10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 0-27512

CSG SYSTEMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	47-0783182
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7887 East Belleview, Suite 1000

Englewood, Colorado 80111

(Address of principal executive offices, including zip code)

(303) 796-2850

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES  x    NO  ¨

Shares of common stock outstanding at November 5, 2004: 51,082,592.

CSG SYSTEMS INTERNATIONAL, INC.

FORM 10-Q For the Quarter Ended September 30, 2004

INDEX

		Page No.
Part I      -	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2004 and 2003 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
Part II     -	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 2.	Changes in Securities, Use of Proceeds and Issuer Repurchases of Equity Securities	45
Item 6.	Exhibits and Reports on Form 8-K	45
	Signatures	47
	Index to Exhibits	48

2

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	130,986		$	105,397
Short-term investments		7,870			—
Total cash, cash equivalents and short-term investments		138,856			105,397
Trade accounts receivable-
Billed, net of allowance of $5,438 and $11,145		123,344			130,691
Unbilled and other		15,051			18,042
Deferred income taxes		5,401			9,134
Income taxes receivable		4,361			35,076
Other current assets		11,805			11,697
Total current assets		298,818			310,037
Property and equipment, net of depreciation of $89,208 and $89,529		33,004			38,218
Software, net of amortization of $73,436 and $62,957		28,053			37,780
Goodwill		217,794			219,199
Client contracts, net of amortization of $59,301 and $50,973		52,408			58,136
Deferred income taxes		46,155			53,327
Other assets		8,536			8,078
Total assets	$	684,768		$	724,775
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	—		$	45,137
Client deposits		19,362			17,175
Trade accounts payable		19,852			21,291
Accrued employee compensation		30,870			32,415
Deferred revenue		46,078			52,655
Income taxes payable		17,816			20,723
Arbitration charge payable		—			25,181
Other current liabilities		20,873			25,818
Total current liabilities		154,851			240,395
Non-current liabilities:
Long-term debt, net of current maturities		230,000			183,788
Deferred revenue		5,389			3,270
Other non-current liabilities		4,148			6,537
Total non-current liabilities		239,537			193,595
Total liabilities		394,388			433,990
Stockholders’ equity:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; zero shares issued and outstanding		—			—
Common stock, par value $.01 per share; 100,000,000 shares authorized; 17,465,876 and 8,911,634 shares reserved for employee stock purchase plan, stock incentive plans and convertible debt securities; 51,077,602 and 53,788,062 shares outstanding		596			593
Additional paid-in capital		296,705			281,784
Deferred employee compensation		(1,757	)		(4,458	)
Accumulated other comprehensive income:
Unrealized gain (loss) on short-term investments, net of tax		(2	)		1
Cumulative translation adjustments		6,467			6,519
Treasury stock, at cost, 8,482,496 and 5,499,796 shares		(224,008	)		(171,111	)
Accumulated earnings		212,379			177,457
Total stockholders’ equity		290,380			290,785
Total liabilities and stockholders’ equity	$	684,768		$	724,775

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30, 2004			September 30, 2003			September 30, 2004			September 30, 2003
	(unaudited)						(unaudited)
Revenues:
Processing and related services (inclusive in 2003 of $13,472 charge for arbitration ruling attributable to the third quarter of 2003)	$	80,748		$	79,369		$	242,775		$	261,586
Software		9,644			10,600			25,390			32,912
Maintenance (inclusive in 2003 of $450 charge for arbitration ruling attributable to the third quarter of 2003)		24,636			23,676			73,340			68,907
Professional services		18,045			17,544			51,595			52,077
		133,073			131,189			393,100			415,482
Charge for arbitration ruling attributable to periods prior to July 1, 2003		—			(105,679	)		—			(105,679	)
Total revenues		133,073			25,510			393,100			309,803
Cost of revenues:
Cost of processing and related services		37,977			36,523			106,402			106,199
Cost of software and maintenance		17,295			18,546			50,731			54,251
Cost of professional services		17,177			16,778			46,943			50,006
Total cost of revenues		72,449			71,847			204,076			210,456
Gross margin (loss) (exclusive of depreciation)		60,624			(46,337	)		189,024			99,347
Operating expenses:
Research and development		15,035			14,322			45,257			46,742
Selling, general and administrative		20,556			25,439			66,021			87,459
Depreciation		3,535			4,529			10,688			13,462
Restructuring charges		91			3,451			2,387			7,603
Total operating expenses		39,217			47,741			124,353			155,266
Operating income (loss)		21,407			(94,078	)		64,671			(55,919	)
Other income (expense):
Interest expense		(1,811	)		(3,291	)		(8,049	)		(10,647	)
Write-off of deferred financing costs		—			—			(6,569	)		—
Interest and investment income, net		536			381			1,092			1,112
Other, net		1,261			753			211			3,582
Total other		(14	)		(2,157	)		(13,315	)		(5,953	)
Income (loss) before income taxes		21,393			(96,235	)		51,356			(61,872	)
Income tax (provision) benefit		(5,060	)		42,461			(16,434	)		28,524
Net income (loss)	$	16,333		$	(53,774	)	$	34,922		$	(33,348	)
Basic net income (loss) per common share:
Net income (loss) available to common stockholders	$	0.33		$	(1.05	)	$	0.69		$	(0.65	)
Weighted average common shares		49,565			51,456			50,844			51,372
Diluted net income (loss) per common share:
Net income (loss) available to common stockholders	$	0.32		$	(1.05	)	$	0.68		$	(0.65	)
Weighted average common shares		50,324			51,456			51,558			51,372

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

CSG SYSTEMS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended
	September 30, 2004			September 30, 2003
	(unaudited)
Cash flows from operating activities:
Net income (loss)	$	34,922		$	(33,348	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities-
Depreciation		10,688			13,462
Amortization		20,328			18,684
Restructuring charge for abandonment of facilities		654			3,234
Gain on short-term investments		(4	)		—
Write-off of deferred financing costs		6,569			—
Deferred income taxes		10,927			461
Tax benefit of stock options exercised		1,253			15
Stock-based employee compensation		11,448			4,067
Changes in operating assets and liabilities:
Trade accounts and other receivables, net		10,752			18,048
Other current and non-current assets		(428	)		829
Arbitration charge payable		(25,181	)		119,601
Income taxes payable/receivable		29,183			(44,774	)
Accounts payable and accrued liabilities		(9,332	)		(12,284	)
Deferred revenues		(4,823	)		10,814
Net cash provided by operating activities		96,956			98,809
Cash flows from investing activities:
Purchases of property and equipment		(5,454	)		(6,706	)
Purchases of short-term investments		(14,479	)		(7,782	)
Proceeds from sale of short-term investments		6,610			—
Acquisition of businesses and assets, net of cash acquired		(699	)		(2,380	)
Acquisition of and investments in client contracts		(2,254	)		(1,584	)
Net cash used in investing activities		(16,276	)		(18,452	)
Cash flows from financing activities:
Proceeds from issuance of common stock		5,564			1,310
Repurchase of common stock		(53,538	)		(207	)
Proceeds from long-term debt		230,000			—
Payments on long-term debt		(228,925	)		(41,075	)
Payments of deferred financing costs		(8,127	)		(87	)
Net cash used in financing activities		(55,026	)		(40,059	)
Effect of exchange rate fluctuations on cash		(65	)		941
Net increase in cash and cash equivalents		25,589			41,239
Cash and cash equivalents, beginning of period		105,397			94,424
Cash and cash equivalents, end of period	$	130,986		$	135,663
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for-
Interest	$	5,059		$	8,321
Income taxes		(24,537	)		15,606

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

CSG SYSTEMS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The accompanying unaudited condensed consolidated financial statements as of September 30, 2004 and December 31, 2003, and for the three and nine months ended September 30, 2004 and 2003, have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the financial position and operating results have been included. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC (the “Company’s 2003 10-K”). The results of operations for the three and nine months ended September 30, 2004, are not necessarily indicative of the expected results for the entire year ending December 31, 2004.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Postage. The Company passes through to its clients the cost of postage that is incurred on behalf of those clients, and typically requires an advance payment on expected postage costs. These advance payments are included in “client deposits” in the accompanying Condensed Consolidated Balance Sheets and are classified as current liabilities regardless of the contract period. The Company nets the cost of postage against the postage reimbursements, and includes the net amount in processing and related services revenues. The total cost of postage incurred on behalf of clients that has been netted against processing and related services revenues for the three months ended September 30, 2004 and 2003 was $45.9 million and $42.6 million, respectively, and for the nine months ended September 30, 2004 and 2003 was $134.7 million and $124.3 million, respectively.

Stock-Based Compensation Expense. During the fourth quarter of 2003, the Company adopted the fair value method of accounting for stock-based awards in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), using the prospective method of transition as outlined in SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure — An Amendment of FASB Statement No. 123” (“SFAS 148”). The adoption of SFAS 123 was effective as of January 1, 2003. Under the prospective method of transition, all stock-based awards granted, modified, or settled on or after January 1, 2003, are accounted for in accordance with SFAS 123. Stock-based awards granted prior to January 1, 2003, continue to be accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations (“APB 25”), and follow the disclosure provisions of SFAS 123 and SFAS 148. As a result, the Company has restated its condensed consolidated financial statements for the three and nine months ended September 30, 2003 to reflect the inclusion of additional stock-based compensation expense of $0.3 million and $0.6 million, respectively.

At September 30, 2004, the Company had five stock-based compensation plans. The Company recorded stock-based compensation expense of $3.5 million and $1.4 million, respectively, for the three months ended September 30, 2004 and 2003 and $11.4 million and $4.1 million, respectively, for the nine months ended September 30, 2004 and 2003.

Awards under the Company’s stock-based compensation plans generally vest over periods ranging from three to four years. Because the Company follows APB 25 for all stock-based awards granted prior to January 1, 2003, and the prospective method of transition under SFAS 148 for stock-based awards granted, modified, or settled on or after January 1, 2003, compensation expense recorded in the Company’s accompanying Condensed Consolidated Statements of Operations is less than what would have been recognized if the fair value based method under SFAS

6

123 had been applied to all awards for all periods. Had compensation expense for the Company’s five stock-based compensation plans been based on the fair value at the grant dates for awards under those plans for all periods, consistent with the methodology of SFAS 123, the Company’s net income (loss) and net income (loss) per share available to common stockholders for the three and nine months ended September 30, 2004 and 2003, would approximate the pro forma amounts as follows (in thousands, except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Net income (loss), as reported	$	16,333		$	(53,774	)	$	34,922		$	(33,348	)
Add: Stock-based compensation expense included in reported net income (loss), net of related tax effects		2,674			758			7,785			2,192
Deduct: Total stock-based compensation expense determined under the fair value-based method for all awards, net of related tax effects		(3,998	)		(4,004	)		(11,939	)		(13,029	)
Net income (loss), pro forma	$	15,009		$	(57,020	)	$	30,768		$	(44,185	)
Net income (loss) per share:
Basic – as reported	$	0.33		$	(1.05	)	$	0.69		$	(0.65	)
Basic – pro forma		0.30			(1.11	)		0.61			(0.86	)
Diluted – as reported		0.32			(1.05	)		0.68			(0.65	)
Diluted – pro forma		0.30			(1.11	)		0.60			(0.86	)

Reclassification and Restatement. Certain prior period amounts have been reclassified to conform to the September 30, 2004 presentation. In addition, as discussed above, the Company restated 2003 amounts to reflect the adoption of SFAS 123, effective January 1, 2003.

3. DEBT

2004 Revolving Credit Facility

On September 21, 2004, the Company entered into a five-year, $100 million senior secured revolving credit facility (the “2004 Revolving Credit Facility”) with a syndicate of U.S. financial institutions. The 2004 Revolving Credit Facility is guaranteed by the capital stock of the Company and all of its existing and future domestic subsidiaries, and 65% of the capital stock of all the Company’s existing and future foreign subsidiaries. The 2004 Revolving Credit Facility has a $40 million sub-facility for standby and commercial letter of credit and a $10 million sub-facility for same day advances provided solely by the U.S financial institution where the Company maintains its cash deposits.

The 2004 Revolving Credit Facility requires maintenance of certain financial ratios, including a leverage ratio and an interest coverage ratio. In addition, the 2004 Revolving Credit Facility subjects the Company to certain limitations, including: (i) the incurrence of certain indebtedness and liens on Company property; (ii) the execution of contracts that represent certain fundamental changes in the Company’s business; (iii) the sale of Company property except in the ordinary course of business; and (iv) the making of certain restricted payments, as defined, and investments. As of September 30, 2004, the Company was in compliance with the financial ratio and other covenants of the 2004 Revolving Credit Facility, and the entire $100 million of the 2004 Revolving Credit Facility was available to the Company.

The interest rate for borrowings under the 2004 Revolving Credit Facility, except for same day advances, is chosen at the option of the Company and is based upon a base rate or adjusted LIBOR rate, plus an applicable margin. The base rate represents the higher of a floating prime rate and a floating rate equal to 50 basis points in excess of the Federal Funds Effective Rate. The interest rate for same day advances is based upon base rate, plus an applicable margin. The applicable margins are dependent on the Company’s leverage ratio, as defined, and range from zero to 100 basis points for base rate loans and 125 to 225 basis points for LIBOR loans.

7

As of September 30, 2004, the Company had made no borrowings under the 2004 Revolving Credit Facility. The Company pays a quarterly commitment fee on the unused portion of the 2004 Revolving Credit Facility. This rate is dependent on the Company’s leverage ratio and ranges from 25 to 50 basis points per annum. As of September 30, 2004, the commitment fee rate was 37.5 basis points per annum.

In conjunction with securing the 2004 Revolving Credit Facility, the Company incurred fees of approximately $0.8 million. These costs have been deferred and will be amortized on a straight-line basis over the term of the 2004 Revolving Credit Facility.

Convertible Debt Securities

On June 2, 2004, the Company completed an offering of $230.0 million of 2.5% senior subordinated convertible contingent debt securities due June 15, 2024 (the “Convertible Debt Securities”) to qualified buyers pursuant to Rule 144A under the Securities Act of 1933.

The Company used the proceeds from the Convertible Debt Securities, along with available cash, cash equivalents and short-tem investments, to: (i) repay the outstanding balance of $198.9 million and terminate its 2002 Credit Facility (including the revolving credit facility); (ii) repurchase 2.1 million shares of the Company’s common stock for $40.0 million (market price of $18.72 per share) from the initial purchasers of the Convertible Debt Securities; and (iii) pay debt issuance costs of $7.1 million, of which $6.3 million consisted of underwriting commissions.

The Convertible Debt Securities are unsecured, subordinated to any of the Company’s future senior debt, and senior to the Company’s future junior subordinated debt. The Convertible Debt Securities, issued at a price of 100% of their principal amount, bear interest at a rate of 2.5% per annum, which is payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2004. The $7.1 million of deferred financing costs related to the Convertible Debt Securities issuance are being amortized to interest expense over seven years. The Convertible Debt Securities are callable by the Company for cash, on or after June 20, 2011, at a redemption price equal to 100% of the principal amount of the Convertible Debt Securities, plus accrued interest. The Convertible Debt Securities can be put back to the Company by the holders for cash at June 15, 2011, 2016 and 2021, or upon a change of control, at a repurchase price equal to 100% of the principal amount of the Convertible Debt Securities, plus any accrued interest.

Commencing with the six-month period beginning June 15, 2011, the Company will pay contingent interest equal to 0.25% of the average trading price of the Convertible Debt Securities during any six-month period if the average trading price of the Convertible Debt Securities for the five consecutive trading days ending on the second trading day immediately preceding the first day of the six-month period equals 120% or more of the principal amount of the Convertible Debt Securities.

The Convertible Debt Securities are convertible into the Company’s common stock, under the specified conditions below, at an initial conversion rate of 37.3552 shares per $1,000 principal amount of Convertible Debt Securities, which is equal to an effective conversion price of $26.77 per share and represents a maximum of 8.6 million shares of potentially issuable Company common stock. The conversion rate can be adjusted in the future for certain events, to include stock dividends, stock splits/reverse splits, the issuance of warrants to purchase Company stock at a price below the then-current market price, cash dividends, and certain purchases by the Company of its common stock pursuant to a tender offer or exchange offer.

Holders of the Convertible Debt Securities can convert their securities: (i) at any time the price of the Company’s common stock trades over $34.80 per share (130% of the $26.77 effective conversion price) for a specified period of time; (ii) at any time the trading price of the Convertible Debt Securities fall below 98% of the average conversion value for the Convertible Debt Securities for a specified period of time; (iii) upon the Company exercising its right to redeem the Convertible Debt Securities at any time after June 20, 2011; and (iv) at any time upon the occurrence of specified corporate transactions, to include a change in control.

8

The Company has the right to settle the Convertible Debt Securities upon conversion by delivering Company common stock, cash or any combination of Company common stock and cash. At any time prior to maturity, the Company may irrevocably elect at its sole discretion to satisfy in cash 100% of the principal amount of the Convertible Debt Securities converted after the date of such election. After such election, the Company may still satisfy its conversion obligation, to the extent it exceeds the principal amount, in cash or common stock, or a combination of cash and Company common stock. At this time, in the fourth quarter of 2004 the Company expects to make the irrevocable election to settle in cash 100% of the principal amount of the Convertible Debt Securities as a result of an impending change in the accounting rules that will change the treatment of the Convertible Debt Securities in determining diluted EPS. See Note 5 for additional discussion of this matter.

As of September 30, 2004, the Convertible Debt Securities were not registered with the SEC. The Company has entered into a registration rights agreement with the initial purchasers, in which the Company has agreed to: (i) file a shelf registration statement with the SEC for the benefit of the holders of the Convertible Debt Securities within 90 days of the completion of the Convertible Debt Securities offering; (ii) use reasonable best efforts to cause such registration statement to become effective as promptly as possible, but in no event later than 180 days from the completion of the Convertible Debt Securities offering; and (iii) keep the registration statement effective for a specified period of time. If the Company defaults on the registration rights agreement, it will be required to pay additional interest at a rate of 0.25% per annum on the principal amount of the Convertible Debt Securities up to and including the 90th day following such default, and additional interest at a rate of 0.50% per annum on the principal amount of the Convertible Debt Securities from and after the 91^st day following such default. On July 16, 2004, the Company filed a shelf registration statement with the SEC on Form S-3 for the Convertible Debt Securities. The Company is currently working through the process necessary to have the shelf registration statement on Form S-3 declared effective by the SEC.

The fair value of the Convertible Debt Securities as of September 30, 2004, based upon quoted market prices, was approximately $217 million. The contingent interest feature of the Convertible Debt Securities discussed above is considered an embedded derivative that is required to be bifurcated and accounted for as a freestanding derivative financial instrument. The fair value of this derivative financial instrument, as of September 30, 2004, was approximately $0.1 million.

2002 Credit Facility

New Amendments. During the first quarter of 2004, the Company entered into two amendments to its 2002 Credit Facility. The Second Amendment was made to clarify the Company’s ability to repurchase its common stock in certain situations pursuant to the Company’s stock-based compensation plans. The Third Amendment was made in conjunction with the Company signing the Comcast Contract (see Note 7).

Mandatory Prepayment. In March 2004, the Company made a $30 million mandatory prepayment on its 2002 Credit Facility using the proceeds from income tax refunds received in the first quarter of 2004. This $30 million mandatory prepayment, required under the First Amendment to the 2002 Credit Facility, was to be paid on or before July 30, 2004.

Repayment and Termination. As discussed above, the Company used a portion of the proceeds from the Convertible Debt Securities to repay and terminate the 2002 Credit Facility. As a result, the Company wrote-off unamortized deferred financing costs attributable to the 2002 Credit Facility of $6.6 million during the second quarter of 2004.

4. STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION PLANS

Modifications to Stock-Based Compensation Awards. During the first quarter of 2004, the Company modified the terms of approximately 406,000 shares of unvested restricted stock, and 116,000 unvested stock options held by key members of management (members other than executive management) to include a provision which allows for full vesting of the stock-based awards upon a change in control of the Company. Unless such an event occurs, the stock-based awards will continue to vest as set forth in the original terms of the agreements. This modification did not have a significant impact on total stock-based compensation expense in the first quarter of 2004.

9

1996 Employee Stock Purchase Plan. During the second quarter of 2004, the Company’s stockholders approved a 500,000 share increase in the authorized number of shares available under the 1996 Employee Stock Purchase Plan, bringing the total number of authorized shares to be sold under the plan to 958,043. As of September 30, 2004, 511,479 shares remain eligible for purchase under the plan.

Stock Repurchase Program. Effective June 2, 2004, the Company’s Board of Directors approved a five million share increase in the number of shares the Company is authorized to repurchase under its stock repurchase program, bringing the total number of authorized shares to 15.0 million. During the second quarter of 2004 (in conjunction with the issuance of the Convertible Debt Securities), the Company repurchased 2.1 million shares of its common stock for $40.0 million (weighted-average price of $18.72 per share). During the third quarter of 2004, the Company repurchased 0.8 million shares of its common stock for $12.9 million (weighted-average price of $15.25 per share). As of September 30, 2004, the total shares repurchased under the Company’s stock repurchase program since its inception in August 1999 totaled 9.3 million shares, at a total repurchase price of approximately $253 million (weighted-average price of $27.10 per share). At September 30, 2004, the total remaining number of shares authorized for repurchase under the program totaled 5.7 million shares.

5. EARNINGS PER COMMON SHARE

Calculation of Earnings Per Common Share. Earnings per common share (“EPS”) has been computed in accordance with SFAS No. 128, “Earnings Per Share”. Basic EPS is computed by dividing income (loss) available to common stockholders (the numerator) by the weighted average number of common shares outstanding during the period (the denominator). Diluted EPS is consistent with the calculation of basic EPS while considering the effect of potentially dilutive common shares outstanding during the period. Unvested shares of restricted stock are not included in the basic EPS calculation. Basic and diluted EPS are presented on the face of the Company’s Condensed Consolidated Statements of Operations.

No reconciliation of the basic and diluted EPS numerators is necessary for the three and nine months ended September 30, 2004 and 2003, as net income (loss) is used as the numerator for each period. The reconciliation of the EPS denominators is included in the following table (in thousands).

	Three Months Ended September 30,		Nine Months Ended September 30,
	2004	2003	2004	2003
Basic common shares outstanding	49,565	51,456	50,844	51,372
Dilutive effect of stock options	270	—	317	—
Dilutive effect of unvested restricted stock	489	—	397	—
Dilutive effect of Convertible Debt Securities	—	—	—	—
Diluted common shares outstanding	50,324	51,456	51,558	51,372

Because the Company was in a net loss position for the three and nine months ended September 30, 2003, potentially dilutive common shares of 0.5 million and 0.3 million, respectively, related to stock options and unvested restricted stock are excluded in calculating diluted EPS, as their effect is anti-dilutive... In addition, irrespective of whether the Company was in a net income or net loss position, potentially dilutive common shares related to stock options and unvested restricted stock of 1.3 million and 4.9 million, respectively, for the three months ended September 30, 2004 and 2003, and 1.6 million and 5.7 million, respectively, for the nine months ended September 30, 2004 and 2003, are excluded in calculating diluted EPS as their effect is anti-dilutive.

The Convertible Debt Securities had no impact on the number of diluted common shares outstanding since none of the contingent conversion features have been met as of September 30, 2004 (see Note 3). Under the application of existing GAAP, the Convertible Debt Securities are not included within the computation of diluted EPS until one of the contingent conversion features has been met.

10

Recent Accounting Pronouncement Impacting EPS. In September 2004, the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) reached a final consensus decision on EITF Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share”. The EITF’s consensus decision states that shares to be potentially issued under contingently convertible instruments should be included in diluted earnings per share (if dilutive) regardless of whether any of the contingent conversion features have been met. As stated above, under the existing application of GAAP, those securities are not included in the computation of diluted EPS until the period in which one of the contingent conversion features has been met. In October 2004, the EITF’s consensus decision was ratified by the FASB, and EITF 04-8 is expected to become effective during the fourth quarter of 2004.

The Company’s Convertible Debt Securities fall within the scope of EITF 04-8. The Company expects to adopt EITF 04-8 during the period it becomes effective. While retroactive application of the consensus decision is required upon adoption of EITF 04-8, a modified transition method is allowed. That is, for contingently convertible instruments outstanding as the date of adoption of EITF 04-8 and whose terms have been modified since issuance, prior-period diluted EPS should be restated to conform to the consensus decision for comparative purposes based on the modified terms of the instrument at the date of adoption of EITF 04-8.

As discussed in Note 3, the Company currently has the right to settle the Convertible Debt Securities upon conversion by delivering Company common stock, cash or any combination of Company common stock and cash. At any time prior to maturity, the Company may irrevocably elect at its sole discretion to satisfy in cash 100% of the principal amount of the Convertible Debt Securities converted after the date of such election. After such election, the Company may still satisfy its conversion obligation, to the extent it exceeds the principal amount, in cash or Company common stock, or a combination of cash and Company common stock. At this time, prior to adoption of EITF 04-8, the Company expects to make the irrevocable election to settle in cash 100% of the $230 million principal amount of the Convertible Debt Securities which would then require the Company to calculate dilution for the Convertible Debt Securities using the “treasury stock” method in periods in which the Company’s average stock price exceeds the current effective conversion price of $26.77 per share. Under the treasury stock method, the Company would have no reduction in its previously reported diluted EPS in the second and third quarters of 2004, as the Company’s average stock price did not exceed the effective conversion price of $26.77 per share during these periods. In addition, going forward, the Convertible Debt Securities would impact the Company’s diluted EPS calculation only in those periods in which the Company’s average stock price exceeds the current effective conversion price of $26.77 per share.

If the Company does not make the irrevocable election to settle in cash 100% of the $230 million principal amount of the Convertible Debt Securities prior to the adoption of EITF Issue No. 04-8, the Company will be required to calculate dilution for the Convertible Debt Securities using the “if-converted” method, with retroactive application back to the June 2004 issuance date of the Convertible Debt Securities. Under the if-converted method, the Company would restate its previously reported diluted EPS for the third quarter of 2004 from $0.32 to $0.30, or approximately 6% of additional dilution. The impact to the second quarter of 2004 is not significant, and as a result, no restatement of diluted EPS would be required for this period. In addition, going forward, the if-converted method would be expected to decrease the Company’s diluted EPS by approximately 7-8% over current near-term expectations.

6. COMPREHENSIVE INCOME (LOSS)

The Company’s components of comprehensive income (loss) were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Net income (loss)	$	16,333		$	(53,774	)	$	34,922		$	(33,348	)
Other comprehensive income (loss), net of tax, if any:
Foreign currency translation adjustments		(289	)		(8	)		(52	)		2,895
Unrealized gain (loss) on short-term investments		—			—			(3	)		7
Comprehensive income (loss)	$	16,044		$	(53,782	)	$	34,867		$	(30,446	)

11

7. SIGNIFICANT CLIENTS

Comcast Corporation

Arbitration Resolution. During 2002 and 2003, the Company was involved in various legal proceedings with its largest client, Comcast Corporation (“Comcast”), consisting principally of arbitration proceedings related to the Comcast Master Subscriber Agreement. In October 2003, the Company received the final ruling in the arbitration proceedings. The Comcast arbitration ruling included an award of $119.6 million to be paid by the Company to Comcast. The award was based on the arbitrator’s determination that the Company had violated the most favored nations (“MFN”) clause of the Comcast Master Subscriber Agreement. As specified in the arbitration ruling, the $119.6 million was segregated such that $105.7 million was attributable to periods prior to July 1, 2003, and $13.9 million was attributable to the third quarter of 2003. The Company recorded the impact from the arbitration ruling in the third quarter of 2003 as a charge against its revenues. In the fourth quarter of 2003, the Company paid approximately $95 million of the arbitration award to Comcast, and in January 2004, the Company paid the remaining portion of the arbitration award of approximately $25 million. In addition to the arbitration award, the Company paid to Comcast interest of $1.1 million, $0.1 million of which was reflected as interest expense in the first quarter of 2004.

Signing of New Comcast Contract. In March 2004, the Company signed a new contract with Comcast (the “Comcast Contract”). The Comcast Contract supersedes the former Comcast Master Subscriber Agreement that was set to expire at the end of 2012. The term of the new agreement runs through December 31, 2008. A summary of the significant provisions of the Comcast Contract and related documents is as follows:

• the establishment of annual financial minimums for 2004, 2005 and 2006 of $85 million, $75 million and $60 million, respectively (total of $220 million);

• the elimination of any exclusive right the Company had under its previous contract with Comcast to provide customer care and billing services for the entire 13 million AT&T Broadband customer base (acquired by Comcast in November 2002);

• the elimination of any MFN pricing clause and the establishment of new mutually agreed upon pricing for the Company’s products and services, including the definition of the underlying customer billing units, which was consistent with the measurement established as a result of the arbitration ruling;

• the establishment of contract termination rights for both parties;

• the establishment of Comcast’s rights to certain customer data and deconversion assistance;

• the establishment of service level agreements (“SLA’s”) and damages that the Company would pay if it fails to achieve the SLA’s; and

• the parties entered into a mutual release whereby both parties were released from any and all claims and disputes related to the Comcast Master Subscriber Agreement.

See Note 9 for discussion of the client contracts intangible asset related to the Comcast Contract.

Echostar Communications

Signing of New Contract Amendment. Echostar Communications (“Echostar”) is the Company’s second largest client. In February 2004, the Company signed the Thirtieth Amendment to the Echostar Master Subscriber Agreement, extending the term of the Echostar Master Subscriber Agreement until March 1, 2006. The Echostar Master Subscriber Agreement was previously set to expire at the end of 2004.

12

8. SEGMENT INFORMATION

The Company serves its clients through its two operating segments: the Broadband Services Division (the “Broadband Division”) and the Global Software Services Division (the “GSS Division”). The Company’s operating segment information and corporate overhead costs are presented below (in thousands, except percentages).

	Three Months Ended September 30, 2004
	Broadband Division			GSS Division			Corporate			Total
Processing revenues	$	80,013		$	735		$	—		$	80,748
Software revenues		1,176			8,468			—			9,644
Maintenance revenues		4,529			20,107			—			24,636
Professional services revenues		210			17,835			—			18,045
Total revenues		85,928			47,145			—			133,073
Segment operating expenses (1)		53,509			43,577			14,489			111,575
Contribution margin (loss) (1)	$	32,419		$	3,568		$	(14,489	)	$	21,498
Contribution margin percentage		37.7	%		7.6	%		N/A			16.2	%
Certain non-cash expenses:
Amortization of investment in client contracts (3)	$	3,171		$	—		$	—		$	3,171
Other intangible assets amortization		—			3,328			257			3,585
Depreciation		1,665			879			991			3,535
Stock-based compensation		1,089			789			1,625			3,503
Total	$	5,925		$	4,996		$	2,873		$	13,794
	Three Months Ended September 30, 2003 (2)
	Broadband Division			GSS Division			Corporate			Total
Processing revenues (Broadband Division net of $13,472 for the arbitration charge)	$	78,731		$	638		$	—		$	79,369
Software revenues		1,897			8,703			—			10,600
Maintenance revenues (Broadband Division net of $450 of the arbitration charge)		4,649			19,027			—			23,676
Professional services revenues		310			17,234			—			17,544
Subtotal		85,587			45,602			—			131,189
Charge for arbitration ruling attributable to periods prior to July 1, 2003		(105,679	)		—			—			(105,679	)
Total revenues, net		(20,092	)		45,602			—			25,510
Segment operating expenses (1)		54,479			46,530			15,128			116,137
Contribution margin (loss) (1)	$	(74,571	)	$	(928	)	$	(15,128	)	$	(90,627	)
Contribution margin (loss) percentage		(371.1	)%		(2.0	)%		N/A			(355.3	)%
Certain non-cash expenses:
Amortization of investment in client contracts (3)	$	2,272		$	—		$	—		$	2,272
Other intangible assets amortization		—			3,417			629			4,046
Depreciation		2,190			1,424			915			4,529
Stock-based compensation		51			28			1,278			1,357
Total	$	4,513		$	4,869		$	2,822		$	12,204

13

	Nine Months Ended September 30, 2004
	Broadband Division			GSS Division			Corporate			Total
Processing revenues	$	240,735		$	2,040		$	—		$	242,775
Software revenues		2,999			22,391			—			25,390
Maintenance revenues		14,202			59,138			—			73,340
Professional services revenues		608			50,987			—			51,595
Total revenues		258,544			134,556			—			393,100
Segment operating expenses (1)		151,463			128,828			45,751			326,042
Contribution margin (loss) (1)	$	107,081		$	5,728		$	(45,751	)	$	67,058
Contribution margin percentage		41.4	%		4.3	%		N/A			17.1	%
Certain non-cash expenses:
Amortization of investment in client contracts (3)	$	8,258		$	—		$	—		$	8,258
Other intangible assets amortization		—			10,641			1,429			12,070
Depreciation		5,140			2,794			2,754			10,688
Stock-based compensation		3,283			2,443			5,722			11,448
Total	$	16,681		$	15,878		$	9,905		$	42,464
	Nine Months Ended September 30, 2003 (2)
	Broadband Division			GSS Division			Corporate			Total
Processing revenues (Broadband Division net of $13,472 for the arbitration charge)	$	259,613		$	1,973		$	—		$	261,586
Software revenues		4,032			28,880			—			32,912
Maintenance revenues (Broadband Division net of $450 of the arbitration charge)		14,757			54,150			—			68,907
Professional services revenues		892			51,185			—			52,077
Subtotal		279,294			136,188			—			415,482
Charge for arbitration ruling attributable to periods prior to July 1, 2003		(105,679	)		—			—			(105,679	)
Total revenues, net		173,615			136,188			—			309,803
Segment operating expenses (1)		159,562			146,065			52,492			358,119
Contribution margin (loss) (1)	$	14,053		$	(9,877	)	$	(52,492	)	$	(48,316	)
Contribution margin (loss) percentage		8.1	%		(7.3	)%		N/A			(15.6	)%
Certain non-cash expenses:
Amortization of investment in client contracts (3)	$	5,576		$	—		$	—		$	5,576
Other intangible assets amortization		—			11,225			1,883			13,108
Depreciation		7,045			3,637			2,780			13,462
Stock-based compensation		127			69			3,871			4,067
Total	$	12,748		$	14,931		$	8,534		$	36,213

(1) Segment operating expenses and contribution margin (loss) exclude restructuring charges of $0.1 million and $3.5 million, respectively, for the three months ended September 30, 2004 and 2003, and $2.4 million and $7.6 million, respectively, for the nine months ended September 30, 2004 and 2003.

14

(2) During the fourth quarter of 2003, the Company adopted the fair value method of accounting for stock-based awards in accordance with SFAS 123, using the prospective method of transition (see Note 2). The adoption of SFAS 123 was effective as of January 1, 2003. As a result, the segment operating results for the three and nine months ended September 30, 2003 have been restated to reflect the inclusion of additional stock-based compensation expense of $0.3 million and $0.6 million, respectively.

(3) Amortization related to investments in client contracts has been reflected as a reduction in processing and related services revenues in the segment information presented above and in the accompanying Condensed Consolidated Statements of Operations.

Reconciling information between reportable segments contribution margin and the Company’s consolidated totals is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Segment contribution margin (loss)	$	21,498		$	(90,627	)	$	67,058		$	(48,316	)
Restructuring charges		(91	)		(3,451	)		(2,387	)		(7,603	)
Operating income (loss)		21,407			(94,078	)		64,671			(55,919	)
Interest expense		(1,811	)		(3,291	)		(8,049	)		(10,647	)
Write-off of deferred financing costs		—			—			(6,569	)		—
Other		1,797			1,134			1,303			4,694
Income (loss) before income taxes	$	21,393		$	(96,235	)	$	51,356		$	(61,872	)

Of the $0.1 million and $2.4 million restructuring charges recorded in the three and nine months ended September 30, 2004, $0 and $0.2 million relate to the Broadband Division, $0 and $1.4 million relate to the GSS Division, and $0.1 million and $0.8 million relate to Corporate. Of the $3.5 million and $7.6 million restructuring charges recorded in the three and nine months ended September 30, 2003, $0.2 million and $0.2 million relate to the Broadband Division. $3.3 million and $7.3 million relate to the GSS Division, and $0.0 and $0.1 million relate to Corporate.

9. LONG LIVED ASSETS

Goodwill. The Company does not have any intangible assets with indefinite lives other than goodwill. The changes in the carrying amount of goodwill by operating segment for the nine months ended September 30, 2004 was as follows (in thousands):

	Broadband Division		GSS Division			Consolidated
Balance as of December 31, 2003	$	623	$	218,576		$	219,199
Impairment losses		—		—			—
Adjustment to Kenan Business acquired assets and assumed liabilities		—		(1,508	)		(1,508	)
Effects of changes in foreign currency exchange rates and other		—		103			103
Balance as of September 30, 2004	$	623	$	217,171		$	217,794

15

Other Intangible Assets. The Company’s intangible assets subject to amortization consist of client contracts and software. As of September 30, 2004 and December 31, 2003 the carrying values of these assets were as follows (in thousands):

	September 30, 2004							December 31, 2003
	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Client contracts	$	111,709	$	(59,301	)	$	52,408	$	109,109	$	(50,973	)	$	58,136
Software		101,490		(73,437	)		28,053		100,737		(62,957	)		37,780
Total	$	213,199	$	(132,738	)	$	80,461	$	209,846	$	(113,930	)	$	95,916

The aggregate amortization related to intangible assets for the three months ended September 30, 2004 and 2003 was $6.5 million and $5.7 million, respectively, and for the nine months ended September 30, 2004 and 2003 was $18.9 million and $16.8 million, respectively. Based on the September 30, 2004 net carrying value of these intangible assets, the estimated aggregate amortization for each of the five succeeding fiscal years ending December 31 are: 2004 – $25.5 million; 2005 – $26.2 million; 2006 – $21.1 million; 2007 – $14.2 million; and 2008 – $12.5 million. These amounts have been revised from the amounts disclosed as of December 31, 2003, primarily as a result of the change in amortization related to the Comcast client contracts intangible asset, as discussed below.

Carrying Value of the GSS Division’s Intangible Assets. As of September 30, 2004, there was approximately $30 million in net intangible assets (primarily software) and approximately $217 million of goodwill that was attributable to the GSS Division, which included the assets from the Kenan Business, ICMS, Davinci, and plaNet acquisitions. Key drivers of the value assigned to these acquisitions are the global telecommunications industry client base and the software assets acquired. The Company performed its annual GSS Division goodwill impairment test as of July 31, 2004, and also performed certain financial analyses of the GSS Division’s other long-lived intangible assets at that time as well, and concluded that no impairment of the GSS Division’s goodwill or other long-lived intangible assets had occurred at that time. As of September 30, 2004, the Company concluded that no events or changes in circumstances have occurred since July 31, 2004 to warrant an impairment assessment of the GSS Division’s goodwill and/or other long-lived intangible assets. The Company will continue to monitor the carrying value of these assets during the period of economic recovery for the telecommunications industry and will perform the next scheduled GSS Division annual goodwill impairment test in the third quarter of 2005. If the current economic conditions take longer to recover than anticipated, it is reasonably possible that a review for impairment of the GSS Division’s goodwill and/or related long-lived intangible assets in the future may indicate that these assets are impaired, and the amount of impairment could be substantial.

Carrying Value of Broadband Division’s Intangible Assets. As of September 30, 2004, the Broadband Division had client contracts intangible assets with a net carrying value of approximately $50 million. Of this amount, approximately $48 million related to the Comcast Contract. As discussed in Note 7 above, during the first quarter of 2004, the Company signed a new contract with Comcast. The Company has evaluated the carrying value of this intangible asset in light of the net cash flows expected to be generated from the Comcast Contract, and has concluded that there was no impairment to this asset as a result of the new Comcast Contract. However, as a result of the shortened term of the Comcast Contract, effective in March 2004, the Company was required to accelerate the amortization of this intangible asset. The Company’s revised estimated amortization of all client contracts intangible assets, reflecting the accelerated amortization resulting from the Comcast Contract, for each of the five succeeding fiscal years ending December 31 are: 2004 - $11.3 million; 2005 - $12.0 million; 2006 - $11.9 million; 2007 - $11.9 million; and 2008 - $11.8 million.

16

10. RESTRUCTURING CHARGES

Cost Reduction Initiatives. Due to the economic decline in the global telecommunications industry and the uncertainty in the timing and the extent of any economic turnaround within the industry, beginning in the third quarter of 2002 and continuing through the third quarter of 2003, the Company implemented several cost reduction initiatives resulting in restructuring charges. In addition, in response to the expected reduction in revenues resulting from the Comcast arbitration ruling received in October 2003, the Company implemented a cost reduction initiative in the fourth quarter of 2003. A summary of the Company’s cost reduction initiatives through September 30, 2004 is as follows:

• During the third quarter of 2002, the cost reduction initiative consisted of: (i) involuntary employee terminations from all areas of the Company of approximately 300 people (approximately 10% of the Company’s then current workforce); (ii) limited hiring of new employees; (iii) a reduction of the Company’s facilities and infrastructure support costs, including facility consolidations and abandonments; and (iv) reductions in costs in several discretionary spending areas, such as travel and entertainment. Substantially all of the involuntary employee terminations were completed during the third quarter of 2002, with the remainder completed during the fourth quarter of 2002.

• During the first quarter of 2003, the cost reduction initiative consisted of involuntary employee terminations of approximately 70 people (approximately 2% of the Company’s then current workforce). All of these involuntary employee terminations were completed by the end of the first quarter of 2003, and consisted principally of individuals within the GSS Division.

• During the second and third quarters of 2003, the cost reduction initiative consisted principally of involuntary employee terminations of approximately 60 people (approximately 2% of the Company’s then current workforce). All of these involuntary employee terminations were completed by the end of the third quarter of 2003, and consisted principally of individuals within the GSS Division.

• During the fourth quarter of 2003, the cost reduction initiative consisted of: (i) involuntary employee terminations from all areas of the Company of approximately 130 people (approximately 5% of the Company’s then current workforce), with the greatest percentage of these terminations occurring within the Broadband Division; (ii) a reduction of costs related to certain of the Company’s employee compensation and fringe benefit programs, to include a wage freeze; (iii) limited hiring of new employees; (iv) movement of certain product support and/or software research and development functions to lower cost locales; and (v) a reduction in costs in several discretionary spending areas. The fourth quarter of 2003 cost reduction initiative was substantially completed in the first six months of 2004, with additional involuntary employee terminations of approximately 40 people (2% of the Company’s then current workforce), all occurring within the GSS Division.

Restructuring Charges. As a result of the cost reduction initiatives described above, during the three months ended September 30, 2004 and 2003, the Company recorded restructuring charges of $0.1 million and $3.5 million, and during the nine months ended September 30, 2004 and 2003, the Company recorded restructuring charges of $2.4 million and $7.6 million, respectively. The restructuring costs have been reflected as a separate line item on the accompanying Condensed Consolidated Statements of Operations. The components of the restructuring charges are as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2004		2003			2004		2003
Involuntary employee terminations	$	32	$	853		$	1,731	$	4,324
Facility abandonments		59		2,599			654		3,253
All other		—		(1	)		2		26
Total restructuring charges	$	91	$	3,451		$	2,387	$	7,603

17

The involuntary employee terminations component of the restructuring charges relates primarily to severance payments and job placement assistance for those terminated employees. The facility abandonments component of the restructuring charges relates to office facilities that are under long-term lease agreements that the Company has abandoned. The facility abandonments charge is equal to the present value of the future costs associated with those abandoned facilities, net of the estimated proceeds from any future sublease agreements. The Company has used estimates to arrive at both the future costs of the abandoned facilities and the proceeds from any future sublease agreements. The Company will continue to evaluate its estimates used in recording the facility abandonments charge. As a result, there may be additional charges or reversals in the future related to the facilities that had been abandoned as of September 30, 2004.

Restructuring Reserves. The activity in the business restructuring reserves during the nine months ended September 30, 2004 is as follows (in thousands):

	Termination Benefits			Facility Abandonments			Other			Total
December 31, 2003, balance	$	2,118		$	13,121		$	—		$	15,239
Charged to expense during period		1,731			654			2			2,387
Cash payments		(3,796	)		(5,264	)		(2	)		(9,062	)
Other		—			10			—			10
September 30, 2004, balance	$	53		$	8,521		$	—		$	8,574

Of the $8.6 million business restructuring reserve as of September 30, 2004, $5.5 million was included in current liabilities and $3.1 million was included in non-current liabilities. As of December 31, 2003, the present value of the estimated proceeds from any future sublease agreements used in the calculation of the business restructuring reserves was approximately $13 million, of which approximately $5 million related to future sublease proceeds from signed sublease agreements. As of September 30, 2004, the present value of the estimated proceeds from any future sublease agreements used in the calculation of the business restructuring reserves was approximately $13 million, of which approximately $5 million related to future sublease proceeds from signed sublease agreements.

11. INCOME TAXES

The Company was in a domestic net operating loss (“NOL”) position for 2003 as a result of the Comcast $119.6 million arbitration charge (see Note 7). The Company’s income tax receivable as of December 31, 2003 was $35.1 million, which resulted from the Company’s ability to claim a refund for 2003 income taxes already paid, and from its ability to carry back the Company’s NOL to prior years. During the first quarter of 2004, the Company received approximately $34 million of this income tax receivable, and identified additional income tax receivable amounts during its final preparation of the 2003 U.S. Federal income tax return, which was filed in March 2004. As a result, the Company’s September 30, 2004, income taxes receivable is $4.4 million.

In accordance with GAAP applicable to interim financial statements, the Company is required to estimate its expected annual effective income tax rate at each quarter-end, and record adjustments to bring the interim year-to-date income tax provision to the expected income tax rate. During the three months ended September 30, 2004, the Company changed its 2004 estimated annual effective income tax rate to 32%, which is a decrease from the previous estimate of 38% as of the end of the second quarter of 2004. The decrease in the 2004 estimated annual effective income tax rate is primarily the result of the completion and resolution of certain tax matters in foreign jurisdictions during the third quarter of 2004. In order to reflect an effective income tax rate of 32% for the nine months ended September 30, 2004, the effective income tax rate for the three months ended September 30, 2004 was 24%.

12. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Product Warranties. The Company generally warrants that its products and services will conform to published specifications, or to specifications provided in an individual client arrangement, as applicable. The typical warranty

18

period is 90 days from delivery of the product or service. The typical remedy for breach of warranty is to correct or replace any defective deliverable, and if not possible or practical, the Company will accept the return of the defective deliverable and refund the amount paid to the Company under the client arrangement that is allocable to the defective deliverable. Historically, the Company has incurred minimal warranty costs, and as a result, does not maintain a warranty reserve.

