to which such bonus will relate.
(c) Other Benefits. You will be entitled to participate in and
receive benefits under ULTRADATA's standard ULTRADATA benefits plans as in
effect from time to time, including medical insurance, sick leave, and vacation
time, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and ULTRADATA policies.
<PAGE>
Bissinger, Ronald
November 6, 1998
(d) Expenses. During the term of your employment hereunder, you will
be entitled to receive prompt reimbursement from the ULTRADATA for all
reasonable business-related expenses incurred by you, in accordance with
ULTRADATA's policies and procedures as in effect from time to time, provided
that you will properly account for such business expenses in accordance with
ULTRADATA's policy.
(e) Deductions and Withholding. All amounts payable or which become
payable under any provision of this Agreement will be subject to any deductions
authorized in writing by you and any deductions and withholdings required by
law.
3. TERM OF EMPLOYMENT.
(a) Term. This Agreement will continue in full force and effect from
and including the Effective Date unless sooner terminated as hereinafter
provided (the "Employment Term") or replaced by another such agreement as may be
mutually agreed upon in writing by all parties.
(b) Early Termination. Your employment with ULTRADATA under this
Agreement may be terminated by ULTRADATA at any time during the Employment Term
by the President or the Board, for any reason and with or without cause, upon
delivery of written notice by ULTRADATA. ULTRADATA is not required to give you
any advance notice of termination which, in the sole discretion of ULTRADATA,
may be effective immediately upon delivery of written notice to you. You may
terminate this Agreement at any time by giving ULTRADATA written notice of your
resignation at least 30 days in advance; provided, however, that the Board may
determine upon receipt of such notice that the effective date of such
resignation will be immediate or some time prior to the expiration of the notice
period stated in your written notice to ULTRADATA.
(c) Termination for Cause. Prior to the expiration of the Employment
Term, your employment may be terminated for Cause by the Board, immediately upon
delivery of termination notice thereof to you. For these purposes, termination
for "Cause" will include, without limitation, termination because of your (a)
failure or a refusal to comply in any material respect with the reasonable
policies, standards or regulations of the Company; (b) failure or a refusal in
any material respect, faithfully or diligently, to perform your duties
determined by the Company in accordance with this Agreement or the customary
duties of Employee's employment (whether due to ill health, disability or
otherwise); (c) unprofessional, unethical or fraudulent conduct or conduct that
materially discredits the Company or is materially detrimental to the
reputation, character or standing of the Company; (d) dishonest conduct or a
deliberate attempt to do an injury to the Company; (e) material breach of a term
of this Agreement or the Employee Invention Assignment and Confidentiality
Agreement, including, without limitation, Employee's
2
<PAGE>
Bissinger, Ronald
November 6, 1998
theft of the Company's proprietary information; or (f) an unlawful or criminal
act which would reflect badly on the Company in the Company's reasonable
judgment.
(d) Termination Due to Death or Disability. Your employment
hereunder will terminate immediately upon your death. In the event that by
reason of injury, illness or other physical or mental impairment you are (i)
completely unable to perform your services hereunder for more than two
consecutive months, or (ii) unable in the good faith judgment of the Board to
perform your services hereunder for 50% or more of the normal working day
throughout six consecutive months, then ULTRADATA may terminate your employment
hereunder at the end of such two-month or six-month period, as applicable, by
delivery to you of written notice of such termination.
4. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT IN
THE ABSENCE OF A CORPORATE TRANSACTION
(a) Termination For Cause, Death or Disability, or Voluntary
Termination. Upon termination of your employment by ULTRADATA under Section 3(c)
or Section 3(d) above, but subject to the provisions of Section 5 below, or upon
your voluntary termination of employment pursuant to Section 3(b) above, all
salary and benefits hereunder will cease immediately.
(b) Involuntary Termination except for Cause, Death or Disability.
Except as provided in Section 5 below, following involuntary termination of your
employment by ULTRADATA under Section 3(b) above, you will receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for six (6) months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for six (6) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) Continued vesting of any stock options granted to you by
ULTRADATA for six (6) months, followed by a 90 day period during which such
options may be exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
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Bissinger, Ronald
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(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
5. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT FOLLOWING A
CORPORATE TRANSACTION
(a) Definitions. For purposes of this Section 5:
(i) A "Corporate Transaction" is defined as (A) a merger or
acquisition in which the Company is not the surviving entity (except for a
merger of the Company into a wholly-owned subsidiary, and except for a
transaction the purpose of which is to change the State in which the Company is
incorporated), (B) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (C) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
(ii) The "Post-Transaction Period" is defined as the period
commencing on the date of the closing or effectiveness of a Corporate
Transaction.
