-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sy+N98DUYEr+nibABS2cR3rvaJbQ+8XynOpgG5bCRG27DIjFEC6PYvRvKTTCMoHG cOjk2SX/DGTzjzBBbqoo1A== 0000109758-96-000008.txt : 19960328 0000109758-96-000008.hdr.sgml : 19960328 ACCESSION NUMBER: 0000109758-96-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: CSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERIDIAN CORP CENTRAL INDEX KEY: 0000109758 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 520278528 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01969 FILM NUMBER: 96538796 BUSINESS ADDRESS: STREET 1: 8100 34TH AVE S CITY: MINNEAPOLIS STATE: MN ZIP: 55425 BUSINESS PHONE: 6128538100 FORMER COMPANY: FORMER CONFORMED NAME: CONTROL DATA CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COMMERCIAL CREDIT CO DATE OF NAME CHANGE: 19680910 10-K 1 10-K 12/31/95 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 Commission File Number 1-1969 CERIDIAN CORPORATION (Exact name of Registrant as specified in its charter) Delaware 52-0278528 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8100 34th Avenue South Minneapolis, Minnesota 55425 (Address of principal executive offices) Telephone No.: (612) 853-8100 Securities Registered Pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Stock, par value $.50 New York Stock Exchange, Inc.; The Chicago Stock Exchange; and Pacific Stock Exchange Depositary Shares, each representing a One One-Hundredth Interest in a Share of 5-1/2% Cumulative Convertible Exchangeable Preferred Stock, Par Value $100........................ New York Stock Exchange, Inc. 5-1/2% Cumulative Convertible Exchangeable Preferred Stock, Par Value $100........................ None 5-1/2% Convertible Subordinated Debentures Due 2008................... None Has the Registrant (1) filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) been subject to such filing requirements for the past 90 days. Yes (X) No ( ). Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 29, 1996 was $2,844,268,970. The shares of Common Stock outstanding as of February 29, 1996 were 67,912,402. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1995 Annual Report to Stockholders of Registrant: Parts I & II Portions of the Proxy Statement for Annual Meeting of Stockholders, May 8, 1996: Parts III and IV CERIDIAN CORPORATION PART I The information contained in this Report includes forward-looking statements, based on current expectations, that involve risks and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Various important factors known to Ceridian Corporation that could cause such material differences are identified in the "Management's Discussion and Analysis of Results of Operations and Financial Condition" on page 28 of the Company's 1995 Annual Report to Stockholders, which is incorporated by reference into Part II, Item 7 of this Report. Item 1. Business. Ceridian Corporation ("Ceridian" or the "Company"), known as Control Data Corporation until June 1992, was founded in 1957 and is incorporated in Delaware. The principal executive office of Ceridian is located at 8100 34th Avenue South, Minneapolis, Minnesota 55425, telephone (612) 853-8100. Ceridian is comprised of two business segments: Information Services and Defense Electronics. Information Services Segment The Information Services segment, which consists of the Human Resources Group ("HRG"), Comdata Holdings Corporation and Arbitron, provides products and services to customers in the human resources, trucking, gaming and electronic media markets. The Information Services businesses collect, manage and analyze data and process transactions on behalf of customers, report information resulting from such activities to customers, and provide customers with related software applications and services. The products and services provided by the Information Services businesses address specific information management and transaction processing needs of other businesses to enable them to operate more efficiently. The technology-based products and services of the Information Services businesses are typically provided through long-term customer relationships that result in a high level of recurring revenue. Information regarding Information Services' revenue, operating profit or loss and identifiable assets for the years 1993-1995 is in Note K, Segment Data, on page 47 of the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference. Human Resources Group. The businesses comprising the HRG offer a broad range of products and services designed to help employers more effectively manage their work forces and information that is integral to human resource processes. HRG's revenue for the years 1993, 1994 and 1995 was $244.0 million, $321.5 million and $412.2 million, respectively. The products and services of the HRG include payroll processing and payroll tax filing services, and human resources management software and services provided through the Ceridian Employer Services business (which includes Ceridian's Centre-file Limited subsidiary ("Centre-file") in the United Kingdom); payroll processing, benefits administration and human resources management software provided through Ceridian's Tesseract Corporation subsidiary ("Tesseract"); skills management software and services provided through Ceridian's Resumix, Inc. subsidiary ("Resumix"); training services provided through Ceridian's User Technology, Inc. subsidiary ("UserTech"); employee assistance programs through the Employee Advisory Resource business; payroll processing services to customers with fewer than 100 employees in the mid- Atlantic states through Ceridian's Minidata Services, Inc. subsidiary ("Minidata"); and automated time and attendance software through Ceridian's EAS Technologies, Inc. subsidiary ("EAS") acquired in February 1996. 2 Markets. The human resource services market covers a comprehensive range of information management services and software and employer/employee assistance services. These products and services include transaction- oriented information management services such as payroll, tax filing and benefits administration services; management support software and services such as human resource information, skills management, time and attendance and applicant tracking systems; employee-focused services such as employee assistance programs; and other services such as compensation and benefits consulting and systems training. The market for these products and services is expected to continue to grow as companies continue to outsource administrative services, seek to further automate internal processes, and avail themselves of external expertise to foster high performance workplaces. The factors driving the movement toward outsourcing include the increasing scope and complexity of legislation regulating businesses and their employees, the rising costs of providing payroll and other human resource services in-house and the introduction of new types of human resource services. Traditionally, the human resource services market consisted of payroll processing, payroll tax filing and other services that were transaction- based, generally routinized and technology-oriented. Although these types of services continue to account for a significant portion of the human resource services market and demand for them continues to grow, the human resource services market is expanding into other value-added services that address other aspects of the employment relationship, such as human resource management, benefits administration, compensation, staffing, training development and employee relations. HRG believes that the ability to provide a number of these other services and to integrate payroll and human resource information databases can be an important factor in customer retention because it provides customers with a stronger connection to their provider of transaction-based services, and offers that provider a means to distinguish its services from others provided in the market. Accordingly, it is increasingly important for companies in the human resource services market, particularly for those targeting medium and large employers, to offer a wide range of services that are designed to address a broad spectrum of human resource services needs. The Company segments the human resource services market by classifying employers into three categories: small (fewer than 75 employees), medium (75 to 5,000 employees) and large (over 5,000 employees). Small employers in the payroll services market are relatively price sensitive, tend to focus more narrowly on payroll services and payroll tax filing and have low costs in switching from one provider to another. Medium and large employers generally require more complex, customized payroll services, have a greater need for additional services and integrated databases and have higher costs in switching from one provider to another. Services. During 1995, payroll processing and payroll tax filing services provided by Employer Services accounted for 78% of HRG's total revenue. Payroll processing consists primarily of preparing and furnishing employee payroll checks, direct deposit advices and supporting journals, summaries and other reports, but does not involve the handling or transmission of customer payroll funds. Payroll tax filing consists primarily of collecting funds for federal, state and local employment taxes from customers based on payroll information provided, remitting funds collected to the appropriate taxing authorities, filing applicable returns, and handling regulatory correspondence and amendments. These payroll- related services are typically priced on a fee-per-item-processed basis, and quarterly revenue consequently fluctuates with the volume of items processed. Revenue from payroll tax filing services also includes investment income Employer Services receives from tax filing deposits temporarily held pending remittance on behalf of customers to taxing authorities. These funds are held in a tax filing trust established by Ceridian to more clearly evidence the fiduciary capacity in which such funds are held. The trust invests primarily in high quality collateralized short-term investments or top tier commercial paper. The trust also invests in U.S. Treasury and Agency securities, AAA rated asset-backed securities and 3 corporate securities rated A3/A- or better. The trust may not use leverage for investment purposes or purchase highly structured securities of any kind. The duration of investments is carefully managed to meet the liquidity needs of the trust. About two-thirds of Employer Services' 1995 payroll tax filing revenue and about 15% of HRG's 1995 revenue was attributable to such investment income. Because of the significance of this investment income, Employer Services' quarterly revenue and profitability vary as a result of changes in interest rates and in the amount of tax filing deposits held. Payroll processing is currently conducted by Employer Services at 31 district offices located throughout the United States, all of which are linked in a nationwide network. Employer Services' payroll system allows customers to input their own payroll data via personal computers, transmit the data on-line to Employer Services for processing, retrieve reports and data files from Employer Services and print reports and, in certain instances, payroll checks or direct deposit advices on site. Customers can also input payroll data by telephone or batch transmittal, with payroll checks and related reports prepared by Employer Services at one of its district processing centers. Employer Services' payroll system also interfaces with both customer and third-party transaction processing systems to facilitate services such as direct deposit of payroll checks. Because Employer Services' existing payroll processing system incorporates older technology, particularly the payroll processing software utilized, the system requires a significant amount of manual intervention by Employer Services and is relatively labor intensive to install, maintain and customize. As a result, the Company is in the process of upgrading that software in order to create an enhanced payroll processing system that is more highly automated, easier and less costly to install and maintain and provides greatly increased functionality and flexibility to customers in terms of product and service features and options. The Company anticipates that a substantial majority of the existing payroll processing customers will elect to eventually upgrade to this software, referred to as "CII." To achieve these goals, the Company acquired Tesseract in June 1994, and has been conducting an internal development effort to adapt Tesseract's proprietary payroll processing software to run in Employer Services' multi-customer data center environment. In connection with the decision to upgrade its payroll processing software, Employer Services also decided to phase out payroll data processing in certain of its district offices and to consolidate processing utilizing the upgraded software in centralized facilities operated by Integrated Systems Solutions Corporation ("ISSC") pursuant to a ten-year technology services agreement that commenced in January 1995. The time when the consolidation of payroll processing can begin is principally a function of the timing of the Company's introduction of its CII software and the availability of resources required to transition the existing customer base to that software. During the second half of 1996, the Company expects that existing customers who participate in the testing of the "production" version of the CII software will begin utilizing that software exclusively, and that the installation of certain large new customers on the enhanced payroll processing system using the CII software will be in process. The installation of all new customers on the enhanced system and the general transition of existing customers to that system are expected to begin during 1997. Employer Services will continue, for the foreseeable future, to make payroll processing utilizing its existing software available to customers who do not wish to upgrade. The transition of existing payroll customers to centralized processing on the CII software in the ISSC center and the phased reduction of processing capabilities in the district offices is expected to occur over a 30 to 36 month period, largely because of the system conversion and customer training efforts required of Employer Services to assure a satisfactory transition process for customers electing the software upgrade. The Company expects that the transition process will entail significant incremental costs that principally reflect the cost of systems 4 and data conversion, maintaining duplicate processing systems during the transition period, and providing necessary training. The impact of these costs is discussed in Part II, Item 7 of this Report. During 1995, Employer Services completed a project to consolidate most aspects of telephonic customer support from its district offices into a single national telephone customer support center. By creating such a national center, Employer Services believes that it can improve customer service by creating a single point of contact for most customer inquiries involving payroll processing or tax filing. Employer Services has, however, retained the capability in the district offices to address certain customer support needs. Employer Services' payroll tax filing services are provided by its Systems Tax Service ("STS" ) division located in Fountain Valley, California. STS was acquired by the Company in 1993, and payroll tax filing processing for all of Employer Services' tax filing customers was consolidated on STS' system beginning in 1994. The STS acquisition also expanded Employer Services' tax filing customer base beyond employers who utilize Employer Services' payroll processing service to include local and regional payroll processors who utilize STS' tax filing service for their customers. Employer Services' human resource information service provides application software to customers that enables them to combine their payroll and human resource information databases and can serve as a "front-end" to Employer Services' payroll processing system. This enables the customer to create a single database of employee information for on-line inquiry, updating and reporting in areas important to human resource administration and management. Employer Services began offering during 1995 an integrated human resource/payroll information management software to run in a Windows* environment in conjunction with its existing payroll processing software, and has developed comparable Windows-based software to be used in conjunction with the CII software. Employer Services is also developing a client/server version of this human resource/payroll information management software for use in connection with the CII software. Employer Services also provides related human resources information management consulting services. In addition to providing the Company with the payroll processing software that will be the core of the CII software, the Tesseract acquisition provided Ceridian with payroll processing, benefits administration and human resources management software offerings for large customers with complex information management needs that prefer to handle such tasks in-house. Although Tesseract's product offerings have historically been mainframe-based, it is developing client/server versions of these offerings. Resumix, which was acquired by the Company in August 1995, provides skills management software (and related hardware) that employs image processing, knowledge base and database technologies to improve an organization's staffing and skills management processes. Organizations use the Resumix software to manage large volumes of incoming resume data to identify qualified candidates for hire and match them with available staffing needs, and to manage the skills of an existing work force by placing current employees in new jobs or projects. Resumix also offers its software on a service bureau basis to support smaller and medium-sized organizations. In October 1995, the Company purchased the assets of the Personnel and Payroll Services business conducted by NatWest Group's Centre-file subsidiary. Centre-file provides payroll processing services and human resource management software, and is the largest outsourced payroll processing business in the United Kingdom in terms of revenue. . * "Windows" is a trademark of Microsoft Corporation 5 HRG's Employee Advisory Resource ("EAR") provides confidential, around-the-clock assessment and referral services to customers' employees to help them address legal and financial problems, substance abuse, child care, eldercare and other personal problems. EAR maintains a network of professional counselors who are available to work with employees to solve problems and to provide referrals to specialists if such referrals are warranted by the circumstances. UserTech, purchased by the Company in 1994, provides custom user training, reference documentation and on-line employee communications systems to facilitate customers' implementation and utilization of human resources and other business information management systems. In January 1996, the Company purchased the business and assets of Information Learning Inc., including the Information Learning Systems trademark, and made this business part of UserTech. Information Learning, which had 1995 revenue of $2.5 million, provides expert systems that enable employers to address employee and retiree questions about benefits, payroll and other human resources policies and programs. In February 1996, the Company acquired EAS, which had 1995 revenue of $3.5 million. EAS provides time and attendance software for medium to large-sized companies. Sales and Marketing. Employer Services markets its products and services through a direct sales force operating through about three dozen offices located throughout the U.S. Employer Services also has established marketing relationships with banks, accounting firms and insurance companies, pursuant to which Employer Services offers its services to the business clients of these entities. Employer Services' most significant source of customer leads are referrals from existing customers and from the marketing relationships previously noted. Employer Services' large and diverse customer base covers a wide range of industries and markets, with no single customer currently representing more than 1% of HRG's 1995 revenue. In January 1996, Employer Services entered into a three year contract with Kmart Corporation to provide payroll processing and tax filing services. Under this contract, the annual revenue from which is ultimately expected to exceed 1% of HRG's annual revenue, the Company assumed operation of Kmart's payroll system and the employees of its payroll department effective March 1, 1996, and will begin to install Kmart on Employer Services' payroll and tax filing system during 1996. The other HRG businesses also utilize their own direct sales forces. Customer leads for the products and services of these businesses are generally obtained through referrals, trade shows, product demonstration seminars and direct sales efforts. The HRG businesses have utilized cooperative marketing relationships with other companies offering products or services that complement those of the HRG businesses. The Company has entered into a marketing arrangement with ISSC under which ISSC will remarket Employer Services' payroll and tax filing services and Tesseract software where such services and software are required as part of a larger information technology outsourcing project. The Company has also agreed with PeopleSoft, Inc. to develop an interface to link Employer Services' payroll processing system with PeopleSoft's human resource management software to facilitate the use of such payroll processing services by PeopleSoft customers. HRG businesses have also utilized informal marketing alliances with human resource consulting firms, and is exploring similar cooperative arrangements with other software and human resource services providers. HRG believes that increasing the integration of the sales and marketing efforts of its businesses will be an important factor in achieving its profitability and growth objectives. HRG is increasingly orienting sales and marketing efforts toward medium and large employers, which tend to purchase a greater variety of services, require more flexibility and customization in service offerings and have higher costs associated with changing providers. At the same time, efforts to upgrade technology and expand and integrate product and service offerings should also increase sales effectiveness by building greater variety and flexibility into service offerings, differentiating Ceridian from other 6 service providers and providing customers with a stronger connection to Ceridian. HRG's goal is to identify the overall human resource information management needs arising out of the employment relationship, and address those needs through a broad range of integrated customer-driven solutions, such as outsourcing services, software applications and consulting services. Competition. The human resource services industry is characterized by intense competition in the small, medium and large employer segments of the market. Competition in this market comes from national, regional and local third party transaction processors, including banks, as well as from software companies, consulting firms and internally developed and operated systems and software. A substantial portion of the overall payroll processing and tax filing market is supported in-house with the remainder supported by third party providers. Automatic Data Processing, Inc. ("ADP") is the dominant third party provider in this market, with Employer Services and Paychex, Inc. ("Paychex") comprising the other two large, national providers. ADP serves all segments of this market, while Paychex focuses on the small employer segment of the market. The remainder of the third party payroll market is highly fragmented and is represented by smaller regional and local competitors. Consolidation within this industry continues as the larger national providers acquire smaller regional and local providers and as banks sell their payroll service operations. In addition, software companies, including Tesseract, market software products to companies that allow these companies to support their payroll services in-house. The market for the non-payroll portion of the human resource services industry is evolving and is not dominated by a small number of competitors. Currently, the principal competitive factors in the human resource services market are performance, price, reliability, functionality, ease of use, customer support and compatibility with industry standards. HRG believes that its businesses are able to compete effectively in the overall human resource services market with respect to all of these competitive factors. In addition, HRG believes that offering a broad range of information management products and services applicable to the employment relationship will become an increasingly important competitive factor, particularly with respect to medium and large employers. For example, by being able to address large companies' payroll processing preferences with both outsourcing (through Employer Services) and in-house processing (through Tesseract) options, the Company believes it will be in a better position to attract large employers for its payroll processing and related products and services. The ability of the HRG businesses to continue to compete effectively in the human resource services market will depend in large measure on their ability to implement and effectively use new technology, offer additional products and services, such as software applications utilizing client server architecture, and increase their market penetration. HRG intends to seek additional strategic acquisition and partnering opportunities that would better enable it to achieve these objectives. Comdata. Comdata Holdings Corporation ("Comdata Holdings ") is the parent corporation of Comdata Network, Inc. ("Network"), and Comdata Holding's investment in Network and Network's subsidiaries represents Comdata Holding's only material asset. In this report, the term "Comdata" refers to Comdata Holdings, Network and its subsidiaries. Comdata's revenue for the years 1993, 1994 and 1995 was $212.3 million, $243.3 million and $274.1 million, respectively. Comdata is a leading provider of transaction processing services to the trucking and gaming industries. For the trucking industry, Comdata provides funds transfer and regulatory permit services, as well as 7 telephone services and backhaul information, all of which make use of the information processing or telecommunications capabilities of Comdata's proprietary computerized telecommunications network. Comdata also provides cash advance services to the gaming industry using credit cards and debit services employing automated teller machines and similar devices. Comdata uses its network to provide a system by which individuals may use MasterCard, Visa and Discover credit cards or their bank automatic teller machine card to obtain cash in casinos, racetracks and other gaming locations. In addition to expanding its operations by using its network to develop new services for its customer base, Comdata has, over a period of years, acquired other companies engaged in similar activities. Since September 1987, Comdata has acquired ten different businesses, ranging in size from $0.8 million to $57.6 million in annual revenue at the time of acquisition. Markets. Trucking Industry. The trucking industry encompasses both long haul fleets and local fleets. Private fleets, which are part of larger companies that have significant shipping needs, predominate in the local fleet segment, but play a lesser role in the long haul fleet segment. Common carriers, which provide trucking services to companies that do not have fleets of their own, predominate in the long haul fleet segment, which is comprised of less-than-truckload and truckload components. The less-than-truckload component, which involves trucks that make multiple stops to load and unload, is characterized by large capital requirements and a relatively high degree of consolidation. The truckload component, which involves the transportation of full loads directly from shipper to final destination without going through any sorting terminals, is highly fragmented and, Comdata believes, is growing at the expense of private fleets and the less-than-truckload component. The majority of Comdata's trucking company customers are common carriers serving the truckload component of the long haul segment. Many of these carriers do not employ their drivers, but instead contract with individual owner-operators. Such owner-operators usually settle their expenses with the common carrier after the completion of each trip. Drivers for truckload carriers often spend weeks on the road at a time, creating a number of unique conditions and business opportunities. Truckload carriers are challenged to monitor and control fuel purchases, provide driver services to improve retention, obtain necessary licenses and permits, and effectively manage the logistics of such long-distance trips. A variety of trends has affected the trucking industry in recent years and is expected to have an ongoing impact. Outsourcing of fleets has occurred and is expected to continue since the costs of common carriers are generally less than the costs of operating a private fleet. Demand for the services of truckload carriers is expected to increase at the expense of the more capital intensive less-than-truckload carriers. Consolidation of carriers is expected to continue, reflecting economies of scale and competitive pressures. Increased driver retention is expected to continue to be a significant industry focus. The challenges and expense of complying with environmental regulations governing fuel storage tanks is expected to result in a shift from private terminal fueling to truck stop fueling. Demand for legalization services is expected to decline as a result of industry deregulation and increased permit and license reciprocity among states. Gaming Industry. In recent years, the gaming industry has experienced a high rate of growth, particularly with an increasing number of states having acted to permit casino gaming and other forms of wagering, often on Native American reservations and in non-traditional locations such as riverboats. It is estimated that some form of legalized gaming is now available within a one-half day drive of most Americans. Gaming facilities are tending to become more integrated with the rest of the entertainment industry as they expand geographically and are included in larger entertainment complexes. Demand for cash advance services in gaming locations, which can be provided in a variety of ways, has grown commensurately with growth in overall wagering. 