Product Indemnifications. The Company’s software arrangements generally include a product indemnification provision that will indemnify and defend a client in actions brought against the client that claim the Company’s products infringe upon a copyright, trade secret, or valid patent. Historically, the Company has not incurred any significant costs related to product indemnification claims, and as a result, does not maintain a reserve for such exposure.

Contingent Consideration. Contingent consideration represents an arrangement to provide additional consideration to the seller in a business combination if contractually specified conditions related to the acquired entity are achieved. In the Davinci Business Acquisition, which closed in December 2002, the stock purchase agreement included contingent consideration related to the amount of the Company revenues in 2004, 2005 and 2006 associated with CSG Total Care (formerly Davinci’s m-Care solution). The maximum contingent consideration that could be paid out over the three years is $2.3 million. As of September 30, 2004, the Company had not accrued any amount for the 2004 portion of the contingent consideration as the outcome of the contingency is not determinable beyond a reasonable doubt.

Claims for Company Non-performance. The Company’s arrangements with its clients typically cap the Company’s liability for breach to a specified amount of the direct damages incurred by the client resulting from the breach. From time-to-time, the Company’s arrangements may also include provisions for possible liquidated damages or other financial remedies for non-performance by the Company, or in the case of certain of the Company’s out-sourced customer care and billing solutions, provisions for damages related to service level performance requirements. The service level performance requirements typically relate to system availability and timeliness of service delivery. As of September 30, 2004, the Company believes it had adequate reserves to cover any reasonably anticipated exposure as a result of the Company’s nonperformance for any past or current arrangements with its clients.

Legal Proceedings. From time-to-time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. In the opinion of the Company’s management, the Company is not presently a party to any material pending or threatened legal proceedings.

13. SALE OF ADELPHIA ACCOUNTS RECEIVABLE

In June 2002, one of the Company’s larger Broadband Division clients, Adelphia Communications (“Adelphia”), filed for bankruptcy protection. At that time, the Company adjusted its allowance for doubtful accounts and deferred revenue balances for the estimated realizability of Adelphia’s pre-bankruptcy accounts receivable. In the second quarter of 2004, the Company sold, without recourse, $8.0 million of Adelphia pre-bankruptcy accounts receivable to an independent third party for $6.3 million. The Company has accounted for the transfer of the pre-bankruptcy accounts receivable as a “sale” using the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets” and has removed the accounts receivable from the accompanying Condensed Consolidated Balance Sheet. The Company has no continuing involvement or retained interest in the transferred accounts receivable, and as a result of a bankruptcy court order stipulating to the amount of the pre-bankruptcy accounts receivable, there is no risk that the account receivable will be put back to the Company. The excess of the cash received over the net carrying value of the pre-bankruptcy accounts receivable at the date of sale, totaling $3.5 million, was recognized in earnings in the accompanying Condensed Consolidated Statements of Operations during the second quarter of 2004, with $1.3 million recorded as processing revenues (primarily for services performed prior to the bankruptcy filing in June 2002) and $2.2 million as a reduction of bad debt expense.

19

CSG SYSTEMS INTERNATIONAL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

	Three months ended September 30,										Nine months ended September 30,
	2004					2003					2004					2003
	Amount			% of Revenue		Amount			% of Revenue		Amount			% of Revenue		Amount			% of Revenue
Revenues:
Processing and related services (inclusive in 2003 of $13,472 charge for arbitration ruling attributable to the third quarter of 2003)	$	80,748		60.7	%	$	79,369		311.1	%	$	242,775		61.8	%	$	261,586		84.4	%
Software		9,644		7.2			10,600		41.6			25,390		6.4			32,912		10.6
Maintenance (inclusive in 2003 of $450 charge for arbitration ruling attributable to the third quarter of 2003)		24,636		18.5			23,676		92.8			73,340		18.7			68,907		22.3
Professional services		18,045		13.6			17,544		68.8			51,595		13.1			52,077		16.8
		133,073		100.0			131,189		514.3			393,100		100.0			415,482		134.1
Charge for arbitration ruling attributable to periods prior to July 1, 2003		—		—			(105,679	)	(414.3	)		—		—			(105,679	)	(34.1	)
Total revenues		133,073		100.0			25,510		100.0			393,100		100.0			309,803		100.0
Cost of revenues:
Cost of processing and related services		37,977		28.5			36,523		143.2			106,402		27.1			106,199		34.3
Cost of software and maintenance		17,295		13.0			18,546		72.7			50,731		12.9			54,251		17.5
Cost of professional services		17,177		12.9			16,778		65.8			46,943		11.9			50,006		16.1
Total cost of revenues		72,449		54.4			71,847		281.7			204,076		51.9			210,456		67.9
Gross margin (loss) (exclusive of depreciation)		60,624		45.6			(46,337	)	(181.7	)		189,024		48.1			99,347		32.1
Operating expenses:
Research and development		15,035		11.3			14,322		56.1			45,257		11.5			46,742		15.1
Selling, general and administrative		20,556		15.4			25,439		99.7			66,021		16.8			87,459		28.2
Depreciation		3,535		2.7			4,529		17.8			10,688		2.7			13,462		4.4
Restructuring charges		91		0.1			3,451		13.5			2,387		0.6			7,603		2.5
Total operating expenses		39,217		29.5			47,741		187.1			124,353		31.6			155,266		50.2
Operating income (loss)		21,407		16.1			(94,078	)	(368.8	)		64,671		16.5			(55,919	)	(18.1	)
Other income (expense):
Interest expense		(1,811	)	(1.4	)		(3,291	)	(12.9	)		(8,049	)	(2.1	)		(10,647	)	(3.5	)
Write-off of deferred financing costs		—		—			—		—			(6,569	)	(1.7	)		—		—
Interest and investment income, net		536		0.4			381		1.5			1,092		0.3			1,112		0.4
Other, net		1,261		1.0			753		3.0			211		0.1			3,582		1.2
Total other		(14	)	—			(2,157	)	(8.4	)		(13,315	)	(3.4	)		(5,953	)	(1.9	)
Income (loss) before income taxes		21,393		16.1			(96,235	)	(377.2	)		51,356		13.1			(61,872	)	(20.0	)
Income tax (provision) benefit		(5,060	)	(3.8	)		42,461		166.4			(16,434	)	(4.2	)		28,524		9.2
Net income (loss)	$	16,333		12.3	%	$	(53,774	)	(210.8	)%	$	34,922		8.9	%	$	(33,348	)	(10.8	)%
Basic net income (loss) per common share:
Net income (loss) available to common stockholders	$	0.33				$	(1.05	)			$	0.69				$	(0.65	)
Weighted average common shares		49,565					51,456					50,844					51,372
Diluted net income (loss) per common share:
Net income (loss) available to common stockholders	$	0.32				$	(1.05	)			$	0.68				$	(0.65	)
Weighted average common shares		50,324					51,456					51,558					51,372

20

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto (the “Financial Statements”) included in this Form 10-Q and the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2003 (our “2003 10-K”).

Forward-Looking Statements

This report contains a number of forward-looking statements relative to our future plans and our expectations concerning the global customer care and billing industry, as well as the converging telecommunications industry it serves, and similar matters. These forward-looking statements are based on assumptions about a number of important factors, and involve risks and uncertainties that could cause actual results to differ materially from estimates contained in the forward-looking statements. Some of the risks that are foreseen by management are contained in Exhibit 99.01 “Safe Harbor for Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995—Certain Cautionary Statements and Risk Factors”. Exhibit 99.01 constitutes an integral part of this report, and readers are strongly encouraged to review this exhibit closely in conjunction with MD&A.

General Market Conditions

Beginning in early 2001, the economic state of the global telecommunications industry deteriorated, resulting from (among other reasons) a general global economic downturn, network and plant overcapacity, and limited availability of capital. This trend continued into 2003. During this time frame, many companies operating within this industry publicly reported decreased revenues and earnings, and several companies filed for bankruptcy protection. Most telecommunications companies reduced their operating costs and capital expenditures to cope with the market conditions during these times. Since our clients operate within this industry sector, the economic state of this industry directly impacts our business, limiting the amount of money spent on customer care and billing products and services, as well as increasing the likelihood of uncollectible accounts receivable and lengthening the cash collection cycle.

Recent public reports, as well as our recent experiences with our client base, are providing signs of economic improvement within this industry sector. However, public reports are mixed as to whether the recovery is real, and whether the recovery is sustainable. If a turnaround in general market conditions occurs, it will likely be slow, and a full, sustained recovery, if it occurs at all, may take several years. In addition, public reports indicate that even though there are signs of market improvements, telecommunications companies appear to be spending at a cautious pace, possibly awaiting economic recovery within their own respective business before fully utilizing their capital budgets. As a result, we continue to be cautiously optimistic in our outlook, as our ability to increase our revenues and operating performance is highly dependent upon the pace at which the market recovers, the spending patterns of our client base, and ultimately, our success in selling new products and services to new and existing clients. There can be no assurance that the market will recover or that our client base will increase their spending activities, regardless of the market conditions, and even if so, that we will be successful in increasing our revenues and operating performance.

Management Overview of Quarterly Results

The Company. We are a global leader in next-generation billing and customer care solutions for the cable television, direct broadcast satellite, advanced IP services, next-generation mobile, and fixed wireline markets. Our combination of proven and future-ready solutions, delivered in both outsourced and licensed formats, enables our clients to deliver high quality customer service, improve operational efficiencies and rapidly bring new revenue-generating products to market. We are a S&P Midcap 400 company. We serve our clients through two operating segments: the Broadband Services Division (the “Broadband Division”) and the Global Software Services Division (the “GSS Division”).

A summary of our consolidated results of operations for the third quarter of 2004 are as follows:

• Our total consolidated revenues for the third quarter of 2004 increased $3.4 million (or 2.6%) to $133.1 million, when compared to $129.7 million for the second quarter of 2004, with the increase attributable to strong performance in all of the revenue line items.

21

• Our total consolidated operating expenses for the third quarter of 2004 increased approximately $4 million (or 3.7%) to $111.7 million, when compared to $107.7 million for the second quarter of 2004. This increase relates primarily to various employee-related costs, including approximately $1 million related to our company-wide employee merit wage increase in August 2004, and the impact of adding staff to address the revenue opportunities we see in our Broadband Division’s Voice over IP products and services, and in our GSS Division’s foreign operations, primarily within the Asia-Pacific region.

• Our net income per diluted share for the third quarter of 2004 was $0.32, which includes a positive impact of approximately $0.08 per diluted share, resulting from foreign currency transaction gains of $0.02 per diluted share, and $0.06 per diluted share due to a decrease in our estimated 2004 effective income tax rate.

• We continued to generate strong cash flows as a result of our profitable operations and through our effective management of our accounts receivable. During the third quarter of 2004, we generated $24.8 million of cash flow from operating activities, and ended the quarter at $138.9 million of cash and short-term investments, compared to $131.2 million as of June 30, 2004.

Other key events for the quarter ended September 30, 2004 are as follows:

• In September 2004, we entered into a five-year, $100 million revolving credit facility with a bank group which provides us with additional financial flexibility and liquidity. The revolving credit facility allows us to have opportunistic capital available as we manage and grow our business.

• In September 2004, a final consensus was reached by the Financial Accounting Standard Board’s Emerging Issues Task Force (“EITF”) regarding the manner in which our Convertible Debt Securities need to be considered in calculating our diluted earnings per share. See Note 5 to the Financial Statements for additional discussion of this matter.

• In August 2004, we repurchased 0.8 million shares of our common stock for $12.9 million (weighted-average price of $15.25 per share).

Broadband Division. The Broadband Division generates its revenues by providing outsourced customer care and billing services with its core product, CSG CCS/BP (“CCS”), to North American (primarily the United States) broadband service providers, primarily for cable television, Internet, and satellite television product offerings. The market for the Broadband Division’s products and services is highly competitive, resulting in significant pricing pressures for contract renewals.

A summary of the key business matters for the Broadband Division in the third quarter of 2004 is as follows:

• The Broadband Division’s third quarter of 2004 revenues totaled $85.9 million, compared to third quarter of 2003 revenues of negative $(20.1) million and second quarter of 2004 revenues of $86.0 million. The third quarter of 2003 includes a $119.6 million charge to revenue related to the Comcast arbitration ruling, of which $13.9 million was attributed to the third quarter of 2003 revenues, with the remaining $105.7 million attributed to revenues for periods prior to July 1, 2003. See additional discussions of this matter below.

• Total domestic customer accounts processed on our system as of September 30, 2004 were 44.0 million, compared to 43.7 million as of June 30, 2004. The annualized revenue per processing unit for the third quarter of 2004 was $7.36 compared to annualized revenue per processing unit of $7.42 for the second quarter of 2004. The second quarter ARPU measure includes $0.12 related to $1.3 million of revenue related to the sale of Adelphia pre-bankruptcy accounts receivable that were sold in the second quarter of 2004.

22

• The Broadband Division’s segment operating expenses for the third quarter of 2004 totaled $53.5 million, compared to third quarter of 2003 segment operating expenses of $54.5 million (a 1.8% decrease) and second quarter of 2004 segment operating expenses of $48.7 million (a 9.9% increase). As discussed above, the increase in expenses between sequential quarters is primarily related to increases in various employee-related costs, and is consistent with our expectations of adding staff to support the growth opportunities we see for our products and services designed to address our clients’ rollout of Voice over IP service offerings.

• During the quarter, the Broadband Division continued its migration of customers onto its re-architected customer care and billing solution, Advanced Convergent Platform (“ACP”). Currently, over 1.5 million customers are being processed on the solution. See the “Business” section of our 2003 10-K for additional discussion of this matter.

• The Broadband Division participated in planning, testing, trials and rollouts of Voice over IP services with clients offering the service, including Time Warner Cable of New York City, which launched its telephony service this quarter.

GSS Division. The GSS Division was established as a result of our acquisition of the Kenan Business from Lucent Technologies (“Lucent”) in February 2002. The GSS Division is a global provider of convergent billing and customer care software and services that enable telecommunications service providers to bill their customers for existing and next-generation services, including mobile and wireline telephony, Internet, cable television, and satellite.

The GSS Division’s revenues consist of software license and maintenance fees, and various professional and consulting services related to its software products (principally, implementation services). The market for the GSS Division’s products and services is highly competitive, resulting in significant pricing pressures for both new and existing client purchases. Historically, approximately three-fourths of the GSS Division’s revenues have been generated outside the U.S. We expect that a similar portion of the GSS Division’s 2004 revenues will be generated outside the U.S.

A summary of the key business matters for the GSS Division in the third quarter of 2004 is as follows:

• The GSS Division’s third quarter of 2004 revenues totaled $47.1 million, compared to third quarter of 2003 revenues of $45.6 million (a 3.4% increase) and second quarter of 2004 revenues of $43.7 million (an 8.0% increase). The GSS Division had a positive contribution margin in the third quarter of 2004 of $3.6 million, compared to a negative contribution margin in the third quarter of 2003 of $(0.9) million and a positive contribution margin in the second quarter of 2004 of $1.0 million. The improvement in the contribution margin year-over-year is primarily due to lower operating expenses resulting primarily from various cost reduction initiatives, and to a lesser degree, due to an increase in revenues between periods.

• The GSS Division’s segment operating expenses for the third quarter of 2004 totaled $43.6 million, compared to third quarter of 2003 segment operating expenses of $46.5 million (a 6.3% decrease) and second quarter of 2004 segment operating expenses of $42.7 million (a 2.1% increase). As discussed above, the increase in expense between sequential quarters is primarily related to various employee-related costs, and is consistent with our expectations of adding costs to support the growth opportunities of our foreign operations, primarily within the Asia-Pacific region.

• The GSS Division expanded its relationships with clients representing every region this quarter. We continued to see strength in our Asia-Pacific region with expanded contracts with Bharti Airtel, an Indian wireless and wireline provider, and KDB, a Korean multi-channel satellite provider. In

23

addition, CTBC, a leading convergent services provider in Brazil, selected Kenan FX as its platform to standardize all of its services, including wireline, wireless, broadband and data. This brings the total number of customers that have selected the Kenan FX framework to 17.

Significant Client Relationships

Comcast

Background. Comcast is our largest client. During the third quarter of 2004, revenues from Comcast represented approximately 15% of our total consolidated revenues. Total revenues generated from Comcast in the first three quarters of 2004 were approximately 16% of our total consolidated revenues. We expect that the percentage of our total consolidated revenues in 2004 related to Comcast will represent a percentage comparable to that of the first three quarters of 2004 (i.e., approximately 15%-16%), and continue to expect that revenues from Comcast will be in-line with or exceed its contractual minimums.

Arbitration Resolution. During 2002 and 2003, we were involved in various legal proceedings with Comcast, consisting principally of arbitration proceedings related to the Comcast Master Subscriber Agreement. In October 2003, we received the final ruling in the arbitration proceedings. The Comcast arbitration ruling included an award of $119.6 million to be paid by us to Comcast. The award was based on the arbitrator’s determination that we had violated the most favored nations (“MFN”) clause of the Comcast Master Subscriber Agreement. As specified in the arbitration ruling, the $119.6 million was segregated such that $105.7 million was attributable to periods prior to July 1, 2003, and $13.9 million was attributable to the third quarter of 2003. We recorded the impact from the arbitration ruling in the third quarter of 2003 as a charge to the Broadband Division’s revenues. In the fourth quarter of 2003, we paid approximately $95 million of the arbitration award to Comcast, and in January 2004, we paid the remaining portion of the arbitration award of approximately $25 million. In addition to the arbitration award, we paid to Comcast interest of $1.1 million, of which $0.1 million was reflected as interest expense in the first quarter of 2004. See the “Comcast and AT&T Broadband Business Relationship” section of the MD&A section of our 2003 10-K for additional discussion of the results of the Comcast arbitration ruling.

Signing of New Comcast Contract. In March 2004, we signed a new contract with Comcast (the “Comcast Contract”). The Comcast Contract superseded the former Comcast Master Subscriber Agreement that was set to expire at the end of 2012. Under the new agreement, we expect to continue to support Comcast’s video and high-speed Internet customers at least through December 31, 2008. The pricing inherent in the Comcast Contract was consistent with that of the arbitration ruling in October 2003, and as a result, did not materially change our revenue expectations for 2004, except for the impact of the accelerated amortization of the client contracts intangible asset related to the Comcast Contract, as discussed below.

The Comcast Contract includes annual financial minimums for 2004, 2005 and 2006 of $85 million, $75 million and $60 million, respectively (total of $220 million). In addition, the Comcast Contract eliminated the exclusive right we had under our previous contract with Comcast to provide customer care and billing services for the entire 13 million AT&T Broadband customer base (acquired by Comcast in November 2002). Although the elimination of our exclusive rights to process these customers increases the risk of customer deconversions from our system, such risk is mitigated to a certain degree by the annual financial minimums. The Comcast Contract is included in the exhibits to our periodic filings with the Securities and Exchange Commission (the “SEC”). The document is available on the Internet and we encourage readers to review this document for further details.

Impact of Comcast Contract on Client Contracts Intangible Asset. We have a long-lived client contracts intangible asset related to our Comcast Contract that has a net carrying value as of September 30, 2004 of approximately $48 million. During the first quarter of 2004, we evaluated the carrying value of this intangible asset in light of the net cash flows expected to be generated from the Comcast Contract, and concluded that there was no impairment to this asset as a result of the new Comcast Contract. No events have occurred or additional facts have become available since that evaluation was performed that would cause us to change our first quarter of 2004 conclusion. However, as a result of the shortened term of the Comcast Contract, effective in March 2004, we were required to accelerate the amortization of this intangible asset. Total amortization related to the Comcast Contract for the three months ended

24

September 30, 2004 and 2003, was $2.8 million and $1.4 million, respectively, and for the nine months ended September 30, 2004 and 2003, was $7.5 million and $4.3 million, respectively. The amortization was consistent between the second and third quarters of 2004. Going forward, this amortization will be approximately $3 million per quarter through the end of the contract term of December 31, 2008. The amortization of the client contracts intangible asset is recorded as a reduction in processing revenues, as opposed to amortization expense, in the accompanying Condensed Consolidated Statements of Operations.

Significant Client Concentration Risk. We expect to continue to generate a significant percentage of our future revenues under the Comcast Contract. There are inherent risks whenever a large percentage of total revenues are concentrated with one client. One such risk is that, should Comcast terminate its contract in whole or in part for any of the reasons stated above, or significantly reduce the number of customers processed on our system, it could have a material adverse effect on our financial condition and results of operations (including possible impairment, or significant acceleration of the amortization of the Comcast client contracts intangible asset).

Echostar

Background. Echostar is our second largest client. During the third quarter of 2004, revenues from Echostar represented approximately 14% of our total consolidated revenues. Total revenues generated from Echostar in the first three quarters of 2004 were approximately 14% of our total consolidated revenues. We expect that the percentage of our total consolidated revenues in 2004 related to Echostar will represent a percentage comparable to that of the first three quarters of 2004 (i.e., approximately 13%-14%).

Signing of New Echostar Contract Amendment. In February 2004, we signed the Thirtieth Amendment to the Echostar Master Subscriber Agreement, extending the term of the Echostar Master Subscriber Agreement until March 1, 2006. The Echostar Master Subscriber Agreement was set to expire at the end of 2004. The pricing inherent in the amended Echostar contract did not materially change our revenue expectations going forward. The Echostar Master Subscriber Agreement, to include all amendments, is included in the exhibits to our periodic filings with the SEC. The document is available on the Internet and we encourage readers to review this document for further details.

Significant Client Concentration Risk. We expect to continue to generate a significant percentage of our future revenues under the Echostar Master Subscriber Agreement. As stated above, the Echostar Master Subscriber Agreement runs through March 1, 2006. The failure of Echostar to further renew its contract, representing a significant part of its business with us, could have a material adverse effect on our financial condition and results of operations.

Modification of Election To Settlement Convertible Debt Securities Upon Conversion

During the fourth quarter of 2004, we expect to irrevocably modify the settlement options available to us to satisfy our obligation upon conversion of the Convertible Debt Securities (the “Irrevocable Election”). See Note 3 to the Financial Statements for a discussion of the Convertible Debt Securities we issued in June 2004. We currently have the option to settle our entire obligation upon conversion of the Convertible Debt Securities by delivering our common stock, cash or any combination of our common stock and cash. If we make the Irrevocable Election, we will be required to, upon conversion, settle the principal amount of the Convertible Debt Securities in cash, and will have the option to settle our remaining conversion obligation, if any, in our common stock, cash or any combination of our common stock and cash.

We expect to make the Irrevocable Election in response to the EITF reaching a final consensus on EITF Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share” in September 2004. See Note 5 to the Financial Statements for a discussion of the impact of EITF Issue No. 04-8 on our diluted earnings per share (“EPS”).

25

If we make the Irrevocable Election, we will be required to calculate dilution for the Convertible Debt Securities using the “treasury stock” method. If we do not make the Irrevocable Election, we would be required to calculate dilution for the Convertible Debt Securities using the “if-converted” method. Under the “treasury stock” method, our diluted EPS will not be impacted until our average stock price exceeds the Convertible Debt Securities’ current effective conversion price of $26.77 per share. Thus, we will not be required to restate our previously reported diluted EPS in the second and third quarters of 2004. Under the “if-converted” method, we would be required to restate our previously reported diluted EPS for the third quarter of 2004 from $0.32 to $0.30, resulting in approximately 6% of additional dilution. The impact of using the “if-converted” method to the second quarter of 2004 is not significant, and as a result, no restatement of diluted EPS would be required for that period. In addition, going forward, the “if-converted” method would be expected to decrease our diluted EPS by approximately 7-8% over current near-term expectations.

Stock-Based Compensation Expense

As discussed in greater detail in Note 2 to the Financial Statements, in 2003 we adopted the fair value method of accounting for our stock-based awards under SFAS No. 123, using the prospective method of transition outlined in SFAS No. 148. In addition, we completed our exchange of certain stock options for restricted stock (also referred to by us as our “tender offer”) in December 2003. As a result, our stock-based compensation expense is significantly higher in 2004 when compared to 2003. Stock-based compensation expense is included in the following income statement captions, and included in the various segment results, in the Financial Statements (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Consolidated Statements of Operations:
Cost of processing and related services	$	704	$	20	$	1,968	$	36
Cost of software and maintenance		307		6		776		11
Cost of professional services		207		6		781		15
Research and development		450		13		1,380		27
Selling, general and administrative		1,835		1,312		6,543		3,978
Total stock-based compensation expense	$	3,503	$	1,357	$	11,448	$	4,067
Segment Results:
Broadband Division	$	1,089	$	51	$	3,283	$	127
GSS Division		789		28		2,443		69
Corporate		1,625		1,278		5,722		3,871
Total stock-based compensation expense	$	3,503	$	1,357	$	11,448	$	4,067

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to select appropriate accounting policies, and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in our financial statements.

We have identified the most critical accounting policies upon which our financial status depends. The critical accounting policies were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. The most critical accounting policies identified relate to: (i) revenue recognition; (ii) allowance for doubtful accounts receivable; (iii) impairment of long-lived assets; (iv) business restructuring; (v) loss contingencies; (vi) income taxes; (vii) business combinations and asset purchases; (viii) stock-based compensation expense; and (ix) capitalization of internal software development costs. These critical accounting policies and our other significant accounting policies are discussed in our 2003 10-K.

26

Internal Controls Over Financial Reporting

Section 404 of the Sarbanes-Oxley Act of 2002 (“SOA”) requires that we evaluate and report on our internal controls over financial reporting and have our independent auditors attest to such evaluation. We have developed a project plan to address what we believe are the required steps to timely meet the requirements of Section 404 of the SOA, which includes documenting and testing our system of internal controls over financial reporting to provide the basis for our report. We believe we are progressing on our project plan generally as expected. However, due to ongoing evaluation and testing of our internal controls and the uncertainties of the interpretation of the applicable auditing rules required to comply with Section 404 of the SOA, as well as the significant efforts required to timely complete this work for both us and our independent auditors, there can be no assurances that: (i) we will timely and adequately complete the necessary work to meet the requirements of Section 404 of the SOA; and/or (ii) there may not be material weaknesses that will be required to be reported.

Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003

Results of Operations – Consolidated Basis

Total Revenues. Total revenues for the three months ended September 30, 2004 increased to $133.1 million, from $25.5 million for the three months ended September 30, 2003. The increase between periods is primarily due to the $105.7 million charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003 recorded in the third quarter of 2003, as discussed above.

We use the location of the client as the basis of attributing revenues to individual countries. Revenues by geographic region for the three months ended September 30, 2004 and 2003 were as follows (in thousands):

	September 30, 2004		September 30, 2003
North America (principally the United States)	$	95,672	$	(8,852	)
Europe, Middle East and Africa (principally Europe)		23,800		23,313
Asia Pacific		8,239		6,833
Central and South America		5,362		4,216
	$	133,073	$	25,510

Revenues for North America for the three months ended September 30, 2003, reflect the charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003 of $105.7 million. For revenues generated outside North America, no single country accounts for more than 5% of our total revenues.

See the “Results of Operations – Operating Segments” section below for a detailed discussion of revenues and related changes between periods on a segment basis.

Cost of Revenues. See our 2003 10-K for a description of the types of costs that are included in the individual line items for cost of revenues.

Cost of Processing and Related Services. The cost of processing and related services for the three months ended September 30, 2004 increased 4.0% to $38.0 million, from $36.5 million for the three months ended September 30, 2003. The increase between periods is primarily due to: (i) an increase in data processing costs, due primarily to greater processing requirements for ACP functionality and an increase in the number of our clients’ customer accounts processed on our system; and (ii) as discussed above, an increase in employee-related costs primarily as a result of the merit wage increases in August 2004, and the increase in staff added to support the growth opportunities of our Voice over IP products and services. These increases were offset to a certain degree by a reduction in personnel costs resulting from the most recent cost reduction program initiated in the fourth quarter of 2003. Processing costs as a percentage of related processing revenues were 47.0% (gross margin of 53.0%) for the three months ended September 30, 2004 compared to 46.0% (gross margin of 54.0%) for the three months ended September 30, 2003.

27

Cost of processing and related services in the third quarter of 2004 reflects a sequential increase of $3.4 million when compared to the second quarter of 2004 amount of $34.6 million. This increase is primarily due to the increase in employee-related costs as discussed above. We believe our cost of processing revenues for the fourth quarter of 2004 will be somewhat comparable to the third quarter of 2004.

Cost of Software and Maintenance. The combined cost of software and maintenance for the three months ended September 30, 2004 decreased 6.7% to $17.3 million, from $18.5 million for the three months ended September 30, 2003. The decrease between periods is primarily due to a reduction in certain personnel costs, to include the impact of the cost reduction initiatives discussed below. The cost of software and maintenance as a percentage of related revenues was 50.5% (gross margin of 49.5%) for the three months ended September 30, 2004 as compared to 54.1% (gross margin of 45.9%) for the three months ended September 30, 2003. As discussed below, fluctuations in the quarterly gross margin for software and maintenance revenues are an inherent characteristic of software companies, which can be impacted by, among others things, the timing of executed contracts in any one quarter.

Cost of Professional Services. The cost of professional services of $17.2 million for the three months ended September 30, 2004 was relatively flat when compared to $16.8 million for the three months ended September 30, 2003. The cost of professional services as a percentage of related revenues was 95.2% (gross margin of 4.8%) for the three months ended September 30, 2004, as compared to 95.6% (gross margin of 4.4%) for the three months ended September 30, 2003. As discussed below, fluctuations in the quarterly gross margin for professional services revenues are an inherent characteristic of professional services companies.

Cost of professional services in the third quarter of 2004 reflects a sequential increase of $1.6 million when compared to the second quarter of 2004 amount of $15.6 million. This increase relates primarily to an increase in employee-related costs and the timing of certain project-specific support costs (e.g., contractors and subcontractor costs).

Gross Margin. As a result of the Kenan Business acquisition, our revenues from software licenses, maintenance services and professional services have increased and have become a larger percentage of our total revenues. Variability in quarterly revenues and operating results are inherent characteristics of companies that sell software licenses, provide maintenance services, and perform professional services. Our quarterly revenues for software licenses, maintenance services and professional services revenues may fluctuate, depending on various factors, including the timing of executed contracts and the delivery of contracted services or products. See Exhibit 99.01 for additional discussion of factors that may cause fluctuations in quarterly revenues and operating results. However, the costs associated with software and maintenance revenues, and professional services revenues are not subject to the same degree of variability (i.e., these costs are generally fixed in nature within a relatively short period of time), and at times, might be required to be recorded in a period different than the period in which the related revenue is recognized, and thus, fluctuations in our software and maintenance, professional services, and overall gross margins and related gross margin percentages, will likely occur between periods.

The overall gross margin (loss) for the three months ended September 30, 2004 was $60.6 million compared to $(46.3) million for the three months ended September 30, 2003. The overall gross margin (loss) percentage was 45.6% for the three months ended September 30, 2004, compared to (181.7)% for the three months ended September 30, 2003. The changes in the overall gross margin and overall gross margin percentage were due to the factors discussed above, principally, a result of the impact of the charge for the Comcast arbitration ruling recorded in the third quarter of 2003.

The overall gross margin for third quarter of 2004 reflects a sequential decrease of $1.6 million when compared to the second quarter of 2004 amount of $62.3 million. The overall gross margin percentage was 48.0% for the three months ended June 30, 2004. This sequential decrease in overall gross margin and gross margin percentage is primarily due to an increase in expense between sequential quarters, as discussed above.

Research and Development Expense. R&D expense increased 5.0% to $15.0 million for the three months ended September 30, 2004, from $14.3 million for the three months ended September 30, 2003. As a percentage of total revenues, R&D expense was 11.3% for the three months ended September 30, 2004. We did not capitalize any internal software development costs during the three months ended September 30, 2004 and 2003.

28

During the third quarter of 2004, we focused our development and enhancement efforts on:

• various R&D projects for the GSS Division, including the Kenan FX business framework (which is discussed in greater detail in the “Business” section of our 2003 10-K), which was introduced in late 2003, and includes enhancements to the existing versions of the Kenan Business product suite, as well as new modules; and

• enhancements to CCS and related Broadband Division software products to increase the functionalities and features of the products, to include the ACP architectural upgrade to CCS (which is discussed in greater detail in the “Business” section of our 2003 10-K), and Voice over IP functionalities.

At this time, we expect our investment in R&D over time will approximate our historical investment rate of 10-12% of total revenues. We expect this investment will be focused on the CCS and the Kenan Business product suites, as well as additional stand-alone products as they are identified.

Selling, General and Administrative Expense. SG&A expense for the three months ended September 30, 2004, decreased 19.2% to $20.6 million, from $25.4 million for the three months ended September 30, 2003. As a percentage of total revenues, SG&A expense was 15.4% for the three months ended September 30, 2004. The decrease in SG&A expense relates primarily to a reduction in certain personnel costs, to include the impact of the cost reduction initiatives discussed below and a decrease in legal fees due to the Comcast arbitration concluding in October 2003 (such legal costs were approximately $1 million in the third quarter of 2003 with no comparable amounts in 2004.)

SG&A expense for the third quarter of 2004 reflects a sequential decrease of $1.7 million when compared to the second quarter of 2004 amount of $22.2 million. The sequential decrease is primarily due to the $2.5 million of expense recorded in the second quarter of 2004 related to executive management departures, partially offset by the reduction in our bad debt expense, primarily related to the sale of the Adelphia pre-bankruptcy receivables discussed in Note 13 to the Financial Statements.

Depreciation Expense. Depreciation expense for the three months ended September 30, 2004 decreased 21.9% to $3.5 million, from $4.5 million for the three months ended September 30, 2003. The decrease in depreciation expense relates to the decrease in capital expenditures made during the last twelve months as a result of our focus on cost controls. The capital expenditures during the third quarter of 2004 consisted principally of computer hardware and related equipment. Depreciation expense for all property and equipment is reflected separately in the aggregate and is not included in the cost of revenues or the other components of operating expenses.

Restructuring Charges. Our restructuring charges relate to various cost reduction initiatives implemented primarily as a result of market conditions, and the Comcast arbitration ruling. See Note 10 to the Financial Statements for a more detailed discussion of our cost reduction initiatives and related restructuring charges, including the current activity in the accrued liabilities related to the restructuring charges. We believe that the operational impact from these initiatives will not negatively impact our ability to service our current or future clients.

Cost Reduction Initiatives Related to Market Conditions

In response to poor economic conditions within the global telecommunications industry, during 2003 and 2002, we implemented several cost reduction initiatives, consisting primarily of involuntary employee terminations and facility abandonments, with the greatest percentage of the involuntary terminations occurring within the GSS Division. These cost reduction initiatives resulted in material restructuring charges in both 2003 and 2002. In the aggregate, these various initiatives were targeted at reducing operating expenses by approximately $60 million annually, based on various measurement points. These programs were substantially completed by the end of the second quarter of 2003.

Cost Reduction Initiatives Related to the Comcast Arbitration Ruling.

In response to the expected reduction in revenues resulting from the Comcast arbitration ruling, during the fourth quarter of 2003, we implemented a cost reduction initiative, consisting primarily of involuntary employee terminations and a reduction of costs related to certain of our employee compensation and fringe benefit programs, with the greatest percentage of the involuntary employee terminations occurring within the Broadband Division. This cost reduction initiative resulted in material restructuring charges in the fourth quarter of 2003

29

and the first quarter of 2004. This initiative was targeted at reducing operating expenses by approximately $30 million, when compared to the third quarter 2003 annualized operating expense run rate. This program was substantially completed by the end of the first quarter of 2004.

Summary of Restructuring Charges.

The components of the restructuring charges included in total operating expenses, and the impact (net of related estimated income tax expense) these restructuring charges had on net income (loss) and diluted earnings per share, for the three months ended September 30, 2004 and 2003 are as follows (in thousands, except diluted earnings per share):

	Three Months Ended September 30,
	2004		2003
Involuntary employee terminations	$	32	$	853
Facility abandonments		59		2,599
All other		—		(1	)
Total restructuring charges	$	91	$	3,451
Impact of restructuring charges on results of operations (i.e., have reduced operating results):
Net income (loss)	$	69	$	1,933
Diluted earnings per share	$	0.00	$	0.04

We recorded restructuring charges related to involuntary employee terminations and various facility abandonments during the three months ended September 30, 2004 and 2003. The accounting for facility abandonments require significant judgments in determining the restructuring charges, primarily related to the assumptions regarding the timing and the amount of any potential sublease arrangements for the abandoned facilities, and the discount rates used to determine the present value of the liabilities. We continually evaluate these assumptions, and adjust the related facility abandonment reserves based on the revised assumptions at that time. In addition, we continually evaluate ways to cut our operating expenses through restructuring opportunities, to include the utilization of our workforce and current operating facilities. As a result, there is a reasonable possibility that we may incur additional material restructuring charges in the future.

Operating Income (Loss). Operating income for the three months ended September 30, 2004, was $21.4 million or 16.1% of total revenues, compared to an operating loss of $(94.1) million or (368.8)% of total revenues for the three months ended September 30, 2003. The increase in these measures between years relates primarily to the charge for the Comcast arbitration ruling recorded in the third quarter of 2003.

Interest Expense. Interest expense for the three months ended September 30, 2004, decreased 45.0% to $1.8 million, from $3.3 million for the three months ended September 30, 2003. The weighted-average balance of our long-term debt for the three months ended September 30, 2004 was approximately $230 million, compared to approximately $240 million for the three months ended September 30, 2003. The weighted-average interest rate on our debt borrowings for the three months ended September 30, 2004, including the amortization of deferred financing costs and commitment fees on our revolving credit facility, was 3.0%, compared to 5.2% for the three months ended September 30, 2003. The decrease in the weighted-average interest rate between periods relates to the issuance of our Convertible Debt Securities in June 2004, which have a stated coupon rate of 2.5%.

Other, net. Other income for the three months ended September 30, 2004, was $1.3 million compared to other income of $0.8 million for the three months ended September 30, 2003. These amounts consist primarily of foreign currency transaction gains and losses. The change between years relates primarily to the change in the foreign currency exchange rates of the U.S. dollar against the Euro and British pound, and had a positive impact on net income per diluted share of approximately $0.02 for the third quarter of 2004.

Income Tax Provision (Benefit). For the three months ended September 30, 2004, we recorded an income tax

30

provision of $5.1 million, or an effective income tax rate of approximately 24%, compared to an effective income tax rate of approximately 44% for the three months ended September 30, 2003. Our 2004 estimated annual effective income tax rate is 32%, which is a decrease from the estimated annual effective income tax rate of 38% we were estimating at the end of the second quarter of 2004. The decrease in the estimated annual effective income tax rate is primarily the result of the completion and resolution of certain tax matters in foreign jurisdictions during the third quarter of 2004. In order to reflect an effective income tax rate of 32% for the nine months ended September 30, 2004, the effective income tax rate for the three months ended September 30, 2004 was 24%. The change in the effective income tax rate in the third quarter of 2004 had a positive impact on net income per diluted share of approximately $0.06, when compared to our previous earnings expectations using an annual effective income tax rate of 38% for 2004.

As of September 30, 2004, our net deferred income tax assets of $51.6 million were related primarily to our domestic operations, and represented approximately 8% of total assets. We continue to believe that sufficient taxable income will be generated to realize the benefit of these deferred income tax assets. Our assumptions of future profitable domestic operations are supported by the strong operating performance of the Broadband Division over the last several years, and our expectations of future profitability.

Results of Operations - Operating Segments

We serve our clients through our two operating segments: the Broadband Division and the GSS Division. See our 2003 10-K for further discussion of the operations of each operating segment and the related product and service offerings, and the components of segment operating results.

Operating segment information and corporate overhead costs for the three months ended September 30, 2004 and 2003, are presented in Note 8 to the Financial Statements.

Broadband Division

Total Revenues. Total Broadband Division revenues for the three months ended September 30, 2004 increased to $85.9 million, from negative revenue of $(20.1) million for the three months ended September 30, 2003. The increase between periods is primarily due to the $105.7 million charge for the Comcast arbitration ruling attributable to periods prior to July 31, 2003 recorded in the third quarter of 2003, as discussed above.

Processing revenues. Processing revenues for the three months ended September 30, 2004 increased 1.6% to $80.0 million, compared to $78.7 million for the three months ended September 30, 2003. The increase in processing revenues is due primarily to an increase in the number of our clients’ customers serviced by us. Processing revenues for the second quarter of 2004 were $80.3 million, comparable to third quarter 2004 processing revenues.

Total amortization of the client contract intangible asset related to the Comcast Contract (which is reflected as a reduction of processing revenues) for the first three quarters of 2004 was $1.9 million, $2.8 million and $2.8 million, respectively. The increase in amortization between quarters reflects the impact of the acceleration in such amortization effective with the new Comcast Contract in March 2004, as discussed above. Going forward, this amortization will be approximately $3 million per quarter through the end of the Comcast Contract term of December 31, 2008.

Total domestic customer accounts processed on our systems as of September 30, 2004 were 44.0 million compared to 43.7 million customer accounts as of June 30, 2004, a 1% increase. The annualized revenue per unit (“ARPU”) for the third quarter of 2004 was $7.36 compared to $7.42 for the second quarter of 2004. The second quarter ARPU measure includes $0.12 related to $1.3 million of revenue related to the sale of Adelphia pre-bankruptcy accounts receivable that were sold in the second quarter of 2004. The third quarter of 2004 ARPU was higher than we previously anticipated due to higher levels of usage for certain ancillary services and products. We expect our fourth quarter ARPU to range from $7.20 to $7.40. As a result, we expect fourth quarter 2004 revenues to be comparable to the third quarter of 2004.

Segment Operating Expenses and Contribution Margin. Broadband Division operating expenses for the three months

31

ended September 30, 2004 decreased 1.8% to $53.5 million, from $54.5 million for the three months ended September 30, 2003. The decrease in the Broadband Division’s operating expenses is due primarily to an overall reduction in personnel costs as a result of the fourth quarter 2003 cost reduction initiative, offset to a certain degree by: (i) the increase in employee-related costs experienced in the third quarter of 2004 (as discussed above); (ii) an increase in stock-based compensation (as discussed above); and (iii) an increase in data processing costs, due primarily to greater processing requirements for ACP functionality and an increase in the number of our clients’ customer accounts processed on our system.

Broadband Division contribution margin for the three months ended September 30, 2004 was $32.4 million (contribution margin percentage of 37.7%), compared to a contribution loss of $(74.6) million (negative contribution margin percentage of 371.1%) for the three months ended September 30, 2003. The increase in contribution margin between periods is due primarily to the $105.7 million charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003 recorded in the third quarter of 2003, as discussed above.

Total non-cash charges related to depreciation, amortization (shown as a reduction of processing revenues), and stock-based compensation expense included in the determination of the Broadband Division’s contribution margin for the three months ended September 30, 2004 and 2003 were $5.9 million and $4.5 million, respectively. The increase in non-cash charges is due primarily to the acceleration of amortization related to the Comcast Contract intangible asset as discussed above and additional stock-based compensation.

GSS Division

Total Revenues. Total GSS Division revenues for the three months ended September 30, 2004 increased 3.4% to $47.1 million, as compared to $45.6 million for the three months ended September 30, 2003, with the increase due primarily to an increase in maintenance and professional services revenues as discussed in more detail below.

Software Revenues. Software revenues for the three months ended September 30, 2004 decreased 2.7% to $8.5 million, from $8.7 million for the three months ended September 30, 2003. Software revenues for the third quarter of 2004 reflect a sequential increase of $1.3 million when compared to the second quarter of 2004 amount of $7.2 million. As discussed above, fluctuations in revenue from software sales between quarters is an inherent characteristic of software companies and is expected to continue in future periods.

Maintenance Revenues. Maintenance revenues for the three months ended September 30, 2004 increased 5.7% to $20.1 million, from $19.0 million for the three months ended September 30, 2003. This increase in maintenance revenues was due primarily to: (i) the resolution of collectibility concerns for certain clients; and (ii) an increase in the installed software license base as a result of new sales since the end of the third quarter of 2003. We expect the GSS Division’s fourth quarter maintenance revenues to be comparable to the third quarter of 2004.

Professional Services Revenues. Professional services revenues for the three months ended September 30, 2004 increased 3.5% to $17.8 million, from $17.2 million for the three months ended September 30, 2003. Professional services revenues for the third quarter of 2004 reflect a sequential increase of $1.0 million when compared to the second quarter of 2004 amount of $16.8 million. The increase in revenues is due primarily to the timing of work performed, and the number of professional services projects in progress during the two periods.

Segment Operating Expenses and Contribution Margin (Loss). GSS Division operating expenses for the three months ended September 30, 2004 decreased 6.3% to $43.6 million, from $46.5 million for the three months ended September 30, 2003. The decrease in GSS Division operating expenses is due primarily to the cost reduction initiatives, as discussed above, offset to a certain degree by the increase in employee-related costs experienced in the third quarter of 2004 (as discussed above).

The GSS Division’s contribution margin (loss) for the three months ended September 30, 2004 was $3.6 million

32

(contribution margin percentage of 7.6%) as compared to a contribution loss for the three months ended September 30, 2003 of $(1.0) million (negative contribution margin percentage of 2.0%). The increase in contribution margin between quarters is due primarily to a reduction in operating expenses between periods, resulting primarily from various cost reduction initiatives, as discussed above.

Total non-cash charges related to depreciation, amortization, and stock-based compensation expense included in the determination of the GSS Division’s contribution margin (loss) for the three months ended September 30, 2004 and 2003 were $5.0 million and $4.9 million, respectively.

We expect the GSS Division to have a positive contribution margin for 2004.

Corporate

Corporate Operating Expenses. Corporate overhead expenses for the three months ended September 30, 2004 decreased 4.2% to $14.5 million, from $15.1 million for the three months ended September 30, 2003. The decrease in operating expenses related primarily to a decrease in legal fees as a result of completion of the Comcast arbitration proceedings. We incurred approximately $1 million of legal fees in the three months ended September 30, 2003 in defense of the Comcast litigation, with no comparable amount for 2004.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

Results of Operations – Consolidated Basis

Total Revenues. Total revenues for the nine months ended September 30, 2004 increased 26.9% to $393.1 million, from $309.8 million for the nine months ended September 30, 2003. The increase between periods is primarily due to the charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003, discussed above.