(iii) A "Constructive Termination Event" will be deemed to
have occurred at ULTRADATA's close of business on the fourteenth (14th) day
after any of the following action(s) are taken by ULTRADATA and such action(s)
is not reversed in full by ULTRADATA within such fourteen-day period unless
prior to the expiration of such fourteen-day period you have otherwise agreed to
the specific relevant event in writing: (A) your aggregate benefits are
materially reduced (as such reduction and materiality are determined by
customary practice within the software industry within the State of California)
below those in effect immediately prior to the effective date of such
Constructive Termination Event, and/or (B) your duties and/or authority are
materially decreased or increased from those in effect immediately prior to such
Constructive Termination Event, in a way that is adverse to you, as determined
by customary practice within the software industry within the State of
California and/or (C) you are required to perform your employment obligations
(other than routine travel consistent with that prior to the effective date of
such Constructive Termination Event) at a location more than twenty-five (25)
miles away from your principal place of work for ULTRADATA as such place of work
was in effect immediately prior to the effective date of such Constructive
Termination Event.
(b) Severance Pay For Termination After Commencement of the Post
Transaction Period. If at any time after the commencement of the Post
Transaction Period your employment is terminated by ULTRADATA except for Cause,
Death or Disability as stated in
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Bissinger, Ronald
November 6, 1998
Sections 3(c) and 3(d) above, or if a Constructive Termination Event as defined
above occurs and you voluntarily terminate your employment, then you will
receive:
(i) Your salary (including any increases approved by the
Board) continued at the rate specified in Section 2(a) above for twelve (12)
months;
(ii) Medical insurance and life insurance at the levels in
effect at the time of termination for twelve (12) months;
(iii) When otherwise payable, your bonus prorated up to the
date of termination for the period during which you were eligible for any such
bonus;
(iv) In addition to the accelerated vesting of existing stock
options as provided in Section 6 below, continued vesting of any stock options
granted to you after the commencement of the Post Transaction Period for twelve
(12) months, followed by a 90 day period during which such options may be
exercised.
(v) No further continuance of other benefits such as vacation,
sick leave, and employee stock purchase plan participation, unless specified
herein.
(vi) Any cellular phone and notebook computer as then
currently provided by Company. Additionally, placement services will be provided
as the Company customarily provides to other Executives leaving the Company.
(c) Cooperation. After any such termination of your employment,
except to the extent you are not able to do so by reason of your death or
disability, you will cooperate with ULTRADATA in providing for the orderly
transition of your duties and responsibilities to other individuals, as is
reasonably requested by ULTRADATA.
6. ACCELERATION OF STOCK OPTIONS FOLLOWING A CORPORATE TRANSACTION.
Immediately upon the occurrence of a Corporate Transaction as defined above, all
stock options which have been granted to you as of the date of such occurrence
shall become 100% vested and shall be exercisable pursuant to the terms of your
stock option agreement.
7. PROPRIETARY RIGHTS. You hereby acknowledge and confirm that you have
executed the Company's standard Employee Invention Assignment and
Confidentiality Agreement with the Company, which agreement is in full force and
effect. The provisions of such agreement will survive any termination or
expiration of this Agreement.
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Bissinger, Ronald
November 6, 1998
8. MISCELLANEOUS. This Agreement contains the entire understanding and sole and
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, negotiations and discussions
between the parties hereto with respect to the subject matter covered hereby and
may only be modified by an agreement in writing signed by ULTRADATA and you, and
which states the intent of the parties to amend this Agreement. If any provision
of this Agreement is held to be invalid or otherwise unenforceable, in whole or
in part, the remainder of such provision and the remainder of this Agreement
will not be affected thereby and will be enforced to the fullest extent
permitted by law. Neither this Agreement nor the rights or obligations hereunder
will be assignable by you. ULTRADATA may assign this Agreement to any successor
of ULTRADATA, and upon such assignment any such successor will be deemed
substituted for ULTRADATA upon the terms and subject to the conditions hereof.
This Agreement will be binding upon the successors and assigns of the parties
hereof and upon your heirs, executors and administrators. This Agreement has
been negotiated and executed in, and will be governed by and construed with the
laws of, the State of California. Any notice, request, demand or other
communication required or permitted hereunder will be deemed to be properly
given when personally served in writing, or when deposited in the United States
mail, postage pre-paid, addressed to ULTRADATA at the address shown at the
beginning of this letter, or to you at the address shown below, or by facsimile
upon confirmation of receipt. Each party hereto may change its address by
written notice in accordance with this Section 8.
Sincerely,
/s/ Robert J. Majteles
----------------------
Robert J. Majteles
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ Ronald H. Bissinger
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Ronald H. Bissinger
Date signed: November 11, 1998
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