8 Services. Trucking Industry. Revenue from Comdata's services to the trucking industry represented 57.0% of total revenue in 1995. Comdata's results of operations are, therefore, highly dependent on competitive conditions in the trucking industry and upon the level of activity in that industry, which is itself affected to a large degree by general economic conditions. Comdata's services to the trucking industry include fuel purchase services, driver services, legalization services and logistics services. Fuel Purchase Services. Comdata uses its proprietary network to provide a service that allows customers to purchase fuel through the use of an instrument known as a ComchekR draft, which is a draft payable through a Comdata bank account. Comdata funds the fueling transaction when the truck stop negotiates the draft by depositing it in its bank account. Comdata then bills the trucking company for the amount of the draft plus the service fee, and the trucking company remits payment of this amount to Comdata by wire transfer or check, typically within six days. The vast majority of these fuel purchase transactions are initiated through the use of Comdata's proprietary Comchek card in a manner similar to an ordinary credit card transaction. Use of the Comchek card allows the trucking company customer greater control over its expenses by setting limits on the use of the cards such as by designating locations where the cards may be used and the frequency with which they may be used. Use of a Comchek card also enables Comdata to capture and provide to trucking company customers transaction and trip-related information that greatly enhances a customer's ability to track and plan fuel purchases and settle with drivers. Comdata provides similar information gathering and processing services in connection with fueling transactions which Comdata does not fund, but instead are billed directly by the truck stop to the trucking company. Fees for these "direct bill" transactions are substantially lower. Some trucking companies also have access to such information on Comdata's computer system and may therefore promptly obtain information on recent transactions by their independent owner-operators or employees. Comdata also provides fuel price tracking reports and management within a network of truck stops, including cost/plus fuel purchase programs. Driver Services. Comdata provides a variety of services designed to address the specific needs of long haul drivers who spend significant periods of time on the road, including cash advance and funds transfer services, direct deposit of paychecks or settlements (for non-employee owner-operators), ATM and point of sale debit card services using the Comchek card, long distance telephone services using the Comchek card and driver relations services such as a monthly audio magazine for drivers. Comdata's funds transfer system is designed to enable truck drivers to obtain funding for purchases (in addition to fuel) at truck stops and other locations en route to their destination, and to enable trucking companies to maintain control over expenditures made by either their independent owner-operators or their employees. In connection with these services, Comdata is typically able to provide an accounting to the trucking company of trip expenses (including fuel purchases) within 24 hours after the completion of a given trip. In 1995, Comdata processed approximately 40 million funds transfer transactions for the trucking industry (including fuel purchase programs), and as part of such transactions transferred approximately $6.1 billion over its network. Comdata maintains a national network of 24-hour independent truck stop service centers which have point-of-sale devices and other computer equipment to facilitate communication with Comdata's database and operations centers. The service centers act as Comdata's agents pursuant to a service center agreement, and typically also offer the funds transfer services of other companies. When a truck driver makes a request at a service center for a funds transfer, Comdata verifies that the driver's company has established sufficient credit. Upon presentation of valid identification, the service center obtains an authorization number from Comdata and issues a Comchek draft, which is handled in the manner described earlier in connection with fuel purchase transactions. 9 Approximately 90% of the basic funds transfer system (including funded fuel purchases) has been automated to utilize the Comchek card, which has significantly enhanced efficiency by eliminating the need for operator involvement and by reducing the amount of time necessary to complete transactions. In addition, Comdata maintains a 24-hour call center in its Brentwood, Tennessee offices to handle transactions that require operator assistance. Redundancy for the functions performed by the Brentwood call center are provided by alternate sites in LaVergne, Tennessee, Newberry, South Carolina and, beginning in 1996, Birmingham, Alabama. The long distance telephone services available to drivers through the Comchek card enable Comdata's trucking company customers to maintain greater control over the billable telephone use by their drivers by allowing the trucking company to determine which locations the driver may call and to preprogram those numbers into Comdata's voice response unit. The trucking company can also limit the availability of the service to an independent driver by dollar amount or number of calls. Legalization Services. Comdata, through its TransceiverR division, can determine the permits needed for a designated trip, truck, and load, purchase those permits on behalf of the customer and deliver them by facsimile machine to a truck stop where they can be picked up by the driver. In many instances, a trucking company customer will order permits directly from the issuing authority and Comdata will deliver these permits by facsimile machine to their designated location. In addition to charging its customers for the costs imposed by the state authority, Comdata receives a fee for each permit delivered. In addition to providing permits to trucking companies, Comdata also provides certain regulatory compliance services, such as processing and auditing of driver trip logs, reporting of fuel taxes, annual licensing and motor vehicle registration verification. Logistics and Other Services. Comdata designed and operates a computerized shipment interchange system to help trucking companies find loads for their return trips, thereby reducing empty backhauls. By making specific shipment information available to customers on a subscription basis, available shipments can be matched with available cargo space on a nationwide basis. As a result of the 1994 purchase of the assets of RoTec, Comdata also develops and markets software designed to assist in routing, scheduling and other services for companies with private and for- hire delivery fleets. Comdata offers to its trucking company customers long distance telecommunications services provided by Worldcom, Inc. ("Worldcom") and by AT&T. As a result of agreements with these providers, Comdata is able to make available volume discounts to its customers who would not otherwise qualify for such rates. As a result of the March 1995 purchase of Trendar Corporation, Comdata provides fueling service centers with fuel purchase desk systems which automate the various transactions that occur at a fuel purchase desk and accept all fuel purchase cards currently used by drivers. Comdata is also developing for trucking customers a Windows-based software application for fuel purchase and other management services. This application will enable trucking companies to access real-time data on fuel purchases and facilitate pre- and post-trip planning functions. Future modules of this application are expected to provide ready access to other Comdata product and service offerings such as legalization services. Comdata is developing a service to expedite the transfer of bills of lading and freight bills utilizing its imaging storage and retrieval capabilities. Gaming Industry. Comdata processed approximately 8 million funds transfer transactions aggregating approximately $3.0 billion for the gaming industry during 1995. These services accounted for 42.7% of Comdata's total 1995 revenue. 10 Comdata's network enables individuals to use MasterCard, Visa or Discover credit cards to obtain cash through Comchek terminals primarily located in gaming locations. These cash advances differ from standard credit card cash advances in that no personal identification number is required, and differ from ATM withdrawals in that there is no pre-set daily withdrawal limit. Instead, after a gaming patron runs his or her credit card through a Comchek terminal and the transaction is authorized, a Comchek draft drawn on a Comdata bank in the amount requested by the patron at the terminal is generated at the gaming establishment's cashier cage. The gaming patron immediately negotiates the draft for cash or chips, and the gaming establishment presents the draft for payment. Concurrently, the amount of the Comchek draft, along with Comdata's service fee, is charged to the individual's MasterCard, Visa or Discover account. Comdata pays an agent commission to the gaming establishment in connection with cash advance transactions. Comdata's cash advance services are currently available in a majority of casinos in Las Vegas, Reno and Lake Tahoe, Nevada; and Atlantic City, New Jersey, and many other gaming locations, including riverboat casinos and casinos on Native American reservations and in Canada and the Caribbean. Comdata's cash advance services are subject to policies and regulations adopted from time to time by the major credit card associations, including policies which currently preclude Comdata from expanding its cash advance services to nongaming locations and prescribe the applicable merchant discount to which such transactions are subject. These policies are subject to change from time to time, and Comdata must comply with changes to these policies and regulations, some of which could have an adverse effect on Comdata. In addition to credit card cash advances, Comdata also provides check acceptance services and electronic funds transfers through Comdata's automatic teller machines and other point of sale devices located in gaming establishments. Because of the lower risk associated with these transactions, the fees are much lower than fees for credit card cash advances. In April 1994, Comdata acquired the casino cash advance business of Western Union Financial Services, Inc. and became the exclusive agent for Western Union's money transfer service to the gaming industry in the United States. Comdata also provides market information to gaming establishments to assist in marketing and promotional activities. Comdata is developing a cashier operations and information system for gaming establishments that is expected to integrate various funds transfer and information gathering devices into a common platform. Sales and Marketing. Trucking Industry. Comdata markets its services to the trucking industry through a direct sales force operating in various cities throughout the U.S., and through a tele-sales operation in Comdata's Brentwood, Tennessee headquarters. Comdata has contracts with approximately 16,000 long haul trucking companies, ranging in size from those with several thousand trucks to those with fewer than five trucks. Approximately 11,000 of these trucking companies use Comdata's funds transfer services. Comdata also has relationships with approximately 8,000 fueling locations. Contracts with trucking companies generally range up to three years in duration, while contracts with service centers are typically one or two years in duration. No single customer represented more than 2% of Comdata's 1995 revenue from services to the trucking industry. Gaming Industry. Comdata markets its services to the gaming industry through a direct sales force operating in Reno and Las Vegas, Nevada, Atlantic City, New Jersey, Brentwood, Tennessee and in certain other cities in the U.S. Comdata has relationships with approximately 1,000 gaming establishments. Competition. The principal competitive factors relevant to funds transfers in both the trucking and gaming industries are marketing efforts, pricing, sophistication and reliability of computer and communications systems, the provision of new techniques in basic funds transfer services, reduction of the time required to effect transactions 11 and payment and security terms of customer agreements. The major credit card companies and vendors of traveler's checks are competitors of Comdata in that they make cash available to holders of their cards and checks on a nationwide basis. Comdata also faces increasing competition from lower fee automated teller machines that participate in national networks. In the trucking industry, at least six other companies offer similar funds transfer services. These competitors are smaller than Comdata, although at least two are owned by companies significantly larger than Comdata. One of Comdata's competitors, EDS Fleet Services, was acquired by Electronic Data Systems, Inc. in 1992. In addition, truckstops may negotiate directly with trucking companies for a direct billing relationship. Comdata also competes with several credit and debit card services with respect to its fuel purchase program, some of which are larger and have greater resources than Comdata. Certain of Comdata's competitors also operate or franchise nationwide truckstop chains. In addition, Comdata competes with some of its service centers (such as truckstops) that offer similar products and services. In the business of transmitting special regulatory permits, there is at least one other nationwide company and several regional companies providing permit services similar to those provided by Comdata. Moreover, the majority of permitting and legalization services continue to be performed in-house. Competition in this market is influenced by price, the expertise of personnel and the ease with which permits may be ordered and received. In the gaming industry, Comdata competes with numerous sources and potential sources of cash, including at least three providers of credit card cash advance services, certain smaller regional competitors and the large gaming establishments themselves. Competition in this market is also influenced by the pricing of agent commissions and the increasing sophistication of ATM networks and other funds delivery mechanisms. Comdata believes that it is a leading provider of funds transfer services and outsourced permitting services to the trucking industry, and of credit card cash advances to the gaming industry. Comdata believes that its competitive strengths include (i) its ability to provide services at a large number of locations in the continental United States and Canada, (ii) its ability to offer a variety of services, frequently tailored to an individual customer's needs, (iii) its large proprietary databases regarding funds transfers and fuel purchases, and (iv) its long- term experience and concomitant relationships in the trucking and gaming industries. Network and Data Processing Operations. Comdata's principal communications center for its funds transfer business is located