We use the location of the client as the basis of attributing revenues to individual countries. Revenues by geographic region for the nine months ended September 30 were as follows (in thousands):

	September 30, 2004		September 30, 2003
North America (principally the United States)	$	288,890	$	205,025
Europe, Middle East and Africa (principally Europe)		62,415		66,857
Asia Pacific		26,227		20,147
Central and South America		15,568		17,774
Subtotal	$	393,100	$	309,803

Revenues for North America for the nine months ended September 30, 2003, reflect the charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003 of $105.7 million. For 2004 revenues generated outside North America, no single country accounts for more than 5% of our total revenues.

See the “Results of Operations - Operating Segments” section below for a detailed discussion of revenues and related changes between periods on a segment basis.

Cost of Processing and Related Services. The cost of processing and related services of $106.4 million for the nine months ended September 30, 2004 was relatively flat when compared to $106.2 million for the nine months ended September 30, 2003. The increase between periods is primarily due to: (i) an increase in data processing costs, due primarily to greater processing requirements for ACP functionality and an increase in the number of our clients’ customer accounts processed on our system; and (ii) stock-based compensation expense (see above discussion). These increases were offset by a decrease in certain personnel costs, to include the impact of the cost reduction initiatives discussed above. Processing costs as a percentage of related processing revenues were 43.8% (gross margin of 56.2%) for the nine months ended September 30, 2004 compared to 40.6% (gross margin of 59.4%) for the nine months ended September 30, 2003. The increase in processing costs as a percentage of related revenues is primarily due to the lower Comcast revenues.

33

Cost of Software and Maintenance. The combined cost of software and maintenance for the nine months ended September 30, 2004 decreased 6.5% to $50.7 million, from $54.3 million for the nine months ended September 30, 2003. The decrease is primarily due to: (i) a reduction in personnel costs between periods, resulting from the cost reduction initiatives discussed above; and (ii) 2003 having approximately $1 million of amortization related to the acquired Kenan Business client contracts, which became fully amortized in February 2003. These decreases were offset to a certain degree by an increase in other various costs necessary to support our products and clients (e.g., third party software costs, contractors, etc.). The cost of software and maintenance as a percentage of related revenues was 51.4% (gross margin of 48.6%) for the nine months ended September 30, 2004 as compared to 53.3% (gross margin of 46.7%) for the nine months ended September 30, 2003. As discussed above, fluctuations in the quarterly gross margin for software and maintenance revenues are an inherent characteristic of software companies, which can be impacted by, among other things, the timing of executed contracts in any one quarter.

Cost of Professional Services. The cost of professional services for the nine months ended September 30, 2004 decreased 6.1% to $46.9 million, from $50.0 million for the nine months ended September 30, 2003. The decrease relates primarily to a reduction in personnel costs, to include the impact of the cost reduction initiatives discussed above. The decrease was offset to a certain degree by an increase in certain project-specific support costs (e.g., contractors and subcontractor costs). The cost of professional services as a percentage of related revenues was 91.0% (gross margin of 9.0%) for the nine months ended September 30, 2004, as compared to 96.0% (gross margin of 4.0%) for the nine months ended September 30, 2003. The increase in the gross margin measure between periods is due in part to the 2003 gross margin being negatively impacted by the difficulties we experienced on the Proximus implementation project during 2003, to include recording a loss accrual of $1 million on such contract in the first quarter of 2003.

Gross Margin. The overall gross margin for the nine months ended September 30, 2004 increased 90.3% to $189.0 million from $99.3 million for the nine months ended September 30, 2003. The overall gross margin percentage increased to 48.1% for the nine months ended September 30, 2004, compared to 32.1% for the nine months ended September 30, 2003. The change in the overall gross margin and overall gross margin percentage were due to the factors discussed above, principally, a result of the impact of the charge for the Comcast arbitration ruling recorded in 2003.

Research and Development Expense. R&D expense for the nine months ended September 30, 2004, decreased 3.3% to $45.3 million, from $46.7 million for the nine months ended September 30, 2003. The decrease in the R&D expenditures between periods is primarily due to a reduction of personnel as a result of the cost reduction initiatives discussed above. As a percentage of total revenues, R&D expense decreased to 11.5% for the nine months ended September 30, 2004, from 15.1% for the nine months ended September 30, 2003. The decrease in R&D costs as a percentage of revenues is due to lower revenues in 2003 resulting from the charge for the Comcast arbitration ruling. We did not capitalize any internal software development costs during the nine months ended September 30, 2004 and 2003.

During the first nine months of 2004, we focused our development and enhancement efforts on:

• various R&D projects for the GSS Division, including the Kenan FX business framework (which is discussed in greater detail in the “Business” section of our 2003 10-K), which was introduced in late 2003, and includes enhancements to the existing versions of the Kenan Business product suite, as well as new modules; and

• enhancements to CCS and related Broadband Division software products to increase the functionalities and features of the products, to include the architectural upgrade to CCS (which is discussed in greater detail in the “Business” section of our 2003 10-K), and Voice over IP functionalities.

Selling, General and Administrative Expense. SG&A expense for the nine months ended September 30, 2004, decreased 24.5% to $66.0 million, from $87.5 million for the nine months ended September 30, 2003. As a percentage of total revenues, SG&A expense decreased to 16.8% for the nine months ended September 30, 2004, from 28.2% for the nine months ended September 30, 2003. The decrease in SG&A expense relates primarily to: (i) a decrease in legal fees due to the Comcast arbitration concluding in October 2003 (such costs were approximately $12 million in the first nine months of 2003 with no comparable amounts in 2004); and to a much lesser degree (ii) a reduction in

34

certain personnel costs, to include the impact of the cost reduction initiatives discussed above. These decreases were offset to a certain degree by $2.5 million of expense recorded in the second quarter of 2004 related to our executive management departures and an increase in stock-based compensation between periods.

Depreciation Expense. Depreciation expense for the nine months ended September 30, 2004 decreased by 20.6% to $10.7 million, from $13.5 million for the nine months ended September 30, 2003. The decrease in depreciation expense relates to the decrease in capital expenditures made during the last twelve months as a result of our focus on cost controls. The capital expenditures during the last three months of 2003 and first nine months of 2004 consisted principally of: (i) computer hardware and related equipment; (ii) statement production equipment; and (iii) facilities and internal infrastructure expansion. Depreciation expense for all property and equipment is reflected separately in the aggregate and is not included in the cost of revenues or the other components of operating expenses.

Restructuring Charges. Our restructuring charges relate to the cost reduction initiatives mentioned above. The components of the restructuring charges included in total operating expenses, and the impact (net of related estimated income tax expense) these restructuring charges had on net income and diluted earnings per share, for the nine months ended September 30, 2004 and 2003 are as follows (in thousands, except diluted earnings per share):

	Nine Months Ended September 30,
	2004		2003
Involuntary employee terminations	$	1,731	$	4,324
Facility abandonments		654		3,253
All other		2		26
Total restructuring charges	$	2,387	$	7,603
Impact of restructuring charges on results of operations (i.e., have reduced operating results):
Net income	$	1,623	$	4,106
Diluted earnings per share	$	0.03	$	0.08

Operating Income (Loss). Operating income for the nine months ended September 30, 2004, was $64.7 million or 16.5% of total revenues, compared to an operating loss of $(55.9) million or (18.1)% of total revenues for the nine months ended September 30, 2003. The increase in these measures between years relates primarily to the charge for the Comcast arbitration ruling being reflected in 2003.

Interest Expense. Interest expense for the nine months ended September 30, 2004, decreased 24.4% to $8.0 million, from $10.6 million for the nine months ended September 30, 2003. The weighted-average balance of our long-term debt for the nine months ended September 30, 2004 was approximately $222 million, compared to approximately $256 million for the nine months ended September 30, 2003. The weighted-average interest rate on our debt borrowings for the nine months ended September 30, 2004, including the amortization of deferred financing costs and commitment fees on our revolving credit facility, was 4.6%, compared to 5.3% for the nine months ended September 30, 2003. The decrease in the weighted-average interest rate between periods relates to the issuance of our Convertible Debt Securities in June 2004, which have a stated coupon rate of 2.5%.

Write-off of Deferred Financing Costs. As result of the repayment and termination of the 2002 Credit Facility, we wrote-off unamortized deferred financing costs attributable to the 2002 Credit Facility of $6.6 million during the second quarter of 2004, which had the effect of reducing our second quarter of 2004 net income per diluted share by approximately $0.08.

Other, net. Other income for the nine months ended September 30, 2004, was $0.2 million compared to other income of $3.6 million for the nine months ended September 30, 2003. These amounts consist primarily of foreign currency transaction gains and losses. The change between years relates primarily to the change in the foreign currency exchange rates of the U.S. dollar against the Euro and British pound.

35

Income Tax Provision (Benefit). For the nine months ended September 30, 2004, we recorded an income tax provision of $16.4 million, or an effective income tax rate of approximately 32%, compared to an effective income tax rate of 46% for the nine months ended September 30, 2003. The 2003 effective income tax rate was primarily impacted by the net operating loss position resulting from the $119.6 million Comcast arbitration charge, as discussed above.

The effective income tax rate for the first nine months of 2004 represents our estimate of the effective income tax rate for 2004. The estimate of 32% for 2004 is based on various assumptions, with the primary assumptions related to our estimate of total pretax income, the status of certain income tax contingencies, foreign tax credit utilization, and the amounts and sources of foreign pretax income. The actual effective income tax rate for 2004 could deviate from the 32% estimate based on our actual experiences with these items, as well as others.

Results of Operations - Operating Segments

Operating segment information and corporate overhead costs for the nine months ended September 30, 2004 and 2003 are presented in Note 8 to the Financial Statements.

Broadband Division

Total Revenues. Total Broadband Division revenues for the nine months ended September 30, 2004 increased 48.9% to $258.5 million, from $173.6 million for the nine months ended September 30, 2003, primarily due to the $105.7 million charge for the Comcast arbitration ruling recorded in the third quarter of 2003 as discussed above.

Processing revenues. Processing revenues for the nine months ended September 30, 2004 decreased 7.3% to $240.7 million, compared to $259.6 million for the nine months ended September 30, 2003. The decrease in processing revenues was due primarily to lower processing revenues from Comcast for the nine months ended September 30, 2004 as a result of the arbitration ruling in the third quarter of 2003, as discussed above.

Segment Operating Expenses and Contribution Margin. Broadband Division operating expenses for the nine months ended September 30, 2004 decreased 5.1% to $151.5 million, from $159.6 million for the nine months ended September 30, 2003. The decrease in the Broadband Division’s operating expenses is due primarily to the fourth quarter 2003 cost reduction initiative (principally a reduction in personnel costs), and to a lesser degree, a reduction in bad debt expense (primarily related to the sale of the Adelphia pre-bankruptcy accounts receivable in the second quarter of 2004). These decreases were offset to a certain degree by an increase between periods in stock-based compensation and an increase in data processing costs, due primarily to greater processing requirements for ACP functionality and an increase in the number of our clients’ customer accounts processed on our system.

Broadband Division contribution margin for the nine months ended September 30, 2004 was $107.1 million (contribution margin percentage of 41.4%) compared to a contribution margin of $14.1 million (contribution margin percentage of 8.1%) for the nine months ended September 30, 2003. The increase in contribution margin between periods is due primarily to the $105.7 million charge for the Comcast arbitration ruling attributable to periods prior to July 1, 2003 recorded in the third quarter of 2003, as discussed above.

Total non-cash charges related to depreciation, amortization (shown as a reduction of processing revenues), and stock-based compensation expense included in the determination of the Broadband Division’s contribution margin for the nine months ended September 30, 2004 and 2003 were $16.7 million and $12.7 million, respectively. The increase in non-cash charges is due primarily to the acceleration of amortization related to the Comcast Contract intangible asset as discussed above and an increase in stock-based compensation.

GSS Division

Total Revenues. Total GSS Division revenues for the nine months ended September 30, 2004 decreased 1.2% to $134.6 million, as compared to $136.2 million for the nine months ended September 30, 2003, with the decrease due primarily to a decrease in software revenue as discussed in more detail below.

Software Revenue. Software revenue for the nine months ended September 30, 2004 decreased 22.5% to $22.4

36

million, from $28.9 million for the nine months ended September 30, 2003. The decrease in software revenues was primarily due to the timing of executed software contracts and related revenue recognition between periods, and general market conditions. As discussed above, fluctuations in revenue from software sales between periods is an inherent characteristic of software companies and is expected to continue in future periods.

Maintenance Revenue. Maintenance revenue for the nine months ended September 30, 2004 increased 9.2% to $59.1 million, from $54.2 million for the nine months ended September 30, 2003. This increase in maintenance revenues was due primarily to: (i) the resolution of collectibility concerns for certain clients; and (ii) an increase in the installed software license base as a result of new sales since the end of the third quarter of 2003.

Professional Services Revenue. Professional services revenue for the nine months ended September 30, 2004 remained relatively unchanged at $51.0 million compared to $51.1 million for the nine months ended September 30, 2003.

Segment Operating Expenses and Contribution Margin (Loss). GSS Division operating expenses for the nine months ended September 30, 2004 decreased 11.8% to $128.8 million, from $146.1 million for the nine months ended September 30, 2003. The decrease in GSS Division operating expenses is due primarily to a reduction in various personnel costs, to include the impact of the cost reduction initiatives discussed above.

The GSS Division’s contribution margin for the nine months ended September 30, 2004 was $5.7 million (contribution margin percentage of 4.3%) compared to a contribution loss for the nine months ended September 30, 2003 of $(9.9) million (negative contribution margin percentage of 7.3%). The increase in contribution margin between periods is due primarily to the reduction in GSS Division operating expenses between periods, as discussed above.

Total non-cash charges related to depreciation, amortization, and stock-based compensation expense included in the determination of the GSS Division’s contribution margin (loss) for the nine months ended September 30, 2004 and 2003 were $15.9 million and $14.9 million, respectively. The increase in non-cash charges is due primarily to an increase in stock-based compensation, offset by a decrease in depreciation.

Corporate

Corporate Operating Expenses. Corporate overhead expenses for the nine months ended September 30, 2004, decreased 12.8% to $45.8 million, from $52.5 million for the nine months ended September 30, 2003. The decrease in operating expenses related primarily to a decrease in legal fees as a result of completion of the Comcast arbitration proceedings. We incurred approximately $12 million of legal fees in the nine months ended September 30, 2003 in defense of the Comcast litigation, with no comparable amount for 2004. This decrease is offset to a certain degree by $2.5 million of expense in the nine months ended September 30, 2004 related to executive management departures and an increase in stock-based compensation.

Liquidity

Cash and Liquidity. As of September 30, 2004, our principal sources of liquidity included cash, cash equivalents, and short-term investments of $138.9 million, compared to $105.4 million as of December 31, 2003. We generally invest our excess cash balances in low-risk cash equivalents and short-term investments to limit our exposure to market risks.

On September 21, 2004, we entered into a five-year, $100 million senior secured revolving credit facility (the “Revolver”) with a syndicate of U.S. financial institutions (see Note 3 to the Financial Statements). The Revolver has a $40 million sub-facility for standby and commercial letters of credit and a $10 million sub-facility for same day advances. As of the date of this filing, there were no borrowings outstanding. Our ability to borrow under the revolver is subject to a limitation of total indebtedness based upon the results of consolidated leverage and interest coverage ratio calculations, and a minimum liquidity requirement. As of September 30, 2004, we were in compliance with the financial ratio and other covenants of the 2004 Revolving Credit Facility, and the entire $100 million of the 2004 Revolving Credit Facility was available to us.

37

Our cash, cash equivalents, and short-term investment balances as of the end of the indicated periods were located in the following geographical regions (in thousands):

	September 30, 2004		June 30, 2004		March 31, 2004		December 31, 2003
North America (principally the United States)	$	71,752	$	61,729	$	55,193	$	50,779
Europe, Middle East and Africa (principally Europe)		56,337		52,174		31,034		37,270
Asia Pacific		5,292		4,775		5,688		4,453
Central and South America (CALA)		5,475		12,523		13,821		12,895
Total cash, cash equivalents and short-term investments	$	138,856	$	131,201	$	105,736	$	105,397

In July 2004, approximately $8 million of cash was transferred from CALA (from our Brazilian subsidiary) to North America in the ordinary course of our operations. We generally have ready access to substantially all of our cash and short-term investment balances, but do face limitations on moving cash out of certain foreign jurisdictions. As of September 30, 2004, the cash, cash equivalents, and short-term investments subject to such limitations were not significant.

Cash Flows From Operating Activities. We calculate our cash flows from operating activities in accordance with accounting principles generally accepted in the United States, beginning with net income, adding back the impact of non-cash items (e.g., depreciation, amortization, stock-based compensation expense, etc.), and then factoring in the impact of changes in working capital items. See our 2003 10-K for a description of the primary uses and sources of our cash flows from operating activities.

Our net cash flows provided by (used in) operating activities for the quarterly and year-to-date totals for the indicated periods were as follows (in thousands). These amounts are reflected in our Condensed Consolidated Statements of Cash Flows.

	Quarter Totals			Year-to- Date Totals
2003 (1):
March 31	$	22,222		$	22,222
June 30		37,141			59,363
September 30		39,446			98,809
December 31		(38,456	)		60,353
2004:
March 31 (2)		31,965			31,965
June 30 (3)		40,186			72,151
September 30		24,805			96,956

(1) The negative cash flows from operating activities of $(38.5) million in the fourth quarter of 2003 relates primarily to the approximately $95 million paid to Comcast during the fourth quarter of 2003 as a result of the arbitration ruling. Absent this amount, we generated strong quarterly cash flows from operating activities for 2003, which included improved cash collections of our international accounts receivable during the last two quarters of 2003. Our strong cash flows from operations allowed us to pay amounts to Comcast with available corporate funds, without having to draw on our revolving credit facility.

(2) Cash flows from operations for the first quarter of 2004 reflects the impact of the approximately $25 million arbitration payment made to Comcast during the first quarter of 2004 and the receipt of income tax refunds of approximately $34 million.

(3) Approximately $14 million of the cash flows from operations for the second quarter of 2004 can be attributed to the sale of certain Adelphia pre-bankruptcy accounts receivable to a third party and to higher than normal cash collections of accounts receivable within the GSS Division.

38

We believe this table illustrates our ability to consistently generate strong quarterly cash flows, and the importance of managing our working capital items, in particular, timely collections of our accounts receivable. Absent any unusual fluctuations in working capital items during the fourth quarter of 2004, we expect our 2004 annual cash flows from operating activities to range from $121 million to $125 million.

The key balance sheet items impacting our cash flows from operating activities are as follows.

Billed Accounts Receivable

Our billed accounts receivable balance by geographic region (based on the location of the client) as of the end of the indicated periods are as follows (in thousands):

	September 30, 2004			June 30, 2004			March 31, 2004			December 31, 2003
North America (principally the United States)	$	91,640		$	88,256		$	98,637		$	101,156
Europe, Middle East and Africa (principally Europe)		19,835			25,842			32,424			20,216
Asia Pacific		11,959			9,813			13,308			14,287
Central and South America		5,348			6,751			4,659			6,177
Total billed accounts receivable		128,782			130,662			149,028			141,836
Less allowance for doubtful accounts		(5,438	)		(6,942	)		(11,397	)		(11,145	)
Total billed accounts receivable, net of allowance	$	123,344		$	123,720		$	137,631		$	130,691

Management of our billed accounts receivable is one of the primary factors in maintaining strong quarterly cash flows from operating activities. Our billed trade accounts receivable balance includes billings for several non-revenue items (primarily postage, sales tax, and deferred revenue items). As a result, we evaluate our performance in collecting our accounts receivable through our calculation of days billings outstanding (“DBO”) rather than a typical days sales outstanding (“DSO”) calculation. DBO is calculated based on the billing for the period (including non-revenue items) divided by the average monthly net trade accounts receivable balance for the period. Our target range for our DBO is 65-75 days.

Our gross and net billed trade accounts receivable and related allowance for doubtful accounts receivable (“Allowance”), as of the end of the indicated periods, and our DBOs for the quarters then ended, are included in the following table (in thousands, except DBOs). This information illustrates our improvement in managing our accounts receivable since the middle of 2003:

Quarter Ended	Gross		Allowance			Net Billed		DBO
2003:
March 31	$	182,573	$	(12,609	)	$	169,964	68
June 30		183,189		(14,093	)		169,096	79
September 30		162,810		(13,728	)		149,082	78
December 31		141,836		(11,145	)		130,691	67
2004:
March 31 (1)		149,028		(11,397	)		137,631	66
June 30 (2) (3)		130,662		(6,942	)		123,720	66
September 30		128,782		(5,438	)		123,344	65

(1) The increase in the net billed accounts receivable balance between December 31, 2003 and March 31, 2004 was primarily the result of the timing of new invoices and cash collections.

(2) The decrease in both the gross and net billed accounts receivable between March 31, 2004 and June 30, 2004 relates primarily to the sale of the Adelphia pre-bankruptcy accounts receivable to a third party, and the success we experienced collecting accounts receivable within the GSS Division during the second quarter of 2004.

39

(3) The $4.5 million decrease in the Allowance between March 31, 2004 and June 30, 2004 relates primarily to the sale of the aforementioned Adelphia pre-bankruptcy accounts receivable.

Unbilled Accounts Receivable and Other Receivables

Revenue earned and recognized prior to the scheduled billing date of an item is reflected as unbilled accounts receivable. Unbilled accounts receivable are an inherent characteristic of certain software and professional services transactions and may fluctuate between quarters, as these types of transactions typically have scheduled invoicing terms over several quarters, as well as certain milestone billing events. Our unbilled accounts receivable and other receivables as of the end of the indicated periods are as follows (in thousands):

2003:
March 31	$	25,555
June 30		27,093
September 30		25,498
December 31		18,042
2004:
March 31		14,409
June 30		13,756
September 30		15,051

We managed the unbilled receivables down since the middle of 2003, and going forward, we expect a range comparable to that of the last several quarters. The September 30, 2004 unbilled accounts receivable balance consists primarily of several projects with various contractual billing dates which have not yet been reached, and unbilled accounts receivable related to billing cutoffs for certain processing services. A substantial percentage of the September 30, 2004 unbilled accounts receivable is scheduled to be billed and collected by the end of the first quarter of 2005. However, there can be no assurances that the fees will be billed and collected within the expected time frames.

Income Taxes Receivable

We were in a domestic net operating loss (“NOL”) position for 2003 as a result of the Comcast $119.6 million arbitration charge discussed above. Our income tax receivable as of December 31, 2003 was $35.1 million, which resulted from our ability to claim a refund for 2003 income taxes already paid, and from our ability to carry back our NOL to prior years. During the first quarter of 2004, we received approximately $34 million of this income tax receivable, and identified additional income tax receivable amounts during our final preparation of our 2003 U.S. Federal income tax return, which was filed in March 2004. As a result, our September 30, 2004, income taxes receivable is $4.4 million.

Deferred Revenue

Client payments and billed amounts due from clients in excess of revenue recognized are recorded as deferred revenue. Deferred revenue balances broken out by source of revenue as of the end of the indicated periods are as follows (in thousands):

	September 30, 2004		June 30, 2004		March 31, 2004		December 31, 2003		September 30, 2003
Processing	$	7,384	$	7,274	$	7,010	$	6,888	$	6,029
Software		4,435		6,784		8,518		5,017		6,406
Maintenance		31,749		38,336		36,093		34,593		32,701
Professional services		7,899		9,857		9,645		9,427		12,421
Total	$	51,467	$	62,251	$	61,266	$	55,925	$	57,557

40

The changes in total deferred revenues between June 30, 2004 and September 30, 2004 relates primarily to the timing of invoices for such products and services, and the related revenue recognition for such items. The majority of our maintenance agreements renew in the first and fourth fiscal quarters of the year.

Arbitration Charge Payable

The arbitration charge payable reflected in the Financial Statements relates to the $119.6 million Comcast arbitration award. We paid approximately $95 million of this amount in the fourth quarter of 2003. During the first quarter of 2004, we paid the remaining approximately $25 million.

Investing Activities. Our investing activities typically consist of purchases of property and equipment and investments in client contracts intangible assets, and business acquisitions.

Purchases/Sales of Short-term Investments

We generally invest our excess cash balances in low-risk, short-term investments to limit our exposure to market risks. These short-term investments are readily convertible back into cash. During the nine months ended September 30, 2004, we purchased $14.5 million and sold $6.6 million of short-term investments. We continually evaluate the possible uses of our excess cash balances and may purchase additional short-term investments in the future.

Property and Equipment/Client Contracts

Our capital expenditures for the nine months ended September 30, 2004 and 2003 for property and equipment, and investments in client contracts were as follows (in thousands):

	2004		2003
Property and equipment	$	5,454	$	6,706
Client contracts		2,254		1,584

As of September 30, 2004, we did not have any material commitments for capital expenditures or for investments in client contracts intangible assets, and our fourth quarter of 2004 capital expenditures are expected to be comparable to the third quarter of 2004.

Business and Asset Acquisitions

Historically, our business model has not included a significant amount of business acquisition activity. However, in order to expand our international business, in 2002 we acquired several different businesses and related assets for $270.6 million. This consisted principally of the Kenan Business acquisition in February 2002. See our 2003 10-K for a more detailed discussion of our most recent acquisitions. During the nine months ended September 30, 2004, there have been no business acquisitions and $0.7 million of asset acquisitions.

Financing Activities. Our financing activities typically consist of various debt-related transactions, and activities with our common stock.

Long-Term Debt

During the first quarter of 2004, we made the mandatory $30 million prepayment which was due no later than July 2004. This payment was made with the proceeds from our $34 million of income tax refunds received in March 2004.

In June 2004, we completed our offering of the Convertible Debt Securities, as discussed in greater detail in Note 3 to the Financial Statements. We used a portion of the $230 million of proceeds from the Convertible Debt Securities to repay the outstanding balance of $198.9 million and terminate our 2002 Credit Facility. In connection with the issuance of the Convertible Debt Securities, we have incurred debt issuance costs of $7.1 million.

41

Common Stock

Proceeds from the issuance of common stock relate to our various stock-based compensation plans. The $5.6 million of cash received from the issuance of common stock for the nine months ended September 30, 2004 relates primarily to the exercise of stock options in the second quarter of 2004.

Repurchase of Common Stock

During the third quarter of 2004, we repurchased and then cancelled 13,238 shares of common stock in connection with minimum tax withholdings for employees as the result of the vesting of restricted stock under our stock-based compensation plans.

During the second quarter of 2004, our Board of Directors increased the number of shares we are authorized to repurchase under our stock repurchase program by five million, bringing the total authorized shares under the program to 15.0 million. During the second quarter of 2004 (in conjunction with the issuance of the Convertible Debt Securities), the Company repurchased 2.1 million shares of its common stock for $40.0 million (weighted-average price of $18.72 per share). During the third quarter of 2004, the Company repurchased 0.8 million shares of its common stock for $12.9 million (weighted-average price of $15.25 per share). A summary of the activity to date for this repurchase program is as follows (in thousands, except per share amounts):

	2004		2003	2002		2001		2000		1999		Total
Shares repurchased		2,983	—		1,573		3,020		1,090		656		9,322
Total amount paid	$	52,897	—	$	18,920	$	109,460	$	51,088	$	20,242	$	252,607
Weighted-average price per share	$	17.73	—	$	12.02	$	36.25	$	46.87	$	30.88	$	27.10

At September 30, 2004, the total remaining number of shares available for repurchase under the program totaled 5.7 million shares.

Capital Resources

We continue to make investments in client contracts, capital equipment, facilities, and research and development, and at our discretion, may continue to make stock repurchases under our stock repurchase program. In addition, as part of our growth strategy, we are continually evaluating potential businesses and asset acquisitions. We had no significant capital commitments as of September 30, 2004.

The Convertible Debt Securities bear interest at a rate of 2.5% per annum, which is payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2004. The Convertible Debt Securities are callable by us for cash, on or after June 20, 2011. The Convertible Debt Securities can be put back to us by the holders for cash at June 15, 2011, 2016 and 2021, or upon a change of control, at a repurchase price equal to 100% of the principal amount of the Convertible Debt Securities, plus any accrued interest. As a result, in the near-term, we expect our annual debt service costs related to Convertible Debt Securities to be limited to the annual interest costs of $5.8 million.

As discussed above, we expect to make the Irrevocable Election to settle in cash 100% of the $230 million principal amount of the Convertible Debt Securities. Such a cash payment related to this election will only occur upon the conversion of the Convertible Debt Securities. As a result, we do not expect the Irrevocable Election to adversely impact our liquidity or our need for additional capital resources in the near-term.

The interest rate for borrowings under the new $100 million revolving credit facility, except for same day advances, is chosen at our option and is based upon a base rate or adjusted LIBOR rate, plus an applicable margin. The base rate represents the higher of a floating prime rate and a floating rate equal to 50 basis points in excess of the Federal Funds Effective Rate. The interest rate for same day advances is based upon base rate, plus an applicable margin. The applicable margins are dependent on our leverage ratio, as defined, and range from zero to 100 basis points for base rate loans and 125 to 225 basis points for LIBOR loans. As of September 30, 2004, we had made no borrowings under the new revolving credit facility. We pay a quarterly commitment fee on the unused portion of the 2004 Revolving Credit Facility. This rate is dependent on our leverage ratio and ranges from 25 to 50 basis points per annum. As of September 30, 2004, the commitment fee rate was 37.5 basis points per annum. As of September 30, 2004, the entire $100 million of the 2004 Revolving Credit Facility was available to us.

42

We believe that cash generated from operating activities, together with our current cash, cash equivalents, and short-term investments, and the amount available under our new revolving credit facility, will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings. “Earnings” is defined as income from continuing operations before income taxes, plus fixed charges. “Fixed charges” consist of interest expense (including the amortization of deferred financing costs) and the estimated interest component of rental expense. Our consolidated ratio of earnings to fixed charges for the nine months ended September 30, 2004, was 4.64:1.00, which excludes the write-off of unamortized deferred financing costs of $6.6 million resulting from the prepayment of our outstanding indebtedness under our then-existing credit facility in June 2004. See Exhibit 12.10 to this document for information regarding the calculation of our ratio of earnings to fixed charges.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in our 2003 10-K, we have historically been exposed to various market risks, including changes in interest rates and foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk.

Market Risk Related to Long-term Debt. As of September 30, 2004, our long-term debt consists of $230.0 million of 2.5% senior subordinated convertible contingent debt securities due June 15, 2024 (the “Convertible Debt Securities”). The Convertible Debt Securities are convertible into shares of our common stock under specified conditions, unless previously redeemed by us or put back to us by the holders. The interest rate on the Convertible Debt Securities is fixed and provides for semi-annual interest payments of $2.9 million each June 15 and December 15, beginning on December 15, 2004. Commencing with the six-month period beginning June 15, 2011, we will pay contingent interest equal to 0.25% of the average trading price of the Convertible Debt Securities if the average trading price equals 120% or more of the principal amount of the Convertible Debt Securities. We will also be required to pay additional interest of 0.25% to 0.50% per annum on the principal amount of the Convertible Debt Securities if we default on a registration rights agreement associated with the Convertible Debt Securities. With our filing of a Form S-3 registration statement with the SEC on July 16, 2004, we are in compliance with all aspects of the registration rights agreement as of September 30, 2004. We are currently working through the process necessary to have the shelf registration statement on Form S-3 declared effective by the SEC on or about November 29, 2004. However, there can be no assurances that we will successfully complete this process by that date. See Note 3 to the Financial Statements for additional information related to the Convertible Debt Securities.

As of September 30, 2004, we had made no borrowings under the 2004 Revolving Credit Facility. The interest rate for borrowings under the 2004 Revolving Credit Facility, except for the same day advances, is chosen at the option of the Company and is based upon a base rate or adjusted LIBOR rate, plus an applicable margin. The base rate represents the higher of a floating prime rate and a floating rate equal to 50 basis points in excess of the Federal Funds Effective Rate. The interest rate of the same day advances is based upon base rate, plus an applicable margin. The applicable margins are dependent on the Company’s leverage ratio, as defined, and range from zero to 100 basis points for base rate loans and 125 to 225 basis points for LIBOR loans.

Market Risk Related to Short-term Investments. Our cash and cash equivalents as of September 30, 2004 were $131.0 million. Our cash balances are typically “swept” into overnight money market accounts on a daily basis, and at times, are placed into somewhat longer term cash equivalent instruments. We have minimal market risk for our cash and cash equivalents due to the relatively short maturities of the instruments. Our short-term investments as of

43

September 30, 2004 were $7.9 million. We do not utilize any derivative financial instruments for purposes of managing our market risks related to short-term investments. We generally invest our excess cash balances in low-risk, short-term investments to limit our exposure to market risks.

Currently, we utilize short-term investments as a means to invest our excess cash only in the U.S. The day-to-day management of our cash equivalents and short-term investments in the U.S is done by the money management branch of one of the largest financial institutions in the U.S. This financial institution manages our cash equivalents and short-term investments based upon strict and formal investment guidelines established by us. Under these guidelines, investments are limited to highly liquid, short-term government and corporate securities that have a credit rating of A-1 / P-1 or better.

We do not utilize any derivative financial instruments for purposes of managing our market risks related to interest rate risk.

Foreign Exchange Rate Risk.

Our approximate percentage of total revenues generated outside the United States for the years ended December 31, 2003 and 2002 was 32% and 25%, respectively. Our approximate percentage of total revenues generated outside the United States for the nine months ended September 30, 2004 and 2003 was 27% and 34%, respectively. The percentage of total revenue generated outside the United States for the nine months and year ended December 31, 2003 is abnormally high due to the reduction in revenue in the third quarter of 2003 as the result of the Comcast arbitration ruling. Factoring out the effect of the Comcast arbitration ruling, the percentage of our total revenues generated outside the United States for the year ended December 31, 2003 would have been approximately 25%. For the nine months ended September 30, 2004, approximately 88% and 7%, respectively, of our total revenues were denominated in U.S. dollars and Euros. For the year ended December 31, 2003, approximately 89% and 7%, respectively, of our total revenues, net were denominated in U.S. dollars and Euros. Refer to our 2003 10-K for further discussion of our foreign exchange rate risk.

We continue to evaluate whether we should enter into derivative financial instruments for the purposes of managing our foreign currency exchange rate risk, but, as of the date of this filing, we have not entered into such instruments. A hypothetical adverse change of 10% in the September 30, 2004 foreign currency exchange rates would not have a material impact upon our results of operations.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures

As required by Rule 13a-15(b), our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e). Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Internal Control Over Financial Reporting

As required by Rule 13a-15(d), our management, including the CEO and CFO, also conducted an evaluation of our internal control over financial reporting, as defined by Rule 13a-15(f), to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, the CEO and CFO concluded that there has been no such change during the quarter covered by this report.

44

CSG SYSTEMS INTERNATIONAL, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time-to-time, we are involved in litigation relating to claims arising out of its operations in the normal course of business. In the opinion of our management, we are not presently a party to any material pending or threatened legal proceedings.

Item 2. Changes in Securities, Use of Proceeds and Issuer Repurchases of Equity Securities

Refer to Note 3 of the Financial Statements for the information required to be provided under Item 701 of Regulation S-K related to our completion of an offering of $230.0 million of 2.5% senior subordinated convertible contingent debt securities on June 2, 2004.

The following table presents information with respect to purchases of company common stock we made during the three months ended September 30, 2004 by CSG Systems International, Inc. or any “affiliated purchaser” of CSG Systems International, Inc., as defined in Rule 10b-18(a)(3) under the Exchange Act.

Period	Total Number of Shares Purchased2	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs1
July 1 - July 31	—		—	—	6,524,408
August 1 - August 31	859,238	$	15.23	846,000	5,678,408
September 1 - September 30	—		—	—	5,678,408
Total	859,238	$	15.23	846,000

¹ In August 1999, our Board of Directors approved a stock repurchase program which authorized us to purchase up to a total of five million shares of our common stock from time-to-time as business conditions warrant. In September 2001, our Board of Directors amended the program to authorize us to purchase an additional five million shares, for a total of ten million shares. Effective June 2, 2004, our Board of Directors amended the program to authorize us to purchase an additional five million shares, for a total of 15 million shares. The stock repurchase program does not have an expiration date.

² The total number of shares purchased that are not part of the stock repurchase program represents shares purchased and cancelled in connection with minimum tax withholdings for employees as the result of the vesting of restricted stock under our stock-based compensation plans.

Item 3. - 5. None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.20A* First Amendment to the CSG Master Subscriber Agreement between CSG Systems, Inc. and Comcast Cable Communications Management, LLC dated March 17, 2004

45

10.21B*	Thirty-Second and Thirty-Eighth Amendment to CSG Master Subscriber Management System Agreement between CSG Systems, Inc. and Echostar Satellite Corporation
10.30	$100,000,000 Credit Agreement among CSG Systems International, Inc., as Borrower, the Lenders from Time to Time Parties Hereto, Wells Fargo Bank, National Association, as Administrative Agent, Keybank National Association, as Syndication Agent, and Wells Fargo Bank, National Association and Keybank National Association as Co-Lead Arrangers and Co-Book Runners, dated as of September 21, 2004.
10.80	Forms of Agreements for Equity Compensation
12.10	Statement regarding computation of Ratio of Earnings to Fixed Charges
31.01	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.01	Safe Harbor for Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995 – Certain Cautionary Statements and Risk Factors

* Portions of the exhibit have been omitted pursuant to an application for confidential treatment, and the omitted portions have been filed separately with the Commission.

(b) Reports on Form 8-K

• Form 8-K dated September 22, 2004, under Item 1.01, Entry into a Material Definitive Agreement and 2.03, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, was filed with the Securities and Exchange Commission and stated that the Company had closed on a $100 million, five-year senior secured revolving credit facility with a syndicate of domestic and international banks.

• Form 8-K dated October 25, 2004, under Item 2.02, Results of Operations and Financial Condition, was filed with the Securities and Exchange Commission which included a press release dated October 25, 2004. The press release announced the Company’s third quarter earnings release.

46

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 9, 2004

CSG SYSTEMS INTERNATIONAL, INC.

/s/ Neal C. Hansen

Neal C. Hansen

Chairman and Chief Executive Officer

(Principal Executive Officer)

/s/ Peter E. Kalan

Peter E. Kalan

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/ Randy R. Wiese

Randy R. Wiese

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

47

CSG SYSTEMS INTERNATIONAL, INC.

INDEX TO EXHIBITS

Exhibit Number	Description
10.20A*	First Amendment to the CSG Master Subscriber Agreement between CSG Systems, Inc. and Comcast Cable Communications Management, LLC dated March 17, 2004
10.21B*	Thirty-Second and Thirty-Eighth Amendment to CSG Master Subscriber Management System Agreement between CSG Systems, Inc. and Echostar Satellite Corporation
10.30	$100,000,000 Credit Agreement among CSG Systems International, Inc., as Borrower, the Lenders from Time to Time Parties Hereto, Wells Fargo Bank, National Association, as Administrative Agent, Keybank National Association, as Syndication Agent, and Wells Fargo Bank, National Association and Keybank National Association as Co-Lead Arrangers and Co-Book Runners, dated as of September 21, 2004
10.80	Forms of Agreement for Equity Compensation
12.10	Statement regarding computation of Ratio of Earnings to Fixed Charges
31.01	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.01	Safe Harbor for Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995 – Certain Cautionary Statements and Risk Factors

* Portions of the exhibit have been omitted pursuant to an application for confidential treatment, and the omitted portions have been filed separately with the Commission.

48

EX-10.20A

Exhibit 10.20A

FIRST AMENDMENT

TO

CSG MASTER SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT

BETWEEN

CSG SYSTEMS, INC.

AND

COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC

This First Amendment (the “Amendment”) is made by and between CSG Systems, Inc., a Delaware corporation (“CSG”) and Comcast Cable Communications Management, LLC, a Delaware Limited Liability Company (“Customer”). CSG and Customer entered into a certain CSG Master Subscriber Management System Agreement dated March 17, 2004, (the “Agreement”), and now desire to amend the Agreement in accordance with the terms and conditions set forth in this Amendment. If the terms and conditions set forth in this Amendment shall be in conflict with the Agreement, the terms and conditions of this Amendment shall control. Any terms in initial capital letters or all capital letters used as a defined term but not defined in this Amendment shall have the meaning set forth in the Agreement. Upon execution of this Amendment by the parties, any subsequent reference to the Agreement between the parties shall mean the Agreement as amended by this Amendment. Except as amended by this Amendment, the terms and conditions set forth in the Agreement shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. Schedule J of the Agreement is hereby deleted and replaced with Attachment A hereto.

2. CSG will not collect a deposit for Customer’s supplies. Therefore, Exhibit C-2 of the Agreement is amended by deleting the reference to Section 4 in the first sentence of paragraph 7.

3. Schedule D of the Agreement shall be amended by adding the Designated Environment for CSG Message Express attached hereto as Attachment B.

IN WITNESS WHEREOF, the parties execute this Amendment on the date last signed below.

CSG SYSTEMS, INC. (“CSG”)		COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC (“CUSTOMER”)
By:	/s/ Edward C. Nafus	By:	/s/ Terrel Ellis Davis
Name:	Edward C. Nafus	Name:	Terrel Ellis Davis
Title:	President, BBS	Title:	Vice President and Authorized Agent
Date:	9/1/04	Date:	8/31/04

1

Attachment A

Name	PC Doc Number	Type	Execution Date
MediaOne Video and High Speed Data Conversions and Product Implementation	6849	SOW	8/14/2001
Implementation Services - Workforce Express for San Francisco, California	8201	SOW	2/6/2002
NAS to DAC for Mountain Region	11876	SOW	4/22/2003
NAS to DAC Change Order #1	12848	C.O.	6/2/2003
NAS to DAC Change Order #2	13037	C.O.	8/18/2003
NAS to DAC Change Order #3	1959825	C.O.	9/22/2003
NAS to DAC Change Order #4	1965390	C.O.	12/8/2003
NAS to DAC Change Order #5	1999824	C.O.	1/12/2004
NAS to DAC Change Order #6	2008527	C.O.	2/12/2004
Global AT&T VOD Interface	12680	SOW	6/20/2003
VOD Change Order #1	1945512	C.O.	12/8/2003

2

VOD Change Order #2	1972442	C.O.	1/16/2004
Migrate the Customer centralized JD Z-Ports at the Denver location to the CSG terminal server solution.	1951032	SOW	10/6/2003
Addressable Launch for Bay	1959796	LOA	9/11/2003
Addressable Launch Change Order	1987993	C.O.	12/10/2003
Launching addressable Jerrold (JD) in Dallas	1960049	LOA	9/10/2003
Early hour support for (8798/2000) Chicago Nas to DAC launch	1967578	LOA	11/17/2003
South Florida Agent Transfer 8495/6000/0080-0120 to 8495/7500	1987330	LOA	11/18/2003
South Florida Agent Transfer 8495/6200/0020 to 8495/6000	1987333	LOA	11/18/2003
South Florida Agent Transfer 8495-7500/1840, 1850, and 1860 to 8495/6200 and Transfer 8495/7500 1800 - 1900 to 8495/6000	1987362	LOA	12/15/2003
Video on Demand (“VOD”) Boston Derry and Boston-Mashpee interface implementation, system configuration, access anc connectivity services for Customer	1991190	SOW	2/12/2004
Implementing an Analog Nas to Dac to Analog Dac Launch in Denver	1991621	LOA	11/25/2003
Video on Demand (“VOD”) Bristol, CT interface implementation, system configuration, access and connectivity services for Customer	2000310	SOW	2/12/2004
Upgrade of current Screen Express application to allow screen pops on outbound calls	2001381	LOA	12/22/2003

3

IP Gateway Implementation for Pittsburgh	2002791	SOW	2/19/2004
Implementation Services- CSG Workforce Express Chicago Market	2006186	LOA	2/2/2004
Deconversion Tapes for Comcast/Richmond, VA	2009698	SOW	2/2/2004
Converter Passer for the Northeast Market	2009951	LOA	1/26/2004
Replacement of ESP Statement CD-ROMs for the Northeast Market	2009958	LOA	1/26/2004
Training Class charges for two Seattle representative to attend the February 23, 2004 Application Administration training class	2010012	LOA	1/26/2004
Expedited manual computer letter build for Comcast Portland	2010019	LOA	1/26/2004
CSG Assistance in configuring two Call Center Servers in Chelmsford	2012185	LOA	1/29/2004
CSG Assistance in configuring two Call Center Servers in Redmond	2012199	LOA	1/29/2004
One employee from South Florida market to attend Application Administration training in Omaha the week of February 23 - 27, 2004	2012391	LOA	1/30/2004
LA Server config Screen Express	2013747	SOW	3/8/2004
Agent transfer for Customer’s Pittsburgh site moving subscribers out of 8493 1000, 1100 and 1200	2014542	SOW	2/25/2004

4

Conversion of subs from US Online for Portland	2017675	LOA	3/9/2004
CSG to add a new Z port for Minnesota	2019060	LOA	3/9/2004
Vantage Reassignment for six ids for the Sacramento Market	2019232	LOA	3/9/2004
Duplicate CDs for Southern California	2014535	LOA	3/9/2004
Duplicate CDs for Seattle	2014157	LOA	3/9/2004
Jacksonville Service Code Passer	2005972	LOA	3/9/2004
Add new JD Z port for S. Florida	2016936	LOA	3/9/2004

5

Attachment B

CSG MessageExpress^® Designated Environment

Effective: 01/04 Page 1 of 1

CSG MessageExpress is inherent to the ACSR product and therefore requires the ACSR product to execute properly. Please refer to the ACSR DEG to ensure that all ACSR requirements are met before utilizing MessageExpress.

MessageExpress CTI Server Requirements

MessageExpress Server Environment:

NT server class machine with a Pentium III 650 MHz or greater; 256 MB RAM; 10 GB available hard drive space ⁽¹⁾; network card (10MB min., 10BT or BNC); NT version 4.0, Windows 2000 Server or Windows 2000 Advanced Server, all with the latest service packs. TCP/IP protocol and MS IIS (Internet Information Server) 4.0 or greater installed. Requires remote access: CA-Unicenter Remote Control, pcAnywhere, VNC, or equivalent.

MS SQL 7 or SQL 2000 required for MessageExpress.

MessageExpress Desktop Workstation

Windows only environment. Refer to ACSR DEG. Windows NT 4.0, Windows 2000, or Windows 2000 Professional, all with latest service packs; 200 MHz or greater; 64 MB RAM ⁽²⁾; minimum 3MB available hard drive space; network card (10MB min., 10BT or BNC). Windows NT version 4.0; TCP/IP protocol installed.

MessageExpress ACD Options

Aspect ACD – version 6.2 Operating System – 8.2 inclusive. Requires native Application Bridge Link (Ethernet) for agent information and communication with the CTI server. Sites that have migrated to Aspect Contact Server not currently supported.

RealTime Bridge required for MessageExpress.

Lucent/Avaya Communications Definity G3 ACD – version 6.0 Operating System or greater and requires the native ASAI Interface. Requires a MAPD gateway card for agent information and to communicate with the CTI server.

Avaya CMS or BCMS report server, report generated for statistics on desired agents/skills. Root access to CMS server for report generation.

Nortel/Meridian – Any Nortel Meridian ACD with SCCS (Symposium Call Center Server) 4.1.7 or greater installed and running.

Siemens/Rolm – HICOM 300 series (9751/9006 or greater) with ORTL (Open RealTime Link) installed.

⁽¹⁾ Optional data logging features may require additional drive space if logging destination is local.

⁽²⁾ 128 MB of Ram or higher is recommended when purchasing new equipment

6

EX-10.21B

Exhibit 10.21B

THIRTY-SECOND AMENDMENT

TO

CSG MASTER SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT

BETWEEN

CSG SYSTEMS, INC.

AND

ECHOSTAR SATELLITE L.L.C.

This Thirty-Second Amendment (the “Amendment”) is made by and between CSG Systems, Inc., a Delaware corporation (“CSG”) and EchoStar Satellite L.L.C. (“Customer”). CSG and Customer entered into a certain CSG Master Subscriber Management System Agreement dated April 1, 1999, as amended, (the “Agreement”), and now desire to amend the Agreement in accordance with the terms and conditions set forth in this Amendment. If the terms and conditions set forth in this Amendment shall be in conflict with the Agreement, the terms and conditions of this Amendment shall control. Any terms in initial capital letters or all capital letters used as a defined term but not defined in this Amendment shall have the meaning set forth in the Agreement. Upon execution of this Amendment by the parties, any subsequent reference to the Agreement between the parties shall mean the Agreement as amended by this Amendment. Except as amended by this Amendment, the terms and conditions set forth in the Agreement shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. Customer desires to add relational tables to their existing CSG Vantage Plus environment. Therefore, Attachment 2, added by the parties in the Twentieth Amendment dated December 23, 2002, shall be amended to include the relational tables identified in Attachments A and B attached hereto.

2. Customer desires to add ***** (**) user IDs with access to CSG Vantage Plus. Therefore, the total number of user IDs with access to CSG Vantage Plus shall be increased from ********** (**) to ************ (**). Customer agrees to pay a total of $***.** per month for the *****fifty (**50) user IDs, which shall increase Customer’s monthly total for all ************ (**) user IDs to $***.**.

IN WITNESS WHEREOF, the parties execute this Amendment on the date last signed below.

CSG SYSTEMS, INC. (“CSG”)		ECHOSTAR SATELLITE L.L.C. (“CUSTOMER”)
By:	/s/ Edward C. Nafus	By:	/S/ Dr.-Ing. Germar Schaefer
Name:	Edward C. Nafus	Name:	Dr.-Ing. Germar Schaefer
Title:	President, BBS	Title:	SVP, Chief Information Officer
Date:	7/14/04	Date:	7/12/04

ATTACHMENT A

Reports	Report Description
CPPD-004	ORDER FILE UPDATES
CPPE-002	EVENT FILE UPDATES
CPSD-360	SUBSCRIBER MESSAGE AUDIT REPORT
CPIM-016	AUTHORIZATION PROFILES
CPMM-022	SERVICE CODE PENETRATION & CHURN
CPSD-142	ADJUSTMENT CLEARANCE REPORT
CPSD-310	DAILY PAYMENT BATCH RE-CAP
CPSD-036	CREDIT CARD BILLING REPORT
CPSD-312	CREDIT CARD DECLINES REPORT
CPSD-314	CREDIT CARD RE-SUBMIT
CPSD-324	CREDIT CARD PAYMENT REPORT
CPSD-122	DAILY MEMO DUMP
CPSD-130	DAILY CHARGE OFF ACTIVITY
CPSD-148	MISCELLANEOUS ADJUSTMENT RESEARCH REPORT
CPSD-158	MASS ADJUSTMENT FILE/PARAMETER ERROR REP.
CPSD-380	USPS ADDRESS CHANGE SERVICE EXCEPTION
CPSD-144	ADJUSTMENT EXCEPTION REPORT
CPSM-212	DELETED ACCOUNTS
CPWD-026	WORK ORDER STATUS
CPSD-266	MONETARY TRANSFER SUMMARY
CPSD-268	ACCOUNT TRANSFER ACTIVITY
CPIM-112	EQUIPMENT STATUS BREAKDOWN
CPSD-044	UNRECOVERED EQUIPMENT—DAILY
CPSD-140	PPV ADJUSTMENT RESEARCH LOG
CPSD-080	SUBSCRIBER EXCEPTIONS
CPSD-082	SUBSCRIBER EXCEPTIONS (PART 2)
CPSD-084	SUBSCRIBER EXCEPTIONS (PART 3)
CPSD-086	SUBSCRIBER EXCEPTIONS (PART 4)
CPSM-214	CONNECTED DELINQUENT ACCOUNTS
CPSM-216	DISCONNECTED DELINQUENT ACCOUNTS
CPHD-002	HOUSE ADDS
CPSD-110	DAILY LETTERS REPORT
CPMM-302	BASIC SERVICE STATISTICS
CPSD-108	SUBSCRIBER CASH REFUNDS
CPSD-146	MONETARY ACTIVITY SUMMARY
CPSD-022	MONETARY TRAN JOURNAL
CPSM-034	POTENTIAL REFUNDS
CPSD-180	DUPLICATE TAX ID REPORT
CPSD-334	CVI PROCESSING ACTIVITY REPORT
CPWD-008	WORK ORDER ADDS
CPWD-014	WORK ORDERS TO BE SCHEDULED
CPWD-016	WORK ORDERS AGEING
CPWD-020	WORK ORDERS CANCELED
CPWD-042	WORK ORDERS COMPLETED
CPWD-044	CLOSED WORK ORDER SERVICE CODE SUMMARY

ATTACHMENT B

Relational Tables	Report Description
CPID-080	DAILY NON-RESPONDING EQUIPMENT
CPMM-004	TOTAL SERVICE CODE STATISTICS
CPPD-006	EVENT ORDER ENTRY LIST
CPPM-010	EVENT ORDER ROYALTY/USAGE SUMMARY
CPSD-014	MONETARY ENTRY LIST
CPSD-016	LOCKBOX ACCEPTED
CPSD-018	LOCK BOX REJECTED
CPSD-028	UNPOSTED NON-MONETARY ITEMS
CPSD-030	UNPOSTED MONETARY ITEMS
CPSD-100	LEDGER ACTIVITY REPORT
CPSM-300	ACCOUNTS RECEIVABLE JOURNAL
CPSM-302	MONTHLY MONETARY TRANSACTION ACTIVITY
CPSM-304	MONTHLY ADJUSTMENT BY REASON
CPSM-306	PAYMENT ADJUST COMPOSITION REPORT
CPSM-308	MONTHLY EARNED AND UNEARNED REVENUE
CPSM-310	MONTHLY PAYMENT BATCH RECAP
CPWD-012	WORK ORDERS REJECTED
CPWM-048	TROUBLE CALL RESPONSE TIME
CPWM-320	WORK ORDER RESPONSE TIME
CPSD-332	EFT ACTIVITY REPORT

THIRTY-EIGHTH AMENDMENT

TO

CSG MASTER SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT

BETWEEN

CSG SYSTEMS, INC.

AND

ECHOSTAR SATELLITE L.L.C.

This Thirty-Eighth Amendment (the “Amendment”) is made by and between CSG Systems, Inc., a Delaware corporation (“CSG”) and EchoStar Satellite L.L.C. (“Customer”). CSG and Customer entered into a certain CSG Master Subscriber Management System Agreement dated April 1, 1999, as amended, (the “Agreement”), and now desire to amend the Agreement in accordance with the terms and conditions set forth in this Amendment. If the terms and conditions set forth in this Amendment shall be in conflict with the Agreement, the terms and conditions of this Amendment shall control. Any terms in initial capital letters or all capital letters used as a defined term but not defined in this Amendment shall have the meaning set forth in the Agreement. Upon execution of this Amendment by the parties, any subsequent reference to the Agreement between the parties shall mean the Agreement as amended by this Amendment. Except as amended by this Amendment, the terms and conditions set forth in the Agreement shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. For the fees set forth in Paragraph 2 below, Customer desires to utilize and CSG desires to provide CSG’s Customer Letter services. Therefore, Schedule A is amended to include Customer Letters.

2. Schedule F shall be amended to include the following fees for CSG’s Customer Letter services:

DESCRIPTION OF ITEM/UNIT OF MEASURE	FREQUENCY	PRICE
Customer Letters (Note 4)
1.      Processing – First Physical Page (Black Ink Only with Insertion of Letter Page and Remit Envelope (if any)) (Excludes Paper, Envelopes and Postage) (per letter per system principle) (Note 1)	Monthly	$	***
2.      Processing – Additional Physical Page (Black Ink Only with Insertion of Letter Page) (Excludes Paper)	Monthly	$	***
3.      Customer Letter Paper – 8 1/2 x 11, 24#, Two Preprinted Colors, Minimum Order Quantity – 500,000 (Note 2)	Per Page	$	***
4.      Customer Letter Carrier Envelope – Phase 3.1 Envelope (Note 2)	Per Envelope	$	***
5.      Other Customer Letter Envelopes	Per Envelope		Quote
6.      Start-up Fee	Per Request		No Charge
7.      Custom Paper/Custom Envelope Set-up Fee (Note 3)	Per Request	$	***

Note 1: Pricing for jobs exceeding *** Customer Letters may be quoted at special rates.

Note 2: Paper and envelopes may be quoted should order quantities or specifications change.

Note 3: Customer shall pay the Custom Paper/Custom Envelope Set-up Fee in the event Customer opts to use paper and/or envelopes that require special ordering.

Note 4: CSG shall provide *********** (**) hour turnaround for Customer Letters excluding major holidays.

IN WITNESS WHEREOF, the parties execute this Amendment on the date last signed below.

CSG SYSTEMS, INC. (“CSG”)		ECHOSTAR SATELLITE L.L.C. (“CUSTOMER”)
By:	/S/ Edward C. Nafus	By:	/S/ Dr.-Ing. Germar Schaefer
Name:	Edward C. Nafus	Name:	Dr.-Ing. Germar Schaefer
Title:	Pres, BBS	Title:	SVP, Chief Information Officer
Date:	9/30/04	Date:	9/30/04

EX-10.30

Exhibit 10.30

$100,000,000

CREDIT AGREEMENT

among

CSG SYSTEMS INTERNATIONAL, INC.,

as Borrower,

The Lenders

from Time to Time Parties Hereto,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

KEYBANK NATIONAL ASSOCIATION,

as Syndication Agent,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

and

KEYBANK NATIONAL ASSOCIATION,

as Co-Lead Arrangers and Co-Book Runners

Dated as of September 21, 2004

TABLE OF CONTENTS

		Page
Section 1.	DEFINITIONS	1
1.1	Defined Terms	1
1.2	Other Definitional Provisions	22
Section 2.	AMOUNT AND TERMS OF COMMITMENTS	23
2.1	Revolving Credit Commitments	23
2.2	Procedure for Revolving Credit Borrowing	23
2.3	Swing Line Loans.	23
2.4	Procedure for Swing Line Borrowing	24
2.5	Repayment of Loans; Evidence of Debt	24
2.6	Commitment Fees, etc	25
2.7	Termination or Reduction of Revolving Credit Commitments	26
2.8	Optional Prepayments	26
2.9	Conversion and Continuation Options	27
2.10	Minimum Amounts and Maximum Number of Eurodollar Tranches	28
2.11	Interest Rates and Payment Dates	28
2.12	Computation of Interest and Fees	28
2.13	Inability to Determine Interest Rate	29
2.14	Pro Rata Treatment and Payments	29
2.15	Requirements of Law	31
2.16	Taxes	32
2.17	Indemnity	34
2.18	Illegality	35
2.19	Change of Lending Office	35
2.20	Replacement of Lenders under Certain Circumstances	35
Section 3.	LETTERS OF CREDIT	37
3.1	L/C Commitment	37
3.2	Procedure for Issuance of Letter of Credit	37
3.3	Fees and Other Charges	38
3.4	L/C Participations	38
3.5	Reimbursement Obligation of the Borrower	39
3.6	Obligations Absolute	40
3.7	Letter of Credit Payments	41
3.8	Applications	41
Section 4.	REPRESENTATIONS AND WARRANTIES	41
4.1	Financial Condition	41
4.2	No Change	42
4.3	Corporate Existence; Compliance with Law	42
4.4	Corporate Power; Authorization; Enforceable Obligations	42
4.5	No Legal Bar	42
4.6	No Material Litigation	43
4.7	No Default	43
4.8	Ownership of Property; Liens	43

i

TABLE OF CONTENTS

(continued)

		Page
4.9	Intellectual Property	43
4.10	Taxes	44
4.11	Federal Regulations	44
4.12	Labor Matters	44
4.13	ERISA	44
4.14	Investment Company Act; Other Regulations	45
4.15	Subsidiaries	45
4.16	Use of Proceeds	45
4.17	Environmental Matters	45
4.18	Accuracy of Information, etc	46
4.19	Security Documents	47
4.20	Solvency	47
4.21	Date of Representations and Warranties	48
Section 5.	CONDITIONS PRECEDENT	48
5.1	Conditions to Closing Date	48
5.2	Conditions to Each Extension of Credit	50
Section 6.	AFFIRMATIVE COVENANTS	50
6.1	Financial Statements	50
6.2	Certificates; Other Information	51
6.3	Payment of Obligations	52
6.4	Conduct of Business and Maintenance of Existence, etc	53
6.5	Maintenance of Property; Insurance	53
6.6	Inspection of Property; Books and Records; Discussions	53
6.7	Notices	53
6.8	Environmental Laws	54
6.9	Additional Collateral, etc	55
6.10	Further Assurances	57
Section 7.	NEGATIVE COVENANTS	57
7.1	Financial Condition Covenants	58
7.2	Limitation on Indebtedness	58
7.3	Limitation on Liens	59
7.4	Limitation on Fundamental Changes	61
7.5	Limitation on Disposition of Property	61
7.6	Limitation on Restricted Payments	62
7.7	Limitation on Investments	63
7.8	Limitation on Charter Amendments	65
7.9	Limitation on Transactions with Affiliates	65
7.10	Limitation on Sales and Leasebacks	65
7.11	Limitation on Changes in Fiscal Periods	65
7.12	Limitation on Negative Pledge Clauses	65
7.13	Limitation on Restrictions on Subsidiary Distributions	66
7.14	Limitation on Lines of Business	66

ii

TABLE OF CONTENTS

(continued)

		Page
7.15	Prepayments of Subordinated Debt; Amendments to Indenture	66
7.16	Limitation on Hedge Agreements	67
7.17	Negative Pledge	67
Section 8.	EVENTS OF DEFAULT	68
Section 9.	THE AGENTS	71
9.1	Appointment	71
9.2	Delegation of Duties	71
9.3	Exculpatory Provisions	71
9.4	Reliance by Agents	72
9.5	Notice of Default	73
9.6	Non-Reliance on Agents and Other Lenders	73
9.7	Indemnification	74
9.8	Agent in Its Individual Capacity	75
9.9	Successor Administrative Agent	75
9.10	Collateral Matters; Authorization to Release Liens and Guarantees	75
9.11	The Arrangers and the Syndication Agent	76
Section 10.	MISCELLANEOUS	76
10.1	Amendments and Waivers	76
10.2	Notices	77
10.3	No Waiver; Cumulative Remedies	78
10.4	Survival of Representations and Warranties	78
10.5	Payment of Expenses	79
10.6	Successors and Assigns; Participations and Assignments	80
10.7	Adjustments; Set-off	83
10.8	Counterparts	84
10.9	Severability	84
10.10	Integration	84
10.11	GOVERNING LAW	84
10.12	Submission To Jurisdiction; Waivers	84
10.13	Acknowledgments	85
10.14	Confidentiality	85
10.15	Release of Collateral and Guarantee Obligations	86
10.16	Certain Provisions Regarding Outstanding Letters of Credit	87
10.17	Accounting Changes	87
10.18	Delivery of Lender Addenda	88
10.19	Designated Senior Indebtedness	88
10.20	WAIVERS OF JURY TRIAL	88
10.21	Patriot Act	88

iii

ANNEXES:
A	Pricing Grid
SCHEDULES:
1.1A	Permitted Investments
4.4	Consents, Authorizations, Filings and Notices
4.15	Subsidiaries
4.19-1	UCC Filing Jurisdictions
4.19-2	UCC Financing Statements to Remain on File
4.19-3	UCC Financing Statements to be Terminated
7.2	Existing Indebtedness
7.3	Existing Liens
EXHIBITS:
A	Form of Guarantee and Collateral Agreement
B	Form of Compliance Certificate
C	Form of Closing Certificate
D	Form of Borrowing Notice
E	Form of Assignment and Acceptance
F-1	Form of Revolving Credit Note
F-2	Form of Swing Line Note
G	Form of Exemption Certificate
H	Form of Lender Addendum
I	Form of Notice of Conversion/Continuation

iv

CREDIT AGREEMENT, dated as of September 21, 2004, among CSG SYSTEMS INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (the “Lenders”), WELLS FARGO BANK NATIONAL ASSOCIATION, as administrative agent (in such capacity and as further defined below, the “Administrative Agent”), and KEYBANK NATIONAL ASSOCIATION, as syndication agent (in such capacity, the “Syndication Agent”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested that the Lenders make available to the Borrower the credit facilities described herein for ongoing working capital, general corporate purposes and for the other purposes expressly set forth herein; and

WHEREAS, each of the Lenders and the other parties hereto are willing to make available the credit facilities described herein;

NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms.

As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

“Adjusted LIBOR”: for each Interest Period in respect of LIBOR Loans comprising part of the same borrowing, an interest rate per annum (rounded upward, if necessary, to the nearest 1/100^th of one percent (0.01%)) determined pursuant to the following formula:

Adjusted LIBOR =	LIBOR
	1.00 – Eurodollar Reserve Percentage

“Adjustment Date”: as defined in the Pricing Grid.

“Administrative Agent”: as defined in the preamble hereto; and shall include any successor Administrative Agent appointed pursuant to Section 9.9.

“Affiliate”: as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan or Multiemployer Plan). For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 20% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

1

“Agents”: the collective reference to the Syndication Agent and the Administrative Agent.

“Aggregate Available Revolving Credit Commitments”: the aggregate of the Available Revolving Credit Commitments of each Lender having a Revolving Credit Commitment.

“Aggregate Exposure”: with respect to any Lender at any time, an amount equal to the amount of such Lender’s Revolving Credit Commitment then in effect or, if the Revolving Credit Commitments have been terminated, the amount of such Lender’s Revolving Extensions of Credit then outstanding.

“Aggregate Exposure Percentage”: with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the sum of the Aggregate Exposures of all Lenders at such time.

“Agreement”: this Credit Agreement, as amended, supplemented or otherwise modified from time to time.

“Applicable Margin”: for each Type of Loan, the rate per annum set forth under the relevant column heading as set forth in the Pricing Grid.

“Application”: an application, in such form as the relevant Issuing Lender may reasonably specify from time to time in accordance with its customary practice, requesting such Issuing Lender to issue a Letter of Credit.

“Arrangers”: the collective reference to Wells Fargo and KeyBank in their separate capacities as co-lead arrangers and co-book-runners.

“Assignee”: as defined in Section 10.6(c).

“Assignment and Acceptance”: an Assignment and Acceptance, substantially in the form of Exhibit E.

“Assignor”: as defined in Section 10.6(c).

“Available Revolving Credit Commitment”: with respect to any Revolving Credit Lender at any time, an amount equal to (a) such Lender’s Revolving Credit Commitment then in effect less the sum of (b) (i) such Lender’s Revolving Extensions of Credit then outstanding plus (ii) such Lender’s (including such Lender which is also the Swing Line Lender) Revolving Credit Percentage of the Swing Line Extensions of Credit then outstanding.

“Base Rate”: for any day, the higher of (a) the per annum floating rate established by Wells Fargo in San Francisco, California as its “prime rate” for domestic (United States) commercial loans in effect on such day (the “Prime Rate”) and (b) the per annum floating rate equal to one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate in effect on such day. The Prime Rate is a rate set by Wells Fargo based upon various factors, including Wells Fargo’s costs and desired return, general economic conditions and other factors, and is

2

neither directly tied to an external rate of interest or index nor necessarily the lowest or best rate of interest actually charged by Wells Fargo at any given time to any customer or particular class of customers for any particular credit extension. Wells Fargo may make commercial or other loans at rates of interest at, above or below the Prime Rate. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loans”: Loans for which the applicable rate of interest is based upon the Base Rate.

“Benefited Lender”: as defined in Section 10.7(a).

“Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).

“Borrower”: as defined in the preamble hereto.

“Borrowing Date”: any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.

“Borrowing Notice”: with respect to any request for a borrowing of Loans hereunder, a notice from the Borrower, substantially in the form of, and containing the information prescribed by, Exhibit D.

“Business Day”: (a) for all purposes other than as covered by clause (b) below, a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, LIBOR Loans, any day which is a Business Day described in clause (a) and which is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market.

“Capital Lease Obligations”: with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP; and the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time

3

deposits or overnight bank deposits having maturities of one year or less from the date of acquisition issued by (i) any commercial bank organized under the laws of the United States of America or any state thereof, or any branch or agency of a foreign bank licensed to conduct business in the United States of America, in each case having combined capital and surplus of not less than $500,000,000 or (ii) any Lender; (c) commercial paper of an issuer rated at least A-2 by S&P or P-2 by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within 270 days from the date of acquisition; (d) repurchase obligations of (i) any Lender, (ii) any commercial bank satisfying the requirements of clause (b) of this definition or (iii) any other Person (x) whose commercial paper (or the commercial paper of whose direct or indirect parent) satisfies the ratings criteria set forth in clause (c) above or (y) whose long term unsecured senior debt (or the long term unsecured senior debt of whose direct or indirect parent) is rated at least A- by S&P or A3 by Moody’s or if both S&P and Moody’s cease publishing ratings of long term unsecured senior debt generally, carries an equivalent rating by another nationally recognized rating agency, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A- by S&P or A-2 by Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) shares of money market mutual or similar funds at least 95% of whose assets are invested in investments satisfying the requirements of clauses (a) through (f) of this definition, as applicable; (h) investments permitted under the guidelines attached hereto as Schedule 1.1A; and (i) in the case of any Subsidiary of the Borrower organized or having a material place of business outside the United States, investments denominated in the currency of the jurisdiction in which such Subsidiary is organized or has a material place of business which are substantially similar to the items specified in clauses (a) through (h) above.

“Change of Control”: the occurrence of any of the following events: (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall acquire, or obtain rights (whether by means or warrants, options or otherwise) to acquire, beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of securities representing greater than 30% of the combined voting power of all securities of the Borrower ordinarily entitled to vote in the election of directors; (b) a majority of the board of directors of the Borrower shall cease to consist of Continuing Directors; (c) the Borrower shall cease to own and control, of record and beneficially, directly, 100% of each class of outstanding Capital Stock of CSG free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement); or (d) a Specified Change of Control.

“Closing Date”: the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied, which date shall be not later than September 30, 2004.

4

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

“Collateral”: all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

“Commitment”: with respect to any Lender, each of the Revolving Credit Commitment and the Swing Line Commitment of such Lender.

“Commitment Fee Rate”: the Commitment Fee Rate will be determined pursuant to the Pricing Grid.

“Commonly Controlled Entity”: an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.

“Compliance Certificate”: a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B.

“Consolidated EBITDA”: of any Person, as measured on a consolidated basis for such Person and its Subsidiaries for any period, Consolidated Net Income of such Person and its Subsidiaries for such period plus without duplication and to the extent reflected as a charge in the consolidated statement of income for such period, the sum of (a) income tax expense, (b) interest expense (including the amortization or writeoff of debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness), (c) depreciation and amortization expense, (d) acquired research and development efforts that are expensed at the time of or immediately following acquisition, (e) fees, expenses, financing costs, severance costs and management bonuses incurred or paid in connection with the acquisition of any Person or business division or line, (f) amortization or writedowns of intangible assets (including goodwill), organizational costs and other non-current assets, (g) extraordinary, unusual or non-recurring expenses or losses (including restructuring charges and losses on sales of assets outside of the ordinary course of business), (h) other non-cash charges (including stock-based compensation expense) and (i) any mark-to-market losses recognized pursuant to FASB 133 and minus without duplication and to the extent reflected as a credit in the consolidated statement of income for such period, the sum of (j) interest income (except to the extent deducted in determining the amount of consolidated interest expense added pursuant to clause (b) above in this definition), (k) extraordinary, unusual or non-recurring income or gains (including gains on the sales of assets outside of the ordinary course of business), (l) other non-cash income and (m) any mark-to-market gains recognized pursuant to FASB 133. Notwithstanding the above definition, for purposes of measuring the Consolidated Leverage Ratio, to the extent such quarterly periods are included in the calculation thereof, Consolidated EBITDA for the fiscal quarters ending on the following dates shall be deemed to be:

September 30, 2003	$	40,550,000
December 31, 2003:	$	31,074,000
March 31, 2004:	$	36,864,000
June 30, 2004:	$	36,194,000

5

“Consolidated Interest Coverage Ratio”: for any period, the ratio of (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period to (b) Consolidated Interest Expense of the Borrower and its Subsidiaries for such period.

“Consolidated Interest Expense”: of any Person, as measured on a consolidated basis for such Person and its Subsidiaries for any period, total cash interest expense (including that attributable to Capital Lease Obligations) for such period with respect to all outstanding Indebtedness (including, without limitation, all commissions, discounts and other fees and charges owed by such Person or any of its Subsidiaries with respect to letters of credit and bankers’ acceptance financing and net costs of such Person or any of its Subsidiaries under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP but excluding up-front fees and expenses); provided that for purposes of calculating the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters ending prior to the end of the fourth full fiscal quarter ended after the Closing Date, Consolidated Interest Expense for such period of four consecutive fiscal quarters shall be deemed to be (i) in the case of the period ended at the end of the first such fiscal quarter, Consolidated Interest Expense for such fiscal quarter multiplied by 4, (ii) in the case of the period ended at the end of the second such fiscal quarter, Consolidated Interest Expense for the period of two fiscal quarters ended at the end of such fiscal quarter multiplied by 2 and (iii) in the case of the period ended at the end of the third such fiscal quarter, Consolidated Interest Expense for the period of three fiscal quarters ended at the end of such fiscal quarter multiplied by  ⁴/3.

“Consolidated Leverage Ratio”: for any day, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four consecutive fiscal quarters of the Borrower most recently ended on or prior to such date; provided that for purposes of calculating Consolidated EBITDA of the Borrower and its Subsidiaries for any period, (i) the Consolidated EBITDA of any Person or business acquired by the Borrower or any of its Subsidiaries during such period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred on the first day of such period and including cost savings (to the extent including such cost savings would be permitted in accordance with Regulation S-X) that would have been realized had such acquisition occurred on such day) if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such Person and the related consolidated statements of income and stockholders’ equity and of cash flows for the period in respect of which Consolidated EBITDA is to be calculated have been provided to the Administrative Agent and the Lenders prior to the date of such acquisition, (ii) the Consolidated EBITDA of any Person Disposed of by the Borrower or any of its Subsidiaries, or attributable to the assets Disposed of, during such period shall be excluded for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period) and (iii) the Consolidated EBITDA attributable to any Customer Service Agreement for which CSA Payments have been made during such period shall be included, at the election of the Borrower, on a pro forma basis for such period (assuming that such Customer Service Agreement had become effective on the first day of such period) if the Borrower’s calculation of such additional Consolidated EBITDA has been provided to the Administrative Agent and the Lenders.

6

“Consolidated Net Income”: of any Person for any period, the consolidated net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that in calculating Consolidated Net Income of the Borrower and its consolidated Subsidiaries for any period, there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries (except, in the case of the calculation of the Consolidated Leverage Ratio, to the extent otherwise provided in the definition of “Consolidated Leverage Ratio”), (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

“Consolidated Total Debt”: at any date, the aggregate principal amount of all Funded Debt of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

“Continuing Directors”: the directors of the Borrower on the Closing Date, and each other director of the Borrower, if, in each case, such other director’s nomination for election to the board of directors of the Borrower is recommended by at least 66-2/3% of the then Continuing Directors.

“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound.

“Control Investment Affiliate”: as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“Copyrights”: as defined in the Guarantee and Collateral Agreement.

“CSA Payments”: signing bonuses paid by the Borrower and its Subsidiaries to any Customer Service Client in consideration of, and as an inducement to, such Customer Service Client’s entering into a Customer Service Agreement and other investments by the Borrower and its Subsidiaries in Customer Service Agreements.

“CSG”: CSG Systems Inc., a Delaware corporation and a Wholly Owned Subsidiary of the Borrower.

7

“Customer Services Agreement”: any contract or agreement (or series of related contracts or agreements) entered into by the Borrower or any of its Subsidiaries with any Person, pursuant to which the Borrower or any of its Subsidiaries renders services or sells, leases or licenses its products or property, in either case related to the business of providing subscriber or customer management services, billing and statement mailing services, management reporting, live-voice operator telemarketing services, Cableperks and billing statement inserts, refund check processing, pay-per-view itemization, insert printing, decision support services, VIP services and other similar services for businesses in various industries and developing and licensing related software to multiple cable system operators, direct broadcast satellite television operators, cable programming providers, video dial tone providers, telephony and telephone system operators, on-line service providers, utility providers, insurance companies, financial services providers and businesses in other industries.

“Customer Services Client”: any Person who has entered into a Customer Services Agreement.

“Default”: any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Deposit Accounts”: as defined in the Guarantee and Collateral Agreement.

“Derivatives Counterparty”: as defined in Section 7.6.

“Designated Subsidiary”: any Domestic Subsidiary that is not a Wholly Owned Subsidiary and that has been designated by the Borrower as a Designated Subsidiary for purposes of this Agreement by written notice to the Administrative Agent.

“Disposition”: with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof (except for any license of Intellectual Property not described in clauses (b) or (c) below) and shall include, without limitation, (a) the issuance of Capital Stock by any Subsidiary of the Borrower (other than any such issuance by any such Person to the Borrower or its Subsidiary, as the case may be, that is the holder of the remaining Capital Stock of such Person), (b) any exclusive license in the United States of Intellectual Property relating to the Communications Control System product (“CCS”), and (c) any long term exclusive license in the United States of Intellectual Property of the Borrower or any of its Subsidiaries (other than Intellectual Property relating to CCS), and the terms “Dispose” and “Disposed of” shall have correlative meanings.

“Dollars” and “$”: lawful currency of the United States of America.

“Domestic Subsidiary”: any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States of America.

“Environmental Laws”: any and all laws, rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees, or other legally enforceable requirements (including, without limitation, common law) of any international authority, foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment, or

8

protection of human health or employee health and safety (as affected by the environment or by any substance the exposure to which is reasonably suspected of causing harm to human health), as has been, is now, or may at any time hereafter be, in effect.

“Environmental Permits”: any and all permits, licenses, approvals, registrations, notifications, exemptions and other authorizations required under any Environmental Law.

“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Eurodollar Reserve Percentage”: the reserve percentage (expressed as a decimal, rounded upward, if necessary, to the nearest 1/100^th of one percent (0.01%)) in effect on the date LIBOR for such Interest Period is determined (whether or not applicable to any Lender) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”) having a term comparable to such Interest Period.

“Eurodollar Tranche”: the collective reference to LIBOR Loans under the Revolving Credit Facility, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

“Event of Default”: any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Excluded Assets”: as defined in the Guarantee and Collateral Agreement.

“Excluded Foreign Subsidiaries”: any Foreign Subsidiary of the Borrower in respect of which no election has been made to treat such Foreign Subsidiary for United States federal income tax purposes as a branch of a Person formed or organized under the laws of the United States of America, or any State thereof or partnership the partners of which are Persons formed or organized under the laws of the United States of America, or any State thereof.

“Federal Funds Effective Rate”: for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, “H.15(519)”) for such day opposite the caption “Federal Funds (Effective)” (or, if such day is not a Business Day, for the Business Day next preceding such day). If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the “Composite 3:30 p.m. Quotation”) for such day under the caption “Federal Funds Effective Rate” (or, if such day is not a Business Day, for the Business Day next preceding such day). If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent.

9

“Foreign Subsidiary”: any Subsidiary of the Borrower that is not a Domestic Subsidiary.

“FQ1”, “FQ2 “, “FQ3”, and “FQ4”: when used with a numerical year designation, means the first, second, third or fourth fiscal quarters, respectively, of such fiscal year of the Borrower. (e.g., FQ4 2004 means the fourth fiscal quarter of the Borrower’s 2004 fiscal year, which ends December 31, 2004).

“Funded Debt”: with respect to any Person, all Indebtedness of such Person of the types described in, without duplication, clauses (a) through (e), (h) and (j) (but in the instance of Guarantee Obligations under clause (h), only to the extent the Indebtedness so guaranteed pursuant to such Guarantee Obligations are of a type described in clauses (a) through (e) or clause (j)), in each case of the definition of “Indebtedness” in this Section 1.1; provided, however, that the Indebtedness of any Person whose earnings are excluded from the calculation of Consolidated Net Income for any period pursuant to clause (c) of the definition of “Consolidated Net Income” in this Section 1.1 shall not be included for purposes of calculating Funded Debt at any time during such period.

“Funding Office”: the office specified from time to time by the Administrative Agent as its funding office by notice to the Borrower and the Lenders.

“GAAP”: generally accepted accounting principles in the United States of America as in effect from time to time.

“Governmental Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Grantor”: as defined in the Guarantee and Collateral Agreement.

“Guarantee and Collateral Agreement”: the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time.

“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, the issuer or maker of or under any letter of credit, foreign bank guaranty or comparable third party payment or credit support agreement or instrument), if to induce the creation of such obligation of such other Person, the guaranteeing Person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (ii) to advance

10

or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

“Hedge Agreements”: all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar derivative or hedging instrument or arrangement entered into by the Borrower or any its Subsidiaries to provide for protection of such Person against fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies.

“Immaterial Subsidiaries”: any Subsidiaries of the Borrower (a) the combined revenues of which constituted, for the period of four fiscal quarters ended on the last day of the most recent fiscal quarter or fiscal year in respect of which financial statements shall have been delivered pursuant to Section 6.1, less than, for all such Subsidiaries in the aggregate, 5% of the consolidated revenues of the Borrower and its Subsidiaries for such period and (b) the consolidated assets of which constituted, as at such last day, less than, for all such Subsidiaries in the aggregate, 5% of the consolidated assets of the Borrower and its Subsidiaries at such day.

“Inactive Subsidiary”: each Subsidiary of the Borrower that has total net assets of $10,000 or less and has not Subsidiaries (other than Inactive Subsidiaries).

“Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than (i) trade or other accounts payable incurred in the ordinary course of such Person’s business, (ii) deferred compensation arrangements with respect to officers, directors, employees or agents of such Person and (iii) client deposits, accrued employee compensation and other liabilities accrued, in each case in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an

11

account party or applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person (other than any obligation to repurchase Capital Stock pursuant to the CSG Employee Stock Purchase Plan or to repurchase options or warrants (or Capital Stock issued upon the exercise of options or warrants) in connection with the “cashless exercise” of options or warrants), (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation; (j) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP and (k) for the purposes of Section 8(e) only, all obligations of such Person in respect of Hedge Agreements (provided that the principal amount of the Indebtedness of any Person in respect of any Hedge Agreement at any time shall be the amount, if any, that would, under the agreements and instruments governing such Hedge Agreement, be payable by such Person at such time if such Hedge Agreement were terminated at such time by the other party thereto, in each case taking into account any netting or set-off arrangements or agreements applicable thereto).

“Indemnified Liabilities”: as defined in Section 10.5(d).

“Indemnitee”: as defined in Section 10.5(d).

“Indenture”: that certain Indenture dated June 2, 2004 between the Borrower, as issuer, and Deutsche Bank Trust Company Americas, as trustee, pursuant to which the Borrower issued its 2.50% Senior Subordinated Convertible Contingent Debt Securities^SM (CODES^SM) due 2024.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvent”: pertaining to a condition of Insolvency.

“Intellectual Property”: the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Interest Payment Date”: (a) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any LIBOR Loan having an Interest Period of three months or shorter, the last day of such Interest Period, (c) as to any LIBOR Loan having an Interest

12

Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any portion of any LIBOR Loan that is prepaid, the date of any such prepayment.

“Interest Period”: as to any LIBOR Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one, two, three, six or, with the consent of all relevant Lenders, nine or twelve months thereafter, as selected by the Borrower in its Borrowing Notice or Notice of Conversion/Continuation, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one, two, three, six or, with the consent of all relevant Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable Notice of Continuation/Conversion given to the Administrative Agent prior to 11:00 A.M., Denver time, at least three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(ii) any Interest Period that would otherwise extend beyond the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date;

(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iv) notwithstanding the foregoing, with respect to the first Interest Period in respect of any Loan that commences on or after the Closing Date, the Borrower may elect an Interest Period that commences on the first day otherwise applicable thereto and, subject to clauses (i) and (iii) above, ends on the last day of the calendar month in which such Interest Period begins.

“Interest Rate Determination Date”: with respect to any Interest Period, the date for calculating the applicable LIBOR for purposes of determining the interest rate for such Interest Period. The Interest Rate Determination Date for any LIBOR Loan shall be the second Business Day prior to the first day of the related Interest Period for such LIBOR Loan.

“Investments”: as defined in Section 7.7.

“Issuing Lender”: Wells Fargo in its capacity as issuer of the Letters of Credit hereunder, and each other Lender from time to time designated by the Borrower as an Issuing Lender with the consent of such Lender and the Administrative Agent (which consent, in the case of the Administrative Agent, will not be unreasonably withheld).

13

“KeyBank”: KeyBank National Association.

“L/C Commitment”: $40,000,000.

“L/C Fee Payment Date”: the last day of each March, June, September and December and the Revolving Credit Termination Date.

“L/C Obligations”: at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5.

“L/C Participants”: with respect to any Letter of Credit, the collective reference to all the Revolving Credit Lenders other than the Issuing Lender that issued such letter of Credit.

“Lender Addendum”: with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit H, to be executed and delivered by such Lender on the Closing Date as provided in Section 10.18.

“Lenders”: as defined in the preamble hereto. Unless the context clearly indicates otherwise, “Lenders” shall include the Swing Line Lender.

“Letter of Credit Rights”: as defined in the Guarantee and Collateral Agreement.

“Letters of Credit”: as defined in Section 3.1(a).

“LIBOR”: for any Interest Rate Determination Date with respect to an Interest Period for any Loan to be made, continued as or converted into a LIBOR Loan, the London interbank offered rate, rounded upward, if necessary, to the nearest 1/100^th of one percent (0.01%), equal to the offered rate for deposits in Dollars for a period equal to such Interest Period, commencing on the first day of such Interest Period, which appears on Page LIBOR01 of the Reuters screen (or such other page as may replace Page LIBOR01 on that service or any successor service for the purpose of displaying London interbank offered rates of major banks) as of 11:00 A.M., London time, on such Interest Rate Determination Date. If the LIBOR for an Interest Period cannot be determined pursuant to the preceding sentence, then the LIBOR for such Interest Period shall be determined on the basis of the rates at which deposits in Dollars are offered to the Reference Lender at approximately 11:00 A.M., London time, on such Interest Rate Determination Date on an amount approximately equal to the principal amount of the Reference Lender’s LIBOR Loans to which such Interest Period is applicable. The Administrative Agent will request the principal London office of the Reference Lender to provide a quotation of its rate.

“LIBOR Loans”: Loans for which the applicable rate of interest is based upon Adjusted LIBOR.

“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference,

14

priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

“Liquidity”: without duplication, the sum of (a) cash on hand and Cash Equivalents of the Borrower and its Subsidiaries plus (b) the Aggregate Available Revolving Credit Commitments.

“Loan”: any loan made by any Lender pursuant to this Agreement.

“Loan Documents”: this Agreement, the Security Documents, the Applications and the Notes.

“Loan Parties”: the Borrower and each other Subsidiary of the Borrower that is a party to a Loan Document.

“Material Adverse Effect”: a material adverse effect on (a) the business, property, financial condition or results of operations of the Borrower and its Subsidiaries (which are Subsidiary Guarantors), taken as a whole, or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder.

“Material Customer Services Agreement”: at any time, any Customer Service Agreement the processing revenues under which, during the period of four consecutive fiscal quarters of the Borrower ended on the last day of the fiscal quarter most recently ended for which financial statements shall have been delivered pursuant to Section 5.1(b) or 6.1, shall exceed 10% of the consolidated processing revenues of the Borrower and its Subsidiaries for such period.

“Material Environmental Amount”: an amount or amounts payable by the Borrower and/or any of its Subsidiaries, in the aggregate in excess of $10,000,000, for: costs to comply with any Environmental Law; costs of any investigation, and any remediation, of any Material of Environmental Concern; and compensatory damages (including, without limitation damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental Law.

“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants, contaminants, radioactivity, and any other substances or forces of any kind, whether or not any such substance or force is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or would reasonably be expected to give rise to liability under any Environmental Law.

“Moody’s”: Moody’s Investors Service, Inc. (or successors thereto).

“Multiemployer Plan”: a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

15

“Non-Excluded Taxes”: as defined in Section 2.16(a).

“Non-U.S. Lender”: as defined in Section 2.16(d).

“Note”: any promissory note evidencing any Loan.

“Notice of Conversion/Continuation”: with respect to any request for conversion or continuation of Loans hereunder, a notice from the Borrower, substantially in the form of, and containing the information prescribed by, Exhibit I, delivered to the Administrative Agent.

“Obligations”: the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender or any Qualified Counterparty, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided that (a) obligations of the Borrower or any of its Subsidiaries under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (b) any release of Collateral or Subsidiary Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements.

“Other Taxes”: any and all present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant”: as defined in Section 10.6(b).

“Payment Amount”: as defined in Section 3.5.

“Payment Office”: the office specified from time to time by the Administrative Agent as its payment office by notice to the Borrower and the Lenders.

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

16

“Permitted Acquisition”: any acquisition by the Borrower or any of its Subsidiaries of all or substantially all of the Capital Stock, or substantially all of the assets, of any Person, or of all or substantially all of the assets constituting a division or business line of any Person (including pursuant to an merger, consolidation or similar transaction), if such acquisition complies with the following criteria:

(a) no Default (other than a Default existing solely under Section 8.1(d)) or Event of Default shall be in effect after giving effect to such acquisition, and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect;

(b) after giving effect to the consummation of such acquisition and to the incurrence of any Indebtedness associated therewith, the Borrower shall be in pro forma compliance with the covenant in Section 7.1(c);

(c) the acquisition of the Person, division or line of business acquired shall not be in violation of Section 7.14;

(d) except as otherwise expressly permitted by Section 7.7(n) relating to Investments in joint ventures, any Person whose Capital Stock is directly or indirectly acquired shall be, after giving effect to such acquisition, a direct or an indirect Subsidiary of the Borrower; and

(e) if the total consideration for, or value paid in, such acquisition, is at least $10.0 million (whether such consideration or value paid is in the form of cash, securities or a combination thereof and including any escrowed or other amounts held back), the Borrower shall have given notice of such acquisition to the Administrative Agent pursuant to Section 6.7(f).

“Permitted CSA Payment”: any CSA Payment made by the Borrower or any of its Subsidiaries, if such CSA Payment complies with the following criteria:

(a) no Default (other than a Default existing solely under Section 8.1(d)) or Event of Default shall be in effect after giving effect to the making of such CSA Payment; and

(b) after giving effect to the making of such CSA Payment, the Borrower shall be in pro forma compliance with the covenant in Section 7.1(c).

“Permitted Subordinated Debt Payment”: as defined in Section 7.7(m).

“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Plan”: at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledged Stock”: as defined in the Guarantee and Collateral Agreement.

17

“Pricing Grid”: the pricing grid attached hereto as Annex A.

“Prime Rate”: as defined in the definition of Base Rate.

“Projections”: as defined in Section 6.2(c).

“Property”: any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.

“Qualified Counterparty”: with respect to any Specified Hedge Agreement, any counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or an affiliate of a Lender.

“Reference Lender”: Wells Fargo.

“Register”: as defined in Section 10.6(d).

“Regulation U”: Regulation U of the Board as in effect from time to time.

“Regulation X”: Regulation X of the Board as in effect from time to time.

“Reimbursement Obligation”: the obligation of the Borrower to reimburse an Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing Lender.

“Related Fund”: with respect to any Lender, any fund that (a) invests in commercial loans and (b) is managed or advised by the same investment advisor as such Lender, by such Lender or an Affiliate of such Lender.

“Reorganization”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

“Required Lenders”: at any time, the holders of more than 50% of the Total Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding; provided that if at any applicable time there shall be two or more Lenders, then Required Lenders must also consist of at least two (2) Lenders (which are not an Affiliate or a Related Fund of the other).

“Requirement of Law”: as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

18

“Responsible Officer”: with respect to any Person, the chief executive officer, president, chief financial officer, principal accounting officer or treasurer of such Person. Unless otherwise qualified, all references to a “Responsible Officer” in this Agreement shall refer to a Responsible Officer of the Borrower.

“Restricted Payments”: as defined in Section 7.6.

“Revolving Credit Commitment”: as to any Lender, the obligation of such Lender, if any, to make Revolving Credit Loans and to participate in Letters of Credit, in an aggregate principal and/or face amount not to exceed the amount set forth under the heading “Revolving Credit Commitment” opposite such Lender’s name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Total Revolving Credit Commitments is $100,000,000.

“Revolving Credit Commitment Period”: the period from and including the Closing Date to the Revolving Credit Termination Date.

“Revolving Credit Facility”: the Revolving Credit Commitments and the extensions of credit made thereunder.