in its corporate headquarters in Brentwood, Tennessee with secondary centers located in Dallas, Texas and Newberry, South Carolina. Worldcom is the primary supplier of telecommunications services to Comdata pursuant to an agreement whose term expires in January 2003. Under this agreement, Comdata is to purchase at least 80% of its internal and external resale telecommunications requirements from Worldcom. Substantially all of Comdata's internal data processing functions, including its payment processing systems, are provided by ISSC pursuant to an agreement for systems operations services whose term expires in April 2005. The processing center is connected to Comdata-owned and customer-owned computers installed in customer locations and to terminals and computers located in Comdata's headquarters. Customer Credit Comdata's general policy is that trucking companies and other money transfer customers must establish credit before they may use Comdata's services. Comdata may require letters of credit, surety bonds or prepayment for funds transfer services, and generally will not authorize services if the aggregate service cost exceeds the amount of the security or internally established credit limits. Regulation. Many of the states in which Comdata operates require persons engaged in the business of selling or issuing payment instruments 12 (such as the Comchek draft) or in the business of transmitting funds to obtain a license from the appropriate state agency. In certain states, Comdata is required to post bonds or other collateral to secure its obligations to its customers in those states. Some state agencies have the authority to deny licenses to, or revoke the license of, financially weak companies. For its cash advance services in Atlantic City, New Jersey casinos, Comdata is required to hold a Casino Service Industry License issued by the State of New Jersey Casino Control Commission. Comdata believes that it is currently in compliance in all material respects with the regulatory requirements applicable to its business. The failure to comply with the requirements of any particular state could have a material adverse effect on Comdata's business in that state. Arbitron. Arbitron is the leading provider of radio audience measurement information in terms of revenue, and also provides electronic media and marketing information to radio and television broadcasters, cable operators, advertising agencies and advertisers. Arbitron's proprietary data regarding radio audience size and demographics is provided to customers through multi-year license agreements. In addition, through acquisitions, joint ventures and the introduction of new products, Arbitron has obtained access to or developed services that provide data regarding product purchasing decisions. Arbitron's revenue for the years 1993, 1994 and 1995 was $172.2 million, $121.3 million and $137.2 million, respectively. The greatest portion of the revenue decrease from 1993 to 1994 was due to the discontinuance of Arbitron's syndicated television ratings service, effective at the end of 1993. Markets. Consolidation of radio station ownership has been a continuing trend in recent years, due largely to industry economics and the relaxation of governmental restrictions on station ownership. With federal telecommunications legislation enacted in late 1995 permitting greater concentration of ownership, this trend is expected to continue. This consolidation has tended to intensify competition within the radio industry, and to intensify competition between radio and other forms of media for advertising dollars. Because of the significant amounts spent by advertisers, radio broadcasters, advertising agencies and advertisers all have a strong interest in information regarding the size and composition of audiences for radio broadcasts. However, as advertisers increasingly seek to tailor advertising strategies to target specific demographic groups through specific media, and as audiences become more fragmented with increased programming choices, the audience information needs of radio broadcasters, advertising agencies and advertisers become more complex. Increasingly, more detailed information regarding the demographics and buying behavior of audiences is required, as well as more sophisticated means to analyze such information. These trends are not confined to the radio broadcast industry, but also affect other media. As the importance of reaching niche audiences with targeted marketing strategies increases, broadcasters, publishers, advertising agencies and advertisers increasingly require that information regarding exposure to advertising be provided on an individualized rather than a household basis and that such information be coupled with information regarding shopping patterns and purchaser behavior. The need for such qualitative information may create opportunities for innovative approaches to satisfy these information needs, particularly as technological advances increase the alternatives available to advertisers for reaching potential customers, including the possibilities of interactive communication. Services. Arbitron estimates audience size and demographics in the U.S. for local radio stations, and reports this and related data to its customers. This information is used by radio stations to price and sell advertising time and by advertising agencies and large corporate advertisers in purchasing advertising time. Arbitron uses listener diaries to gather radio listener data from sample households in the 263 local markets for which it currently provides radio ratings. Respondents mail 13 the diaries to Arbitron's processing center in Columbia, Maryland, where Arbitron compiles periodic audience measurement estimates. Arbitron also provides software applications that give customers flexible and unlimited access to Arbitron's database, and enable them to more effectively analyze and understand that information and develop sales strategies for maximum effectiveness. Arbitron is also developing applications that will enable customers to link information provided by Arbitron's database with information from other databases (such as product purchasing behavior) so as to enable customers to further refine sales strategies and compete more effectively for advertising dollars. The radio audience measurement service represented about 85% of Arbitron's revenue during 1995. Arbitron is also exploring opportunities to expand its information service offerings to the radio industry in the areas of marketing and promotion systems and systems to provide perceptual data for programmers. In that regard, Arbitron acquired Media Marketing Technologies to obtain a proprietary marketing analysis system that creates block group-coded data bases of radio listeners and provides segmentation analyses and map displays of key listener segments. Arbitron believes it will become increasingly important to address the more comprehensive information needs of the broadcast and cable industries by providing customers with services and technology that link audience measurement data with product purchasing data to enable customers to make more productive marketing decisions. Through the Scarborough Research Partnership, Arbitron has the exclusive right to market the Scarborough Report to radio broadcasters and cable systems. The Scarborough Report provides qualitative information regarding product/service usage and media usage in 59 major U.S. markets, and measures products purchased based on a sample of consumers in the relevant markets. Arbitron has also developed and introduced in smaller markets its RetailDirect service, which is a locally oriented, qualitative audience research service. The service, which utilizes diaries and telephone surveys, provides a profile of the broadcast audience in terms of local media, retail and consumer preferences so that local radio and television broadcasters and cable systems will have information that helps them develop targeted sales and programming strategies. Arbitron intends to further develop its capabilities and technologies through acquisitions, alliances and licensing arrangements that will enable it to provide the comprehensive information management services that broadcasters, cable systems, telecommunications companies, advertising agencies and advertisers will require to market their products and services more effectively. Arbitron holds a minority equity interest in ADcom Information Services, Inc., which has developed hardware and software technology to provide cost-effective, electronic audience measurement systems to the cable industry. Arbitron is also involved in cooperative efforts to develop a passive, personalized electronic measurement device to record broadcast listening or viewing, and to develop measurement products for the Internet and interactive television. Sales and Marketing. Arbitron provides its radio audience measurement and related services to approximately 2,300 radio stations and about 2,400 advertising agencies nationwide. Contracts with customers vary in length from one to seven years, and no single customer represented more than 3% of Arbitron's 1995 revenue. Arbitron markets its products and services through a direct sales force operating through offices in six cities around the U.S. Competition. Arbitron competes with other providers of applications software, qualitative data and proprietary qualitative studies used by broadcasters, cable systems, advertising agencies and advertisers, including one other national provider of radio audience measurement services. 14 Defense Electronics Segment - Computing Devices International The Defense Electronics segment, consisting of Computing Devices International ("Computing Devices"), develops, manufactures and markets electronic systems, subsystems and components, and provides systems integration and other services, primarily to government defense agencies. In addition, its Business Information Services division runs custom data processing applications for customers (primarily the U.S. government) and delivers them via a timesharing network. Computing Devices' revenue for the years 1993, 1994 and 1995 was $461.3 million, $486.3 million and $509.5 million, respectively. Information regarding Computing Devices' operating profit and identifiable assets for the years 1993-1995 is in Note K, Segment Data, on page 47 of the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference. Markets. The defense contracting market has undergone dramatic change in recent years. With changing geo-political conditions and government budgetary constraints, defense spending has declined and the number of companies serving the defense industry has decreased. At the same time, the defense market focus has shifted from strategic defense (nuclear) to tactical defense (non-nuclear), as the threat of military conflicts shifts toward regional and ethnic conflicts. The reduction in overall defense spending and the shift in focus toward tactical defense needs, coupled with advances in commercially- available technologies, is also shifting the focus of defense spending. Computing Devices believes that customers will increasingly emphasize, and that therefore the most attractive business opportunities in the defense contracting market will exist in, areas such as (i) weapons sophistication, electronics, surveillance and intelligence; (ii) extending the service life of existing military equipment by upgrading, enhancing and retrofitting such equipment, including the insertion of new technology, in order to reduce the costs (including substantial training costs) associated with the development and production of new equipment; and (iii) incorporating lower cost commercial off-the-shelf technology and components into military equipment. Products and Services. Computing Devices' products and services feature its capabilities in signal processing, digital image manipulation, "ruggedized" subsystems for harsh environments and real-time software systems. These products and services are produced primarily through its operations in the U.S. and Canada, with only a small portion produced in the United Kingdom ("U.K."). A majority of Computing Devices' revenue is attributable to products and services relating to avionics systems, including the AN/AYK-14 standard Navy airborne mission computer systems; communications systems, including the Iris contract described below; and intelligence and surveillance systems, including advanced parallel processing, reconnaissance systems and imaging software. The remainder of Computing Devices' revenue is primarily attributable to products and services relating to shipboard subsystems, anti-submarine warfare subsystems, ground subsystems, space processing, display subsystems and tactical reconnaissance systems. Computing Devices employs technology developed through internal research and development, contract research and development and customer funded development programs. During 1991, Computing Devices secured, through its Canadian subsidiary, a contract to modernize the tactical command, control and communications system used by the Canadian Department of National Defence. This system, called Iris, incorporates a broad range of technologies, including satellite, fiber optic and microwave communication. During 1994 and 1995, Computing Devices recorded revenue from this contract of $153.8 million and $163.9 million, respectively, representing 31.6% and 32.2%, respectively, of Computing Devices' revenue in those years. This contract has a remaining term of approximately five years and estimated total remaining revenue of $557 million over the life of the contract. Although Computing Devices' Canadian subsidiary is the prime contractor under this contract, a significant portion of the contract has been subcontracted to other communications technology companies. 