“Revolving Credit Lender”: each Lender that has a Revolving Credit Commitment or that is the holder of Revolving Extensions of Credit.

“Revolving Credit Loans”: as defined in Section 2.1(a).

“Revolving Credit Note”: as defined in Section 2.5(f).

“Revolving Credit Percentage”: as to any Revolving Credit Lender at any time, the percentage which such Lender’s Revolving Credit Commitment then constitutes of the Total Revolving Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate amount of such Lender’s Revolving Extensions of Credit then outstanding constitutes of the amount of the Total Revolving Extensions of Credit then outstanding).

“Revolving Credit Termination Date”: the date which is five years after the Closing Date.

“Revolving Extensions of Credit”: as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding and (b) the aggregate amount of such Lender’s participating interests in the L/C Obligations then outstanding (or, in the case of each Issuing Lender, such Issuing Lender’s interest remaining in such L/C Obligations after giving effect to the grant of participating interests therein to the other Lenders pursuant to Section 3.4).

“S&P”: Standard & Poor’s Ratings Services (or successors thereto).

19

“SEC”: the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority).

“Secured Parties”: as defined in the Guarantee and Collateral Agreement.

“Securities Accounts”: as defined in the Guarantee and Collateral Agreement.

“Security Documents”: the collective reference to the Guarantee and Collateral Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.

“Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

“Solvent”: with respect to any Person, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person, as of such date, exceeds the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) such Person does not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (c) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (A) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Change of Control”: a “Change of Control”, or like event, as defined in the Indenture or in any other indenture pursuant to which Indebtedness of the Borrower or CSG may be outstanding at any time.

“Specified Hedge Agreement”: any Hedge Agreement entered into by the Borrower or any of its Subsidiaries with (a) any Lender or any affiliate thereof, as counterparty or (b) any Person that was a Lender or an affiliate of a Lender at the time such Hedge Agreement was entered into, as counterparty.

“Standby Letter of Credit”: an irrevocable letter of credit (other than a Trade Letter of Credit) for the account of any Loan Party and for the benefit of any holder of obligations of the Borrower or any of its Subsidiaries.

“Subordinated Debt”: the Indebtedness of the Borrower in the original principal amount of $230,000,000 incurred pursuant to the Indenture and the other Subordinated Debt Documents.

20

“Subordinated Debt Documents”: the Indenture, and all other instruments, agreements and documents evidencing or governing the Subordinated Debt or providing for any Guarantee Obligation thereof.

“Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Subsidiary Guarantor”: each Subsidiary of the Borrower other than any Excluded Foreign Subsidiary, any Designated Subsidiary and any Inactive Subsidiary.

“Swing Line Commitment”: as to the Swing Line Lender, the obligation of such Lender, if any, to make Swing Line Loans in an aggregate principal amount not to exceed the amount set forth under the heading “Swing Line Credit Commitment” opposite such Lender’s name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Swing Line Lender’s Commitment is $10,000,000.

“Swing Line Extensions of Credit”: as to the Swing Line Lender at any time, an amount equal to the aggregate principal amount of all Swing Line Loans made by the Swing Line Lender then outstanding.

“Swing Line Facility”: the Swing Line Commitment and the extensions of credit made thereunder.

“Swing Line Lender”: Wells Fargo, in its capacity as Lender of Swing Line Loans hereunder.

“Swing Line Loan”: a Loan made pursuant to Section 2.3.

“Swing Line Maturity Date”: as defined in Section 2.5(b).

“Swing Line Note”: as defined in Section 2.5(f).

“Syndication Agent”: as defined in the preamble hereto.

“Total Revolving Credit Commitments”: at any time, the aggregate amount of the Revolving Credit Commitments then in effect for all Lenders.

“Total Revolving Extensions of Credit”: at any time, the aggregate amount of the Revolving Extensions of Credit of all Revolving Credit Lenders outstanding at such time.

21

“Trade Letter of Credit”: a documentary, trade or commercial letter of credit in respect of the purchase of goods or services issued for the account of any Loan Party and for the benefit of any holder of obligations of the Borrower or any of its Subsidiaries incurred in the ordinary course of business.

“Transferee”: as defined in Section 10.14.

“Type”: as to any Loan, its nature as a Base Rate Loan or a LIBOR Loan.

“Uniform Commercial Code” or “UCC”: as defined in the Guarantee and Collateral Agreement.

“Wells Fargo”: Wells Fargo Bank, National Association.

“Wholly Owned Subsidiary”: as to any Person, any other Person all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

1.2 Other Definitional Provisions.

(a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(e) All calculations of financial ratios set forth in Section 7.1, and the calculation of the Consolidated Leverage Ratio for purposes of determining the Applicable Margin and the Commitment Fee Rate, shall be calculated to the same number of decimal places as the relevant ratios are expressed in and shall be rounded upward if the number in the decimal place immediately following the last calculated decimal place is five or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place and the calculation of the ratio is 5.125, the ratio will be rounded up to 5.13.

22

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Revolving Credit Commitments.

Subject to the terms and conditions hereof, the Revolving Credit Lenders severally agree to make revolving credit loans (“Revolving Credit Loans”) to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding for each Revolving Credit Lender which, when added to such Lender’s Revolving Credit Percentage of the L/C Obligations then outstanding and such Lender’s Revolving Credit Percentage of the Swing Line Extensions of Credit then outstanding, does not exceed the amount of such Lender’s Revolving Credit Commitment. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit Loans may from time to time be LIBOR Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.9, provided that no Revolving Credit Loan shall be made as a LIBOR Loan after the day that is one month prior to the Revolving Credit Termination Date.

2.2 Procedure for Revolving Credit Borrowing.

The Borrower may borrow under the Revolving Credit Commitments on any Business Day during the Revolving Credit Commitment Period, provided that the Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior to 11:00 A.M., Denver time, (a) three Business Days prior to the requested Borrowing Date, in the case of LIBOR Loans or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans. Each borrowing of Revolving Credit Loans under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, (I) $1,000,000 or a multiple of $500,000 in excess thereof or (II) the then aggregate Available Revolving Credit Commitments; provided that a borrowing of Base Rate Loans made pursuant to Section 3.5 shall be in the amount of the Payment Amount to be paid with the proceeds of such Base Rate Loans) and (y) in the case of LIBOR Loans, $2,500,000 or a whole multiple of $500,000 in excess thereof. Upon receipt of any such Borrowing Notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make its Revolving Credit Percentage of the amount of each borrowing of Revolving Credit Loans available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 A.M.(Noon), Denver time, on such requested Borrowing Date in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in like funds as received by the Administrative Agent.

2.3 Swing Line Loans.

Subject to the terms and conditions hereof, the Swing Line Lender agrees to make loans to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all Swing Line Loans exceeding the Swing Line Commitment or (ii) the sum

23

of (1) all Revolving Extensions of Credit then outstanding plus (2) all Swing Line Extensions of Credit then outstanding, after giving effect to such requested Swing Line Loan, exceeding the Total Revolving Credit Commitments. Each Swing Line Loan shall be in a principal amount of $50,000 or an integral multiple of $50,000; provided that the Swing Line Lender shall not be required to make a Swing Line Loan to refinance an outstanding Swing Line Loan. The Swing Line Facility may be terminated or reduced from time to time as provided herein. Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow Swing Line Loans hereunder, subject to the terms, conditions and limitations set forth herein.

2.4 Procedure for Swing Line Borrowing.

The Borrower shall notify the Administrative Agent by telecopy or by telephone, not later than 11:00 A.M., Denver time, on the day of a proposed Swing Line Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and shall refer to this Agreement. Promptly after such notification, the Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Notice confirming such notification. Each such Borrowing Notice shall be signed by or on behalf of the Borrower and shall specify: (i) that the Borrower is requesting a Swing Line Loan, (ii) the requested date of such Swing Line Loan (which shall be a Business Day), and (iii) the amount of such Swing Line Loan. The Administrative Agent will promptly advise the Swing Line Lender of any notice received from the Borrower pursuant to this Section 2.4. The Swing Line Lender shall make each Swing Line Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swing Line Lender by 2:00 P.M., Denver time, on the date such Swing Line Loan is so requested. Each Swing Line Loan shall be a Base Rate Loan and shall bear interest as provided in Section 2.11 and Section 2.12.

2.5 Repayment of Loans; Evidence of Debt.

(a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the appropriate Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Loan of such Revolving Credit Lender on the Revolving Credit Termination Date (or on such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 8).

(b) The Borrower hereby unconditional promises to pay to the Swing Line Lender the outstanding principal amount of each Swing Line Loan on the earlier of (A) the maturity date specified in the applicable Borrowing Notice (which maturity shall be no later than the ten (10^th) Business Day after the requested Borrowing Date (each such date a “Swing Line Maturity Date”)) and (B) the Revolving Loan Termination Date (or on such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 8); provided, that anything contained in this Agreement to the contrary notwithstanding, (x) unless the Borrower shall have notified the Administrative Agent and the Swing Line Lender prior to 9:00 A.M., Denver time, on the Swing Line Maturity Date for any Swing Line Loan that the Borrower intends on such day to repay such Swing Line Loan with funds other than the proceeds of Revolving Loans, the Borrower shall be deemed to have given a timely Borrowing Notice to the Administrative Agent requesting the Lenders having Revolving Loan Commitments to make Revolving Loans that are Base Rate Loans on such Swing Line Maturity Date in an amount in

24

Dollars equal to the amount of such outstanding Swing Line Loan and the Administrative Agent shall promptly notify each relevant Lender of its Revolving Credit Percentage of such Revolving Loans and (B) Lenders having Revolving Loan Commitments shall, not later than 11:00 A.M., Denver time, on such Swing Line Maturity Date, make Revolving Loans that are Base Rate Loans in the amount of such Swing Line Loan, the proceeds of which shall be applied directly to repay such Swing Line Loan. Each Lender’s obligation to make Revolving Loans pursuant to the immediately preceding sentence shall be absolute and unconditional and shall not, for the avoidance of doubt, be subject to satisfaction of the conditions set forth in Section 5.2.

(c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

(d) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.

(e) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.5(c) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.

(f) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will promptly execute and deliver to such Lender a promissory note of the Borrower evidencing any Revolving Credit Loans or Swing Line Loans, as the case may be, of such Lender, substantially in the forms of Exhibit F-1 or F-2, respectively (a “Revolving Credit Note” or “Swing Line Note”, respectively), with appropriate insertions as to date and principal amount.

2.6 Commitment Fees, etc.

(a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for each day during the period from and including the Closing Date to but excluding the last day of the Revolving Credit Commitment Period, computed at the Commitment Fee Rate for such day on the Available Revolving Credit Commitment of such Lender. The commitment fee computed pursuant to this Section 2.6(a) shall be computed as of the close of business on such day, and shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date, commencing on the first of such dates to occur after the date hereof.

25

For purposes of computing the commitment fee payable to any Lender pursuant to this Section 2.6(a) only and not for any other purpose, (i) the Available Revolving Credit Commitment of each Lender shall be computed without including in such computation such Lender’s Revolving Credit Percentage of the Swing Line Extensions of Credit then outstanding and (ii) notwithstanding clause (i), with respect to the computation of the commitment fee payable to the Lender that is also the Swing Line Lender only, the Available Revolving Credit Commitment of such Lender shall be computed by including in place of such Lender’s Revolving Credit Percentage of the Swing Line Extensions of Credit then outstanding the aggregate principal amount of the Swing Loans then outstanding.

(b) The Borrower agrees to pay to the Agents the fees in the amounts and on the dates previously agreed to in writing by the Borrower, the Agents and the Arrangers.

(c) The Borrower agrees to pay to the Administrative Agent the agency fees in the amounts and on the dates from time to time agreed to in writing by the Borrower and the Administrative Agent.

2.7 Termination or Reduction of Revolving Credit Commitments.

The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitments; provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans, Swing Line Loans or Reimbursement Obligations made, or terminations or expirations of Letters of Credit occurring, on the effective date thereof, the sum of the Total Revolving Extensions of Credit and the total Swing Line Loans then outstanding would exceed the Total Revolving Credit Commitments. Any such reduction shall be in an amount equal to (i) $1,000,000 or a whole multiple of $500,000 in excess thereof or (ii) the then aggregate Available Revolving Credit Commitments, and shall reduce permanently the Revolving Credit Commitments then in effect. To the extent that the Total Revolving Credit Commitments are terminated or are permanently reduced pursuant to this Section 2.7 to an amount less than the amount of the Swing Line Commitment then in effect, the Swing Line Commitment shall be correspondingly terminated or permanently reduced so that at no time is the Swing Line Commitment greater than the Total Revolving Credit Commitments.

2.8 Optional Prepayments.

The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (except as otherwise provided herein), upon irrevocable notice delivered to the Administrative Agent at least one Business Day prior thereto, in the case of Base Rate Loans (or same day notice with respect to Swing Line Loans), and three Business Days prior thereto, in the case of LIBOR Loans, which notice shall, in each case, specify the date and amount of such prepayment, whether such prepayment is of Swing Line Loans or Revolving Credit Loans, and whether such prepayment is of LIBOR Loans or Base Rate Loans; provided that if a LIBOR Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.17.

26

Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Revolving Credit Loans shall be in an aggregate principal amount of (i) $1,000,000 or a whole multiple of $500,000 in excess thereof or (ii) the aggregate principal amount of the Revolving Credit Loans, as applicable, or the applicable Eurodollar Tranche thereof then outstanding. Partial prepayments of Swing Line Loans shall be in an aggregate principal amount of (1) $50,000 or a whole multiple of $50,000 in excess thereof or (2) the aggregate principal amount of the Swing Line Loans then outstanding.

2.9 Conversion and Continuation Options.

(a) The Borrower may elect from time to time to convert LIBOR Loans to Base Rate Loans by giving the Administrative Agent an irrevocable Notice of Conversion/Continuation prior to 11:00 A.M., Denver time, at least three Business Days prior to such conversion, provided that any such conversion of LIBOR Loans may be made only on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to LIBOR Loans by giving the Administrative Agent an irrevocable Notice of Conversion/Continuation prior to 11:00 A.M., Denver time, at least three Business Days prior to such conversion (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan may be converted into a LIBOR Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or Required Lenders have, determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the final scheduled termination or maturity date of the Revolving Credit Facility. Upon receipt of any such Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each relevant Lender thereof.

(b) Subject to Section 2.13, the Borrower may elect to continue any LIBOR Loan as such upon the expiration of the then current Interest Period with respect thereto by giving the Administrative Agent an irrevocable Notice of Conversion/Continuation prior to 11:00 A.M., Denver time, at least three Business Days prior to such continuation in accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.1, which notice shall specify the length of the next Interest Period to be applicable to such Loans, provided that no LIBOR Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or Required Lenders have, determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the final scheduled termination or maturity date of the Revolving Credit Facility, and provided, further, that if the Borrower shall fail to give any required Notice of Conversion/Continuation as described above in this paragraph with respect to any LIBOR Loans or if such continuation with respect to any LIBOR Loans is not permitted pursuant to the preceding proviso, such Loans shall be converted automatically to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each relevant Lender thereof.

27

2.10 Minimum Amounts and Maximum Number of Eurodollar Tranches.

Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of LIBOR Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the LIBOR Loans comprising each Eurodollar Tranche shall be equal to $2,500,000 or a whole multiple of $500,000 in excess thereof and (b) no more than ten (10) Eurodollar Tranches shall be outstanding at any one time.

2.11 Interest Rates and Payment Dates.

(a) Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to Adjusted LIBOR determined for such day plus the Applicable Margin in effect for such day.

(b) Each Base Rate Loan shall bear interest for each day on which it is outstanding at a rate per annum equal to the Base Rate in effect for such day plus the Applicable Margin in effect for such day.

(c) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum that is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount (other than principal) payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans under the Revolving Credit Facility plus 2% (or, in the case of any such other amounts that do not relate to the Revolving Credit Facility, the rate then applicable to Base Rate Loans under the Revolving Credit Facility plus 2%), in each case, with respect to clauses (i) and (ii) above, from and including the date such amount became due to but excluding the date such amount is paid in full (after as well as before judgment).

(d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.

2.12 Computation of Interest and Fees.

(a) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans on which interest is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of an Adjusted LIBOR. Any change in the interest rate on a Loan resulting from a change in the Base Rate shall become effective as of the opening of

28

business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.

(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.11(a).

2.13 Inability to Determine Interest Rate.

If prior to the first day of any Interest Period:

(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR for such Interest Period, or

(b) the Administrative Agent shall have received notice from Required Lenders that the Adjusted LIBOR determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given, (x) unless the Borrower shall have elected (subject to the provisions of Section 2.17), by notice to the Administrative Agent not later than 10:00 A.M., Denver time, on the scheduled Borrowing Date for such Loans, not to borrow such Loans, any LIBOR Loans under the Revolving Credit Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the Revolving Credit Facility that were to have been converted on the first day of such Interest Period to LIBOR Loans shall be continued as Base Rate Loans and (z) any outstanding LIBOR Loans under the Revolving Credit Facility shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further LIBOR Loans under the Revolving Credit Facility shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the Revolving Credit Facility to LIBOR Loans.

2.14 Pro Rata Treatment and Payments.

(a) Each borrowing by the Borrower from the Lenders hereunder (other than Swing Line Loans), each payment by the Borrower on account of any commitment fee or Letter of Credit fee, and any reduction of the Commitments of the Lenders, shall be made pro rata according to the respective Revolving Credit Percentages of the relevant Lenders. Each payment (other than prepayments) in respect of principal or interest in respect of the Revolving Credit Loans and each payment in respect of fees payable hereunder shall be applied to the amounts of such obligations owing to the Lenders pro rata according to the respective amounts then due and owing to the Lenders.

29

(b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Revolving Credit Lenders. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letter of Credit.

(c) The application of any payment of Loans under the Revolving Credit Facility (including prepayments) shall be made, first, to Base Rate Loans and, second, to LIBOR Loans.

(d) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 11:00 A.M., Denver time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at the Payment Office, in Dollars and in immediately available funds. Any payment made by the Borrower after 11:00 A.M., Denver time, on any Business Day may, at the option of the Administrative Agent, be deemed to have been made on the next following Business Day. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a LIBOR Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.

(e) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender’s share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the Revolving Credit Facility, on demand, from the Borrower.

(f) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent

30

may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.

2.15 Requirements of Law.

(a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made (x) in the case of any Lender party hereto on the date hereof, subsequent to the date hereof, and (y) in the case of any other Lender, subsequent to the date such Lender became a Lender:

(i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Adjusted LIBOR hereunder; or

(ii) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.

(b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made (i) in the case of any Lender party hereto on the date hereof, subsequent to the date hereof, and (ii) in the case of any other Lender, subsequent to the date such Lender became a Lender, shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the

31

Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.

(c) A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

(d) Anything in this Section 2.15 to the contrary notwithstanding, the Borrower shall not be obligated to make any payment to any Lender under this Section 2.15 on account of any period or portion thereof prior to the date that is 180 days prior to the date upon which such Lender shall have notified the Borrower in writing of the adoption or change giving rise to such Lender’s request for the payment of additional amounts under this Section 2.15; provided, however, that if such adoption or change giving rise to such Lender’s request is retroactive, then the 180 day period referred to in this Section 2.15(d) shall be extended to include the period of retroactive effect thereof.

2.16 Taxes.

(a) All payments made by, or on account of any obligation of, the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes, branch profits taxes, franchise taxes and similar taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender by a jurisdiction under the laws of which such Agent or Lender is organized or in which its principal executive office or applicable lending office is located, or as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent’s or such Lender’s having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) or any Other Taxes are required by law to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 2.16(a)) such Agent or Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Agent or any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender’s failure to comply with the requirements of paragraph (d) of this Section 2.16, (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this

32

paragraph (a) or (iii) that relate to any period or portion thereof prior to the date that is 180 days prior to the date upon which such Lender or Agent shall have notified the Borrower in writing of its entitlement under this paragraph (a) to receive additional amounts; provided further, however, that if any such amounts giving rise to such Lender’s notification are retroactive, then the 180 day period referred to in this Section 2.16(a) shall be extended to include the period of retroactive effect thereof.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender directly as a result of any such failure. The agreements in this Section 2.16 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

(d) Each Lender (or Transferee) that is not a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof) (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, as appropriate, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” a statement substantially in the form of Exhibit G and a Form W-8BEN, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the expiration, obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.

(e) The Borrower shall indemnify each Agent and each Lender for the full amount of any Non-Excluded Taxes or Other Taxes paid by the Administrative Agent or such Lender on or with respect to any payment by or on account of any obligation of the Borrower

33

hereunder or under any other Loan Document (including Non-Excluded Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.16) and any penalties, interest and reasonable expenses arising therefrom; provided, however, that the Borrower shall not be obligated to make payment to such Agent or Lender pursuant to this Section in respect of such Non-Excluded Taxes, Other Taxes, interest, penalties or other liabilities (i) if such Non-Excluded Taxes, Other Taxes, interest, penalties or other liabilities are attributable to such Lender’s failure to comply with the requirements of paragraph (d) of this Section, (ii) if such interest or penalties are attributable to the gross negligence or willful misconduct of such Agent or such Lender, (iii) if such taxes are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such United States withholding taxes pursuant to Section 2.16(a), (iv) with respect to a period or portion thereof prior to the date that is 180 days prior to the date upon which such Lender or Agent shall have notified the Borrower in writing of its entitlement to such payment under this paragraph (e) or (v) if, with respect to interest or penalties, such interest or penalties have accrued after the Borrower has indemnified or paid the additional amount in respect of the Non-Excluded Taxes or Other Taxes from which the interest or penalties arose; provided, however, that if any such amounts giving rise to such Lender’s notification are retroactive, then the 180 day period referred to in this Section 2.16(e)(iv) shall be extended to include the period of retroactive effect thereof. After an Agent or Lender learns of the imposition of Non-Excluded Taxes or Other Taxes, such Agent or such Lender will act in good faith to promptly notify the Borrower of its obligations hereunder.

(f) If any Lender or any Agent receives a refund in respect of any amounts paid by the Borrower pursuant to this Section 2.16, which refund in the good faith judgment of such Lender or Agent is allocable to such payment, it shall promptly notify the Borrower of such refund and shall, within 15 days after receipt, repay such refund (including any interest paid or credited by the relevant taxing or governmental authority with respect to such refund) to the Borrower net of all out-of-pocket expenses of such Lender or such Agent; provided, however, that the Borrower, upon the request of such Lender or such Agent, agrees to repay the amount paid over to the Borrower to such Lender or such Agent in the event such Lender or such Agent is required to repay such refund.

2.17 Indemnity.

The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement, (c) the making of a prepayment or conversion of LIBOR Loans on a day that is not the last day of an Interest Period with respect thereto or in connection with any assignment pursuant to Section 2.20 or (d) any election of the Borrower pursuant to Section 2.13 not to borrow LIBOR Loans. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert

34

or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

2.18 Illegality.

Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Base Rate Loans to LIBOR Loans shall forthwith be canceled and (b) such Lender’s Loans then outstanding as LIBOR Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.17.

2.19 Change of Lending Office.

Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.15 or 2.18, or requiring the Borrower to pay additional amounts pursuant to Section 2.16(a), with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant to Section 2.15, 2.16(a) or 2.18. The mere existence of fees, charges, costs or expenses that the Borrower has offered and agreed to pay on behalf of a Lender shall not be deemed to cause a material disadvantage to such Lender.

2.20 Replacement of Lenders under Certain Circumstances.

(a) The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.15 or 2.16 or gives a notice of illegality pursuant to Section 2.18 or (b) defaults in its obligation to make Loans hereunder, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) prior to any such replacement, such Lender shall have taken no action

35

under Section 2.19 so as to eliminate the continued need for payment of amounts owing pursuant to Section 2.15 or 2.16 or to eliminate the illegality referred to in such notice of illegality given pursuant to Section 2.18, (iii) the replacement financial institution shall purchase, at par, all Loans, interest, fees and other amounts owing to such replaced Lender and such replaced Lender’s pro rata portion of all outstanding Reimbursement Obligations, if any, on or prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 2.17 (as though Section 2.17 were applicable) if any LIBOR Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (v) the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.6 (provided that the Borrower shall be obligated to pay the registration and processing fee referred to therein), (vii) the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.15 or 2.16, as the case may be, in respect of any period prior to the date on which such replacement shall be consummated, (viii) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, any Agent or any other Lender shall have against the replaced Lender and (ix) the replaced Lender shall cease to be a Lender hereunder.

(b) In connection with any proposed amendment, modification, supplement, extension, termination, consent or waiver requiring the consent of all Lenders (such proposed amendment, modification, supplement, extension, termination, consent or waiver, a “Proposed Change”), if the consent of Required Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 2.20(b) being referred to as a “Non-Consenting Lender”), then, at the Borrower’s request, the Lender that is acting as the Administrative Agent, or any other Lender or affiliate, Related Fund or Control Investment Affiliate of such Lender, or any other bank, financial institution or other entity that is acceptable to the Administrative Agent, provided in each case that such Person (a “Replacement Assignee”) is not a Non-Consenting Lender, shall have the right with the Administrative Agent’s consent and in the Administrative Agent’s sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s request, sell and assign to such Replacement Assignee all of its rights and obligations under this Agreement and the other Loan Documents (including for purposes of this Section 2.20(b), the Non-Consenting Lender’s Revolving Credit Commitment and Revolving Credit Extensions of Credit) for an amount equal to the aggregate outstanding principal balance of all Revolving Loans of such Non-Consenting Lender (and, if such Lender is also the Swing Line Lender, the aggregate outstanding principal balance of all Swing Line Loans of the Swing Line Lender), and such Non-Consenting Lender’s pro rata portion of all outstanding Reimbursement Obligations, if any, and all accrued interest, fees and other Obligations owing or otherwise payable with respect thereto through the date of sale (or such other amounts as may be agreed upon by the Non-Consenting Lender and the Replacement Assignee). In such event, such Non-Consenting Lender agrees to execute an Assignment and Acceptance to reflect such purchase and sale, but regardless of whether such Assignment and Acceptance is executed, such Non-Consenting Lender’s rights hereunder, except rights under Section 10.5 with respect to actions prior to such date, shall cease from and after the date of tender by the Replacement Assignee of the amount of the purchase price.

36

SECTION 3. LETTERS OF CREDIT

3.1 L/C Commitment.

(a) Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue Trade Letters of Credit or Standby Letters of Credit (the “Letters of Credit”) on any Business Day during the Revolving Credit Commitment Period in such form as the Borrower shall request that shall be reasonably acceptable to such Issuing Lender; provided that no Issuing Lender shall issue any Letter of Credit if after giving effect to such issuance, (A) the L/C Obligations would exceed the L/C Commitment or (B) the aggregate amount of the Available Revolving Credit Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) (I) the first anniversary of its date of issuance, in the case of Standby Letters of Credit or (II) One Hundred Eighty (180) calendar days from the date of its issuance, in the case of Trade Letters of Credit and (y) the Revolving Credit Termination Date; provided that any Letter of Credit with a one-year term may provide for the automatic renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above).

(b) No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

3.2 Procedure for Issuance of Letter of Credit.

The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its address for notices specified herein an Application therefor, completed to the reasonable satisfaction of such Issuing Lender, and such other customary certificates, documents and other papers and information as such Issuing Lender may reasonably request. Upon receipt of any Application, the applicable Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby, subject to the terms and conditions hereof, by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower (but in no event shall such Issuing Lender be required without its consent to issue any Letter of Credit earlier than three Business Days (or, in the case of any Trade Letter of Credit, five Business Days) after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto). Promptly after issuance by an Issuing Lender of a Letter of Credit, such Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower. Each Issuing Lender shall promptly give notice to the Administrative Agent of the issuance of each Letter of Credit issued by such Issuing Lender, and of any amendment, renewal, extension or expiration of any Letter of Credit (including the amount thereof), and upon receipt of such notice, Administrative Agent shall promptly give notice to each L/C Participant of such issuance, amendment, renewal, extension or expiration of any such Letter of Credit (including the amount thereof).

37

3.3 Fees and Other Charges.

(a) In the case of Standby Letters of Credit, the Borrower will pay a fee, for each day on which there shall be any Standby Letters of Credit outstanding, on the aggregate drawable amount on such day of all outstanding Standby Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to LIBOR Loans payable on each L/C Fee Payment Date; in the case of Trade Letters of Credit, the Borrower will pay a fee equal to 0.25% (but not less than $250) of the drawable amount of such Trade Letter of Credit, such fee fully earned when due, and such fees in each case to be shared ratably among the Revolving Credit Lenders in accordance with their respective Revolving Credit Percentages. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account, for each day on which there shall be any Letters of Credit issued by such Issuing Lender outstanding, a fronting fee of 0.125% of the aggregate drawable amount on such day of all outstanding Letters of Credit issued by it at the percentage per annum rate agreed upon from time to time by the Borrower and such Issuing Lender, payable on each L/C Fee Payment Date.

(b) In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.

3.4 L/C Participations.

(a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk, an undivided interest equal to such L/C Participant’s Revolving Credit Percentage in each Issuing Lender’s obligations and rights under each Letter of Credit issued by such Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at such Issuing Lender’s address for notices specified herein an amount equal to such L/C Participant’s Revolving Credit Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. Each L/C Participant acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit, any failure to satisfy the conditions to making any Revolving Extension of Credit (including those set forth in Section 5), the occurrence and continuance of a Default or an Event of Default or the reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(b) If any amount required to be paid by any L/C Participant to an Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made

38

by such Issuing Lender under any Letter of Credit is not paid to such Issuing Lender on the date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to such Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Revolving Credit Facility. A certificate of such Issuing Lender submitted to any L/C Participant with respect to any such amounts owing under this Section shall be conclusive in the absence of manifest error.

(c) Whenever, at any time after an Issuing Lender has made payment of a drawing under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by such Issuing Lender), or any payment of interest on account thereof, such Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to it.

3.5 Reimbursement Obligation of the Borrower.

The Borrower agrees to reimburse each Issuing Lender for the amount of (a) any draft paid by such Issuing Lender under a Letter of Credit issued by such Issuing Lender and (b) any taxes, fees, charges or other costs or expenses incurred by such Issuing Lender in connection with such payment (the amounts described in the foregoing clauses (a) and (b) in respect of any drawing, collectively, the “Payment Amount”); each such reimbursement shall be made on the later of (i) the Business Day following the date of such notice and (ii) the date upon which such payment is made by such Issuing Lender. Each such payment shall be made to such Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on each Payment Amount from the date of the applicable drawing until payment is made in full (x) until the second Business Day following the date of the applicable notice by the Issuing Lender, at the rate set forth in Section 2.11(b) in respect of Revolving Credit Loans that are Base Rate Loans and (y) thereafter, at the rate set forth in Section 2.11(c). Each drawing under any Letter of Credit shall (unless (I) an event of the type described in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 3.4 for funding by L/C Participants shall apply or (II) the Borrower shall have notified the Administrative Agent prior to 10:00 A.M., Denver time, on the date upon which such borrowing of Base Rate Loans would otherwise be made that it does not wish to make such a borrowing of Base Rate Loans) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 2.2 of Base Rate Loans in the Payment Amount in respect of

39

such drawing. The Borrowing Date with respect to such borrowing shall be the date on which the Borrower is required to pay such Payment Amount pursuant to this Section 3.5. Each Revolving Credit Lender acknowledges and agrees that its obligation to make Base Rate Loans in respect of unreimbursed drawings under Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit, any failure to satisfy the conditions to making any Revolving Extension of Credit (including those set forth in Section 5), the occurrence and continuance of a Default or an Event of Default (other than the occurrence and continuance of an event of the type described in clause (i) or (ii) of Section 8(f) with respect to the Borrower) or the reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

3.6 Obligations Absolute.

The Borrower’s obligations under this Section 3 shall, to the fullest extent permitted under applicable law, be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Issuing Lender shall not be responsible for, and the Borrower’s Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit issued by it or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards or care specified in the Uniform Commercial Code of the State of California and, with respect to Trade Letters of Credit, the “Uniform Customs and Practices for Documentary Credit (1993 Revision), International Chamber of Commerce, Publication No. 500,” or by later Uniform Customs and Practices fixed by later Congresses of the International Chamber of Commerce as in effect on the date the Letter of Credit is issued (the “UCP”), and with respect to Standby Letters of Credit, the Rules on International Standby Practices, International Chamber of Commerce Publication No. 590 (“ISP98”) (provided, however, that to the extent any conflict exists between such Uniform Commercial Code and the UCP or ISP98, as the case may be, as then in effect, Division 5 of such Uniform Commercial Code shall govern), shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower.

40

3.7 Letter of Credit Payments.

If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit, in addition to any payment obligation expressly provided for in such Letter of Credit issued by such Issuing Lender, shall be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit.

3.8 Applications.

To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Agreement, the provisions of this Agreement shall apply.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to each Agent and each Lender that:

4.1 Financial Condition.

The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 2003 and the consolidated statements of income and cash flows for the fiscal year ended on December 31, 2003 included in the Borrower’s annual report on Form 10-K for the fiscal year ended December 31, 2003 as filed with the SEC, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at December 31, 2003 and the consolidated results of their operations and their consolidated cash flows for the fiscal year ended December 31, 2003. The unaudited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at March 31, 2004, and the related unaudited consolidated statements of income and cash flows for the three-month period ended on such date included in the Borrower’s quarterly report on Form 10-Q as filed with the SEC for the period ended March 31, 2004, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the Borrower’s independent certified public accountants and disclosed therein). As of the Closing Date, the Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent annual and quarterly financial statements referred to in this paragraph. During the period from December 31, 2003 to and including the date hereof there has been no Disposition by the Borrower or any of its Subsidiaries of any material part of their businesses or Properties, taken as a whole.

41

4.2 No Change.

Since December 31, 2003 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

4.3 Corporate Existence; Compliance with Law.

Each of the Borrower and its Subsidiaries (other than the Inactive Subsidiaries) (a) is duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its Property, to lease the Property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to be in good standing, to have any such corporate power or legal right, to be so qualified or to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

4.4 Corporate Power; Authorization; Enforceable Obligations.

Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or the execution, delivery, performance, validity or enforceability of this Agreement or any of the other Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer or similar laws affecting creditors’ rights generally and to general equitable principles (whether enforcement is sought by proceedings in equity or at law).

4.5 No Legal Bar.

The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the Borrower or any of its Subsidiaries that would, individually or in the aggregate, reasonably be

42

expected to result in a Material Adverse Effect and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

4.6 No Material Litigation.

No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of their respective properties or revenues that could reasonably be expected to have a Material Adverse Effect.

4.7 No Default.

Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations (including under any Customer Service Agreement) in any respect that could reasonably be expected to have a Material Adverse Effect. To the Borrower’s knowledge, no customer or other Person party thereto is in default under or with respect to any of its Contractual Obligations under any Customer Service Agreement in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

4.8 Ownership of Property; Liens.

Each of the Borrower and its Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other Property, except to the extent that the failure to have any such title or leasehold interests would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and none of such Property is subject to any Lien except as permitted by Section 7.3.

4.9 Intellectual Property.

Other than any exception to the following that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) the Borrower and each of its Subsidiaries owns, or is licensed to use, all Intellectual Property used in the conduct of its business as currently conducted, (ii) no claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property used in the conduct of the business of the Borrower or such Subsidiary or the validity, effectiveness or ownership of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim and (iii) the use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person. There is no infringement or, to the Borrower’s knowledge, claim of infringement by any Person of any Intellectual Property owned, licensed or sublicensed by the Borrower or any of its Subsidiaries, except for such claims or infringements that could not reasonably be expected to have or result in a Material Adverse Effect.

43

4.10 Taxes.

Each of the Borrower and each of its Subsidiaries has filed or caused to be filed all United States Federal income tax returns and other material state and other material tax returns that are required to be filed by it and has paid all material taxes shown to be due and payable on such returns or on any assessments made against it (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); and no state or other material tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any tax, fee or other charge, except any such claim which the Borrower, in consultation with its legal counsel and independent accountants, has determined in good faith would not reasonably be expected to have a Material Adverse Effect.

4.11 Federal Regulations.

No part of the proceeds of any Loans will be used in violation of Regulation U as now and from time to time hereafter in effect.

4.12 Labor Matters.

There are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary.

4.13 ERISA.

Other than exceptions to any of the following that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (a) neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, (b) no termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period, (c) the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount, (d) neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be

44

expected to result in a material liability under ERISA, (e) neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made and (f) no such Multiemployer Plan is in Reorganization or Insolvent.

4.14 Investment Company Act; Other Regulations.

No Loan Party is required to register as an “investment company” under (and within the meaning) of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X) which limits its ability to incur Indebtedness under this Agreement and the other Loan Documents.

4.15 Subsidiaries.

(a) The Subsidiaries listed on Schedule 4.15 constitute all the Subsidiaries of the Borrower at the date hereof. Schedule 4.15 sets forth as of the Closing Date the name and jurisdiction of incorporation of each Subsidiary of the Borrower and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by each Loan Party.

(b) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Capital Stock of any Subsidiary of the Borrower, except as disclosed on Schedule 4.15.

4.16 Use of Proceeds.

The proceeds of the Revolving Credit Loans, the Swing Line Loans and the Letters of Credit shall be used to fund permitted acquisitions, stock repurchases, dividends and CSA Payments, to pay fees and expenses incurred in connection with the transactions contemplated by this Agreement and to finance the working capital and other general corporate needs of the Borrower and its Subsidiaries.

4.17 Environmental Matters.

Other than exceptions to any of the following that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

(a) The Borrower and its Subsidiaries: (i) are, and within the period of all applicable statutes of limitation have been, in compliance with all applicable Environmental Laws; (ii) hold all Environmental Permits (each of which is in full force and effect) required for any of their current or intended operations or for any property owned, leased, or otherwise operated by any of them; (iii) are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits; and (iv) reasonably believe that: each of their Environmental Permits will be timely renewed and complied with, without material expense; any additional Environmental Permits that may be required of any of them will be timely obtained and complied with, without material expense; and compliance with any Environmental Law that is or is expected to become applicable to any of them will be timely attained and maintained, without material expense.

45

(b) To the knowledge of the Borrower and its Subsidiaries, no Materials of Environmental Concern (i) are present at, on, under, in, or about any real property now owned, leased or operated by the Borrower or any of its Subsidiaries, or (ii) were present at any formerly owned, leased or operated property during the period of such ownership, lease or operation by the Borrower or its Subsidiaries or (iii) are present at any other location (including, without limitation, any location to which Materials of Environmental Concern have been sent for re-use or recycling or for treatment, storage, or disposal) which, in the case of any of clauses (i), (ii) or (iii), would reasonably be expected to (A) give rise to liability of the Borrower or any of its Subsidiaries under any applicable Environmental Law or otherwise result in costs to the Borrower or any of its Subsidiaries, (B) interfere with the continued operations of the Borrower or any of its Subsidiaries, or (C) impair the fair saleable value of any real property owned or leased by the Borrower or any of its Subsidiaries. For purposes of Section 8, each of the foregoing representations and warranties in this Section 4.17(b) that are qualified by the knowledge of the Borrower and its Subsidiaries shall be deemed not to be so qualified.

(c) There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law to which the Borrower or any of its Subsidiaries is, or to the knowledge of the Borrower or any of its Subsidiaries will be, named as a party that is pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened.

(d) Neither the Borrower nor any of its Subsidiaries has received any written request for information, or been notified that it is a potentially responsible party under or relating to the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any Materials of Environmental Concern.

(e) Neither the Borrower nor any of its Subsidiaries has entered into or agreed to any consent decree, order, or settlement or other agreement, or is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance with or liability under any Environmental Law.

(f) Neither the Borrower nor any of its Subsidiaries has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Material of Environmental Concern.

4.18 Accuracy of Information, etc.

The statements and information contained in this Agreement, the other Loan Documents and the other documents, certificates and statements furnished in writing to the Agents or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, taken as a whole, did not contain as of the date any such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omit to state a material fact necessary

46

in order to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount.

4.19 Security Documents.

The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement that constitutes certificated securities (within the meaning of Section 8-102(a)(4) of the Uniform Commercial Code), when any stock certificates representing such Pledged Stock are delivered to the Administrative Agent, duly indorsed to the Administrative Agent or in blank, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 4.19-1 and such other filings and other actions as are specified on Schedule 3 to the Guarantee and Collateral Agreement have been completed (the instruments required for all of which filings and other actions have been, or within 30 days after the Closing Date will be, duly completed and delivered to the Administrative Agent), the security interest created under the Guarantee and Collateral Agreement in the Collateral described therein (other than Deposit Accounts, Electronic Chattel Paper and Letter-of-Credit Rights that do not constitute Supporting Obligations with respect to Collateral not referred to in this parenthetical) shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, (i) in the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3 and (ii) in the case of Pledged Stock, tax liens to the extent permitted by Section 7.3(a) to the extent the applicable tax lien statute provides for the priority of such tax lien by operation of law). Schedule 4.19-2 lists, as of the Closing Date, each UCC Financing Statement that (i) names any Loan Party as debtor and (ii) will remain on file after the Closing Date. Schedule 4.19-3 lists, as of the Closing Date, each UCC Financing Statement that (i) names any Loan Party as debtor and (ii) will be terminated on or prior to the Closing Date; and on or prior to the Closing Date, the Borrower will have delivered to the Administrative Agent, or caused to be filed, duly completed UCC termination statements, in respect of each UCC financing statement listed in Schedule 4.19-3.

4.20 Solvency.

On the Closing Date, the Borrower and its Subsidiaries, on a consolidated basis, are Solvent.

47

4.21 Date of Representations and Warranties.

The representations and warranties set forth in this Section 4 shall be deemed made as of the Closing Date and as of the date of each Revolving Extension of Credit hereunder (except for any such representations and warranties that are stated to relate to a particular date or dates, in which case such representations and warranties shall be deemed made as of such particular date or dates).

SECTION 5. CONDITIONS PRECEDENT

5.1 Conditions to Closing Date.

This Agreement shall become binding upon the parties hereto upon the satisfaction of the following conditions precedent (all Loan Documents and other documents to be delivered to the Administrative Agent or any Lender pursuant to this Section 5.1 shall be subject to prior approval as to form and substance (including as to results) by the Lenders and the Administrative Agent, with delivery by a Lender or the Administrative Agent of its signature page to this Agreement evidencing such Lender’s or the Administrative Agent acknowledgment that the conditions set forth in this Section 5.1 have been satisfied, unless otherwise waived in writing):

(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of the Borrower and each Subsidiary Guarantor, (iii) a Collateral Information Certificate executed and delivered by a duly authorized officer of the Borrower and (iv) a Lender Addendum, executed and delivered by each Lender and accepted by the Borrower.

(b) Financial Statements. The Lenders shall have received (i) the financial statements of the Borrower and its consolidated Subsidiaries referred to in Section 4.1 and (ii) unaudited interim consolidated financial statements of the Borrower and its consolidated Subsidiaries for each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available.

(c) Related Agreements. The Administrative Agent shall have received true and correct copies, certified as to authenticity by the Borrower, of (i) the Subordinated Debt Documents and (ii) such other material documents or instruments as may be reasonably requested by any Agent at least two Business Days prior to the Closing Date.

(d) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions in which Uniform Commercial Code financing statement or other filings or recordations should be made to evidence or perfect security interests in all material personal property assets of the Loan Parties (other than motor vehicles, aircraft and non-U.S. Intellectual Property), and such search shall reveal no material liens on any of the assets of the Loan Parties, except for Liens permitted by Section 7.3.

48

(e) Filings, Registrations and Recordings. Each document (including, without limitation, any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3 and Liens referred to in, and as to which the Borrower shall have complied with, the last sentence of Section 4.19), shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation.

(f) Pledged Stock; Stock Powers; Acknowledgment and Consent; Pledged Notes. The Administrative Agent shall have received (i) all certificates representing shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note pledged and required to be delivered to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank satisfactory to the Administrative Agent) by the pledgor thereof.

(g) Absence of Litigation. There shall exist no pending or, to the knowledge of the Borrower, overtly threatened litigation, investigation or proceeding (including any proceeding before any Governmental Authority or any arbitration, mediation or other alternative dispute proceeding) of or before any arbitrator or Governmental Authority that purports to directly affect any of the Loan Documents, and the Administrative Agent shall have received a certificate, dated the Closing Date, of a Responsible Officer of the Borrower to such effect.

(h) Fees. (i) The Lenders, the Administrative Agent, the Syndication Agent and the Arrangers shall have received all fees required to be paid on or before the Closing Date and (ii) the Administrative Agent shall have received reimbursement of all out-of-pocket expenses (including reasonable fees, disbursements and other charges of counsel to the Administrative Agent and the Syndication Agent) of the Administrative Agent, the Syndication Agent and the Arrangers payable by the Borrower in connection with the Revolving Credit Facility for which invoices have been presented at least one Business Day before the Closing Date.

(i) Closing Certificate. The Administrative Agent shall have received a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments.

(j) Legal Opinions. The Administrative Agent shall have received the executed legal opinions of counsel to the Borrower and its Subsidiaries, as follows: (i) Davis Polk & Wardwell, (ii) Morris, Nichols, Arsht & Tunnell and (iii) Joseph Ruble, the General Counsel of the Borrower.

49

5.2 Conditions to Each Extension of Credit.

(a) The agreement of each Revolving Credit Lender to make any Revolving Extension of Credit (other than Revolving Loans the proceeds of which are to be applied directly to repay Swing Line Loans in accordance with Section 2.5(b) or to reimburse the applicable Issuing Lender for any Payment Amount then owing to such Issuing Lender in respect of any Letter of Credit in accordance with Section 3.5), of the Swing Line Lender to make any Swing Line Loan, and of the Issuing Lender to issue any Letter of Credit requested to be made or issued by it hereunder (including any amendment to any Letter of Credit to increase the amount thereof), on any date (including, without limitation, its initial Revolving Extension of Credit, Swing Line Loan or Letter of Credit, as the case may be) is subject to the prior or simultaneous satisfaction of the conditions precedent set forth in Section 5.1 and the satisfaction of the following additional conditions precedent:

(i) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date after giving effect to the extensions of credit requested to be made on such date (except for any such representations and warranties that are stated to relate to a particular date or dates, in which case such representations and warranties shall be true and correct as of such particular date or dates).

(ii) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

(b) Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the applicable conditions contained in this Section 5.2 have been satisfied.

SECTION 6. AFFIRMATIVE COVENANTS

The Borrower hereby agrees that, from and after the Closing Date and so long as the Commitments remain in effect, any Letter of Credit remains outstanding (or, as to any outstanding Letter of Credit, (x) the Borrower shall have deposited cash to collateralize such outstanding Letter of Credit or (y) the applicable Issuing Lender shall have fully released the Lenders from their obligations hereunder to reimburse such Issuing Lender in respect of drawings under such Letter of Credit and have accepted in lieu thereof a back up letter of credit or other arrangements acceptable to such Issuing Lender, in the case of each of clause (x) and (y), in accordance with Section 10.16 of this Agreement) or any Loan or other amount is owing to any Lender or any Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to:

6.1 Financial Statements.

Furnish to the Administrative Agent for delivery to each Lender (and the Administrative Agent agrees to make such delivery):

(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and cash flows for such year, setting forth in comparative form the figures as of the end of and for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit (any of the foregoing, a “Going Concern or Scope Qualification”), by independent certified public accountants of nationally recognized standing (it being understood that the independent certified public accountants’ report(s) related to the Borrower’s internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and Auditing Standard No. 2 of the Public Company Accounting Oversight Board, whether or not included or referred to in the auditors’ report on such audited consolidated financial statements, shall not, in and of itself, be deemed a “Going Concern or Scope Qualification”); and

50

(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower beginning with the fiscal quarter of the Borrower ending on June 30, 2004, the unaudited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarter, the related unaudited consolidated statements of income for such quarter and the related unaudited consolidated statements of income and cash flows for the portion of the fiscal year through the end of such quarter, setting forth in comparative form the figures as of the end of and for the corresponding period in the previous year, certified by a Responsible Officer of the Borrower as being fairly stated in all material respects (subject to the absence of certain footnote information and normal year-end audit adjustments);

all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). All financial statements delivered pursuant to this Section 6.1 may, so long as the Borrower is a reporting entity with the SEC, be in the form filed as a part of the Borrower’s Quarterly Report on Form 10-Q, or Annual Report on Form 10-K, as applicable, in each case as filed with SEC.

6.2 Certificates; Other Information.

Furnish to the Administrative Agent for delivery to each Lender (and the Administrative Agent agrees to make such delivery), or, in the case of clause (f), furnish to the relevant Lender:

(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate (it being understood that such certificate shall be limited to the items that independent certified public accountants are permitted to cover in such certificates pursuant to their professional standards and customs of the profession);

51

(b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a certificate of a Responsible Officer of the Borrower stating that such Responsible Officer has obtained no knowledge of any Default or Event of Default that has occurred and is continuing except as specified in such certificate, (ii) a Compliance Certificate containing (A) all information and calculations necessary for determining compliance by the Borrower and its Subsidiaries with Section 7.1 as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (B) to the extent not previously disclosed to the Administrative Agent, a listing of any material Intellectual Property acquired, and any Subsidiary formed or acquired, by any Loan Party since the date of the most recent list delivered pursuant to this clause (B) (or, in the case of the first such list so delivered, since the Closing Date) and (iii) to the extent not previously delivered to the Administrative Agent other filings or documents required by Section 6.9 in respect of any newly-acquired Intellectual Property or newly-acquired or formed Subsidiary specified in such Compliance Certificate;

(c) as soon as available, and in any event no later than 45 days after the beginning of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including projected consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year, and the related consolidated statements of projected income and cash flows, in each case set forth on a quarterly basis), and including a substantive description of each of the material underlying assumptions used in preparing such budget and projections, and, as soon as available, significant revisions, if any, of such budget, with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer of the Borrower stating that such Projections are based on reasonable estimates, information and assumptions;

(d) within five Business Days after the same are sent, copies of all financial statements and reports that the Borrower or any of its Subsidiaries sends to the holders of any class of its public debt securities or equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower or any of its Subsidiaries may make to, or file with, the SEC;

(e) as soon as possible and in any event within 30 days of obtaining knowledge thereof, notice of any litigation, proceeding (including any proceeding before any Governmental Authority or any arbitration, mediation or other alternative dispute proceeding), complaint, written request for information or other notification that would reasonably be expected to result in the payment by the Borrower and its Subsidiaries of a Material Environmental Amount; and

(f) promptly, such additional financial and other information as any Lender may from time to time reasonably request through the Administrative Agent.

6.3 Payment of Obligations.

Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where (i) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on

52

the books of the Borrower or its Subsidiaries, as the case may be, or (ii) such failures to pay, discharge or otherwise satisfy would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

6.4 Conduct of Business and Maintenance of Existence, etc.

(a) (i) Preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law, except to the extent that failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

6.5 Maintenance of Property; Insurance.

(a) Except to the extent that failure to do so would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, keep all Property and systems useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its Property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption), and with no more than such risk retentions, as are usually insured against in the same general area by companies of similar size engaged in the same or a similar business.

6.6 Inspection of Property; Books and Records; Discussions.

(a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) (i) unless an Event of Default shall have occurred and be continuing, no more frequently than once in each calendar year or (ii) if an Event of Default shall have occurred and be continuing, as often as may reasonably be desired, and in any case upon notice to the Borrower or its applicable Subsidiary, during normal business hours permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and, so long as the applicable Lender shall have given the Borrower reasonable notice thereof and a reasonable opportunity to participate therein, with its independent certified public accountants.

6.7 Notices.

Promptly, but in any event within five (or, in the case of clause (c) or (d) below, 30) days after a Responsible Officer of the Borrower shall have become aware thereof, give notice to the Administrative Agent (and the Administrative Agent agrees to deliver such notice to the Lenders) of:

(a) the occurrence of any Default or Event of Default that shall then be continuing;

53

(b) any termination (including any optional termination) of any Material Customer Services Agreement;

(c) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) assertion or receipt of notice of a claim of infringement of Intellectual Property rights, whether or not a Dollar amount is associated with such assertion or claim or (iii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, that in any such case, if not cured or in which there is a reasonable possibility of an adverse determination that, as the case may be, would reasonably be expected to have a Material Adverse Effect;

(d) any litigation or proceeding (including any proceeding before any Governmental Authority or any arbitration, mediation or other alternative dispute proceeding) affecting the Borrower or any of its Subsidiaries in which the amount involved is $15,000,000 or more (whether or not covered by insurance) or in which injunctive or similar relief is sought, except any such litigation or proceeding which the Borrower, in consultation with its counsel, has determined in good faith would not reasonably be expected to have a Material Adverse Effect;

(e) (i) the occurrence of any Reportable Event with respect to any Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan that in any such case would reasonably be expected to have a Material Adverse Effect;

(f) the consummation of any Permitted Acquisition in which the total consideration for, or value paid in, such Permitted Acquisition, is at least $10,000,000 (whether such consideration or value paid is in the form of cash, securities or a combination thereof and including any escrowed or other amounts held back);

(g) the making of any Permitted CSA Payment of at least $10,000,000; and

(h) any development or event that has had or would reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action, if any, the Borrower or the relevant Subsidiary proposes to take with respect thereto.

6.8 Environmental Laws.

Comply with, and use reasonable efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply with and

54

maintain, and ensure, through the use of reasonable efforts, that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except, in each case, where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

6.9 Additional Collateral, etc.

(a) Subject to paragraphs (b) and (c) of this Section, and other than (1) any Property subject to a Lien expressly permitted by Section 7.3(g) or Section 7.3(m) and (2) any Excluded Assets, with respect to any Property acquired after the Closing Date by the Borrower or any of its Domestic Subsidiaries (other than any Designated Subsidiary or any Inactive Subsidiary, but only so long as such Domestic Subsidiaries shall continue to be Designated Subsidiaries or Inactive Subsidiaries) as to which the Administrative Agent, for the benefit of the Secured Parties, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected security interest in such Property, subject to no prior Liens other than, in the case of Collateral other than Pledged Stock, Liens permitted under Section 7.3, and in the case of Pledged Stock, tax liens to the extent (A) permitted under Section 7.3(a) and (B) the applicable tax lien statute provides for the priority of such tax lien by operation of law, including without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law, the taking of such other actions to effect perfection as may be required or provided for by the Guarantee and Collateral Agreement or as otherwise may be reasonably requested by the Administrative Agent; provided that (1) with respect to U.S. Intellectual Property acquired by the Borrower or any of its Domestic Subsidiaries (other than any Designated Subsidiary or any Inactive Subsidiary; but in the case of an Inactive Subsidiary only if such Domestic Subsidiary shall continue to be an Inactive Subsidiary notwithstanding the acquisition of such U.S. Intellectual Property)) in the ordinary course of business during any fiscal quarter, this Section 6.9(a) shall be deemed satisfied if the Borrower and its Subsidiaries (other than any Designated Subsidiary or any Inactive Subsidiary; but in the case of an Inactive Subsidiary, only if such Inactive Subsidiary continues to be an Inactive Subsidiary) take the actions required by clauses (i) and (ii) above with respect to such U.S. Intellectual Property within five Business Days following the date of delivery of the officer’s certificate with respect to such fiscal quarter or the fiscal year ended at the end of such fiscal quarter required to be delivered pursuant to Section 6.2(b); (2) Liens shall not be required to be granted hereunder on more than 65% of the total outstanding Capital Stock of any Foreign Subsidiary; (3) no Loan Party shall be required to deliver promissory notes or other instruments if the aggregate principal amount thereof does not exceed $2,500,000; (4) no Loan Party (or issuer or securities intermediary) shall be required to deliver a “control agreement” with respect to any Securities Account in which the fair market value of the assets maintained in such Securities Account is less than $15,000,000; and (5) no Loan Party shall be required to take any action to perfect any security interest in (x) Letter of Credit Rights that do not constitute Supporting Obligations, (y) Electronic Chattel Paper or (z) Deposit Accounts.

55

(b) With respect to any new Subsidiary (other than any Excluded Foreign Subsidiary or any Subsidiary the Capital Stock of which is held by a Foreign Subsidiary) created or acquired after the Closing Date (which, for the purposes of this paragraph, shall include any existing Subsidiary that ceases to be a Designated Subsidiary, an Excluded Foreign Subsidiary, a Foreign Subsidiary or an Inactive Subsidiary, as the case may be), by the Borrower or any of its Subsidiaries, promptly, and in any event within 30 days after the creation or acquisition of such Subsidiary, (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected security interest in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Domestic Subsidiaries (other than by a Domestic Subsidiary that is a Designated Subsidiary or that is an Inactive Subsidiary; but in the case of an Inactive Subsidiary only if such new Subsidiary is also an Inactive Subsidiary), subject to no other prior Liens other than tax liens to the extent (A) permitted by Section 7.3(a) and (B) the applicable tax lien statute provides for the priority of such tax lien by operation of law, (ii) deliver to the Administrative Agent all certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (other than in the instance of a new Subsidiary that is a Designated Subsidiary or an Inactive Subsidiary), to (A) become a party to the Guarantee and Collateral Agreement as a Guarantor and, unless such new Subsidiary is a Foreign Subsidiary, a Grantor and (B) if such new Subsidiary is a Domestic Subsidiary, take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Secured Parties a perfected security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, subject to no prior Liens other than, in the case of Collateral other than Pledged Stock, Liens permitted under Section 7.3, and, in the case of Pledged Stock, tax liens to the extent (1) permitted by Section 7.3(a) and (2) the applicable tax lien statute provides for the priority of such tax lien by operation of law, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or the taking of such other actions to effect perfection as may be required or provided for by the Guarantee and Collateral Agreement or as otherwise may be reasonably requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent customary legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent; provided that (A) in no event shall more than 65% of the total outstanding Capital Stock of any Excluded Foreign Subsidiary be required to be pledged hereunder; (B) no actions shall be required to be taken to create or perfect any such pledge, and no legal opinions shall be required to be delivered with respect thereto, in each case under the laws of the jurisdiction of any Foreign Subsidiary; (C) no Loan Party shall be required to deliver promissory notes or other instruments if the aggregate principal amount thereof does not exceed $2,500,000; (D) no Loan Party (or issuer or securities intermediary) shall be required to deliver a “control agreement” with respect to any Securities Account in which the fair market value of the assets maintained in such Securities Account is less than $15,000,000; and (E) no Loan Party shall be required to take any action to perfect any security interest in (1) Letter of Credit Rights that do not constitute Supporting Obligations, (2) Electronic Chattel Paper or (3) Deposit Accounts.

56

(c) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by the Borrower or any of its Domestic Subsidiaries (other than any Designated Subsidiary), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected security interest in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Domestic Subsidiaries (other than by a Domestic Subsidiary that is a Designated Subsidiary or is an Inactive Subsidiary; but in the case of an Inactive Subsidiary only if such new Excluded Foreign Subsidiary is also an Inactive Subsidiary), subject to no prior Liens other than tax liens to the extent (A) permitted by Section 7.3(a) and (B) the applicable tax lien statute provides for the priority of such tax lien by operation of law), provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Excluded Foreign Subsidiary be required to be so pledged, (ii) deliver to the Administrative Agent all certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Lien of the Administrative Agent thereon, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent customary legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent; provided that no actions shall be required to be taken to create or perfect any such pledge, and no legal opinions shall be required to be delivered with respect thereto, in each case under the laws of the jurisdiction of organization of such Foreign Subsidiary.

6.10 Further Assurances.

From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take such actions, as the Administrative Agent may, subject to the provisos to Section 6.9(a), Section 6.9(b) and Section 6.9(c), reasonably request for the purposes of creating or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Subsidiary (other than any Designated Subsidiary) which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording, qualification or authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lender may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization.

SECTION 7. NEGATIVE COVENANTS

The Borrower hereby agrees that, from and after the Closing Date and so long as the Commitments remain in effect, any Letter of Credit remains outstanding (or, as to any outstanding Letter of Credit, (x) the Borrower shall have deposited cash to collateralize such

57

outstanding Letter of Credit or (y) the applicable Issuing Lender shall have fully released the Lenders from their obligations hereunder to reimburse such Issuing Lender in respect of drawings under such Letter of Credit and have accepted in lieu thereof a back up letter of credit or other arrangements acceptable to such Issuing Lender, in the case of each of clause (x) and (y), in accordance with Section 10.16 of this Agreement) or any Loan or other amount is owing to any Lender or any Agent hereunder, Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

7.1 Financial Condition Covenants.

(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending on or after the last day of FQ3 2004, to exceed 3.00 to 1.00.

(b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio as of the last day of any period of four consecutive fiscal quarters of the Borrower ending on or after the last day of FQ3 2004 to be less than 4.00 to 1.00.

(c) Liquidity. Permit Liquidity at any time to be less than $30,000,000.

7.2 Limitation on Indebtedness.

Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness of any Loan Party pursuant to any Loan Document;

(b) the Subordinated Debt of the Borrower pursuant to the Subordinated Debt Documents and any refinancings, refundings, renewals or extensions (each a “Refinancing”) thereof; provided that (i) no Default (other than a Default existing solely under Section 8.1(d)) or Event of Default shall be in effect after giving effect to the consummation of such Refinancing; (ii) the principal amount of the new Indebtedness does not exceed the principal amount of the refinanced Indebtedness; (iii) the new Indebtedness is subordinated in right of payment, collection and enforcement on terms no less favorable to the Lenders than the terms applicable to the refinanced Indebtedness; (iv) no scheduled payment or mandatory prepayment of the new Indebtedness shall be required to be made prior to the date which is one year after the Revolving Credit Termination Date; and (v) the new Indebtedness shall be unsecured;

(c) Indebtedness of the Borrower to any Subsidiary, or of any Subsidiary to the Borrower or any other Subsidiary; provided that Indebtedness of Designated Subsidiaries to the Borrower and other Domestic Subsidiaries of the Borrower that are not also Designated Subsidiaries shall be subject to the limitations on Investments in Designated Subsidiaries set forth in Section 7.7;

(d) purchase money and other Indebtedness (including Capital Lease Obligations) of the Borrower or any of its Subsidiaries, the proceeds of which are used to finance the acquisition, expansion, refurbishment or improvement of fixed or capital assets, in an aggregate principal amount not to exceed $40,000,000 at any one time outstanding and any refinancings thereof (without any increase in the principal amount thereof);

58

(e) Indebtedness outstanding on the date hereof and listed on Schedule 7.2 and any refinancings, refundings, renewals or extensions thereof (without any increase in the principal amount thereof);

(f) Guarantee Obligations by the Borrower or any of its Subsidiaries of obligations of the Borrower or any of its Subsidiaries to the extent such obligations are otherwise permitted by this Agreement, including this Section 7.2;

(g) Indebtedness of any Person which becomes a Subsidiary of the Borrower after the Closing Date pursuant to a Permitted Acquisition (provided that such Indebtedness existed at the time such Person became a Subsidiary of the Borrower and is not created in contemplation of or in connection with such Person becoming a Subsidiary), and any refinancings, refundings, renewals or extensions thereof which do not increase the principal amount thereof;

(h) Indebtedness in respect of Hedge Agreements permitted under Section 7.16; and

(i) additional Indebtedness incurred by the Borrower or any Subsidiary to the extent that, immediately upon the incurrence of, and after taking into account, such Indebtedness, the Consolidated Leverage Ratio does not exceed 3.00 to 1.00.

7.3 Limitation on Liens.

Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except for:

(a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;

(c) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation;

(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, and letters of credit issued in lieu of or in support of any of the foregoing, in each case incurred in the ordinary course of business;

(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

59

(f) Liens in existence on the date hereof listed on Schedule 7.3, securing Indebtedness permitted by Section 7.2(e) and Liens securing refinancings of such Indebtedness permitted by Section 7.2(e), provided that no such Lien is spread to cover any additional assets after the Closing Date, including the assets of any other Loan Party;

(g) Liens securing Indebtedness of the Borrower or any of its Subsidiaries permitted pursuant to Section 7.2(d), provided that (i) such Liens (or, if applicable, the Liens securing the Indebtedness refinanced by such Indebtedness) shall be created within 180 days after the acquisition, expansion, refurbishment or improvement of such fixed or capital assets, (ii) such Liens do not at any time encumber any assets other than the assets acquired, expanded, refurbished or improved by such Indebtedness (or, if applicable, the Indebtedness refinanced by such Indebtedness), (iii) the amount of Indebtedness secured thereby is not increased and (iv) the amount of Indebtedness initially secured thereby is not more than 100% of the price of such acquisition, expansion, refurbishment or improvement financed thereby;

(h) Liens created pursuant to the Security Documents;

(i) any interest or title of a lessor under any lease entered into by the Borrower or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased;

(j) any interest of any licensor of Intellectual Property;

(k) Liens arising as a matter of law to secure the purchase of goods purchased by the Borrower or any of its Subsidiaries, provided that the only obligations secured thereby are trade accounts payable with respect to the purchase of such goods arising in the ordinary course of business and the only Property to which such Liens attached are the goods so purchased and any title document in respect thereof;

(l) Liens securing reimbursement obligations and related interest, fees and expenses with respect to trade letters of credit permitted hereunder, provided that such Liens do not extend to any Property other than the goods financed by, or purchased by means of, such letters of credit and documents of title in respect thereof;

(m) Liens on any assets of a Person which becomes a Subsidiary of the Borrower after the Closing Date in a transaction permitted by Section 7.7, and Liens on assets acquired by the Borrower or any of its Subsidiaries after the Closing Date, provided that (i) such Liens existed at the time such Person became a Subsidiary of the Borrower or such assets were acquired, as the case may be, and were not created in anticipation of such acquisition, (ii) any such Lien does not by its terms spread to or cover any assets after the time such Person becomes a Subsidiary or such assets were acquired, as the case may be, which were not covered immediately prior thereto, (iii) any such Lien does not by its terms secure any Indebtedness or other obligation other than Indebtedness or other obligation existing immediately prior to the time such Person becomes a Subsidiary or such assets are acquired, as the case may be, and refinancings thereof permitted hereunder and (iv) any Indebtedness secured by such Liens shall be permitted under Section 7.2;

60

(n) Liens in respect of judgments that do not constitute an Event of Default under clause (h) of Section 8; and

(o) Liens not otherwise permitted by this Section 7.3 securing Indebtedness or other obligations of the Borrower or any of its Subsidiaries so long as the aggregate outstanding principal amount of the obligations secured thereby does not exceed (as to the Borrower and all of such Subsidiaries) $40,000,000 at any one time.

7.4 Limitation on Fundamental Changes.

Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or otherwise suffer any liquidation or dissolution), or, except for Immaterial Subsidiaries, and except to the extent such Disposition would otherwise be permitted by Section 7.5, Dispose of all or substantially all of its Property or business, except that:

(a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower, provided that the Borrower shall be the continuing or surviving corporation;

(b) any Subsidiary of the Borrower may be merged or consolidated with or into any other Subsidiary of the Borrower, provided that, if any of the parties to such merger or consolidation is a Subsidiary Guarantor, (i) the continuing or surviving corporation shall be a Subsidiary Guarantor or (ii) simultaneously with such transaction, the continuing or surviving corporation shall become a Subsidiary Guarantor, and the Borrower shall, and shall cause its Subsidiaries to, comply with Section 6.9 in connection therewith;

(c) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any of its other Subsidiaries, provided that Dispositions to Designated Subsidiaries by the Borrower and its Domestic Subsidiaries that are not also Designated Subsidiaries shall, to the extent that the consideration received for the assets Disposed of is less than the fair market value of such assets that would be received from an unaffiliated third party in a bona fide sale on an arms-length basis, be deemed to be Investments in such Designated Subsidiaries and subject to the limitations set forth in Section 7.7;

(d) the Borrower and its Subsidiaries may make any Restricted Payments permitted under Section 7.6; and

(e) the Borrower or any or its Subsidiaries may enter into any merger, consolidation or amalgamation to effectuate any Permitted Acquisition; provided that (i) if the Borrower is a party to such merger, consolidation or amalgamation, the Borrower shall be the surviving corporation and (ii), subject to the immediately preceding clause (i), if any of the parties to such merger, consolidation or amalgamation is a Subsidiary Guarantor, (1) the continuing or surviving corporation shall be a Subsidiary Guarantor or (2) simultaneously with such transaction, the continuing or surviving corporation shall become a Subsidiary Guarantor, and the Borrower shall, and shall cause its Subsidiaries to, comply with Section 6.9 in connection therewith.

61

7.5 Limitation on Disposition of Property.

Dispose of any of its Property (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any Person, except:

(a) the Disposition of obsolete or worn out property in the ordinary course of business;

(b) the sale of inventory in the ordinary course of business;

(c) Dispositions permitted by Sections 7.4(b) and 7.4(c);

(d) Restricted Payments permitted under Section 7.6;

(e) Investments permitted by Section 7.7;

(f) the sale or issuance of the Capital Stock of any Subsidiary of the Borrower to the Borrower or any other Subsidiary of the Borrower;

(g) the Disposition of other assets, so long as immediately upon the consummation of, and after taking into account, such Disposition, the Consolidated Leverage Ratio does not exceed 3.00 to 1.00; and

(h) any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any of its Subsidiaries.

7.6 Limitation on Restricted Payments.

Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the Borrower or any of its Subsidiaries, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any of its Subsidiaries, or enter into any derivatives or other transaction with any financial institution, commodities or stock exchange or clearinghouse (a “Derivatives Counterparty”) obligating the Borrower or any of its Subsidiaries to make payments to such Derivatives Counterparty as a result of any change in market value of any such Capital Stock (collectively, “Restricted Payments”), except that:

(a) any Subsidiary of the Borrower may make Restricted Payments to the Borrower or any other Subsidiary, provided that any Restricted Payment made to a Designated Subsidiary by any Domestic Subsidiary that is not a Designated Subsidiary shall be deemed to be an Investment in such Designated Subsidiary subject to the limitations set forth in Section 7.7 to the extent such Restricted Payment is not promptly paid by such Designated Subsidiary as a Restricted Payment to the holders of such Designated Subsidiary’s equity securities;

62

(b) the Borrower may make Restricted Payments in the form of common stock of the Borrower;

(c) the Borrower may (i) repurchase shares of “Restricted Stock” and “Performance Stock” sold pursuant to the CSG Employee Stock Purchase Plan from a holder of such Capital Stock whose employment with the Borrower and its Subsidiaries has terminated, provided that the repurchase price paid for any such Restricted Stock or Performance Stock shall not exceed, in the case of Performance Stock, the purchase price initially paid by such Person for such Performance Stock or, in the case of Restricted Stock, the higher of the purchase price initially paid by such Person for such Restricted Stock or the Book Value (as defined in the applicable purchase agreement) of such Restricted Stock, (ii) repurchase options and warrants (or Capital Stock issued upon the exercise of options or warrants) in connection with the “cashless exercise” of options or warrants, and (iii) repurchase capital Stock of the Borrower issued pursuant to a stock incentive plan of the Borrower or any of its Subsidiaries in such amounts as may be necessary to satisfy the tax withholding requirements under applicable law with respect to such Capital Stock;

(d) so long as (i) no Default (other than a Default existing solely under Section 8.1(d)) or Event of Default shall have occurred and be continuing, and (ii) after giving effect to the consummation of such repurchase, declaration or payment, the Borrower shall be in pro forma compliance with the covenant in Section 7.1(c), the Borrower may repurchase its Capital Stock or declare and pay dividends on its Capital Stock (it being understood that any such dividend may be paid if, at the date of declaration thereof, such payment would have been permitted hereunder);

(e) subject to Section 7.6(a), any Subsidiary of the Borrower may make Restricted Payments to the holders of any class of such Subsidiary’s equity securities in proportion to their respective holdings of such class; and

(f) the Borrower may make Permitted Subordinated Debt Payments.

7.7 Limitation on Investments.

Make any advance, loan, extension of credit (by way of guaranty or otherwise), CSA Payments, or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting an ongoing business from, or make any other investment in, any other Person (all of the foregoing, “Investments”), except:

(a) extensions of trade credit in the ordinary course of business;

(b) investments in Cash Equivalents;

(c) Investments arising in connection with (i) the incurrence of Indebtedness and other obligations to the extent permitted by Sections 7.2(c) and 7.2(f) or (ii) any Disposition to the extent permitted by Sections 7.4(c) or 7.5(d);

63

(d) loans and advances to employees of the Borrower or any of its Subsidiaries in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses);

(e) Investments (other than those relating to the incurrence of Indebtedness permitted by Section 7.7(c)) by the Borrower or any of its Subsidiaries in the Borrower or any of its Subsidiaries (other than Investments by the Borrower or any Domestic Subsidiary that is not also a Designated Subsidiary in any Designated Subsidiary);

(f) Permitted Acquisitions;

(g) Investments in Hedge Agreements permitted under Section 7.16;

(h) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;

(i) Investments consisting of consideration received in connection with Dispositions permitted under Section 7.5(g);

(j) Investments made by the Borrower or any of its Subsidiaries to the extent that the consideration therefor consists of equity securities of, or proceeds of the issuance by the Borrower after the Closing Date of equity securities of, the Borrower;

(k) loans and advances to officers, directors and employees of the Borrower and its Subsidiaries for the sole purpose of purchasing Capital Stock of the Borrower or of refinancing any such loans made by others (or purchase of such loans made by others), provided that if any such loans and advances are made in cash, the Person making such loans or advances shall, substantially contemporaneously with the making of any such loans or advances, receive cash in the amount of such loans and advances;

(l) Investments by Borrower or any its Subsidiaries in any joint venture or in any Designated Subsidiary, provided that the aggregate consideration (other than any such consideration (i) of the type referred to in Section 7.7(j) or (ii) consisting of licenses of Intellectual Property that do not constitute Dispositions) paid by the Borrower and such Subsidiaries in respect of such Investments during the term of this Agreement shall not exceed (1) in the case of any single Investment, $50,000,000 and (2) in the case of all such Investments, $100,000,000;

(m) so long as (i) no Default (other than a Default existing solely under Section 8.1(d)) or Event of Default shall be in effect after giving effect to the making of such repurchase or cash conversion and (ii) after giving effect to the making of such repurchase or cash conversion, the Borrower shall be in pro forma compliance with the covenant in Section 7.1(c), the Borrower may (1) repurchase Subordinated Debt in the open market or (2) settle any conversion, or portion thereof, in cash pursuant to Article X of the Indenture (each a “Permitted Subordinated Debt Payment”); and

64

(n) in addition to Investments otherwise expressly permitted by this Section 7.7, Investments by the Borrower or any of its Subsidiaries in an aggregate amount (valued at cost) not to exceed (i) during any single calendar year, $20,000,000 and (ii) in the case of all such Investments during the term of this Agreement, $40,000,000.

7.8 Limitation on Charter Amendments.

Amend the certificate of incorporation of the Borrower or any Subsidiary Guarantor in any manner that would be materially adverse to the Lenders.

7.9 Limitation on Transactions with Affiliates.

Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Borrower and its Subsidiaries) unless such transaction is (a) otherwise permitted under this Agreement and (b) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate; provided that each of the Borrower and its Subsidiaries shall be permitted to (i) make any Dispositions permitted to be made by it under Section 7.5, (ii) make any Restricted Payments permitted to be made by it under Section 7.6 and (iii) make any Investments permitted to be made by it pursuant to Section 7.7, (iv) pay customary fees to, and the reasonable out-of-pocket expenses of, its Board of Directors and provide customary indemnities for the benefit of members of its Board of Directors and (v) enter into and perform its obligations under employment agreements and other compensation arrangements with its officers, directors and employees in the ordinary course of business.

7.10 Limitation on Sales and Leasebacks.

Enter into any arrangement with any Person providing for the leasing by the Borrower or any of its Subsidiaries of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary if the aggregate consideration received by the Borrower and its Subsidiaries in connection with all such transactions exceeds $20,000,000.

7.11 Limitation on Changes in Fiscal Periods.

Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower’s method of determining fiscal quarters.

7.12 Limitation on Negative Pledge Clauses.

Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the case of the Borrower or any Subsidiary Guarantor, its obligations under the Guarantee and Collateral Agreement, other than (a) this Agreement and the

65

other Loan Documents, (b) any agreements governing any purchase money Indebtedness or Capital Lease Obligations (and any refinancing thereof permitted by Section 7.2(d)) otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (c) any agreements governing Indebtedness of any Foreign Subsidiary permitted hereunder (in which case, any prohibition or limitation shall only be effective against the assets of such Foreign Subsidiary and its Foreign Subsidiaries), (d) customary provisions in leases provided that such restrictions apply only to the leased assets and (e) customary restrictions and conditions contained in agreements relating to a Disposition of assets (including the sale of any Subsidiary) pending such Disposition, provided that such restrictions and conditions apply only to the assets (or Subsidiary) that is to be Disposed of and such Disposition is permitted hereunder.

7.13 Limitation on Restrictions on Subsidiary Distributions.

Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary, (b) make Investments in any Subsidiary or (c) transfer any of its assets to any Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (iii) any restrictions in any agreements governing any purchase money Indebtedness or Capital Lease Obligations (and any refinancing thereof permitted by Section 7.2(d)) otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) and (iv) any restrictions in any agreements governing Indebtedness of Foreign Subsidiaries otherwise permitted hereby (in which case, any restrictions shall only be effective against such Foreign Subsidiary and its Foreign Subsidiaries).

7.14 Limitation on Lines of Business.

Enter into any business, either directly or through any Subsidiary of the Borrower, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto, except to the extent that, in the context of an acquisition permitted hereunder, the acquiring Loan Party acquires a line of business in an unrelated field or industry which is incidental to the business acquired.

7.15 Prepayments of Subordinated Debt; Amendments to Indenture.

(a) Make any voluntary or optional payment or prepayment on or redemption, defeasance or other acquisition for value (including by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) of all or any portion of the principal amount of the Subordinated Debt or settle any conversion, or portion thereof, in cash pursuant to Article X of the Indenture; provided that nothing contained in this Section 7.15 shall limit or impair the rights of (i) the holders of the Subordinated Debt to convert all or any portion of the Subordinated Debt into Capital Stock of the Borrower pursuant to Article X of the Indenture and (ii) the Borrower to consummate any Permitted Subordinated Debt Payment.

66

(b) Amend, supplement or modify or consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to the Indenture or any other agreement, document or instrument executed or delivered pursuant to or in connection therewith, except that Required Lenders’ prior approval shall not be required for any such amendment, supplement or modification which, in each case, does not adversely affect the Borrower’s or any Subsidiary Guarantor’s ability to pay and perform the Obligations or the Administrative Agent’s or any Lender’s rights or remedies under any of the Loan Documents.

(c) The Borrower will not (i) designate any Indebtedness other than the Obligations as “Designated Senior Indebtedness” for purposes of (and as such term is defined in) the Indenture and (ii) in the event of any Refinancing of the Subordinated Debt permitted pursuant to Section 7.2(b), designate any Indebtedness other than the Obligations as “Designated Senior Indebtedness” (or other term of similar intent) as defined in and for purposes of the indenture or other definitive financing document evidencing any such Refinancing.

(d) Except to effect a Permitted Subordinated Debt Payment or to make a payment of accrued interest that is due and payable on the Subordinated Debt and that is otherwise permitted to be paid under the terms of the Indenture and this Agreement, the Borrower will not, without the prior consent of the Required Lenders, deposit with the Trustee under the Indenture cash sufficient to pay all amounts due and owing on the outstanding Subordinated Debt.

7.16 Limitation on Hedge Agreements.

Enter into any Hedge Agreement other than Hedge Agreements entered into in the ordinary course of business, and not for speculative purposes, to protect against changes in interest rates, foreign exchange rates, commodity prices or other risks.

7.17 Negative Pledge. Notwithstanding anything to the contrary in this Agreement (including, without limitation, Section 7.3), create or incur any Lien upon any Deposit Account, Securities Account, Letter-of-Credit Right or Copyrights registered or for which an application for registration has been filed with the United States Copyright Office, in each of which case the Borrower or any of its Subsidiaries has rights, other than the following:

(a) With respect to Deposit Accounts and Securities Accounts, (i) the customary rights of the depositary bank or securities intermediary, as the case may be, with respect to services fees, customer charges, commissions and offset rights; and (ii) Liens that are junior in priority to the Lien of the Administrative Agent granted pursuant to the Guarantee and Collateral Agreement and the other Loan Documents;

(b) With respect to Letter-of-Credit Rights, Liens that are junior in priority to the Lien of the Administrative Agent granted pursuant to the Guarantee and Collateral Agreement and the other Loan Documents;

67

(c) With respect to Copyrights registered or for which an application for registration has been filed with the United States Copyright Office, Liens that are junior in priority to the Lien of the Administrative Agent granted pursuant to the Guarantee and Collateral Agreement and the other Loan Documents, so long as prior to the granting of such junior Lien, the Administrative Agent has duly filed with the United States Copyright Office a security agreement or the equivalent, describing and reflecting the Lien of the Administrative Agent;

(d) Liens permitted under Section 7.3(m);

(e) In the case of Deposit Accounts and Securities Accounts, Liens permitted under Section 7.3(c) or Section 7.3(d); and

(f) In the case of any such Copyrights, Liens permitted under Section 7.3(j).

SECTION 8. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof or thereof; or

(b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other written statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; or

(c) Any Loan Party shall default in the observance or performance of any agreement contained in clause (i) of Section 6.4(a) (with respect to the Borrower and CSG only), Section 6.7(a) or Section 7; or

(d) Any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice of such default shall have been given to the Borrower by the Administrative Agent or any Lender or (ii) a Responsible Officer of the Borrower shall have become aware, or reasonably should have become aware, of such default; or

(e) The Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or

68

performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) or (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness, individually or in the aggregate, the outstanding principal amount of which exceeds in the aggregate $15,000,000; or

(f) (i) The Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 90 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g) (i) Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall be commenced by the PBGC to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for

69

purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or shall be likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or

(h) One or more judgments, decrees or arbital decisions shall be entered against the Borrower or any of its Subsidiaries (other than any Immaterial Subsidiary) involving for the Borrower and such Subsidiaries taken as a whole a liability (to the extent not paid or covered by insurance as to which the relevant insurance company has not contested coverage) of $15,000,000 or more, and such judgments, decrees or arbital decisions shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or

(i) Any of the Security Documents shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby as to Collateral having an aggregate value in excess of $15,000,000, except to the extent that any of the foregoing (i) results from the failure of the Administrative Agent to maintain possession of certificates evidencing securities or instruments pledged under the Security Documents, (ii) results from the failure of the Administrative Agent to file financing statements or continuation statements in any jurisdiction in which any Loan Party has represented to the Administrative Agent that it is located within the meaning of the UCC or (iii) is covered by a lender’s title insurance policy; or

(j) The guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.15), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert in writing; or

(k) Any Change of Control shall occur;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with

70

accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. In the case of all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to 105% of the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other Obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto).

SECTION 9. THE AGENTS

9.1 Appointment.

Each Lender hereby irrevocably designates and appoints the Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.

9.2 Delegation of Duties.

Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

9.3 Exculpatory Provisions.

Neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to

71

the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any Affiliate of any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value of any Collateral or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

9.4 Reliance by Agents.

(a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy, telex or teletype message, telephone message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by such Agent. The Agents may deem and treat the Person whose name is recorded on the Register as the owner of any Note as the owner thereof for all purposes, unless such Note shall have been transferred in accordance with Section 10.6 and all actions required by such Section in connection with such transfer shall have been taken. No Agent shall incur any liability to any Lender for conditioning its willingness to take any action under this Agreement or any other Loan Document upon the receipt by such Agent of such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement or any other Loan Document, all Lenders or any other instructing group of Lenders specified by this Agreement or such other Loan Document), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

(b) For purposes of determining compliance with the conditions precedent specified in Section 5 as to any extension of credit, each Lender that has executed a Lender Addendum or shall hereafter execute and deliver an Assignment and Acceptance in accordance with Section 10.6(c) shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter either sent by any Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender, unless an officer of any Agent responsible for the transactions contemplated by the Loan Documents shall have received notice

72

from such Lender prior to such extension of credit specifying its objection thereto and either such objection shall not have been withdrawn by notice to an Agent to that effect or such Lender shall not have made available to any Agent the Lender’s ratable portion of such extension of credit.

9.5 Notice of Default.

No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent shall have received notice from a Lender, the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent shall receive such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement or any other Loan Document, all Lenders or any other instructing group of Lenders specified by this Agreement or such other Loan Document); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

9.6 Non-Reliance on Agents and Other Lenders.

Each Lender expressly acknowledges that no Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender confirms to the Agents that it has not relied, and will not rely hereafter, on any Agent to check or inquire on such Lender’s behalf into the adequacy, accuracy or completeness or any information provided by any of the Loan Parties or any other Person under or in connection with the Loan Documents or the transactions herein contemplated (whether or not the information has been or is hereafter distributed to such Lender by any Agent). Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates, and all applicable bank regulatory laws relating to the transactions contemplated thereby and by the other Loan Documents, and made its own decision to make its Loans and other extensions of credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the

73

business, prospects, operations, property, condition (financial or otherwise) or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations or warranties, recitals or statements made herein or therein or made in any written or oral statements, or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to the Lenders or by or on behalf of any Loan Party to any Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Loan Party or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Default or Event of Default.

9.7 Indemnification.

Whether or not the transactions contemplated hereby shall be consummated, the Lenders agree to indemnify each Agent in its capacity as such and their respective officers, directors, employees, agents, attorneys-in-fact and affiliates (to the extent not reimbursed by or on behalf of the Borrower and without limiting any obligation of the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), for, and to save each Agent and other Person harmless from and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (including, without limitation, at any time following the payment of the Loans and the termination or resignation of such Agent) be imposed on, incurred by or asserted against such Agent or other Person in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent or other Person under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent’s or other Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse each Agent upon demand for its ratable share of any costs or other out-of-pocket expenses (including all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel (collectively, “Attorney Costs”)) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that such Agent is not reimbursed for such expenses by or on behalf of the Borrower. Without

74

limiting the generality of the foregoing, if the Internal Revenue Service or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section 9.7, together with all costs and expenses (including Attorney Costs), except where such failure to properly withhold tax from such amounts is attributable to the gross negligence or willful misconduct of the Administrative Agent. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

9.8 Agent in Its Individual Capacity.

Each Agent and its affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with any Loan Party and their Affiliates as though such Agent were not an Agent and without notice to or consent of the Lenders. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

9.9 Successor Administrative Agent.

The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall, with, unless an Event of Default shall have occurred and be continuing, the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), appoint from among the Lenders a successor agent for the Lenders, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The Syndications Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndications Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndications Agent hereunder shall automatically be assumed by, and inure to the benefit of, the

75

Administrative Agent, without any further act by the Syndications Agent, the Administrative Agent or any Lender. After any retiring Agent’s resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.

9.10 Collateral Matters; Authorization to Release Liens and Guarantees.

(a) The Administrative Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral and any Security Document which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Security Documents.

(b) The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Section 10.15. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release Liens and guarantee obligations pursuant to this Section 9.10 and Section 10.15.

9.11 The Arrangers and the Syndication Agent.

None of the Arrangers or the Syndication Agent, in their respective capacities as such, shall have any duties or responsibilities, and none of them shall incur any liability, under this Agreement and the other Loan Documents.

SECTION 10. MISCELLANEOUS

10.1 Amendments and Waivers.

Neither this Agreement or any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or (with the written consent of the Required Lenders) the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents (including amendments and restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as may be specified in the instrument of waiver, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall:

(i) forgive all or any portion of the principal amount or extend the final scheduled date of maturity of any Loan or Reimbursement Obligation, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Commitment of any Lender, in each case without the consent of each Lender directly affected thereby;

76

(ii) amend, modify or waive any provision of this Section or reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Guarantors from their guarantee obligations under the Guarantee and Collateral Agreement, in each case without the consent of all Lenders;

(iii) amend, modify or waive any provision of Section 9 or any other provision of this Agreement that affects the rights and obligations of any Agent without the consent of any Agent directly affected thereby;

(iv) amend, modify or waive any provision of Section 2.14, Section 10.7(a) or Section 3.4(c) without the consent of each Lender directly affected thereby;

(v) amend, modify or waive any provision of Section 2.3 or Section 2.4 in any manner that affects the rights or obligations of the Swing Line Lender without the consent of the Swing Line Lender; or

(vi) amend, modify or waive any provision of Section 3 in any manner that affects the rights or obligations of the Issuing Lender without the consent of the Issuing Lender.

Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Loans and issuers of, and participants in, the Letters of Credit. In the case of any waiver, the Loan Parties, the Lenders and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section; provided that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.

For the avoidance of doubt, this Agreement and any other Loan Document may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and each Loan Party to each relevant Loan Document (x) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof (collectively, the “Additional Extensions of Credit”) to share ratably in the benefits of this Agreement and the other Loan Documents with the Revolving Extensions of Credit and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.

10.2 Notices.

All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided

77

herein, shall be deemed to have been duly given or made when delivered, or five Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of the Borrower and the Agents, as follows and (b) in the case of the Lenders, as set forth in an administrative questionnaire delivered to the Administrative Agent or on Schedule I to the Lender Addendum to which such Lender is a party or, in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto:

The Borrower:	CSG Systems International, Inc.
	7887 East Belleview Avenue, Suite 1000
	Englewood, Colorado 80111
	Attention: Chief Financial Officer
	Telecopy: (303) 796-2881
	Telephone: (303) 796-2856
The Administrative Agent:	Wells Fargo Bank, National Association
	1740 Broadway, MAC C7301-031
	Denver, Colorado 80274
	Attention: Catherine M. Jones
	Telecopy: (303) 863-6670
	Telephone: (303) 863-5070
Swing Line Lender:	As notified by the Swing Line Lender to the
	Administrative Agent and the Borrower
Issuing Lender:	As notified by the Issuing Lender to the
	Administrative Agent and the Borrower

provided that any notice, request or demand to or upon the Administrative Agent, the Swing Line Lender or any Issuing Lender shall not be effective until received.

10.3 No Waiver; Cumulative Remedies.

No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

10.4 Survival of Representations and Warranties.

All representations and warranties made herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

78

10.5 Payment of Expenses.

The Borrower agrees (a) to pay or reimburse the Agents for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Revolving Credit Facilities (other than fees payable to syndicate members) and the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements and other charges of, a single firm of outside counsel to the Administrative Agent (and required local counsel) and the charges of Intralinks, (b) to pay or reimburse each Lender and the Agents for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Agents, (c) to pay, indemnify, or reimburse each Lender and the Agents for, and hold each Lender and the Agents harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify or reimburse each Lender, each Agent, their respective affiliates, and their respective officers, directors, trustees, employees, advisors, agents and controlling persons (each, an “Indemnitee”) for, and hold each Indemnitee harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever arising from or in connection with any investigation, action, litigation or proceeding (whether or not such Indemnitee is a party thereto) relating to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower or any of its Subsidiaries or any of the Properties and the fees and disbursements and other charges of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower hereunder (all the foregoing in this clause (d), collectively, the “Indemnified Liabilities”), provided that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by unauthorized persons of Information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such persons or for any special, indirect, consequential or punitive damages in connection with the Facilities. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any

79

of them might have by statute or otherwise against any Indemnitee pursuant to such Indemnitee’s role in or status under this Agreement or the other Loan Documents or its enforcement of its rights hereunder or thereunder. All amounts due under this Section shall be payable not later than 30 days after written demand therefor. Statements for amounts payable by the Borrower pursuant to this Section shall be submitted to Controller/Principal Accounting Officer (Telephone No. (402) 431-7574) (Fax No. (402) 431-7254), at the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a notice to the Administrative Agent. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder.

10.6 Successors and Assigns; Participations and Assignments.

(a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents, all future holders of the Loans and issuers of, and participants in, Letters of Credit and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender.

(b) Any Lender may, without notice to or the consent of the Borrower or the Agents, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a “Participant”) participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan, Commitment or other interest for all purposes under this Agreement and the other Loan Documents, and the Loan Parties and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would require the consent of all Lenders pursuant to Section 10.1. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if such Participant were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 with respect to its participation in the Commitments and the Loans outstanding from time to time as if such Participant were a Lender; provided that, in the case of Section 2.16, such Participant shall have complied with the requirements of said Section, and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the Lender that sold the participating interest to such Participant would have been entitled to receive in respect of the amount of the participation sold by such Lender to such Participant had no such sale occurred.