15 Computing Devices is also seeking to expand the scope of its product offerings and the markets its serves, including the application of existing products and technologies to business opportunities in other worldwide defense markets and in civilian and civil government markets. In so doing, Computing Devices may, from time to time, establish cooperative arrangements with other entities where their expertise or familiarity with other markets, products or technologies would prove beneficial. For example, in January 1995, the Company obtained a minority equity investment in Key Idea Development, LLC, which has developed a lightweight, voice- activated wearable computer. In connection therewith, the Company obtained an exclusive license to sell and develop applications for this computer in the military and airline maintenance markets. In August 1995, the Company entered into the DigitalXpress partnership formed to operate a satellite- based data distribution system to provide point to multi-point distribution of multimedia data for military and large commercial customers. Sales and Marketing. Computing Devices markets its products and services through a direct sales force operating in the U.S., Canada, the U.K., France and Malaysia. Sales of products and services are made principally through competitive proposals in response to requests for bids from government agencies and prime contractors. In addition, Computing Devices has independent sales agents who represent Computing Devices' products and services in a number of European and Asian markets. Competition. Computing Devices faces intense competition with respect to all of its products and services. Competition has increased in recent years, largely reflecting factors such as reduced defense spending, consolidation among defense contractors, increasing vertical integration (and a corresponding decrease in subcontracting) on the part of larger defense contractors, and procurement reform efforts (such as an increasing emphasis on the use of commercial off-the-shelf technology). Although many of Computing Devices' competitors are companies (or divisions or subsidiaries of companies) that are larger and have substantially greater financial resources, Computing Devices believes that smaller companies within the defense contracting industry may at times be able to adjust more quickly to changes in the defense contracting environment. The principal competitive factors include price, compliance with technical specifications, service and ability to perform in accordance with the established schedule. Due to the diversity and specialized nature of the products and services provided and the governmental security restrictions applicable to certain of Computing Devices' activities, it is difficult to generalize as to Computing Devices' market position in certain segments of its business. Computing Devices does believe, however, that it is able to compete effectively in each of its market segments with respect to these competitive factors. In particular, Computing Devices believes that its high rate of schedule adherence is one of its principal competitive advantages. The demonstrated ability to complete a project within the required time schedule is an important factor to governments and prime contractors in selecting companies for new projects. Computing Devices currently has preferred supplier status with two prime contractors. In light of market conditions such as decreases in defense spending, increasing price sensitivity from government customers, and over-capacity and consolidation among defense contractors, Computing Devices believes that the ability to become a low cost provider of products and services will be an increasingly important competitive factor. Government Contracts. Approximately 96% and 94% of Computing Devices' revenue for 1994 and 1995, respectively, was derived from contracts with governmental entities or with prime contractors to governmental entities which typically pass through government contracting requirements to their subcontractors. Companies which do business with governments are subject to certain unique business risks. Among these are dependence on annual 16 government appropriations, changing procurement policies and regulations, complexity of design and possible cost overruns. In addition, government efforts to detect and eliminate irregularities in defense procurement programs have increased the complexity and cost of doing business for government contractors. Moreover, any government contractor determined to be in noncompliance with applicable laws and regulations may be subject to penalties and debarment or suspension from receiving additional U.S. Government contracts. Any government contract may also be terminated by the government at any time it believes that such termination would be in its best interests. In such event, Computing Devices would generally be entitled to receive payments for its allowable costs and, in general, a proportionate share of its fee or profit for the work actually performed. Approximately 90% of Computing Devices' 1995 revenue came from government contracts that were fixed price contracts, including the Iris contract. Under this type of contract, the price paid to Computing Devices is not subject to adjustment by reason of the costs incurred by the Company in the performance of the contract, except for costs incurred due to contract changes ordered by the government. Thus, under fixed price contracts, the Company bears the risk of cost overruns, which may result from factors such as the need to bid on programs in advance of design completion, unforeseen technological difficulties, design complexity and uncertain cost factors, particularly in connection with multi-year contracts. Multi-year fixed price contracts in Canada and the U.K. do, however, normally allow for price revision based on government price indices. Computing Devices is usually entitled to invoice governments monthly on fixed price and cost reimbursable contracts. Computing Devices does not normally acquire inventory in advance of contract award, and does not maintain significant stocks of finished products for sale. Moreover, Computing Devices obtains advance funding from customers in connection with certain of its contracts. The amount of progress payments and customer advances and the amount of the holdback from such payments and advances affect the amount of working capital necessary for Computing Devices to finance work-in-process costs in the performance of these contracts. Governments typically do not recognize interest or other costs associated with the use of capital and, therefore, the timing of payments may affect Computing Devices' profitability either positively or negatively. Computing Devices also performs work under cost reimbursable and incentive type contracts. Cost reimbursable contracts provide for reimbursement of costs incurred, to the extent such costs are allowable under applicable government regulations, plus a fee. Under incentive type contracts, the amount of profit or fee realized varies with the attainment of incentive goals such as costs incurred, delivery schedule, quality and other criteria. Fixed price contracts normally carry a higher profit rate than cost reimbursable and incentive type contracts to compensate for higher business risk. In addition, laws and regulations applicable to government contracting provide that certain types of costs may not be included in either the directly-billed cost or the indirect overheads for which the government is responsible. Many of these so-called "unallowable" costs include ordinary costs of doing business in a commercial context. These costs must be borne out of the pretax profit of the Company and, thus, tend to reduce margins on government work. Recognition of profits is based upon estimates of final performance, which may change as contracts progress. Work may be performed prior to formal authorization or adjustment of contract price for increased work scope, change orders and other funding adjustments. Because of the complexity of government contracts and applicable regulations, contract disputes may occur. The resolution of such disputes may affect the profitability of Computing Devices in performing these contracts. The Company believes that adequate provision has been made in its financial statements for these and other normal uncertainties incident to its Computing Devices business. 17 International Sales. International sales of Computing Devices' products and services totaled approximately $258 million and $287 million, respectively, or 53% and 56%, respectively, of Computing Devices' total revenue in 1994 and in 1995. About 81% of these products and services were produced by the Company's Canadian or U.K. subsidiaries for customers in those countries. Because most of Computing Devices' sales involve technologically advanced products, services and expertise, export control regulations can limit the type of products and services that may be offered and the countries and governments to which sales may be made. Computing Devices' international sales are subject to risks inherent in foreign commerce, including currency fluctuations and devaluations, changes in foreign governments and their policies, differences in foreign laws and difficulties in negotiating and litigating with foreign governments. Computing Devices believes that the location of its international operations tends to minimize certain of these risks, and that it has mitigated other of these risks by obtaining letters of credit and advance payments, by contractual protections on currency fluctuations and by denominating contracts in U.S. dollars where possible. Divestitures In February 1995, Comdata sold the net assets of its retail services division, which had provided check authorization, guarantee and collection services primarily to supermarkets and other multi-lane retailers in the metropolitan areas of Atlanta, Georgia, St. Louis, Missouri, throughout California, and to a limited degree, in other parts of the United States. Additional Information Patents and Trademarks. The Company owns or is licensed under a number of patents which relate to its products and are of importance to its business. Certain of the Company's products and services are marketed under federally registered trademarks which are helpful in creating recognition in the marketplace. However, the Company believes that none of its businesses is materially dependent upon any particular patent, license or trademark, or any particular group of patents, licenses or trademarks. Instead, the Company believes that its success and growth are far more dependent, among other things, on the quality of its services and products and its reputation with its customers. Backlog. The Company's backlog is attributable to the Defense Electronics segment, since no backlog amount is determinable for revenue from the Company's Information Services businesses. Backlog does not include those portions of government contracts for which funding has not yet been approved, but does include the remaining value of the Iris contract. As of December 31, 1995, the backlog of the Company's orders was $1,004 million, of which $557 million relates to the Iris contract and $447 million relates to other contracts and programs. At December 31, 1994, the comparable total backlog was $1,209 million, of which Iris represented $751 million and other contracts and programs represented $458 million. The portion of the backlog at the end of 1995 expected to be reflected in 1996 revenue is $394 million (39%), of which Iris represents $166 million and other contracts and programs represent $228 million. The portion of the total backlog under government prime contracts and subcontracts was 88% at December 31, 1995 and 95% at December 31, 1994, while the portion of government contract backlog under fixed-price contracts was 97% and 95% at December 31, 1995 and 1994, respectively. In each case, these percentages include the Iris contract, which is a fixed- price contract with the Canadian government. 18 Research and Development. The table below sets forth the amount of the Company's research and development expenses for the periods indicated. Year ended December 31, 1995 1994 1993 (Dollars in millions) Research and development $54.5 $40.5 $37.1 Percent of revenues 4.1% 3.4% 3.3% Customer sponsored research $71.7 $78.2 $77.4 and development The Company's research and development efforts, including those sponsored cooperatively by the Company and other participants, are generally described earlier in this Item in the descriptions of the Company's business segments, and in Part II, Item 7 of this report. The amounts shown above as customer sponsored research and development primarily represent government funded product development efforts. Geographic Segment Data. For financial information regarding the Company's U.S. and international operations, see Note K, Segment Data, on page 47 of the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference. Employees. As of December 31, 1995, the Company and its subsidiaries employed approximately 10,200 people on a full- or part-time basis. None of the Company's U.S. employees are covered by a collective bargaining agreement, but certain employees in Canadian and United Kingdom subsidiaries are unionized. 19 Item 2. Properties. At December 31, 1995, the Company's principal production and office facilities were located in the metropolitan areas of Minneapolis, Minnesota; Brentwood, Tennessee; Atlanta, Georgia; Columbia, Maryland; New York, New York; Fountain Valley and San Francisco, California; St. Louis, Missouri; Ottawa and Calgary, Canada; and London and Hastings, England. The following table summarizes the usage and location of the Company's facilities as of February 29, 1996. FACILITIES (In thousands of square feet) Type of Property Interest U.S. Non-U.S. Worldwide Owned 306 405 711 Leased 3,337 235 3,572 Total Square Feet 3,643 640 4,283 Utilization Manufacturing & 294 449 743 Warehousing Office, Computer Center 2,128 191 2,319 & Other Vacant/Idle 419 -- 419 Leased or Subleased to 802 -- 802 Others Total Square Feet 3,643 640 4,283 The 4.3 million square feet of aggregate space is essentially unchanged from February 28, 1995, reflecting an increase in office and computer center space as a result of acquisitions during 1995 that was offset by a decrease in space leased or subleased to others. Space subject to assigned leases is not included in the table above, and the Company remains secondarily liable under all such leases. As of December 31, 1995, these assigned leases involve 1.5 million square feet of space and future rental obligations totaling $31.2 million. The principal elements of these amounts are 0.4 million square feet and $5.5 million related to the spin- off of Control Data Systems, Inc. and 1.1 million square feet and $25.7 million related to the 1989 sale of Imprimis Technology Incorporated to Seagate Technology, Inc. The Company does not anticipate any material nonperformance by the assignees of these leases. Except for one building utilized by Computing Devices' Canadian subsidiary (which is subject to a mortgage securing $6.0 million in debt obligations), no facilities owned by the Company or its subsidiaries are subject to any major encumbrances. The Company believes that all of the facilities it currently utilizes in its continuing operations are adequate for their intended purposes and are adequately maintained. Utilization of those facilities varies among the Company's operations. Generally, most of the facilities relating to the Company's Information Services segment are reasonably necessary for current and anticipated output levels of those businesses, although some excess space is expected to develop in Employer Services' district offices as payroll data processing is consolidated. Employer Services has established restructuring reserves for the expected cost of such facilities in excess of continuing requirements. There is also excess production capacity in the Defense Electronics segment. Efforts are ongoing to identify operations and facilities that can be consolidated and to dispose of excess or idle space. 20 Item 3. Legal Proceedings. Information regarding legal proceedings involving the Company and its subsidiaries is contained in Note N, Legal Matters, on page 50 of the Company's 1995 Annual Report to Stockholders, which is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders. A special meeting of the Company's stockholders was held on December 12, 1995 to approve the issuance of shares of Ceridian common stock to effect the acquisition of Comdata Holdings pursuant to the Agreement and Plan of Merger dated as of August 23, 1995 by and among Ceridian, Comdata Holdings and a newly formed subsidiary of Ceridian. The Company's stockholders voted to approve the issuance of shares, with 33,699,834 shares voted for the issuance, 1,300,386 shares voted against the issuance and 110,853 shares specifically abstained from voting on the matter. In addition, 44,102 shares present at the meeting were the subject of broker non-votes on the matter. 