80

(c) Any Lender (an “Assignor”) may, in accordance with applicable law and upon written notice to the Administrative Agent, at any time and from time to time assign to any Lender or any affiliate, Related Fund or Control Investment Affiliate of any Lender or, with the consent of the Borrower and the Administrative Agent (which, in each case, shall not be unreasonably withheld or delayed) (provided that no such consent of the Administrative Agent need be obtained by either Wells Fargo or KeyBank and provided further that the consent of the Borrower shall not be required if an Event of Default has occurred and is continuing), to an additional bank, or financial institution or other entity (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance executed by such Assignee and such Assignor (and, where the consent of the Borrower, the Administrative Agent is required pursuant to the foregoing provisions, by the Borrower and such other Persons) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, unless otherwise agreed by the Borrower and the Administrative Agent, no such assignment to an Assignee (other than any Lender, any affiliate thereof or Related Fund of any Lender) shall be in an aggregate principal amount of less than, and the aggregate principal amount retained by the assigning Lender shall not (unless such assigning Lender is thereby assigning all of its interest under this Agreement) be less than $5,000,000 unless otherwise agreed to by the Borrower and the Administrative Agent, in each case other than in the case of an assignment of all of a Lender’s interests under this Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with Commitments and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor’s rights and obligations under this Agreement, such Assignor shall cease to be a party hereto, except as to Section 2.15, 2.16 and 10.5 in respect of the period prior to such effective date). Notwithstanding any provision of this Section, the consent of the Borrower shall not be required for any assignment that occurs at any time when any Event of Default shall have occurred and be continuing. For purposes of the minimum assignment amounts set forth in this paragraph, multiple assignments by two or more Related Funds shall be aggregated.

(d) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, each Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed

81

Assignment and Acceptance; thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked “canceled”. The Register shall be available for inspection by the Borrower or any Agent, or by any Lender (with respect to any entry relating to such Lender’s Loans), at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 10.6(c), by each such other Person) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (treating multiple, simultaneous assignments by or to two or more Related Funds as a single assignment) (except that no such registration and processing fee shall be payable in the case of an Assignee which is already a Lender or is an affiliate or Related Fund of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note of the assigning Lender, or in exchange for the Swing Line Note of the assigning Swing Line Lender, if applicable) a new Revolving Credit Note (or Swing Line Note, as the case may be) to the order of such Assignee in an amount equal to the Revolving Credit Commitment (or the Swing Line Commitment) assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a Revolving Credit Commitment upon request, a new Revolving Credit Note to the order of the Assignor in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby.

(f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests in Loans and Notes, including, without limitation, (x) any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law and (y) any pledge or assignment by a Lender that is a fund that invests in bank loans to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by any such holder, trustee or representative shall be subject to the provisions of Section 10.6(c) concerning assignments.

(g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the

82

Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary in this Section 10.6(g), any SPC may (A) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender, or with the prior written consent of the Borrower and the Administrative Agent (which consent shall not be unreasonably withheld) to any financial institutions providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans, and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC; provided that non-public information with respect to the Borrower may be disclosed only with the Borrower’s consent which will not be unreasonably withheld. This paragraph (g) may not be amended without the written consent of any SPC with Loans outstanding at the time of such proposed amendment.

10.7 Adjustments; Set-off.

(a) Except to the extent that this Agreement provides for payments to be allocated to a particular Lender or to the Lenders under the Revolving Credit Facility, if any Lender (a “Benefited Lender”) shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Obligations, such Benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender’s Obligations, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, upon prior written notice to the Administrative Agent and without prior notice to the Borrower, any such notice being expressly waived by the Borrower, to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or

83

unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

10.8 Counterparts.

This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement or of a Lender Addendum by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

10.9 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 such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10.10 Integration.

This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Agents, the Arrangers and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Arranger, any Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

10.11 GOVERNING LAW.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

10.12 Submission To Jurisdiction; Waivers.

The Borrower hereby irrevocably and unconditionally:

(a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, located in Manhattan, New York City, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

84

(b) consents that any such action or proceeding may be brought in such courts and, to the fullest extent permitted under applicable law, waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower, as the case may be, at the address set forth for it in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

10.13 Acknowledgments.

The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

(b) neither any Arranger, any Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Arrangers, the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Arrangers, the Agents and the Lenders or among the Borrower and the Lenders.

10.14 Confidentiality.

Each of the Agents and the Lenders agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement; provided that nothing herein shall prevent any Agent or any Lender from disclosing any such information (a) to any Arranger, any Agent, any other Lender or any affiliate of any thereof, (b) to any Participant or Assignee (each, a “Transferee”) or prospective Transferee that agrees in writing to comply with the provisions of this Section or provisions substantially similar thereto, (c) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) to any financial institution that is a direct or indirect contractual counterparty in swap agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section), (e) upon the request or demand of any Governmental Authority having jurisdiction over

85

it, (f) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (g) in connection with any litigation or similar proceeding, (h) that has been publicly disclosed other than in breach of this Section, (i) to self-regulatory bodies or the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender or (j) in connection with the exercise of any remedy hereunder or under any other Loan Document.

10.15 Release of Collateral and Guarantee Obligations.

(a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Borrower in connection with (i) any Disposition of Property, or (ii) in the case of Intellectual Property, any such Intellectual Property shall be licensed by any Grantor pursuant to a license, in the case of each of clauses (i) and (ii) above to a Person other than the Borrower or any of its Subsidiaries in a transaction not otherwise prohibited by the Loan Documents, the Administrative Agent shall (without notice to, or vote or consent of, any Lender or any affiliate of a Lender that is party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in any Collateral being Disposed of in such Disposition (other than Intellectual Property being licensed, in which event the Administrative Agent shall, to the extent such license is either an exclusive license or a non-exclusive license not entered into in the ordinary course of business within the meaning of Section 9-321 of the UCC, execute and deliver to such Grantor such documents reasonably necessary or desirable to subordinate such security interest to such licensee’s interest in the Intellectual Property being licensed) and to release any guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition, to the extent necessary to permit consummation of such Disposition (or such license of Intellectual Property) in accordance with the Loan Documents.

(b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than (i) obligations in respect of any Specified Hedge Agreement and (ii) contingent indemnification, increased costs and expense reimbursement obligations as to which no claims have been asserted) have been paid in full, all Commitments have terminated or expired and no Letter of Credit shall be outstanding (or, as to any outstanding Letter of Credit, (x) the Borrower shall have deposited cash to collateralize such outstanding Letter of Credit or (y) the applicable Issuing Lender shall have fully released the Lenders from their obligations hereunder to reimburse such Issuing Lender in respect of drawings under such Letter of Credit and have accepted in lieu thereof a back up letter of credit or other arrangements acceptable to such Issuing Lender, in the case of each of clause (x) and (y), in accordance with Section 10.16 of this Agreement), upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender or any affiliate of a Lender that is party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations under any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Specified Hedge Agreements. Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the

86

insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Subsidiary Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Subsidiary Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made.

10.16 Certain Provisions Regarding Outstanding Letters of Credit.

In the event that the Commitments have been terminated and no Loan or any other amount is owing to any Lender or any Agent hereunder, but one or more Letters of Credit with respect to which presentment for honor shall not have occurred at the time of such termination, the Borrower shall do one of the following:

(a) deposit in a cash collateral account opened by the Issuing Lender under any such outstanding Letter of Credit, an amount equal to 105% of the aggregate then undrawn and unexpired amount of such Letter of Credit, with amounts held in such cash collateral account to be applied by the Issuing Lender to the payment of drafts drawn under such Letters of Credit; or

(b) cause to be issued for the benefit of the Issuing Lender under any such outstanding Letter of Credit, a back up letter of credit in lieu thereof acceptable in form and substance to such Issuing Lender, or make other arrangements acceptable in form and substance to such Issuing Lender, provided that, upon, and as a condition to, such acceptance of a back up letter of credit or other arrangements, such Issuing Lender shall expressly and fully release all Lenders from any Reimbursement Obligations hereunder with respect to such outstanding Letter of Credit.

After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full (other than contingent obligations for indemnification, increased costs or expense reimbursement as to which no claims have been asserted), the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto).

10.17 Accounting Changes.

In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree that, upon the written request of the Borrower or the Administrative Agent, they will enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made. If the Borrower shall have so notified the Administrative Agent or the Administrative Agent (at the request of the Required Lenders) shall have so notified the Borrower, until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had

87

not occurred. “Accounting Change” refers to any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants or, if applicable, the SEC.

10.18 Delivery of Lender Addenda.

Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent.

10.19 Designated Senior Indebtedness. The Borrower and the Lenders hereby designate the Obligations from time to time and at any time accrued, incurred, owing, payable or otherwise outstanding under, pursuant to or in connection with this Agreement, any other Loan Document, the Letters of Credit or any other document made, delivered or given in connection herewith or therewith as “Designated Senior Indebtedness”, as such term is defined in, and for purposes of, the Indenture.

10.20 WAIVERS OF JURY TRIAL.

THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

10.21 Patriot Act.

Each Lender hereby notifies each Loan Party that pursuant to the requirements of the USA Patriot Act of 2001 (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Act.

88

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

CSG SYSTEMS INTERNATIONAL, INC.
By:	/s/    Peter E. Kalan
Name:	Peter E. Kalan
Title:	EVP & CFO
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender and in its separate capacities as the Issuing Lender, as the Swing Line Lender and as the Administrative Agent
By:	/s/    Catherine M. Jones
Name:	Catherine M. Jones
Title:	Vice President
KEYBANK NATIONAL ASSOCIATION, as a Lender and in its separate capacity as the Syndication Agent
By:	/s/    Thomas A. Crandell
Name:	Thomas A. Crandell
Title:	Senior Vice President
CALYON NEW YORK BRANCH, as a Lender
By:	/s/    Attila Coach
Name:	Attila Coach
Title:	Senior Vice President
By:	/s/    Philippe Soustra
Name:	Philippe Soustra
Title:	Executive Vice President
DEUTSCHE BANK TRUST COMPANY AMERICAS, as a Lender
By:	/s/    Gregory Shefrin
Name:	Gregory Shefrin
Title:	Director
LEHMAN COMMERCIAL PAPER INC., as a Lender
By:	/s/    Francis J. Chang
Name:	Francis J. Chang
Title:	Authorized Signatory

89

Annex A

PRICING GRID FOR REVOLVING CREDIT LOANS, SWING LINE LOANS

AND COMMITMENT FEES

Consolidated Leverage Ratio	Applicable Margin for LIBOR Loans		Applicable Margin for Base Rate Loans		Commitment Fee Rate
Greater than or equal to 2.50 to 1.00	2.25	%	1.0	%	0.50	%
Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00	2.00	%	0.75	%	0.50	%
Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00	1.75	%	0.5	%	0.375	%
Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00	1.50	%	0.25	%	0.375	%
Less than 1.00 to 1.00	1.25	%	0.0	%	0.25	%

Changes in the Applicable Margin with respect to Revolving Credit Loans or Swing Line Loans or in the Commitment Fee Rate resulting from changes in the Consolidated Leverage Ratio shall become effective on the date (the “Adjustment Date”) on which financial statements are delivered to the Lenders pursuant to Section 6.1 (but in any event not later than the 45^th day after the end of each of the first three quarterly periods of each fiscal year or the 90^th day after the end of each fiscal year, as the case may be) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified above, then, until such financial statements are delivered, the Consolidated Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this Pricing Grid be deemed to be greater than 2.50 to 1.00. In addition, at all times while an Event of Default shall have occurred and be continuing, upon notice from the Administrative Agent to the Borrower at the request of the Required Lenders, the Consolidated Leverage Ratio shall for the purposes of this Pricing Grid be deemed to be greater than 2.50 to 1.00. Each determination of the Consolidated Leverage Ratio pursuant to this Pricing Grid shall be made for the periods and in the manner contemplated by Section 7.1(a).

SCHEDULE 4.4

CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES

SCHEDULE 4.15

SUBSIDIARIES

SCHEDULE 4.19-1

UCC FILING JURISDICTIONS

Loan Party Filing Office

[Borrower to list name of each Loan Party which is a party to any Security Document and each filing office in which a UCC financing statement must be filed in respect of such Loan Party and its collateral]

SCHEDULE 4.19-2

UCC FINANCING STATEMENTS TO REMAIN ON FILE

SCHEDULE 4.19-3

UCC FINANCING STATEMENTS TO BE TERMINATED

SCHEDULE 7.2

EXISTING INDEBTEDNESS

SCHEDULE 7.3

EXISTING LIENS

EX-10.80

This exhibit contains forms of agreements used by the company to grant non-qualified and incentive stock options to its executive officers under the company’s 1996 Stock Incentive Plan and non-qualified options to its non-employee directors under its Stock Option Plan for Non-Employee Directors. Readers should note that there are forms of agreement only and particular agreements with executive officers and directors may contain terms that differ but not in material respects.

Exhibit 10.80

COM-E

8-22-02

CSG SYSTEMS INTERNATIONAL, INC.

1996 STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

This Non-Qualified Stock Option Agreement dated «Agreement_Date», is entered into between «Employee» (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

* * *

WHEREAS, the Company has adopted a 1996 Stock Incentive Plan (the “Plan”); and

WHEREAS, the Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee has authority under the Plan to grant Non-Qualified Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Committee has granted a Non-Qualified Stock Option to the Optionee and has directed the Company to execute this Agreement for the purpose of evidencing the grant of such option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on «Grant_Date» (the “Grant Date”), the Committee granted to the Optionee an option (the “Option”) to purchase «Grant_Amt» shares of Common Stock of the Company at a purchase price of «Price» per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is a Non-Qualified Stock Option for all purposes of the Plan and this Agreement. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Subject to all of the terms of the Plan, the Option shall be exercisable in «Installments» installments of                  shares each [or:              (            ) installments of «Install_1»; «Install_2»; «Install_3» and «Install_4» shares, respectively], which installments shall become exercisable on «Vest_1»; «Vest_2»; «Vest_3» «Vest_4», respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. Except as otherwise provided in Paragraphs 4, 5, 6, and 7, the Option shall terminate if the Optionee ceases to be employed by the Company and all of its Subsidiaries and may not thereafter be exercised.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative, any other person entitled to exercise the Option pursuant to Paragraph 6, or a permitted assignee to whom the Option has been assigned pursuant to Paragraph 9) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares in cash or as otherwise permitted by the Committee with respect to such exercise of the Option. The Committee reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Termination of Employment Other than by Reason of Death, Disability, or Retirement. If the Optionee ceases to be employed by the Company and all of its Subsidiaries for any reason other than the Optionee’s death, Disability, or Retirement, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of three (3) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Notwithstanding the foregoing provisions of this Paragraph 4, the Optionee (and the Optionee’s legal representative) shall not have any rights under the Option, and the Company shall not be obligated to sell or deliver shares of Common Stock of the Company (or have any other obligation or liability) under the Option, if the Committee shall determine that (i) the employment of the Optionee with the Company or any Subsidiary has been terminated for cause or (ii) the Optionee has engaged or may engage in employment or activities competitive with the Company or any Subsidiary or contrary, in the opinion of the Committee, to the best interests of the Company or any Subsidiary. In the event of such determination, the Optionee (and the Optionee’s legal representative) shall have no right under the Option to purchase any shares of Common Stock of the Company regardless of whether the Optionee (or the Optionee’s legal representative) shall have delivered a notice of exercise of the Option prior to the Committee’s making of such determination. The Option may be terminated entirely by the Committee at the time of or at any time subsequent to a determination by the Committee under this Paragraph 4 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock of the Company under the Option. Any rights which the Optionee may have under this Paragraph 4 are subject to the provisions of Paragraph 15.

5. Termination of Employment by Reason of Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of six (6) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 5 are subject to the provisions of Paragraph 15.

6. Termination of Employment by Reason of Death. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s death, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the personal representative of the Optionee’s estate or the person who acquired the right to exercise the Option by bequest or inheritance from the Optionee shall have the right to exercise the Option during its term within a period of twelve (12) months after the date of the Optionee’s death to the extent that the Option was exercisable at the time of such death; however, if, at the time of the Optionee’s death, the Optionee either (i) had reached the age of sixty-five (65) years or (ii) had reached the age of fifty-five (55) years and completed six (6) continuous years of employment by the Company or its Subsidiaries, then such 12-month period shall be extended to thirty-six (36) months.

7. Termination of Employment by Reason of Retirement. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Retirement, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of thirty-six (36) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 7 are subject to the provisions of Paragraph 15. For purposes of this Agreement, “Retirement” means the termination of the Optionee’s employment for any reason (including but not limited to the Optionee’s Disability) other than the Optionee’s death after the Optionee either (i) has reached the age of sixty-five (65) years or (ii) has reached the age of fifty-five (55) years and completed six (6) continuous years of employment by the Company or its Subsidiaries.

8. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

2

9. Nonassignability of Option. Except as provided in the following sentence, neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee. After giving at least thirty (30) days’ prior written notice to the Secretary of the Company, the Optionee may assign the Option in whole or in part to a Family Member or a Family Entity at any time prior to the expiration, termination, or cancellation of the Option, subject to all of the terms and conditions of the Plan and this Agreement; provided, that any such assignment shall be in writing, the Optionee promptly shall deliver a copy of any such assignment to the Secretary of the Company, and the Optionee and the assignee shall enter into such further agreement with the Company providing for the satisfaction of applicable federal, state, and local tax withholding requirements arising from or in connection with the exercise of the Option as the Company may require. A Family Member or a Family Entity to whom the Option has been assigned pursuant to the preceding sentence also shall be subject to the restrictions, limitations, and requirements contained in the first two sentences of this Paragraph 9. For purposes of this Paragraph 9, “Family Member” means only (i) the Optionee, (ii) a spouse, parent, child or more remote descendant, brother, sister, niece, or nephew of the Optionee, and (iii) a spouse of a brother, sister, child, or more remote descendant of the Optionee. For purposes of this Paragraph 9, “Family Entity” means only (i) a corporation, partnership, or limited liability company all of whose equity interests are owned by Family Members or other Family Entities and (ii) a trust or custodianship for the exclusive benefit of one or more Family Members (other than non-Family Member contingent beneficiaries whose rights arise only if no Family Member beneficiary is living). Subject to the first two sentences of Paragraph 2, the exercisability of the Option by a Family Member or a Family Entity to whom the Option has been assigned pursuant to this Paragraph 9 shall be determined by reference to the Optionee’s employment as provided in Paragraphs 2, 4, 5, 6, and 7 and is subject to the provisions of Paragraph 15. The Committee shall have exclusive authority to determine whether an assignment or transfer of the Option is permitted by this Paragraph 9, and the decision of the Committee with respect to such matter shall be binding and conclusive on the Company, the Optionee, and all other persons and entities. Without the prior approval of the Committee, a Family Entity to which the Option has been assigned pursuant to this Paragraph 9 shall not permit any non-Family Member to become a beneficial owner of an equity interest in or a beneficiary of such Family Entity (except by will or the laws of descent and distribution in the event of the death of a Family Member); and if a Family Entity violates the foregoing provisions of this sentence, then the Committee in its absolute discretion may terminate the Option effective as of the date on which such violation occurred. No Family Member or Family Entity to whom the Option has been assigned shall have any greater rights with respect to the Option than the Optionee would have had if the Option had not been assigned.

10. Right of Discharge Reserved. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any Subsidiary for any particular period of time or in any particular capacity or affect any right which the Company or any Subsidiary may have to terminate the employment of the Optionee.

11. Interpretations. The Committee shall have the authority to construe and interpret the provisions of the Plan and this Agreement and to make all decisions of fact and other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Committee on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

12. Waivers. The waiver by the Company of any provision of this Agreement shall not operate or be construed to be a subsequent waiver of the same provision or a waiver of any other provision of this Agreement.

13. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

3

14. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 14 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

15. Nonsolicitation Agreement of Optionee. (a) As a further consideration for the grant of the Option, the Optionee agrees with the Company that for a period of twelve (12) months after the Optionee ceases for any reason, whether voluntarily or involuntarily, to be employed by the Company or any of the Company’s Subsidiaries, the Optionee will not, in any capacity and whether alone or in association with another, directly or indirectly employ, solicit for employment, assist any other person to employ or solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment any person who then is employed by the Company or any of its Subsidiaries or who was employed by the Company or any of its Subsidiaries during the ninety (90) day period prior to the taking of such action by the Optionee.

(b) The Company and the Optionee acknowledge that, if the Optionee breaches any of the foregoing provisions of this Paragraph 15, it would be unreasonably difficult or substantially impossible to determine the actual damages which the Company will sustain or incur as a result of such breach. Accordingly, the Company and the Optionee agree that the Company shall be entitled to recover from the Optionee liquidated damages in respect of such breach determined as follows:

(i) If the Optionee has not exercised the Option as to some or all of the shares of Common Stock of the Company covered by the Option (the “Option Shares”), then the Company shall have the right by written notice to the Optionee to terminate the Option as to all of the Option Shares as to which the Option has not been exercised or previously terminated.

(ii) If the Optionee has exercised the Option as to some or all of the Option Shares but has not yet disposed of some or all of the shares of Common Stock of the Company received upon such exercise(s) of the Option (the “Issued Shares”), then upon written demand from the Company the Optionee forthwith shall deliver to the Company for cancellation the certificates for all of the Issued Shares.

(iii) If the Optionee has exercised the Option as to some or all of the Option Shares and has disposed of some or all of the Issued Shares received upon such exercise(s), then upon written demand from the Company the Optionee forthwith shall pay to the Company an amount equal to (w) the gross cash proceeds of the sale of the Issued Shares (if the Issued Shares have been disposed of by the Optionee for cash), (x) the fair market value of any consideration other than cash received for the Issued Shares (if the Issued Shares have been disposed of by the Optionee for a consideration other than cash), (y) the fair market value of the Issued Shares on the date of their disposition (if the Issued Shares have been disposed of by the Optionee by gift or otherwise for less than their fair market value), or (z) a combination of the foregoing amounts if applicable.

If the Company incurs any costs or expenses, including attorney fees, in enforcing the provisions of this Paragraph 15, then the Optionee further agrees that the Company also shall be entitled to recover from the Optionee, in addition to the foregoing liquidated damages, the reasonable costs and expenses of such enforcement.

16. Change of Control. (a) Upon the occurrence of a Change of Control, the Option automatically shall become immediately exercisable in full without regard to the provisions of Paragraph 2 relating to the exercisability of the Option in installments.

4

(b) For purposes of this agreement, a “Change of Control” shall be deemed to have occurred upon the happening of any of the following events:

(i) The Company is merged or consolidated into another corporation or entity, and immediately after such merger or consolidation becomes effective the holders of a majority of the outstanding shares of voting capital stock of the Company immediately prior to the effectiveness of such merger or consolidation do not own (directly or indirectly) a majority of the outstanding shares of voting capital stock or other equity interests having voting rights of the surviving or resulting corporation or other entity in such merger or consolidation;

(ii) any person, entity, or group of persons within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) and the rules promulgated thereunder becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or more of the outstanding voting capital stock of the Company;

(iii) the Common Stock of the Company ceases to be publicly traded because of an issuer tender offer or other “going private” transaction (other than a transaction sponsored by the then current management of the Company);

(iv) the Company dissolves or sells or otherwise disposes of all or substantially all of its property and assets (other than to an entity or group of entities which is then under common majority ownership (directly or indirectly) with the Company); or

(v) In one or more substantially concurrent transactions or in a series of related transactions, the Company directly or indirectly disposes of a portion or portions of its business operations (collectively, the “Sold Business”) other than by ceasing to conduct the Sold Business without its being acquired by a third party (regardless of the entity or entities through which the Company conducted the Sold Business and regardless of whether such disposition is accomplished through a sale of assets, the transfer of ownership of an entity or entities, a merger, or in some other manner) and either (i) the fair market value of the consideration received or to be received by the Company for the Sold Business is equal to at least thirty percent (30%) of the market value of the outstanding Common Stock of the Company determined by multiplying the average of the closing prices for the Common Stock of the Company on the thirty (30) trading days immediately preceding the date of the first public announcement of the proposed disposition of the Sold Business by the average of the numbers of outstanding shares of Common Stock on such thirty (30) trading days or (ii) the revenues of the Sold Business during the most recent four (4) calendar quarters ended prior to the first public announcement of the proposed disposition of the Sold Business represented thirty percent (30%) or more of the total consolidated revenues of the Company during such four (4) calendar quarters.

(vi) during any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company cease, for any reason, to constitute at least a majority of the Board of Directors of the Company, unless the election or nomination for election of each new director of the Company who took office during such period was approved by a vote of at least seventy-five percent (75%) of the directors of the Company still in office at the time of such election or nomination for election who were directors of the Company at the beginning of such period.

(c) For purposes of this agreement, “Change of Control Date” means the date upon which a Change of Control becomes effective.

(d) The provisions of this Paragraph 16 shall be construed and applied in such manner as to enable the Optionee to realize the economic benefits (if any) of the Option in conjunction with the consummation or anticipated consummation of a Change of Control, and the Company shall permit the exercise of the Option to occur at a time

5

and in a manner which will achieve such result (including, in appropriate circumstances, the exercise of the Option immediately prior to the Change of Control Date) or shall provide for the replacement of the Option with an economically equivalent option to acquire shares of the publicly traded capital stock or other publicly traded equity interests having voting rights of another corporation or other entity which is the direct or indirect successor to the Company as a result of such Change of Control.

(e) Notwithstanding any other provision of this Agreement which provides a shorter period during which the Option may be exercised after the Optionee ceases to be employed by the Company and all of its Subsidiaries, if the Optionee ceases to be employed by the Company and all of its Subsidiaries for any reason upon or after a Change of Control, prior to the expiration or other termination of the Option and without the Optionee’s having fully exercised the Option, then the Optionee or the Optionee’s legal representative (or, in the case of the Optionee’s death, the personal representative of the Optionee’s estate or the person who acquired the right to exercise the Option by bequest or inheritance from the Optionee) shall have the right to exercise the Option (to the extent not previously exercised) at any time during that period after such termination of employment which is the shorter of (i) the remaining term of the Option or (ii) thirty-six (36) months.

17. Gross-Up Payments. If the exercisability of the Option is accelerated pursuant to Paragraph 16 and such acceleration causes the Optionee to become liable for any excise tax on “excess parachute payments” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder) and any interest or penalties thereon (such excise tax, interest, and penalties, collectively, the “Tax Penalties”), then the Company promptly shall make a cash payment (the “Cash Payment”) to the Optionee in an amount equal to the Tax Penalties. The Company also promptly shall make an additional cash payment to the Optionee in an amount rounded to the nearest $100.00 which is equal to any additional income, excise, and other taxes (using the individual tax rates applicable to the Optionee for the year for which such Tax Penalties are owed) for which the Optionee will be liable as a result of the Optionee’s receipt of the Cash Payment (the additional cash payment provided for in this sentence being referred to as a “Gross-Up Payment”). In addition, the Optionee shall be entitled to promptly receive from the Company a further Gross-Up Payment in respect of each prior Gross-Up Payment until the amount of the last Gross-Up Payment is less than $100.00.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,

INC., a Delaware corporation

By:

Title:

«Employee», Optionee

6

COM

8-22-02

CSG SYSTEMS INTERNATIONAL, INC.

1996 STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

This Non-Qualified Stock Option Agreement dated                             , is entered into between                                  (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

* * *

WHEREAS, the Company has adopted a 1996 Stock Incentive Plan (the “Plan”); and

WHEREAS, the Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee has authority under the Plan to grant Non-Qualified Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Committee has granted a Non-Qualified Stock Option to the Optionee and has directed the Company to execute this Agreement for the purpose of evidencing the grant of such option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on                              (the “Grant Date”), the Committee granted to the Optionee an option (the “Option”) to purchase                  shares of Common Stock of the Company at a purchase price of $             per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is a Non-Qualified Stock Option for all purposes of the Plan and this Agreement. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Subject to all of the terms of the Plan, the Option shall be exercisable in                  (            ) installments of                  shares each [or:                  (            ) installments of                 ,                 ,                 , and                  shares, respectively], which installments shall become exercisable on                     ,                     ,                     , and                     , respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. Except as otherwise provided in Paragraphs 4, 5, 6, and 7, the Option shall terminate if the Optionee ceases to be employed by the Company and all of its Subsidiaries and may not thereafter be exercised. The Option shall be exercisable during the life of the Optionee only by the Optionee or the Optionee’s legal representative.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative or any other person entitled to exercise the Option pursuant to Paragraph 6) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares in cash or as otherwise permitted by the Committee with respect to such exercise of the Option. The Committee reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Termination of Employment Other than by Reason of Death, Disability, or Retirement. If the Optionee ceases to be employed by the Company and all of its Subsidiaries for any reason other than the Optionee’s death, Disability, or Retirement, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of three (3) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Notwithstanding the foregoing provisions of this Paragraph 4, the Optionee (and the Optionee’s legal representative) shall not have any rights under the Option, and the Company shall not be obligated to sell or deliver shares of Common Stock of the Company (or have any other obligation or liability) under the Option, if the Committee shall determine that (i) the employment of the Optionee with the Company or any Subsidiary has been terminated for cause or (ii) the Optionee has engaged or may engage in employment or activities competitive with the Company or any Subsidiary or contrary, in the opinion of the Committee, to the best interests of the Company or any Subsidiary. In the event of such determination, the Optionee (and the Optionee’s legal representative) shall have no right under the Option to purchase any shares of Common Stock of the Company regardless of whether the Optionee (or the Optionee’s legal representative) shall have delivered a notice of exercise of the Option prior to the Committee’s making of such determination. The Option may be terminated entirely by the Committee at the time of or at any time subsequent to a determination by the Committee under this Paragraph 4 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock of the Company under the Option. Any rights which the Optionee may have under this Paragraph 4 are subject to the provisions of Paragraph 15.

5. Termination of Employment by Reason of Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of six (6) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 5 are subject to the provisions of Paragraph 15.

2

6. Termination of Employment by Reason of Death. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s death, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the personal representative of the Optionee’s estate or the person who acquired the right to exercise the Option by bequest or inheritance from the Optionee shall have the right to exercise the Option during its term within a period of twelve (12) months after the date of the Optionee’s death to the extent that the Option was exercisable at the time of such death; however, if, at the time of the Optionee’s death, the Optionee either (i) had reached the age of sixty-five (65) years or (ii) had reached the age of fifty-five (55) years and completed six (6) continuous years of employment by the Company or its Subsidiaries, then such 12-month period shall be extended to thirty-six (36) months.

7. Termination of Employment by Reason of Retirement. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Retirement, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of thirty-six (36) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 7 are subject to the provisions of Paragraph 15. For purposes of this Agreement, “Retirement” means the termination of the Optionee’s employment for any reason (including but not limited to the Optionee’s Disability) other than the Optionee’s death after the Optionee either (i) has reached the age of sixty-five (65) years or (ii) has reached the age of fifty-five (55) years and completed six (6) continuous years of employment by the Company or its Subsidiaries.

8. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

9. Nonassignability of Option. Neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee.

10. Right of Discharge Reserved. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any Subsidiary for any particular period of time or in any particular capacity or affect any right which the Company or any Subsidiary may have to terminate the employment of the Optionee.

11. Interpretations. The Committee shall have the authority to construe and interpret the provisions of the Plan and this Agreement and to make all decisions of fact and other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Committee on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

3

12. Waivers. The waiver by the Company of any provision of this Agreement shall not operate or be construed to be a subsequent waiver of the same provision or a waiver of any other provision of this Agreement.

13. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

14. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 14 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

15. Nonsolicitation Agreement of Optionee. (a) As a further consideration for the grant of the Option, the Optionee agrees with the Company that for a period of twelve (12) months after the Optionee ceases for any reason, whether voluntarily or involuntarily, to be employed by the Company or any of the Company’s Subsidiaries, the Optionee will not, in any capacity and whether alone or in association with another, directly or indirectly employ, solicit for employment, assist any other person to employ or solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment any person who then is employed by the Company or any of its Subsidiaries or who was employed by the Company or any of its Subsidiaries during the ninety (90) day period prior to the taking of such action by the Optionee.

(b) The Company and the Optionee acknowledge that, if the Optionee breaches any of the foregoing provisions of this Paragraph 15, it would be unreasonably difficult or substantially impossible to determine the actual damages which the Company will sustain or incur as a result of such breach. Accordingly, the Company and the Optionee agree that the Company shall be entitled to recover from the Optionee liquidated damages in respect of such breach determined as follows:

(i) If the Optionee has not exercised the Option as to some or all of the shares of Common Stock of the Company covered by the Option (the “Option Shares”), then the Company shall have the right by written notice to the Optionee to terminate the Option as to all of the Option Shares as to which the Option has not been exercised or previously terminated.

(ii) If the Optionee has exercised the Option as to some or all of the Option Shares but has not yet disposed of some or all of the shares of Common Stock of the Company received upon such exercise(s) of the Option (the “Issued Shares”), then upon written demand from the Company the Optionee forthwith shall deliver to the Company for cancellation the certificates for all of the Issued Shares.

(iii) If the Optionee has exercised the Option as to some or all of the Option Shares and has disposed of some or all of the Issued Shares received upon such

4

exercise(s), then upon written demand from the Company the Optionee forthwith shall pay to the Company an amount equal to (w) the gross cash proceeds of the sale of the Issued Shares (if the Issued Shares have been disposed of by the Optionee for cash), (x) the fair market value of any consideration other than cash received for the Issued Shares (if the Issued Shares have been disposed of by the Optionee for a consideration other than cash), (y) the fair market value of the Issued Shares on the date of their disposition (if the Issued Shares have been disposed of by the Optionee by gift or otherwise for less than their fair market value), or (z) a combination of the foregoing amounts if applicable.

If the Company incurs any costs or expenses, including attorney fees, in enforcing the provisions of this Paragraph 15, then the Optionee further agrees that the Company also shall be entitled to recover from the Optionee, in addition to the foregoing liquidated damages, the reasonable costs and expenses of such enforcement.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,

INC., a Delaware corporation

By:

Title:

Optionee

5

COM-E

8-22-02

CSG SYSTEMS INTERNATIONAL, INC.

1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

This Incentive Stock Option Agreement dated «Agreement_Date», is entered into between «Employee» (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

* * *

WHEREAS, the Company has adopted a 1996 Stock Incentive Plan (the “Plan”); and

WHEREAS, the Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee has authority under the Plan to grant Incentive Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Committee has granted an Incentive Stock Option to the Optionee and has directed the Company to execute this Agreement for the purpose of evidencing the grant of such option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on «Grant_Date» (the “Grant Date”), the Committee granted to the Optionee an option (the “Option”) to purchase «Grant_Amt» shares of Common Stock of the Company at a purchase price of «Price» per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is an Incentive Stock Option for all purposes of the Plan and this Agreement. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Subject to all of the terms of the Plan, the Option shall be exercisable in              (        ) installments of              shares each [or              (        ) installments of             ,             ,             , and              shares, respectively], which installments shall become exercisable on                     ,                     ,                     , and                     , respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. Except as otherwise provided in Paragraphs 4, 5, and 6, the Option shall terminate if the Optionee ceases to be employed by the Company and all of its Subsidiaries and may not thereafter be exercised. The Option shall be exercisable during the life of the Optionee only by the Optionee or the Optionee’s legal representative.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative or any other person entitled to exercise the Option pursuant to Paragraph 6) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares in cash or as otherwise permitted by the Committee with respect to such exercise of the Option. The Committee reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Termination of Employment Other than by Reason of Death or Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries for any reason other than the Optionee’s death or Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of three (3) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Notwithstanding the foregoing provisions of this Paragraph 4, the Optionee (and the Optionee’s legal representative) shall not have any rights under the Option, and the Company shall not be obligated to sell or deliver shares of Common Stock of the Company (or have any other obligation or liability) under the Option, if the Committee shall determine that (i) the employment of the Optionee with the Company or any Subsidiary has been terminated for cause or (ii) the Optionee has engaged or may engage in employment or activities competitive with the Company or any Subsidiary or contrary, in the opinion of the Committee, to the best interests of the Company or any Subsidiary. In the event of such determination, the Optionee (and the Optionee’s legal representative) shall have no right under the Option to purchase any shares of Common Stock of the Company regardless of whether the Optionee (or the Optionee’s legal representative) shall have delivered a notice of exercise of the Option prior to the Committee’s making of such determination. The Option may be terminated entirely by the Committee at the time of or at any time subsequent to a determination by the Committee under this Paragraph 4 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock of the Company under the Option. Any rights which the Optionee may have under this Paragraph 4 are subject to the provisions of Paragraph 15.

5. Termination of Employment by Reason of Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of six (6) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 5 are subject to the provisions of Paragraph 15.

6. Termination of Employment by Reason of Death. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s death, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the personal representative of the Optionee’s estate or the person who acquired the right to exercise the Option by bequest or inheritance from the Optionee shall have the right to exercise the Option during its term within a period of twelve (12) months after the date of the Optionee’s death to the extent that the Option was exercisable at the time of such death.

7. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

8. Nonassignability of Option. Neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee.

9. Right of Discharge Reserved. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any Subsidiary for any particular period of time or in any particular capacity or affect any right which the Company or any Subsidiary may have to terminate the employment of the Optionee.

2

10. Notice of Disposition. The Optionee shall notify the Company of any disposition of shares of Common Stock of the Company issued pursuant to the exercise of the Option under the circumstances described in Section 421(b) of the Internal Revenue Code of 1986 (relating to certain disqualifying dispositions) within ten (10) days after such disposition.

11. Interpretations. The Committee shall have the authority to construe and interpret the provisions of the Plan and this Agreement and to make all decisions of fact and other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Committee on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

12. Waivers. The waiver by the Company of any provision of this Agreement shall not operate or be construed to be a subsequent waiver of the same provision or a waiver of any other provision of this Agreement.

13. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

14. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 14 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

15. Nonsolicitation Agreement of Optionee. (a) As a further consideration for the grant of the Option, the Optionee agrees with the Company that for a period of twelve (12) months after the Optionee ceases for any reason, whether voluntarily or involuntarily, to be employed by the Company or any of the Company’s Subsidiaries, the Optionee will not, in any capacity and whether alone or in association with another, directly or indirectly employ, solicit for employment, assist any other person to employ or solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment any person who then is employed by the Company or any of its Subsidiaries or who was employed by the Company or any of its Subsidiaries during the ninety (90) day period prior to the taking of such action by the Optionee.

(b) The Company and the Optionee acknowledge that, if the Optionee breaches any of the foregoing provisions of this Paragraph 15, it would be unreasonably difficult or substantially impossible to determine the actual damages which the Company will sustain or incur as a result of such breach. Accordingly, the Company and the Optionee agree that the Company shall be entitled to recover from the Optionee liquidated damages in respect of such breach determined as follows:

(i) If the Optionee has not exercised the Option as to some or all of the shares of Common Stock of the Company covered by the Option (the “Option Shares”), then the Company shall have the right by written notice to the Optionee to terminate the Option as to all of the Option Shares as to which the Option has not been exercised or previously terminated.

(ii) If the Optionee has exercised the Option as to some or all of the Option Shares but has not yet disposed of some or all of the shares of Common Stock of the Company received upon such exercise(s) of the Option (the “Issued Shares”), then upon written demand from the Company the Optionee forthwith shall deliver to the Company for cancellation the certificates for all of the Issued Shares.

3

(iii) If the Optionee has exercised the Option as to some or all of the Option Shares and has disposed of some or all of the Issued Shares received upon such exercise(s), then upon written demand from the Company the Optionee forthwith shall pay to the Company an amount equal to (w) the gross cash proceeds of the sale of the Issued Shares (if the Issued Shares have been disposed of by the Optionee for cash), (x) the fair market value of any consideration other than cash received for the Issued Shares (if the Issued Shares have been disposed of by the Optionee for a consideration other than cash), (y) the fair market value of the Issued Shares on the date of their disposition (if the Issued Shares have been disposed of by the Optionee by gift or otherwise for less than their fair market value), or (z) a combination of the foregoing amounts if applicable.

If the Company incurs any costs or expenses, including attorney fees, in enforcing the provisions of this Paragraph 15, then the Optionee further agrees that the Company also shall be entitled to recover from the Optionee, in addition to the foregoing liquidated damages, the reasonable costs and expenses of such enforcement.

16. Change of Control. (a) Upon the occurrence of a Change of Control, the Option automatically shall become immediately exercisable in full without regard to the provisions of Paragraph 2 relating to the exercisability of the Option in installments.

(b) For purposes of this agreement, a “Change of Control” shall be deemed to have occurred upon the happening of any of the following events:

(i) The Company is merged or consolidated into another corporation or entity, and immediately after such merger or consolidation becomes effective the holders of a majority of the outstanding shares of voting capital stock of the Company immediately prior to the effectiveness of such merger or consolidation do not own (directly or indirectly) a majority of the outstanding shares of voting capital stock or other equity interests having voting rights of the surviving or resulting corporation or other entity in such merger or consolidation;

(ii) any person, entity, or group of persons within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) and the rules promulgated thereunder becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or more of the outstanding voting capital stock of the Company;

(iii) the Common Stock of the Company ceases to be publicly traded because of an issuer tender offer or other “going private” transaction (other than a transaction sponsored by the then current management of the Company);

(iv) the Company dissolves or sells or otherwise disposes of all or substantially all of its property and assets (other than to an entity or group of entities which is then under common majority ownership (directly or indirectly) with the Company); or

(v) In one or more substantially concurrent transactions or in a series of related transactions, the Company directly or indirectly disposes of a portion or portions of its business operations (collectively, the “Sold Business”) other than by ceasing to conduct the Sold Business without its being acquired by a third party (regardless of the entity or entities through which the Company conducted the Sold Business and regardless of whether such disposition is accomplished through a sale of assets, the transfer of ownership of an entity or entities, a merger, or in some other manner) and either (i) the fair market value of the consideration received or to be received by the Company for the Sold Business is equal to

4

at least thirty percent (30%) of the market value of the outstanding Common Stock of the Company determined by multiplying the average of the closing prices for the Common Stock of the Company on the thirty (30) trading days immediately preceding the date of the first public announcement of the proposed disposition of the Sold Business by the average of the numbers of outstanding shares of Common Stock on such thirty (30) trading days or (ii) the revenues of the Sold Business during the most recent four (4) calendar quarters ended prior to the first public announcement of the proposed disposition of the Sold Business represented thirty percent (30%) or more of the total consolidated revenues of the Company during such four (4) calendar quarters.

(vi) during any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company cease, for any reason, to constitute at least a majority of the Board of Directors of the Company, unless the election or nomination for election of each new director of the Company who took office during such period was approved by a vote of at least seventy-five percent (75%) of the directors of the Company still in office at the time of such election or nomination for election who were directors of the Company at the beginning of such period.

(c) For purposes of this agreement, “Change of Control Date” means the date upon which a Change of Control becomes effective.

(d) The provisions of this Paragraph 16 shall be construed and applied in such manner as to enable the Optionee to realize the economic benefits (if any) of the Option in conjunction with the consummation or anticipated consummation of a Change of Control, and the Company shall permit the exercise of the Option to occur at a time and in a manner which will achieve such result (including, in appropriate circumstances, the exercise of the Option immediately prior to the Change of Control Date).

17. Gross-Up Payments. If the exercisability of the Option is accelerated pursuant to Paragraph 16 and such acceleration causes the Optionee to become liable for any excise tax on “excess parachute payments” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder) and any interest or penalties thereon (such excise tax, interest, and penalties, collectively, the “Tax Penalties”), then the Company promptly shall make a cash payment (the “Cash Payment”) to the Optionee in an amount equal to the Tax Penalties. The Company also promptly shall make an additional cash payment to the Optionee in an amount rounded to the nearest $100.00 which is equal to any additional income, excise, and other taxes (using the individual tax rates applicable to the Optionee for the year for which such Tax Penalties are owed) for which the Optionee will be liable as a result of the Optionee’s receipt of the Cash Payment (the additional cash payment provided for in this sentence being referred to as a “Gross-Up Payment”). In addition, the Optionee shall be entitled to promptly receive from the Company a further Gross-Up Payment in respect of each prior Gross-Up Payment until the amount of the last Gross-Up Payment is less than $100.00.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,

INC., a Delaware corporation

By:

Title:

«Employee»Optionee

5

COM

8-22-02

CSG SYSTEMS INTERNATIONAL, INC.

1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

This Incentive Stock Option Agreement dated                 , is entered into between                  (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

* * *

WHEREAS, the Company has adopted a 1996 Stock Incentive Plan (the “Plan”); and

WHEREAS, the Plan is administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company; and

WHEREAS, the Committee has authority under the Plan to grant Incentive Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Committee has granted an Incentive Stock Option to the Optionee and has directed the Company to execute this Agreement for the purpose of evidencing the grant of such option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on                      (the “Grant Date”), the Committee granted to the Optionee an option (the “Option”) to purchase              shares of Common Stock of the Company at a purchase price of $             per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is an Incentive Stock Option for all purposes of the Plan and this Agreement. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Subject to all of the terms of the Plan, the Option shall be exercisable in              (            ) installments of              shares each [or              (            ) installments of             ,             ,             , and              shares, respectively], which installments shall become exercisable on                     ,                     ,                     , and                     , respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. Except as otherwise provided in Paragraphs 4, 5, and 6, the Option shall terminate if the Optionee ceases to be employed by the Company and all of its Subsidiaries and may not thereafter be exercised. The Option shall be exercisable during the life of the Optionee only by the Optionee or the Optionee’s legal representative.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative or any other person entitled to exercise the Option pursuant to Paragraph 6) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares in cash or as otherwise permitted by the Committee with respect to such exercise of the Option. The Committee reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Termination of Employment Other than by Reason of Death or Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries for any reason other than the Optionee’s death or Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of three (3) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Notwithstanding the foregoing provisions of this Paragraph 4, the Optionee (and the Optionee’s legal representative) shall not have any rights under the Option, and the Company shall not be obligated to sell or deliver shares of Common Stock of the Company (or have any other obligation or liability) under the Option, if the Committee shall determine that (i) the employment of the Optionee with the Company or any Subsidiary has been terminated for cause or (ii) the Optionee has engaged or may engage in employment or activities competitive with the Company or any Subsidiary or contrary, in the opinion of the Committee, to the best interests of the Company or any Subsidiary. In the event of such determination, the Optionee (and the Optionee’s legal representative) shall have no right under the Option to purchase any shares of Common Stock of the Company regardless of whether the Optionee (or the Optionee’s legal representative) shall have delivered a notice of exercise of the Option prior to the Committee’s making of such determination. The Option may be terminated entirely by the Committee at the time of or at any time subsequent to a determination by the Committee under this Paragraph 4 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock of the Company under the Option. Any rights which the Optionee may have under this Paragraph 4 are subject to the provisions of Paragraph 15.