21 Executive Officers of the Registrant The executive officers of Ceridian as of March 1, 1996, are as follows: Executive Name (Age) Position Officer Since Lawrence Perlman Chairman, President and 1980 (57) Chief Executive Officer John R. Eickhoff Executive Vice President 1989 (55) and Chief Financial Officer Loren D. Gross (50) Vice President and 1993 Corporate Controller Linda J. Jadwin (52) Vice President, Corporate 1990 Relations and Communications Ronald James (45) Executive Vice President, 1996 and President and Chief Executive Officer of the Human Resources Group George J. Klauser Vice President, and 1995 (41) President of Ceridian Employer Services Michael E. Kotten Vice President, 1995 (48) Organization Resources George L. McTavish Executive Vice President, 1995 (54) and Chairman and Chief Executive Officer of Comdata Holdings James D. Miller (47) Vice President, Strategic 1993 Initiatives Stephen B. Morris Executive Vice President, 1992 (52) and President and Chief Executive Officer of Arbitron Steven J. Olson (55) Vice President and General 1994 Counsel Ronald L. Turner Executive Vice President, 1993 (49) and President and Chief Executive Officer of Computing Devices International Linda Hall Whitman Vice President, Business 1995 (47) Integration The executive officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board of Directors and the Chief Executive Officer. They are customarily elected each year at the meeting of the Board of Directors held in conjunction with the annual meeting of stockholders. Lawrence Perlman has been President and Chief Executive Officer of the Company since January 1990, and was appointed Chairman in November 1992. He is a director of Seagate Technology, Inc.; The Valspar Corporation; Computer Network Technology; Kmart Corporation and Bio-Vascular, Inc. Mr. Perlman has been a director of the Company since 1985. 22 John R. Eickhoff has been Executive Vice President and Chief Financial Officer of the Company since May 1995, and was Vice President and Chief Financial Officer of the Company from June 1993 to May 1995. Mr. Eickhoff was Vice President and Corporate Controller of the Company from July 1989 to June 1993. Loren D. Gross has been Vice President and Corporate Controller of the Company since July 1993. Mr. Gross was Assistant Corporate Controller of the Company from March 1987 to July 1993. Linda J. Jadwin has been Vice President, Corporate Relations and Communications of the Company since May 1994, and was Vice President, Corporate Communications of the Company from March 1990 to May 1994. Ronald James has been Executive Vice President of the Company and President and Chief Executive Officer of its Human Resources Group since January 1996. He was Vice President-Minnesota of US WEST Communications, Inc. from January 1990 to December 1995. Mr. James was a director of the Company from May 1991 through December 1995, and is a director of St. Paul Companies, Inc. and Great Hall Investment Funds, Inc. George J. Klauser has been Vice President of the Company and President of its Ceridian Employer Services division since October 1995. Mr. Klauser was Vice President of Sales for Ceridian Employer Services from January 1993 to October 1995, and Regional Vice President of Sales for Ceridian Employer Services from October 1990 to December 1992. Michael E. Kotten has been Vice President, Organization Resources of the Company since July 1995. Mr. Kotten was Vice President, Human Resource Services of the Company from September 1994 to July 1995, and Vice President, Compensation and Benefits of the Company from August 1991 to August 1994. George L. McTavish has been Executive Vice President of the Company and Chairman and Chief Executive Officer of its Comdata Holdings subsidiary since it was acquired by the Company in December 1995. Mr. McTavish was Chairman and Chief Executive Officer of Comdata Holdings from March 1992 to December 1995, and was President and Chief Executive Officer of Comdata Holdings from November 1987 to March 1992. Mr. McTavish is a director of Broadway & Seymour, Inc. and Seer Technology Corporation. James D. Miller has been Vice President, Strategic Initiatives of the Company since January 1993. From February 1989 to January 1993, Mr. Miller was Vice President and Associate General Counsel for the Company. Stephen B. Morris has been Executive Vice President of the Company and President and Chief Executive Officer of its Arbitron division since January 1996. Mr. Morris was Vice President of the Company and President of Arbitron from December 1992 to January 1996. He was President and Chief Executive Officer of Vidcode, Inc., which electronically monitors, verifies and reports the broadcast of television commercials, from August 1990 to December 1992; and Director and co-founder of Spectra Marketing Systems, a micro-marketing firm, from March 1987 to March 1992. Prior to that time, he spent seventeen years at General Foods Corporation, the last three as General Manager/President of the Maxwell House Division. Steven J. Olson has been Vice President and General Counsel of the Company since October 1994. From October 1984 to October 1994, Mr. Olson was Vice President and Associate General Counsel for the Company. 23 Ronald L. Turner has been Executive Vice President of the Company and President and Chief Executive Officer of its Computing Devices International division since January 1996. Mr. Turner was Vice President of the Company and President of Computing Devices International from January 1993 to January 1996. Mr. Turner was President and Chief Executive Officer, GEC-Marconi Electronics Systems Corporation, a defense electronics company, from March 1987 to January 1993. Mr. Turner is a director of Advanced Technology Services, Inc., FLIR Systems, Inc. and BTG, Inc. Linda Hall Whitman has been Vice President, Business Integration of the Company since October 1995. Ms. Whitman was Vice President, Consumer Business Group of Honeywell, Inc. from September 1993 to September 1995, and Director, Home Systems of Honeywell, Inc. from January 1991 to September 1993. Ms. Whitman is a director of MTS Systems Corporation. 24 PART II All information incorporated by reference into Items 5 through 8 below is contained in the financial portion of the Company's 1995 Annual Report to Stockholders, which is filed with this Report as Exhibit 13. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's common stock, par value $.50 per share ("Common Stock"), is listed and trades on the New York Stock Exchange as well as on the Chicago and Pacific Stock Exchanges. The following table sets forth the high and low sales prices for a share of Common Stock on the New York Stock Exchange. ____________1995___________ ______________1994____________ High Low High Low 1st Quarter 34 1/2 26 1/8 24 3/4 18 1/2 2nd Quarter 37 5/8 31 5/8 25 5/8 21 1/2 3rd Quarter 46 7/8 36 3/4 27 1/2 24 4th Quarter 47 1/2 36 5/8 27 1/8 23 1/2 The number of holders of record of Common Stock on March 19, 1995 was 17,382. No dividends have been declared or paid on the Common Stock since 1985. Although the Company is not contractually precluded from paying dividends on its Common Stock, it has no present intention of paying such dividends. Item 6. Selected Financial Data. See "Selected Five-Year Data" on page 1, which is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 16 through 29, which is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The financial statements described in Item 14(a)1 of this Report are incorporated herein by reference. See "Supplementary Quarterly Data (Unaudited)" on page 52, which is incorporated herein by reference. Item 9. Disagreements on Accounting and Financial Disclosure. None. 25 Item 10. Directors and Executive Officers of the Registrant. See information regarding the directors and nominees for director of Ceridian under the heading "Nominees for Director" on pages 4 and 5 of the Proxy Statement for the Annual Meeting of Stockholders, May 8, 1996 (the "Proxy Statement"), which is incorporated herein by reference. See the information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 under the heading "Compliance With Section 16(a) of the Securities Exchange Act" on page 32 of the Proxy Statement, which is incorporated herein by reference. Information regarding the executive officers of Ceridian is on pages 22 through 24 of this Report, and is incorporated herein by reference. Item 11. Executive Compensation. See information under the headings "Directors' Compensation" on pages 6 and 7 of the Proxy Statement and "Executive Compensation" on pages 24 through 29 of the Proxy Statement, all of which is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. See information under the heading "Share Ownership Information" on pages 30 and 31 of the Proxy Statement, which is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. See information under the heading "Compensation Committee Interlocks and Insider Participation" on page 8 of the Proxy Statement, which is incorporated herein by reference. 26 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) 1. Financial Statements of Registrant Incorporated by reference from the pages indicated in the Company's 1995 Annual Report to Stockholders into Part II, Item 8, of this Report: Page Report of Management...........................................30 Independent Auditors' Report...................................31 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993...............................32 Consolidated Balance Sheets as of December 31, 1995 and 1994.....................................33 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993...............................34 Notes to Consolidated Financial Statements for the three years ended December 31, 1995.......................35-51 (a) 2. Financial Statement Schedules of Registrant Included in Part IV of this Report: Page Independent Auditors' Report on financial statement schedule.............................................32 Schedule II - Valuation and qualifying accounts...............33-34 All other financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. 27 (a) 3. Exhibits The following is a complete list of Exhibits filed or incorporated by reference as part of this report. Exhibit Description 2.01 Agreement and Plan of Merger dated as of August 23, 1995 by and among Ceridian Corporation, Convoy Acquisition Corp. and Comdata Holdings Corporation (incorporated by reference to Appendix A to the Prospectus contained in the Company's Registration Statement on Form S-4 (File No. 33- 64089)) 2.02 Agreement and Plan of Reorganization, dated as of May 25, 1994, among Tesseract Corporation, Braemar Acquisition Corp. and Ceridian Corporation (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated June 24, 1994, as amended (File No. 1-1969)) 3.01 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 4.01 to the Company's Registration Statement on Form S-8 (File No. 33- 54379)) 3.02 Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-1969)) 4.01 Form of Deposit Agreement, dated as of December 23, 1993, between The Bank of New York and Ceridian Corporation (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-3 (File No. 33-50959)) 4.02 Form of Indenture, with respect to the 5 1/2% Convertible Subordinated Debentures Due 2008, dated as of December 23, 1993, between The Bank of New York and Ceridian Corporation (incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-3 (File No. 33-50959)) 10.01* Executive Employment Agreement between Ceridian Corporation and Lawrence Perlman, dated February 1, 1994 (incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1969)) 10.02* Executive Employment Agreement between Ceridian Corporation and Ronald L. Turner, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.03* Executive Employment Agreement between Ceridian Corporation and Stephen B. Morris, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report. 28 10.04* Executive Employment Agreement between Ceridian Corporation and John R. Eickhoff, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1069)) 10.05* Severance Compensation Agreement, dated as of November 29, 1994, between Comdata Holdings Corporation and George L. McTavish 10.06* Amendment No. 1 to Severance Compensation Agreement, dated as of January 31, 1996, among Ceridian Corporation, Comdata Holdings Corporation and George L. McTavish 10.07* Ceridian Corporation Directors Deferred Compensation Plan - 1993 Restatement (as amended through December 13, 1993) (incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1969)) 10.08* Ceridian Corporation Directors' Benefit Protection Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association (incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.09* Ceridian Corporation 1993 Non-Employee Director Stock Plan (incorporated by reference to Exhibit 2 to the Company's Proxy Statement for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)) 10.10* Ceridian Corporation Amended and Restated 1993 Long-Term Incentive Plan (as amended through July 26, 1995) 10.11* Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement) (as amended through October 21, 1994) (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.12* Description of the Ceridian Corporation Annual Executive Incentive Plan 10.13* Ceridian Corporation Benefit Equalization Plan, as amended (effective generally as of January 1, 1994) (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.14* Ceridian Corporation Employees' Benefit Protection Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.15* Ceridian Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report. 29 10.16* Comdata Holdings Corporation Stock Option and Restricted Stock Purchase Plan, as amended October 25, 1993 (incorporated by reference to Exhibit 10.36 to Comdata Holdings Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 0-16151)) 10.17* Comdata Holdings Corporation Unfunded Deferred Compensation Plan, as amended 10.18* Form of Indemnification Agreement between Ceridian Corporation and its Directors (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1- 1969)) 10.19 Agreement for Information Technology Services, dated as of January 10, 1995, between Ceridian Corporation and Integrated Systems Solutions Corporation (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.20 Amended and Restated Agreement for Systems Operations Services, dated May 1, 1995, between Comdata Network, Inc. and Integrated Systems Solutions Corporation 10.21 Telecommunications Service Agreement, dated as of December 1, 1994, among Worldcom, Inc., Comdata Network, Inc. and Comdata Telecommunications Services, Inc. 10.22 Credit Agreement, dated as of December 12, 1995, among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto 11. Statement regarding computation of earnings (loss) per share 12. Statements regarding computation of ratio of earnings to fixed charges 13. 1995 Annual Report to Stockholders of the Company 21. Subsidiaries of the Company 23.01 Consent of Independent Auditors - KPMG Peat Marwick LLP 23.02 Consent of Independent Public Accountants - Arthur Andersen LLP 24. Power of Attorney 27. Financial Data Schedule *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report. If requested, the Company will provide copies of any of the exhibits listed above upon payment of its reasonable expenses in furnishing such exhibits. The Company will provide to the Securities and Exchange Commission, upon request, any schedule to any of the foregoing exhibits which has not been filed. Securities authorized pursuant to long-term debt instruments of the Company and its consolidated subsidiaries do not exceed 1% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of instruments under which such securities are authorized to the Securities and Exchange Commission upon request. 