5. Termination of Employment by Reason of Disability. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s Disability, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the Optionee (or the Optionee’s legal representative) shall have the right to exercise the Option during its term within a period of six (6) months after such termination of employment to the extent that the Option was exercisable at the time of such termination of employment. Any rights which the Optionee may have under this Paragraph 5 are subject to the provisions of Paragraph 15.

2

6. Termination of Employment by Reason of Death. If the Optionee ceases to be employed by the Company and all of its Subsidiaries by reason of the Optionee’s death, prior to the expiration of the Option and without the Optionee’s having fully exercised the Option, then the personal representative of the Optionee’s estate or the person who acquired the right to exercise the Option by bequest or inheritance from the Optionee shall have the right to exercise the Option during its term within a period of twelve (12) months after the date of the Optionee’s death to the extent that the Option was exercisable at the time of such death.

7. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

8. Nonassignability of Option. Neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee.

9. Right of Discharge Reserved. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any Subsidiary for any particular period of time or in any particular capacity or affect any right which the Company or any Subsidiary may have to terminate the employment of the Optionee.

10. Notice of Disposition. The Optionee shall notify the Company of any disposition of shares of Common Stock of the Company issued pursuant to the exercise of the Option under the circumstances described in Section 421(b) of the Internal Revenue Code of 1986 (relating to certain disqualifying dispositions) within ten (10) days after such disposition.

11. Interpretations. The Committee shall have the authority to construe and interpret the provisions of the Plan and this Agreement and to make all decisions of fact and other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Committee on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

12. Waivers. The waiver by the Company of any provision of this Agreement shall not operate or be construed to be a subsequent waiver of the same provision or a waiver of any other provision of this Agreement.

13. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

3

14. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 14 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

15. Nonsolicitation Agreement of Optionee. (a) As a further consideration for the grant of the Option, the Optionee agrees with the Company that for a period of twelve (12) months after the Optionee ceases for any reason, whether voluntarily or involuntarily, to be employed by the Company or any of the Company’s Subsidiaries, the Optionee will not, in any capacity and whether alone or in association with another, directly or indirectly employ, solicit for employment, assist any other person to employ or solicit for employment, or advise or recommend to any other person that such other person employ or solicit for employment any person who then is employed by the Company or any of its Subsidiaries or who was employed by the Company or any of its Subsidiaries during the ninety (90) day period prior to the taking of such action by the Optionee.

(b) The Company and the Optionee acknowledge that, if the Optionee breaches any of the foregoing provisions of this Paragraph 15, it would be unreasonably difficult or substantially impossible to determine the actual damages which the Company will sustain or incur as a result of such breach. Accordingly, the Company and the Optionee agree that the Company shall be entitled to recover from the Optionee liquidated damages in respect of such breach determined as follows:

(i) If the Optionee has not exercised the Option as to some or all of the shares of Common Stock of the Company covered by the Option (the “Option Shares”), then the Company shall have the right by written notice to the Optionee to terminate the Option as to all of the Option Shares as to which the Option has not been exercised or previously terminated.

(ii) If the Optionee has exercised the Option as to some or all of the Option Shares but has not yet disposed of some or all of the shares of Common Stock of the Company received upon such exercise(s) of the Option (the “Issued Shares”), then upon written demand from the Company the Optionee forthwith shall deliver to the Company for cancellation the certificates for all of the Issued Shares.

(iii) If the Optionee has exercised the Option as to some or all of the Option Shares and has disposed of some or all of the Issued Shares received upon such exercise(s), then upon written demand from the Company the Optionee forthwith shall pay to the Company an amount equal to (w) the gross cash proceeds of the sale of the Issued Shares (if the Issued Shares have been disposed of by the Optionee for cash), (x) the fair market value of any consideration other than cash received for the Issued Shares (if the Issued Shares have been disposed of by the Optionee for a consideration other than cash), (y) the fair market value of the Issued Shares on the date of their disposition (if the Issued Shares have been disposed of by the Optionee by gift or otherwise for less than their fair market value), or (z) a combination of the foregoing amounts if applicable.

4

If the Company incurs any costs or expenses, including attorney fees, in enforcing the provisions of this Paragraph 15, then the Optionee further agrees that the Company also shall be entitled to recover from the Optionee, in addition to the foregoing liquidated damages, the reasonable costs and expenses of such enforcement.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,

INC., a Delaware corporation

By:

Title:

Optionee

5

CSG SYSTEMS INTERNATIONAL, INC.

STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

STOCK OPTION AGREEMENT

This Stock Option Agreement dated                             ,             , is entered into between                              (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

* * *

WHEREAS, the Company has adopted a Stock Option Plan for Non-Employee Directors (the “Plan”); and

WHEREAS, the Plan is administered by the Board of Directors of the Company (the “Board”); and

WHEREAS, the Board has authority under the Plan to grant Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Board has granted a Stock Option to the Optionee and has directed that this Agreement be executed for the purpose of evidencing the grant of such Stock Option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on                     ,              (the “Grant Date”), the Board granted to the Optionee an option (the “Option”) to purchase                  shares of Common Stock of the Company at a purchase price of $             per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is a nonqualified stock option for purposes of the Internal Revenue Code of 1986. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. Subject to all of the terms of the Plan and this Agreement, the Option shall be exercisable in                  (            ) installments of              shares each, which installments shall become exercisable on                     ,             , and                         , respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Except as otherwise provided in Paragraphs 4, 5, and 6, the Option shall terminate if the Optionee ceases to be a member of the Board.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative, any other person entitled to exercise the Option pursuant to Paragraph 6, or a permitted assignee to whom the Option has been assigned pursuant to Paragraph 8) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares either (a) in cash, (b) in shares of Common Stock of the Company which already are owned by the Optionee (and have been owned by the Optionee for more than six months prior to the Option exercise date) and which are surrendered to the Company in good form for transfer, or (c) in any combination of cash and such shares of Common Stock of the Company. When payment is made in shares of Common Stock of the Company, the value of such shares for such purpose shall be their Fair Market Value (as defined in the Plan) on the Option exercise date. The Board reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Cessation of Service as a Director. If the Optionee ceases to be a member of the Board for any reason other than retirement from the Board under the circumstances described in Paragraph 5 or death, then the Option (to the extent not previously exercised) shall continue to be exercisable to the extent that it was exercisable at the time that the Optionee ceased to be a member of the Board but only until the earlier of (i) one year after the Optionee ceased to be a member of the Board or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

5. Retirement from Board. If the Optionee ceases to be a member of the Board (other than by reason of death) and at the time of such occurrence (the “Retirement Date”) is at least age 65 with ten or more years of service as a member of the Board or is at least age 70 with five or more years of service as a member of the Board, then the Option (to the extent not previously exercised) shall continue to be or shall become exercisable in accordance with its terms until the earlier of (i) five years after the Retirement Date or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

6. Death. If the Optionee dies while the Option is unexercised (in whole or in part) and has been held by the Optionee for at least twelve months as of the date of the Optionee’s death, then the Option automatically shall become exercisable in full (if not already exercisable) upon the Optionee’s death. If the Option becomes exercisable pursuant to the preceding sentence or already was exercisable on the date of the Optionee’s death, then the Option may be exercised by the personal representative of the Optionee’s estate or by the beneficiaries of such estate to whom the Option is distributed until the earlier of (i) three years after the date of the Optionee’s death or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

2

7. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

8. Nonassignability of Option. Except as provided in the following sentence, neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee. After giving at least thirty (30) days’ prior written notice to the Secretary of the Company, the Optionee may assign the Option in whole or in part to a Family Member or a Family Entity at any time prior to the expiration, termination, or cancellation of the Option, subject to all of the terms and conditions of the Plan and this Agreement; provided, that any such assignment shall be in writing, and the Optionee promptly shall deliver a copy of any such assignment to the Secretary of the Company. A Family Member or a Family Entity to whom the Option has been assigned pursuant to the preceding sentence also shall be subject to the restrictions, limitations, and requirements contained in the first two sentences of this Paragraph 8. For purposes of this Paragraph 8, “Family Member” means only (i) the Optionee, (ii) a spouse, parent, child or more remote descendant, brother, sister, niece, or nephew of the Optionee, and (iii) a spouse of a brother, sister, child, or more remote descendant of the Optionee. For purposes of this Paragraph 8, “Family Entity” means only (i) a corporation, partnership, or limited liability company all of whose equity interests are owned by Family Members or other Family Entities and (ii) a trust or custodianship for the exclusive benefit of one or more Family Members (other than non-Family Member contingent beneficiaries whose rights arise only if no Family Member beneficiary is living). Subject to the third and fourth sentences of Paragraph 2, the exercisability of the Option by a Family Member or a Family Entity to whom the Option has been assigned pursuant to this Paragraph 8 shall be determined by reference to the Optionee’s membership on the Board as provided in Paragraphs 2, 4, 5, and 6. The Board shall have exclusive authority to determine whether an assignment or transfer of the Option is permitted by this Paragraph 8, and the decision of the Board with respect to such matter shall be binding and conclusive on the Company, the Optionee, and all other persons and entities. Without the prior approval of the Board, a Family Entity to which the Option has been assigned pursuant to this Paragraph 8 shall not permit any non-Family Member to become a beneficial owner of an equity interest in or a beneficiary of such Family Entity (except by will or the laws of descent and distribution in the event of the death of a Family Member); and if a Family Entity violates the foregoing provisions of this sentence, then the Board in its absolute discretion may terminate the Option effective as of the date on which such violation occurred. No Family Member or Family Entity to whom the Option has been assigned shall have any greater rights with respect to the Option than the Optionee would have had if the Option had not been assigned.

3

9. Change of Control.

(a) Upon the occurrence of a Change of Control, the Option automatically shall become immediately exercisable in full without regard to the provisions of Paragraph 2 relating to the exercisability of the Option in installments.

(b) For purposes of this agreement, a “Change of Control” shall be deemed to have occurred upon the happening of any of the following events:

(1) The Company is merged or consolidated into another corporation or entity, and immediately after such merger or consolidation becomes effective the holders of a majority of the outstanding shares of voting capital stock of the Company immediately prior to the effectiveness of such merger or consolidation do not own (directly or indirectly) a majority of the outstanding shares of voting capital stock or other equity interests having voting rights of the surviving or resulting corporation or other entity in such merger or consolidation;

(2) any person, entity, or group of persons within the meaning of Sections 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “1934 Act”) and the rules promulgated thereunder becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or more of the outstanding voting capital stock of the Company;

(3) the Common Stock of the Company ceases to be publicly traded because of an issuer tender offer or other “going private” transaction (other than a transaction sponsored by the then current management of the Company);

(4) the Company dissolves or sells or otherwise disposes of all or substantially all of its property and assets (other than to an entity or group of entities which is then under common majority ownership (directly or indirectly) with the Company); or

(5) In one or more substantially concurrent transactions or in a series of related transactions, the Company directly or indirectly disposes of a portion or

4

portions of its business operations (collectively, the “Sold Business”) other than by ceasing to conduct the Sold Business without its being acquired by a third party (regardless of the entity or entities through which the Company conducted the Sold Business and regardless of whether such disposition is accomplished through a sale of assets, the transfer of ownership of an entity or entities, a merger, or in some other manner) and either (i) the fair market value of the consideration received or to be received by the Company for the Sold Business is equal to at least thirty percent (30%) of the market value of the outstanding Common Stock of the Company determined by multiplying the average of the closing prices for the Common Stock of the Company on the thirty (30) trading days immediately preceding the date of the first public announcement of the proposed disposition of the Sold Business by the average of the numbers of outstanding shares of Common Stock on such thirty (30) trading days or (ii) the revenues of the Sold Business during the most recent four (4) calendar quarters ended prior to the first public announcement of the proposed disposition of the Sold Business represented thirty percent (30%) or more of the total consolidated revenues of the Company during such four (4) calendar quarters.

(6) during any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company cease, for any reason, to constitute at least a majority of the Board of Directors of the Company, unless the election or nomination for election of each new director of the Company who took office during such period was approved by a vote of at least seventy-five percent (75%) of the directors of the Company still in office at the time of such election or nomination for election who were directors of the Company at the beginning of such period.

(c) For purposes of this agreement, “Change of Control Date” means the date upon which a Change of Control becomes effective.

5

(d) The provisions of this Paragraph 9 shall be construed and applied in such manner as to enable the Optionee to realize the economic benefits (if any) of the Option in conjunction with the consummation or anticipated consummation of a Change of Control, and the Company shall permit the exercise of the Option to occur at a time and in a manner which will achieve such result (including, in appropriate circumstances, the exercise of the Option immediately prior to the Change of Control Date) or shall provide for the replacement of the Option with an economically equivalent option to acquire shares of the publicly traded capital stock or other publicly traded equity interests having voting rights of another corporation or other entity which is the direct or indirect successor to the Company as a result of such Change of Control.

(e) If the Optionee ceases to be a member of the Board upon or after a Change of Control, prior to the expiration or other termination of the Option and without the Optionee’s having fully exercised the Option, then the period of time referred to in clause (i) of Paragraph 4 shall be three years rather than one year.

10. Gross-Up Payments. If the exercisability of the Option is accelerated pursuant to Paragraph 9 and such acceleration causes the Optionee to become liable for any excise tax on “excess parachute payments” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder) and any interest or penalties thereon (such excise tax, interest, and penalties, collectively, the “Tax Penalties”), then the Company promptly shall make a cash payment (the “Cash Payment”) to the Optionee in an amount equal to the Tax Penalties. The Company also promptly shall make an additional cash payment to the Optionee in an amount rounded to the nearest $100.00 which is equal to any additional income, excise, and other taxes (using the individual tax rates applicable to the Optionee for the year for which such Tax Penalties are owed) for which the Optionee will be liable as a result of the Optionee’s receipt of the Cash Payment (the additional cash payment provided for in this sentence being referred to as a “Gross-Up Payment”). In addition, the Optionee shall be entitled to promptly receive from the Company a further Gross-Up Payment in respect of each prior Gross-Up Payment until the amount of the last Gross-Up Payment is less than $100.00.

11. No Right of Continued Service. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue to be a member of the Board.

12. Interpretations. The Board shall have the authority to interpret the provisions of the Plan and this Agreement and to decide all questions of fact and make all other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Board on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

6

13. Waivers. The waiver by the Company of any provision of this Agreement shall not operate as or be construed to be a subsequent waiver of the same provision or a wavier of any other provision of this Agreement.

14. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

15. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 15 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,
INC., a Delaware corporation
By:
Title:	Chairman of the Board and
	Chief Executive Officer
, Optionee

7

CSG SYSTEMS INTERNATIONAL, INC.

STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

STOCK OPTION AGREEMENT

This Stock Option Agreement dated                             ,             , is entered into between                              (the “Optionee”) and CSG SYSTEMS INTERNATIONAL, INC. (the “Company”), a Delaware corporation.

*  *  *

WHEREAS, the Company has adopted a Stock Option Plan for Non-Employee Directors (the “Plan”); and

WHEREAS, the Plan is administered by the Board of Directors of the Company (the “Board”); and

WHEREAS, the Board has authority under the Plan to grant Stock Options covering shares of Common Stock of the Company; and

WHEREAS, pursuant to the Plan, the Board has granted a Stock Option to the Optionee and has directed that this Agreement be executed for the purpose of evidencing the grant of such Stock Option;

NOW, THEREFORE, the Company and the Optionee agree as follows:

1. Grant of Option. Pursuant to the Plan, on                             ,              (the “Grant Date”), the Board granted to the Optionee an option (the “Option”) to purchase                  shares of Common Stock of the Company at a purchase price of $             per share; and the Company and the Optionee are executing this Agreement to evidence the grant of the Option and the terms thereof. The Option is a nonqualified stock option for purposes of the Internal Revenue Code of 1986. The Plan is incorporated in this Agreement with the same force and effect as if the Plan were set forth in full in this Agreement, and the Option is subject to all of the applicable terms and provisions of the Plan. The number of shares subject to the Option and the purchase price per share are subject to adjustment as provided in the Plan. By signing this Agreement, the Optionee acknowledges receipt from the Company of a copy of the Plan.

2. Term and Exercisability of Option. Subject to all of the terms of the Plan and this Agreement, the Option shall be exercisable in                  (            ) installments of                  shares each, which installments shall become exercisable on                 ,                 , and                     , respectively. Once an installment of the Option becomes exercisable under this Agreement, it shall remain exercisable until the expiration, cancellation, or termination of the Option. The Option shall not be exercisable more than ten (10) years after the Grant Date. If not sooner exercised, terminated, or cancelled, the Option shall expire ten (10) years after the Grant Date. Except as otherwise provided in Paragraphs 4, 5, and 6, the Option shall terminate if the Optionee ceases to be a member of the Board.

3. Method of Exercise of Option. The Option may be exercised by the Optionee (or by the Optionee’s legal representative, any other person entitled to exercise the Option pursuant to Paragraph 6, or a permitted assignee to whom the Option has been assigned pursuant to Paragraph 8) as to all or any part of the shares covered by the Option as to which the Option is then exercisable by (i) either logging on to www.benefitaccess.com, which is a stock option access web site, or calling (800) 367-4777, which is a touch-tone voice response system, in either case specifying the number of shares to be purchased and providing any other information requested by the web site or voice response system, and (ii) submitting to the Company or the broker designated by the Company payment in full for such shares either (a) in cash, (b) in shares of Common Stock of the Company which already are owned by the Optionee (and have been owned by the Optionee for more than six months prior to the Option exercise date) and which are surrendered to the Company in good form for transfer, or (c) in any combination of cash and such shares of Common Stock of the Company. When payment is made in shares of Common Stock of the Company, the value of such shares for such purpose shall be their Fair Market Value (as defined in the Plan) on the Option exercise date. The Board reserves the right from time to time to modify or supplement the method or methods of exercising the Option and will promptly notify the Optionee of any such modification.

4. Cessation of Service as a Director. If the Optionee ceases to be a member of the Board for any reason other than retirement from the Board under the circumstances described in Paragraph 5 or death, then the Option (to the extent not previously exercised) shall continue to be exercisable to the extent that it was exercisable at the time that the Optionee ceased to be a member of the Board but only until the earlier of (i) one year after the Optionee ceased to be a member of the Board or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

5. Retirement from Board. If the Optionee ceases to be a member of the Board (other than by reason of death) and at the time of such occurrence (the “Retirement Date”) is at least age 65 with ten or more years of service as a member of the Board or is at least age 70 with five or more years of service as a member of the Board, then the Option (to the extent not previously exercised) shall continue to be or shall become exercisable in accordance with its terms until the earlier of (i) five years after the Retirement Date or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

6. Death. If the Optionee dies while the Option is unexercised (in whole or in part) and has been held by the Optionee for at least twelve months as of the date of the Optionee’s death, then the Option automatically shall become exercisable in full (if not already exercisable) upon the Optionee’s death. If the Option becomes exercisable pursuant to the preceding sentence or already was exercisable on the date of the Optionee’s death, then the Option may be exercised by the personal representative of the Optionee’s estate or by the beneficiaries of such estate to whom the Option is distributed until the earlier of (i) three years after the date of the Optionee’s death or (ii) the expiration of the term of the Option; and to the extent not exercisable or not exercised (if exercisable) by such applicable date, the Option shall terminate and be of no further force or effect.

2

7. Rights of Optionee. Neither the Optionee nor any other person having the right to exercise the Option shall have any rights as a stockholder of the Company with respect to the shares of Common Stock of the Company subject to the Option until the issuance of a stock certificate to the Optionee or such other person for such shares in accordance with the Plan.

8. Nonassignability of Option. Except as provided in the following sentence, neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be assigned or transferred by the Optionee in whole or in part either directly or by operation of law or otherwise (except by will or the laws of descent and distribution in the event of the Optionee’s death); and neither the Option nor any of the Optionee’s rights and interests under the Plan or this Agreement may be pledged, encumbered, or otherwise subjected to any obligation or liability of the Optionee. After giving at least thirty (30) days’ prior written notice to the Secretary of the Company, the Optionee may assign the Option in whole or in part to a Family Member or a Family Entity at any time prior to the expiration, termination, or cancellation of the Option, subject to all of the terms and conditions of the Plan and this Agreement; provided, that any such assignment shall be in writing, and the Optionee promptly shall deliver a copy of any such assignment to the Secretary of the Company. A Family Member or a Family Entity to whom the Option has been assigned pursuant to the preceding sentence also shall be subject to the restrictions, limitations, and requirements contained in the first two sentences of this Paragraph 8. For purposes of this Paragraph 8, “Family Member” means only (i) the Optionee, (ii) a spouse, parent, child or more remote descendant, brother, sister, niece, or nephew of the Optionee, and (iii) a spouse of a brother, sister, child, or more remote descendant of the Optionee. For purposes of this Paragraph 8, “Family Entity” means only (i) a corporation, partnership, or limited liability company all of whose equity interests are owned by Family Members or other Family Entities and (ii) a trust or custodianship for the exclusive benefit of one or more Family Members (other than non-Family Member contingent beneficiaries whose rights arise only if no Family Member beneficiary is living). Subject to the third and fourth sentences of Paragraph 2, the exercisability of the Option by a Family Member or a Family Entity to whom the Option has been assigned pursuant to this Paragraph 8 shall be determined by reference to the Optionee’s membership on the Board as provided in Paragraphs 2, 4, 5, and 6. The Board shall have exclusive authority to determine whether an assignment or transfer of the Option is permitted by this Paragraph 8, and the decision of the Board with respect to such matter shall be binding and conclusive on the Company, the Optionee, and all other persons and entities. Without the prior approval of the Board, a Family Entity to which the Option has been assigned pursuant to this Paragraph 8 shall not permit any non-Family Member to become a beneficial owner of an equity interest in or a beneficiary of such Family Entity (except by will or the laws of descent and distribution in the event of the death of a Family Member); and if a Family Entity violates the foregoing provisions of this sentence, then the Board in its absolute discretion may terminate the Option effective as of the date on which such violation occurred. No Family Member or Family Entity to whom the Option has been assigned shall have any greater rights with respect to the Option than the Optionee would have had if the Option had not been assigned.

9. No Right of Continued Service. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue to be a member of the Board.

3

10. Interpretations. The Board shall have the authority to interpret the provisions of the Plan and this Agreement and to decide all questions of fact and make all other determinations necessary or advisable for the administration of the Plan and this Agreement. Decisions and determinations of the Board on all matters relating to the Plan or this Agreement shall be final and binding on all persons as provided in the Plan. The captions of the various paragraphs of this Agreement are for the purpose of convenient reference only and are not intended to define or limit the contents of such paragraphs. Capitalized terms used in this Agreement, unless defined in this Agreement, shall have the meanings given to such terms in the Plan.

11. Waivers. The waiver by the Company of any provision of this Agreement shall not operate as or be construed to be a subsequent waiver of the same provision or a wavier of any other provision of this Agreement.

12. Governing Law. The Plan and this Agreement shall be governed by and construed in accordance with the laws of Delaware.

13. Binding Effect. This Agreement shall be binding upon the Company, the Optionee, and their respective heirs, personal representatives, successors, and assigns. However, nothing contained in this Paragraph 13 shall be construed to allow the Optionee to make any assignment which is otherwise prohibited by the Plan or this Agreement.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this Agreement as of the date first above written.

CSG SYSTEMS INTERNATIONAL,
INC., a Delaware corporation
By:
Title:	Chairman of the Board and
	Chief Executive Officer
, Optionee

4

EX-12.10

Exhibit 12.10

CSG Systems International, Inc.

Ratio of Earnings to Fixed Charges

(in thousands, except ratios)

	Nine Months Ended September 30, 2004 (1)
Income (loss) from continuing operations before income taxes	$	51,356
Fixed Charges:
Interest on long-term and short-term debt including amortization of debt expense		8,049
Interest element of rentals		6,048
Total fixed charges		14,097
Earnings before income taxes and fixed charges	$	65,453
Ratio of earnings to fixed charges		4.64

(1) Excludes the write-off of unamortized deferred financing costs of $6.6 million resulting from the repayment of our outstanding indebtedness under our then-existing credit facility in June 2004.

EX-31.01

Exhibit 31.01

CERTIFICATIONS PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Neal C. Hansen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CSG Systems International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2004	/s/ Neal C. Hansen
	Neal C. Hansen
	Chairman and Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATIONS PURSUANT TO

SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Peter E. Kalan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CSG Systems International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2004	/s/ Peter E. Kalan
	Peter E. Kalan
	Executive Vice President and Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Neal C. Hansen, the Chief Executive Officer and Peter E. Kalan, the Chief Financial Officer of CSG Systems International Inc., each certifies that, to the best of his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CSG Systems International, Inc.

November 9, 2004

/s/ Neal C. Hansen

Neal C. Hansen

Chairman and Chief Executive Officer

November 9, 2004

/s/ Peter E. Kalan

Peter E. Kalan

Executive Vice President and Chief Financial Officer

EX-99.01

Exhibit 99.01

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES

LITIGATION REFORM ACT OF 1995

CERTAIN CAUTIONARY STATEMENTS AND

RISK FACTORS

CSG Systems International, Inc. and its subsidiaries (collectively, the “Company” or forms of the pronoun “we”) or their representatives from time-to-time may make or may have made certain forward-looking statements, whether orally or in writing, including without limitation, any such statements made or to be made in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contained in our various SEC filings or orally in conferences or teleconferences. We wish to ensure that such statements are accompanied by meaningful cautionary statements, so as to ensure to the fullest extent possible the protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995.

ACCORDINGLY, THE FORWARD-LOOKING STATEMENTS ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO AND ARE ACCOMPANIED BY THE FOLLOWING MEANINGFUL CAUTIONARY STATEMENTS IDENTIFYING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.

This list of factors is likely not exhaustive. We operate in a rapidly changing and evolving business involving the converging global telecommunications industry (e.g., cable television, DBS, wireline and wireless telephony, Internet and high speed data, etc.), and new risk factors will likely emerge. Management cannot predict all of the important risk factors, nor can it assess the impact, if any, of such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those in any forward-looking statements.

ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING STATEMENTS WILL BE ACCURATE INDICATORS OF FUTURE ACTUAL RESULTS, AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER FROM RESULTS PROJECTED IN FORWARD-LOOKING STATEMENTS AND THAT SUCH DIFFERENCES MAY BE MATERIAL.

WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM COMCAST AND ECHOSTAR, AND THE LOSS OF THEIR BUSINESS WOULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We generate approximately one-third of our total consolidated revenues from our two largest clients, Comcast and Echostar. We expect to continue to generate a significant percentage of our future revenues from Comcast and Echostar. Concentration of a large percentage of total revenues with a limited number of clients imposes certain risks to our business. Our financial condition and results of operations (including possible impairment, or significant acceleration of the amortization of client contracts intangible assets) could be materially adversely affected by:

• Comcast’s or Echostar’s termination of or failure to renew their contracts with us, in whole or in part for any reason; or

• a significant reduction in the number of Comcast or Echostar customers processed on our system.

We recently renewed our contract with Echostar. However, such contract expires in 2006, and there is no assurance that such contract will be renewed on terms satisfactory to us, or at all.

Our industry is highly competitive, and the possibility that a major client may move all or a portion of its customers to a competitor has increased. While our clients may incur some costs in switching to our competitors, they may do so for a variety of reasons, including if we do not maintain favorable relationships, do not provide satisfactory services and products, or for reasons associated with price. The Comcast Contract contains provisions establishing annual financial minimums for 2004, 2005 and 2006, which we currently expect to exceed based on the current

number of customers on our system. Under the terms of the Comcast Contract, which does not include exclusivity for us, Comcast could remove one or more regions from or significantly reduce the number of customers on our system without automatically incurring a financial penalty. We have been working, particularly since the arbitration ruling with Comcast, towards creating a favorable relationship with Comcast and the different Comcast regions we service. However, there can be no assurance that we can achieve or maintain that relationship with Comcast or that Comcast will not move customers for any particular region to a competitor’s system.

OUR BROADBAND DIVISION, WHICH ACCOUNTS FOR A SUBSTANTIAL PORTION OF OUR REVENUES, IS DEPENDENT ON THE U.S. CABLE TELEVISION AND SATELLITE INDUSTRIES.

The Broadband Division generates its revenues by providing products and services to the U.S. and Canadian cable television and satellite industries. Although our dependence on these industries has been lessened by earning additional revenues outside the U.S. as a result of the Kenan Business acquisition, revenues from the U.S. cable television and satellite industries are still expected to provide a large percentage of our, and substantially all of the Broadband Division’s, total revenues in the foreseeable future. A decrease in the number of customers served by our clients, loss of business due to non-renewal of client contracts, industry and client consolidations, movement of customers from our systems to another vendor’s system as a result of regionalization strategies by our clients, and/or changing consumer demand for services could have a material adverse effect on our results of operations. There can be no assurance that new entrants into the video market will become our clients. Also, there can be no assurance that video providers will be successful in expanding into other segments of the converging telecommunications industry. Even if major forays into new markets are successful, we may be unable to meet the special billing and customer care needs of that market.

VARIABILITY OF OUR QUARTERLY REVENUES AND OUR FAILURE TO MEET REVENUE AND EARNINGS EXPECTATIONS WOULD NEGATIVELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND OUR CONVERTIBLE DEBT SECURITIES.

Variability in quarterly revenues and operating results are inherent characteristics of the software and professional services industries. Common causes of a failure to meet revenue and operating expectations in these industries include, among others:

• the inability to close and/or recognize revenue on one or more material software transactions that may have been anticipated by management in any particular period;

• the inability to timely renew one or more material software maintenance agreements, or renewing such agreements at lower rates than anticipated; and

• the inability to timely and successfully complete an implementation project and meet client expectations, due to factors discussed in greater detail below.

We expect software license, software maintenance services, and professional services revenues to become an increasingly larger percentage of our total revenues in the future. Consequently, as our total revenues grow, so too does the risk associated with meeting financial expectations for revenues derived from our software licenses, software maintenance services, and professional services offerings. As a result, there is a proportionately increased likelihood that we may fail to meet revenue and earnings expectations of the analyst community. Should we fail to meet analyst expectations, by even a relatively small amount, it would most likely have a disproportionately negative impact upon the market price for our common stock and for our Convertible Debt Securities.

WE FACE SIGNIFICANT COMPETITION IN OUR INDUSTRY.

The market for our products and services is highly competitive. We directly compete with both independent providers of products and services and in-house systems developed by existing and potential clients. In addition, some independent providers are entering into strategic alliances with other independent providers, resulting in either new competitors, or competitors with greater resources. Many of our current and potential competitors have significantly greater financial, marketing, technical, and other competitive resources than our company, many with significant and well-established international operations. There can be no assurance that we will be able to compete successfully with our existing competitors or with new competitors.

OUR INABILITY TO TIMELY AND SUCCESSFULLY COMPLETE A COMPLEX IMPLEMENTATION PROJECT AND MEET CLIENT EXPECTATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our GSS Division provides a variety of implementation services in conjunction with its software arrangements. The nature of the efforts required to complete the implementations can range from relatively short and noncomplex projects to long and complex projects. These implementation projects typically range from six to twelve months in length, but can be longer or shorter depending upon the specifics of the project. The length and complexity of an individual project is dependent upon many factors including, but not limited to, the following:

• the level of software customization, if any, required in the implementation;

• the complexity of the client’s business, and the client’s intended use of our products and services to address their business needs;

• whether the project includes multiple software product implementations or services;

• the extent of efforts required to integrate our products with the client’s other computer systems and business processes;

• the amount and type of data that is required to be converted from the client’s old application system to the newly implemented system;

• the geographic location of the implementation project;

• whether the arrangement includes additional vendors participating in the overall project, including, but not limited to, prime and subcontractor relationships with our company; and

• the responsibility we have assumed for the overall project completion. For example, from time to time we may assume a prime contractor (or prime integrator) role in a project in addition to our software implementation responsibilities. Prime contractor roles are inherently more difficult and/or complex as we take on the additional responsibility of managing other vendors as part of the project.

Lengthy and/or complex projects carry a greater degree of business risk than those projects that are short and/or noncomplex in nature. Our inability to timely and successfully complete a project and meet client expectations could have a material adverse effect on our financial condition and results of operations by impacting:

• the amount and timing of revenue recognition. We generally account for our software implementation projects using the percentage-of-completion (“POC”) method of accounting, and account for our fixed-price, long-term professional services projects using the proportional performance method, which results in revenue recognition that is generally consistent with the POC method of accounting. We apply various judgments and estimates in following these accounting methods, the primary one being the determination of the estimated effort required to complete a project. Significant increases between quarters in the total estimated effort required to complete a project accounted for in this manner can result in a reduction in anticipated quarterly revenues, and possibly, the reversal of previously recognized revenue;

• the overall profitability of a project. Many of our projects are priced on a fixed-fee basis or the amount of fees that can be billed on a time-and-materials basis is capped. As a result, unexpected costs and/or delays

can result in the projects being less profitable than originally anticipated or even unprofitable (i.e., a loss contract). In addition, our products may be considered mission critical customer management systems by our clients. As a result, an arrangement may include penalties and/or potential damages for our failure to perform under the agreed-upon terms of the arrangement; and/or

• the timing of invoicing and/or collection of arrangement fees. Our ability to invoice and timely collect arrangement fees may be dependent upon our meeting certain contractual milestones, or may be dependent on the overall project status in certain situations in which we act as a subcontractor to another vendor on a project. As a result, the status of and/or delays in a project can impact the timing of invoicing and collection of our arrangement fees.

OUR BUSINESS IS DEPENDENT UPON THE ECONOMIC CONDITION OF THE GLOBAL TELECOMMUNICATIONS INDUSTRY.

Beginning in early 2001, the economic state of the global telecommunications industry deteriorated. This trend continued into 2003. During this time frame, many companies operating within this industry publicly reported decreased revenues and earnings, and several companies filed for bankruptcy protection. Most telecommunications companies reduced their operating costs and capital expenditures to cope with the market condition during these times. Since our clients operate within this industry sector, the economic state of this industry directly impacts our business, potentially limiting the amount of money spent on customer care and billing products and services, as well as increasing the likelihood of uncollectible accounts receivable and lengthening the cash collection cycle.

Recent public reports, as well as our recent experiences with our client base, are providing signs of economic improvement within this industry sector. However, the public reports are mixed as to whether the recovery is real and whether the recovery is sustainable. If a turnaround in the market conditions occurs, it will likely be slow, and a full, sustained recovery, if it occurs at all, may take several years. Since a significant amount of our GSS Division’s business comes from international sources within this industry sector, the pace at which the market recovers presents a significant risk to our ability to timely collect our accounts receivable, maintain profitability, and grow this segment of our business.

OUR INTERNATIONAL OPERATIONS SUBJECT US TO ADDITIONAL RISKS.

We currently conduct a significant amount of our business outside the United States. We are subject to certain risks associated with operating internationally including:

• difficulties with product development meeting local requirements;

• fluctuations in foreign currency exchange rates for which a natural or purchased hedge does not exist or is ineffective;

• longer collection cycles for client billings or accounts receivable, as well as heightened client collection risks, especially in countries with highly inflationary economies and/or with restrictions on the movement of cash out of the country;

• compliance with laws and regulations related to the collection, use, and disclosure of certain personal information relating to clients’ customers, such as privacy laws, that are more strict than those currently in force in the United States;

• reduced protection for intellectual property rights in some countries;

• inability to recover value added taxes and/or goods and services taxes in foreign jurisdictions; and

• a potential adverse impact to our overall effective income tax rate resulting from, among other things:

• operations in foreign countries with higher tax rates than the United States;

• the inability to utilize certain foreign tax credits; and

• the inability to utilize some or all of losses generated in one or more foreign countries.

SUBSTANTIAL IMPAIRMENT OF THE GSS DIVISION’S GOODWILL AND OTHER INTANGIBLE ASSETS IN THE FUTURE MAY BE POSSIBLE.

As of September 30, 2004, there was approximately $30 million in net intangible assets (primarily software) and approximately $217 million of goodwill that was attributable to the GSS Division, which included the assets from the Kenan Business, ICMS, Davinci, and plaNet acquisitions. Key drivers of the value assigned to these acquisitions are the global telecommunications industry client base and the software assets acquired. We performed our annual GSS Division goodwill impairment test as of July 31, 2004, and also performed certain financial analyses of the GSS Division’s other long-lived intangible assets at that time as well, and concluded that no impairment of the GSS Division’s goodwill or other long-lived intangible assets had occurred at that time. As of September 30, 2004, we concluded that no events or changes in circumstances have occurred since that time to warrant an impairment assessment of the GSS Division’s goodwill and/or other long-lived intangible assets. We will continue to monitor the carrying value of these assets during the period of economic recovery for the telecommunications industry and will perform the next scheduled GSS Division annual goodwill impairment testing in the third quarter of 2005. If the current economic conditions take longer to recover than anticipated, it is reasonably possible that a review for impairment of the GSS Division’s goodwill and/or related long-lived intangible assets in the future may indicate that these assets are impaired, and the amount of impairment could be substantial.

A REDUCTION IN DEMAND FOR OUR KEY CUSTOMER CARE AND BILLING PRODUCTS AND SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Historically, a substantial percentage of our total revenues have been generated from our core service bureau processing product, CSG CCS/BP, or CCS, and related services. These CCS products and services are expected to provide a large percentage of our, and most of the Broadband Division’s, total revenues in the foreseeable future.

Historically, a substantial percentage of the GSS Division’s revenues have been generated from its core customer care and billing system product, CSG Kenan FX (formerly CSG Kenan/BP), and associated software maintenance services and professional services. CSG Kenan FX software licenses and related software maintenance services and professional services are expected to provide a large percentage of the GSS Division’s total revenues in the foreseeable future.

Any reduction in demand for CCS and/or CSG Kenan FX and related services discussed above could have a material adverse effect on our financial condition and results of operations, including possible impairments to related goodwill and other intangible assets.

CLIENT BANKRUPTCIES COULD ADVERSELY AFFECT OUR BUSINESS, AND ANY ACCOUNTING RESERVES WE HAVE ESTABLISHED MAY NOT BE SUFFICIENT.

The economic state of the telecommunications industry increases the risk of our clients filing for bankruptcy protection. Indeed, certain of our clients have filed for bankruptcy protection, with Adelphia Communications representing the largest one for us. Companies involved in bankruptcy proceedings pose greater financial risks to us, consisting principally of possible claims of preferential payments for certain amounts paid to us prior to the bankruptcy filing date, as well as increased collectibility risk for accounts receivable, particularly those accounts receivable that relate to periods prior to the bankruptcy filing date. We consider such risks in assessing our revenue recognition and the collectibility of accounts receivable related to our clients that have filed for bankruptcy protection. We establish accounting reserves for our estimated exposure on these items. However, there can be no assurance that our accounting reserves related to these items are adequate. Should any of the factors considered in determining the adequacy of the overall reserves change adversely, an adjustment to the provision for doubtful account receivables may be necessary. Because of the potential significance of these items, such an adjustment could be material.

WE MAY INCUR ADDITIONAL MATERIAL RESTRUCTURING CHARGES IN THE FUTURE.

Since the third quarter of 2002, we have recorded restructuring charges related to involuntary employee terminations and various facility abandonments. The accounting for facility abandonments requires significant judgments in determining the restructuring charges, primarily related to the assumptions regarding the timing and the amount of any potential sublease arrangements for the abandoned facilities, and the discount rates used to determine the present value of the liabilities. We continually evaluate these assumptions, and adjust the related facility abandonment reserves based on the revised assumptions at that time. Moreover, we continually evaluate ways to reduce our operating expenses through restructuring opportunities, including the utilization of our workforce and current operating facilities. As a result, there is a reasonable possibility that we may incur additional material restructuring charges in the future.

WE MAY NOT BE ABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY.

The market for customer care and billing systems is characterized by rapid changes in technology and is highly competitive with respect to the need for timely product innovations and new product introductions. In particular, the Broadband Division recently completed its architectural upgrade to CCS and related services and software products to further support convergent broadband services including cross-service bundling, convergent order entry and advanced service provisioning capabilities. We have migrated several clients to the new platform. CCS’s advanced convergent solution is expected to be the Broadband Division’s next generation product offering.

In addition, during late 2003, we introduced CSG Kenan FX, which combined certain software technologies we had previously developed with the best of the CSG Kenan/BP product family. CSG Kenan FX was the result of an 18-month research and development project that resulted in a business framework consisting of pre-integrated products and modules that make services available via a common middle layer. CSG Kenan FX is expected to be the GSS Division’s primary product offering in future periods.

We believe that our future success in sustaining and growing our revenues depends upon continued market acceptance of our current products, including CCS and CSG Kenan FX, and our ability to continuously adapt, modify, maintain, and operate our products to address the increasingly complex and evolving needs of our clients, without sacrificing the reliability or quality of the products. As a result, substantial research and development will be required to maintain the competitiveness of our products and services in the market. Technical problems may arise in developing, maintaining and operating our products and services as the complexities are increased. Development projects can be lengthy and costly, and are subject to changing requirements, programming difficulties, a shortage of qualified personnel, and unforeseen factors which can result in delays. In addition, we may be responsible for the implementation of new products, and depending upon the specific product, may also be responsible for operations of the product. There is an inherent risk in the successful implementation and operations of these products as the technological complexities increase. There can be no assurance:

• of continued market acceptance of our current products;

• that we will be successful in the timely development of product enhancements or new products that respond to technological advances or changing client needs; or

• that we will be successful in supporting the implementation and/or operations of product enhancements or new products.

See the above risk factor, “our inability to timely and successfully complete a complex implementation project and meet client expectations could have a material adverse effect on our financial condition and results of operations”, for additional risks related to implementation projects.

THE CONSOLIDATION OF THE GLOBAL TELECOMMUNICATIONS INDUSTRY MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

The global telecommunications industry is undergoing significant ownership changes at an accelerated pace. One facet of these changes is that telecommunications service providers are consolidating, decreasing the potential number of buyers for our products and services. Such client consolidations carry with them the inherent risk that the consolidators may choose to move their purchased customers to a competitor’s system. In addition, consolidation in the global telecommunications industry may put at risk our ability to leverage our existing relationships. Should this consolidation result in a concentration of customer accounts being owned by companies with whom we do not have a relationship, or with whom competitors are entrenched, it could negatively affect our ability to maintain or expand our market share, thereby having a material adverse effect to our results of operations.

FAILURE TO ATTRACT AND RETAIN OUR KEY MANAGEMENT AND OTHER HIGHLY SKILLED PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

Our future success depends in large part on the continued service of our key management, sales, product development, and operational personnel. We are particularly dependent on our executive officers. We believe that our future success also depends on our ability to attract and retain highly skilled technical, managerial, operational, and marketing personnel, including, in particular, personnel in the areas of research and development and technical support. Competition for qualified personnel at times can be intense, particularly in the areas of research and development, conversions, software implementations, and technical support, especially now that market conditions are improving and the demand for such talent is increasing. In addition, our restructuring activities adversely impact our workforce as a result of involuntary terminations of employees and may adversely impact our ability to retain key personnel and recruit new employees when there is a need. For these reasons, we may not be successful in attracting and retaining the personnel we require, which could have a material adverse effect on our ability to meet our commitments and new product delivery objectives.

FAILURE TO PROTECT OUR PROPRIETARY INTELLECTUAL PROPERTY RIGHTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We rely on a combination of trade secret and copyright laws, nondisclosure agreements, and other contractual and technical measures to protect our proprietary rights in our products. We also hold a limited number of patents on some of our newer products, but do not rely upon patents as a primary means of protecting our rights in our intellectual property. There can be no assurance that these provisions will be adequate to protect our proprietary rights. Although we believe that our intellectual property rights do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us or our clients.

Historically, the vast majority of our revenue has come from domestic sources, limiting the need to develop a strong international intellectual property protection program. With the Kenan Business acquisition, we have clients using our products in many countries. As a result, we need to continually assess whether there is any risk to our intellectual property rights in many countries throughout the world. Should these risks be improperly assessed or if for any reason should our right to develop, produce and distribute our products anywhere in the world be successfully challenged or be significantly curtailed, it could have a material adverse effect on our financial condition and results of operations.

THE DELIVERY OF OUR PRODUCTS AND SERVICES IS DEPENDENT ON A VARIETY OF MAINFRAME AND DISTRIBUTED SYSTEM COMPUTING ENVIRONMENTS AND TELECOMMUNICATIONS NETWORKS, WHICH MAY NOT BE AVAILABLE OR MAY BE SUBJECT TO SECURITY ATTACKS.

The delivery of our products and services is dependent on a variety of mainframe and distributed system computing environments, which we will collectively refer to herein as “systems.” We provide such computing environments through both out-sourced arrangements, such as our data processing arrangement with First Data Corporation, as well as internally operating numerous distributed servers in geographically dispersed environments. The end users are connected to our systems through a variety of public and private telecommunications networks, which we will collectively refer to herein as “networks,” and are highly dependent upon the continued availability and uncompromised security of our networks and systems to conduct their business operations. Our networks and systems are subject to the risk of failure as a result of human and machine error, acts of nature and intentional, unauthorized attacks from computer “hackers.” Security attacks on distributed systems throughout the industry are more prevalent than on mainframe systems due to the open nature of those computer systems. In addition, we continue to expand our use of the Internet with our product offerings thereby permitting, for example, our clients’ customers to use the Internet to review account balances, order services or execute similar account management functions. Opening up our networks and systems to permit access via the Internet increases their vulnerability to unauthorized access and corruption, as well as increasing the dependency of the systems’ reliability on the availability and performance of the Internet’s infrastructure. As a means to mitigate certain risks in this area of our business, we have implemented a business continuity plan, and test certain aspects of this plan on a periodic basis. In addition, we have implemented a security program utilizing ISO 17799 as a guideline, and periodically undergo a security review of our systems by independent parties, and have implemented a plan intended to mitigate the risk of an unauthorized access to the networks and systems, including network firewalls, procedural controls, intrusion detection systems and antivirus applications.

The method, manner, cause and timing of an extended interruption or outage in our networks or systems are impossible to predict. As a result, there can be no assurances that our networks and systems will not fail, or that our business continuity plans will adequately mitigate any damages incurred as a consequence. Should our networks or systems experience an extended interruption or outage, have their security compromised or data lost or corrupted, it would impede our ability to meet product and service delivery obligations, and likely have an immediate impact to the business operations of our clients. This would most likely result in an immediate loss to us of revenue or increase in expense, as well as damaging our reputation. Any of these events could have both an immediate, negative impact upon our financial condition and our short-term revenue and profit expectations, as well as our long-term ability to attract and retain new clients.