30 (b) Reports on Form 8-K The Company filed one report on Form 8-K during the quarter ended December 31, 1995. That report, dated December 12, 1995, reported in "Item 2: Acquisition or Disposition of Assets" the approval by the stockholders of Ceridian Corporation and Comdata Holdings Corporation of the acquisition of Comdata by Ceridian and the consummation of that acquisition. Also reported in "Item 5: Other Events" was the Company's establishment of a $325 million revolving credit facility with a commercial bank syndicate, with Bank of America as agent. Incorporated by reference in Item 7 of that report were (1) Comdata's consolidated balance sheets as of December 31, 1994 and 1993, the related consolidated statements of operations, cash flows and stockholders' equity for years ended December 31, 1994, 1993 and 1992, and the related notes to such consolidated financial statements as contained in Comdata's Annual Report on Form 10-K for the year ended December 31, 1994; (2) Comdata's consolidated balance sheets as of September 30, 1995 and December 31, 1994, the related consolidated statements of operations and cash flows for the nine months ended September 30, 1995 and September 30, 1994, respectively, and the related notes to such unaudited consolidated financial statements as contained in Comdata's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; and (3) the unaudited pro forma condensed combined balance sheet of Ceridian at September 30, 1995, unaudited condensed combined statements of operations of Ceridian for the years ended December 31, 1994, 1993 and 1992 and for the nine month periods ended September 30, 1995 and 1994, and the related notes to unaudited pro forma condensed combined financial statements as contained in Ceridian's Registration Statement on Form S-4 (File No. 33-64089). The Company also filed a Form 8-K/A on January 11, 1996 to amend the Form 8-K dated December 12, 1995 for the purpose of furnishing an Independent Auditor's Consent to the incorporation by reference in that Form 8-K of the Report of Independent Public Accountants related to the audited financial statements of Comdata described therein. 31 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE THE BOARD OF DIRECTORS AND STOCKHOLDERS CERIDIAN CORPORATION: Under date of January 23, 1996, we reported on the consolidated balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index (see Item 14.(a)2.). This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, based on our audits and the report of other auditors, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/KPMG Peat Marwick KPMG Peat Marwick LLP Minneapolis, Minnesota January 23, 1996 32 SCHEDULE II CERIDIAN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions) Restructure and Discontinued Operations Reserves Employer Computing Arbitron Arbitron Services Devices TV ScanAm Consolidation Severance Other Total Reserve Balance 12/31/92 $ - $ 0.6 $ 6.0 $ 1.1 $ 133.0 $ 140.7 1993 Restructure Loss (1) 57.0 18.9 5.5 0.3 81.7 Cash Payments (4.1) (0.6) (4.0) (6.1) (44.9) (59.7) Asset Write-Off (26.8) (15.0) (41.8) Adoption of FAS 112 (2) (12.0) (12.0) Other Non-cash Items (0.9) (0.9) Reserve Balance 12/31/93 $ 26.1 $ - $ 20.9 $ 0.5 $ 60.5 $ 108.0 1994 Restructure Loss (1) 15.0 15.0 Sale of TeleMoney (3) 14.1 14.1 Cash Payments (17.4) (8.5) (0.5) (27.3) (53.7) Other Non-cash Items 2.4 2.5 4.9 Reserve Balance 12/31/94 $ 11.1 $ - $ 12.4 $ - $ 64.8 $ 88.3 Cash Payments (3.9) (0.7) (13.6) (18.2) Other Non-cash Items 0.3 0.3 Reserve Balance 12/31/95 $ 7.5 $ - $ 11.7 $ - $ 51.2 $ 70.4 (1) Does not include restructure gains of $14.7 in 1993 and $15.0 in 1994. (2) Represents the reclassification to other liabilities of FAS 112 obligations. (3) Represents obligations undertaken in connection with the sale of TeleMoney.
33 SCHEDULE II (CONT.) CERIDIAN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions) Allowance for Doubtful Accounts Receivable Year Ended December 31 1995 1994 1993 Balance at beginning of year $ 12.2 $ 11.8 $ 10.3 Additions charged to costs and expenses 6.1 6.3 6.7 Write-offs and other adjustments* (5.9) (5.9) (5.2) Balance at end of year $ 12.4 $ 12.2 $ 11.8 (*)Other adjustments include balances removed as a result of sales of businesses. Investments and Advances Year Ended December 31, 1995 1994 1993 Balance of Seagate note at beginning of year $ 10.0 $ 10.0 $ 10.0 Principal payment received (10.0) Balance of Seagate note at end of year $ --- $ 10.0 $ 10.0
34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of March 25, 1996. CERIDIAN CORPORATION By /s/Lawrence Perlman Lawrence Perlman Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of March 25, 1996. /s/Lawrence Perlman /s/J. R. Eickhoff Lawrence Perlman J. R. Eickhoff Chairman, President and Chief Executive Vice President and Chief Executive Officer (Principal Financial Officer Executive Officer) and Director (Principal Financial Officer) /s/Loren Gross Loren D. Gross Vice President and Corporate Controller (Principal Accounting Officer) */s/Charles Marshall* Charles Marshall, Director */s/Ruth M. Davis */s/Carole J. Uhrich Ruth M. Davis, Director Carole J. Uhrich, Director */s/Allen W. Dawson */s/Richard W. Vieser* Allen W. Dawson, Director Richard W. Vieser, Director */s/Richard G. Lareau */s/Paul S. Walsh* Richard G. Lareau, Director Paul S. Walsh, Director */s/George R. Lewis /s/John A. Haveman George R. Lewis, Director *By: John A. Haveman Attorney-in-fact 35 EXHIBIT INDEX Exhibit Description 2.01 Agreement and Plan of Merger dated as of IBR August 23, 1995 by and among Ceridian Corporation, Convoy Acquisition Corp. and Comdata Holdings Corporation (incorporated by reference to Appendix A to the Prospectus contained in the Company's Registration Statement on Form S-4 (File No. 33-64089)) 2.02 Agreement and Plan of Reorganization, dated as of IBR May 25, 1994, among Tesseract Corporation, Braemar Acquisition Corp. and Ceridian Corporation (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated June 24, 1994, as amended (File No. 1-1969)) 3.01 Restated Certificate of Incorporation of the Company IBR (incorporated by reference to Exhibit 4.01 to the Company's Registration Statement on Form S-8 (File No. 33-54379)) 3.02 Bylaws of the Company, as amended (incorporated IBR by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-1969)) IBR 4.01 Form of Deposit Agreement, dated as of December 23, 1993, between The Bank of New York and Ceridian Corporation (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-3 (File No. 33-50959)) 4.02 Form of Indenture, with respect to the 5 1/2% IBR Convertible Subordinated Debentures Due 2008, dated as of December 23, 1993, between The Bank of New York and Ceridian Corporation (incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-3 (File No. 33-50959)) 10.01* Executive Employment Agreement between Ceridian IBR Corporation and Lawrence Perlman, dated February 1, 1994 (incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1969)) 10.02* Executive Employment Agreement between Ceridian IBR Corporation and Ronald L. Turner, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.03* Executive Employment Agreement between Ceridian IBR Corporation and Stephen B. Morris, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.04* Executive Employment Agreement between Ceridian IBR Corporation and John R. Eickhoff, dated February 3, 1995 (incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1069)) 10.05* Severance Compensation Agreement, dated as E of November 29, 1994, between Comdata Holdings Corporation and George L. McTavish 10.06* Amendment No. 1 to Severance Compensation E Agreement, dated as of January 31, 1996, among Ceridian Corporation, Comdata Holdings Corporation and George L. McTavish 10.07* Ceridian Corporation Directors Deferred IBR Compensation Plan - 1993 Restatement (as amended through December 13, 1993) (incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-1969)) 10.08* Ceridian Corporation Directors' Benefit IBR Protection Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association (incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.09* Ceridian Corporation 1993 Non-Employee Director IBR Stock Plan (incorporated by reference to Exhibit 2 to the Company's Proxy Statement for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)) 10.10* Ceridian Corporation Amended and Restated 1993 E Long-Term Incentive Plan (as amended through July 26, 1995) 10.11* Ceridian Corporation 1990 Long-Term Incentive IBR Plan (1992 Restatement) (as amended through October 21, 1994) (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.12* Description of the Ceridian Corporation Annual E Executive Incentive Plan 10.13* Ceridian Corporation Benefit Equalization Plan, IBR as amended (effective generally as of January 1, 1994) (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.14* Ceridian Corporation Employees' Benefit Protection IBR Trust Agreement, dated as of December 1, 1994, between Ceridian Corporation and First Trust National Association (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.15* Ceridian Corporation Deferred Compensation Plan IBR (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) IBR 10.16* Comdata Holdings Corporation Stock Option and Restricted Stock Purchase Plan, as amended October 25, 1993 (incorporated by reference to Exhibit 10.36 to Comdata Holdings Corporation's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 0-16151)) 10.17* Comdata Holdings Corporation Unfunded Deferred E Compensation Plan, as amended 10.18* Form of Indemnification Agreement between Ceridian IBR Corporation and its Directors (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-1969)) 10.19 Agreement for Information Technology Services, dated IBR as of January 10, 1995, between Ceridian Corporation and Integrated Systems Solutions Corporation (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-1969)) 10.20 Amended and Restated Agreement for Systems Operations E Services, dated May 1, 1995, between Comdata Network, Inc. and Integrated Systems Solutions Corporation 10.21 Telecommunications Service Agreement, dated E as of December 1, 1994, among Worldcom, Inc., Comdata Network, Inc. and Comdata Telecommunications Services, Inc. 10.22 Credit Agreement, dated as of December 12, 1995, E among Ceridian Corporation, Bank of America National Trust and Savings Association as Agent, and the Financial Institutions Parties Thereto 11. Statement regarding computation of earnings E (loss) per share 12. Statements regarding computation of ratio of E earnings to fixed charges 13. 1995 Annual Report to Stockholders of the Company E 21. Subsidiaries of the Company E 23.01 Consent of Independent Auditors - E KPMG Peat Marwick LLP 23.02 Consent of Independent Public Accountants - E Arthur Andersen LLP 24. Power of Attorney E 27. Financial Data Schedule E IBR - Incorporated by reference E - Electronically filed EX-10.05 2 SEVERANCE COMPENSATION AGREEMENT EXHIBIT 10.05 SEVERANCE COMPENSATION AGREEMENT This Severance Compensation Agreement, dated as of November 29, 1994, is entered into by and between Comdata Holdings Corporation, a Delaware corporation (the "Company") and George L. McTavish (the "Executive"). The Company's Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of certain members of the Company's senior management, including the Executive, to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control of the Company. This Agreement sets forth the severance compensation which the Company agrees it will pay to the Executive if the Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control of the Company (as defined herein). 1. Term. This Agreement shall terminate, except to the extent that any obligation of the Company hereunder remains unpaid as of such time, upon the earliest of (i) three years from the date hereof if a Change in Control of the Company has not occurred within such three-year period; (ii) the termination of the Executive's employment with the Company based on death, Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c)) or Cause (as defined in Section 3(d)) or by the Executive other than for Good Reason (as defined in Section 3(e)); and (iii) eighteen months from the date of a Change in Control of the Company if the Executive has not terminated his employment for Good Reason as of such time. 2. Change in Control. No compensation shall be payable under this Agreement unless and until (a) there shall have been a Change in Control of the Company, while the Executive is still an employee of the Company and (b) the Executive's employment by the Company thereafter shall have been terminated in accordance with Section 3. For purposes of this Agreement, a Change in Control means the happening of any of the following: (i) any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities and Exchange Act of 1934, other than the Company, a wholly-owned subsidiary thereof, any employee benefit plan of the Company or any of its Subsidiaries or a person or entity that beneficially owns 5% or more of the Common Stock of the Company as of the date hereof, becomes the beneficial owner 1 of the Company's securities having 30% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business); or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transactions are held in the aggregate by the holders of the Company's securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or (iii) during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period. 3. Termination Following Change in Control. (a) If a Change in Control of the Company shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 4 upon the subsequent termination of the Executive's employment with the Company by the Executive or by the Company unless such termination is as a result of (i) the Executive's death; (ii) the Executive's Disability (as defined in Section (3)(b) below); (iii) the Executive's Retirement (as defined in Section 3(c) below); (iv) the Executive's termination by the Company for Cause (as defined in Section 3(d) below); or (v) the Executive's decision to terminate employment other than for Good Reason (as defined in Section 3(e) below). If the lump sum severance payment under Section 4, either alone or together with other payments which the Executive has the right to receive from the Company, would constitute a "parachute payment" (as define in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such lump sum payment shall be "grossed-up" by the Company so that the Executive is in the same after-tax position as if he did not have to pay the excise tax imposed by Section 4999 of the Code. (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall 2 have been absent from his duties with the Company on a full-time basis for six months and within 30 days after written notice of termination is thereafter given by the Company the Executive shall not have returned to the full-time performance of the Executive's duties, the Company may terminate this Agreement for "Disability." (c) Retirement. The term "Retirement" as used in this Agreement shall mean termination by the Company or the Executive of the Executive's employment based on the Executive's having reached age 65 or such other age as shall have been fixed in any arrangement established with the Executive's consent with respect to the Executive. (d) Cause. The Company may terminate the Executive's employment for Cause. For purposes of this Agreement only, the Company shall have "Cause" to terminate the Executive's employment hereunder only on the basis of fraud, misappropriation or embezzlement on the part of the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the membership of the Company's Board of Directors (excluding the Executive) at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in the second sentence of this Section 3(d) and specifying the particulars thereof in detail. (e) Good Reason. The Executive may terminate the Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement "Good Reason" shall mean any of the following (without the Executive's express written consent): (i) the assignment to the Executive by the Company of duties inconsistent with the Executive's position, duties, responsibilities and status with the Company immediately prior to a Change in Control of the Company, or a change in the Executive's titles or offices as in effect immediately prior to a Change in Control of the Company, or any removal of the Executive from or any failure to reelect the Executive to any of such positions, except in connection with the termination of his employment for Disability, Retirement or Cause or as a result of the Executive's death or by the Executive other than for Good Reason; (ii) a reduction by the Company in the Executive'sbase salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Agreement; 3 (iii) a relocation of the Company's principal executive offices to a location outside of Nashville (or Brentwood), Tennessee, or the Executive's relocation to any place other than the location at which the Executive performed the Executive's duties prior to a Change in Control of the Company, except for required travel by the Executive on the Company's business to an extent substantially consistent with the Executive's business travel obligations at the time of a Change in Control of the Company; (iv) any material breach by the Company of any provision of this Agreement; (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (vi) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of this Agreement, no such purported termination shall be effective. (f) Notice of Termination. Any termination by the Company pursuant to Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate those specific termination provisions in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provisions so indicated. For purposes of this Agreement, no such purported termination by the Company shall be effective without such Notice of Termination. (g) Date of Termination. "Date of Termination" shall mean (a) if this Agreement is terminated by the Company for Disability, 30 days after the Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive's duties on a full- time basis during such 30-day period) or (b) if the Executive's employment is terminated by the Company for any other reason, the date on which a Notice of Termination is given. 4. Severance Compensation upon Termination of Employment. (a) If the Company shall terminate the Executive's employment other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment for Good Reason, then the Company shall pay to the Executive as severance pay in a lump sum, in cash, on the fifth day following the Date of Termination, an amount equal to the sum of (i) three times the average of the aggregate annual salary paid to the Executive by the Company during the three calendar years preceding the Change in Control 4 of the Company and (ii) three times the highest bonus compensation paid to the Executive for any of the three calendar years preceding the Change in Control of the Company. (b) In addition to the lump sum payment provided in Section 4(a), if the Company shall terminate the Executive's employment other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment for Good Reason, then the Company (at its expense) shall provide to the Executive term life insurance and health and disability insurance equivalent to that provided to the Executive immediately prior to termination for a period of two years following the Date of Termination. (c) In addition to the benefits provided in Sections 4(a) and (b), if the Company shall terminate the Executive's employment other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment for Good Reason, then all of the Executive's stock awards, including, without limitation, restricted stock and stock options awarded to the Executive by the Company pursuant to the Company's Stock Option and Restricted Stock Purchase Plan, shall to the extent not already vested and exercisable become fully vested and exercisable. The Executive's stock options shall be exercisable for a period of one year from the Date of Termination unless a shorter period is required by applicable law. 5. No Obligation To Mitigate Damages; No Effect on Other Contractual Rights. (a) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the Date of Termination, or otherwise. (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, incentive plan or stock option plan, employment agreement or other contract, plan or arrangement. 6. Successor to the Company. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession 5 or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment for Good Reason. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of the law. If at any time during the term of this Agreement the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, "Company" as used in Sections 3, 4 and 11 hereof shall in addition include such employer. In such event, the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 4 hereof. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid as follows: If to the Company: Comdata Holdings Corporation 5301 Maryland Way Brentwood, Tennessee 37027 If to the Executive: George L. McTavish 521 Westview Avenue Nashville, Tennessee 37205 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any 6 condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee. 9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Legal Fees and Expenses. The Company shall pay all legal fees and expenses which the Executive may incur as a result of the Company's contesting the validity, enforceability or the Executive's interpretation of, or determinations under, this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMDATA HOLDINGS CORPORATION By: /s/Dennis R. Hanson Name: Dennis R. Hanson Title: Executive Vice President EXECUTIVE: /s/George L. McTavish George L. McTavish 7 EX-10.06 3 AMENDMENT NO. 1 TO SEVERANCE COMPENSATION AGREEMENT EXHIBIT 10.06 AMENDMENT NO. 1 TO SEVERANCE COMPENSATION AGREEMENT This Amendment No. 1 to the Severance Compensation Agreement, dated as of January 31, 1996 (the "Amendment"), is entered into by and among George L. McTavish (the "Executive"), Comdata Holdings Corporation (the "Company"), and Ceridian Corporation ("Ceridian"). RECITALS: WHEREAS, the Company and the Executive are parties to that certain Severance Compensation Agreement, dated as of November 29, 1994 (the "Agreement"), pursuant to which, among other things, the Company agreed to provide the Executive with certain severance benefits in the event of a "change in control"; and WHEREAS, as a result of the Company's merger (the "Merger") with Ceridian, a "change in control" as defined in Section 2 of the Agreement has occurred and Ceridian has agreed to assume and perform the Agreement; NOW, THEREFORE, for and in consideration of the premises and the mutual promises, covenants and conditions set forth in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Executive and Ceridian hereby agree as follows: 1. Amendment of Agreement. The Agreement is hereby amended, modified, and supplemented, effective as of the date provided in Section 4 hereof, by this Amendment as set forth below: (a) Section 1 of the Agreement is hereby amended by deleting such section from the Agreement in its entirety, and by substituting in lieu thereof the following new section: "1. Term. This Agreement shall terminate, except to the extent that any obligation of the Company hereunder remains unpaid as of such time, upon the earlier of (i) the termination of the Executive's employment with the Company based on death, Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c)), or Cause (as defined in Section 3(d)), or by the Executive other than for Good Reason (as defined in Section 3(e)); and (ii) June 12, 1997 if the Executive has not terminated his employment for Good Reason as of such time." 1 (b) Section 3(e) of the Agreement is hereby amended by deleting such Section 3(e) from the Agreement in its entirety, and by substituting in lieu thereof the following new Section 3(e): "(e) Good Reason. The Executive may terminate the Executive's employment for Good Reason at any time during the term of this Agreement. For purposes of this Agreement, "Good Reason" shall mean any of the following (without the Executive's express written consent): (i) the assignment to the Executive by the Company of duties inconsistent with the Executive's position, duties and responsibilities with the Company, as described on Schedule 1 hereto, or a change in the Executive's titles or offices from those shown on Schedule 1, or any removal of the Executive from or any failure to reelect the Executive to any of such positions, except in connection with the termination of his employment for Disability, Retirement or Cause or as a result of the Executive's death or by the Executive other than for Good Reason; (ii) a reduction by the Company in the Executive's base salary as in effect on December 12, 1995 or as the same may be increased from time to time during the term of this Agreement; (iii) the Executive's relocation to any place other than Nashville (or Brentwood), except for required travel by the Executive on the Company's business to an extent substantially consistent with the Executive's business travel obligations at the time of the Merger, or a change or replacement of the person to whom the Executive reports; (iv) any material breach by the Company of any provision of this Agreement; (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; or (vi) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of 2 this Agreement, no such purported termination shall be effective." (c) Section 4(a) of the Agreement is hereby amended by deleting such Section 4(a) from the Agreement in its entirety, and by substituting in lieu thereof the following new Section 4(a): "(a) If the Company shall terminate the Executive's employment other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment for Good Reason, then the Company shall pay to the Executive as severance pay in a lump sum, in cash, on the fifth day following the Date of Termination, an amount equal to the sum of (i) three times the average of the aggregate annual salary paid to the Executive by the Company during the three calendar years preceding December 12, 1995 and (ii) three times the highest bonus compensation paid to the Executive for any of the three calendar years preceding December 12, 1995 (the "Lump Sum Payment"). The Lump Sum Payment shall be reduced by an amount equal to all salary and bonus paid to the Executive by the Company after December 12, 1995." (d) Section 4(b) of the Agreement is hereby amended by deleting such Section 4(b) from the Agreement in its entirety, and by substituting in lieu thereof the following new Section 4(b): "(b) In addition to the lump sum payment provided in Section 4(a), if the Company shall terminate the Executive's employment other than pursuant to Sections 3(b), 3(c), or 3(d) or if the Executive shall terminate his employment for Good Reason, then the Company (at its expense) shall provide to the Executive term life insurance and health and disability insurance equivalent to that provided to the Executive immediately prior to December 12, 1995 for a period of two (2) years following the Date of Termination." (e) Section 4(c) of the Agreement is hereby amended by deleting such Section 4(c) from the Agreement in its entirety, and by substituting in lieu thereof the following new Section 4(c): "(c) In addition to the benefits provided in Sections 4(a) and 4(b), if the Company shall terminate the Executive's employment other than pursuant to Sections 3(b), 3(c) or 3(d) or if the Executive shall terminate his employment for Good Reason, then all of 3 the Executive's stock awards, including, without limitation, restricted stock and stock options awarded to the Executive by the Company pursuant to the Company's Stock Option and Restricted Stock Purchase Plan, but excluding any Ceridian stock awards received by the Executive after December 12, 1995, shall to the extent not already vested and exercisable become fully vested and exercisable. The Executive's stock options shall be exercisable for a period of one year from the Date of Termination unless a shorter period is required by applicable law." 2. Assumption of Agreement by Ceridian. Pursuant to Section 6 of the Agreement, Ceridian hereby expressly, absolutely and unconditionally assumes and agrees to perform the Agreement in the same manner and to the same extent that the Company would be required to perform the Agreement after the Merger. Ceridian further acknowledges that the term "Company" as used herein and in the Agreement, shall include Ceridian, unless such reference clearly indicates otherwise. 3. Consent to Continued Employment on New Terms. The Executive hereby consents to his post-Merger positions, duties, responsibilities and status as described on Schedule 1 hereto, and agrees that his right to terminate the Agreement for Good Reason will be determined with respect to the new definition of "Good Reason" contained in this Amendment. 4. Effectiveness of this Amendment. This Amendment shall become effective upon the execution and delivery of this Amendment by the Company, the Executive and Ceridian. 5. Representations and Warranties of Ceridian and the Company. In order to induce the Executive to enter into this Amendment, the Company and Ceridian hereby make the following representations and warranties to the Executive: 5.1. Corporate Power and Authorization. Each of the Company and Ceridian has the requisite corporate power and authority to execute, deliver and perform its obligations under this Amendment and the Agreement. 5.2. No Conflict. Neither the execution and delivery by the Company or Ceridian of this Amendment nor the performance of the obligations required hereby nor compliance by the Company or Ceridian with the terms, conditions and provisions hereof will conflict with or result in a breach of any of the terms, 4 conditions or provisions of the Certificate of Incorporation or Bylaws of either the Company or Ceridian or any law, regulation, order, writ, injunction or decree of any court or governmental instrumentality or any agreement or instrument to which either the Company or Ceridian is a party or by which any of its properties is bound, or constitute a default thereunder or result in the creation or imposition of any lien. 5.3. Authorization. The execution and delivery by the Company and Ceridian of this Amendment and the performance of the obligations contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of both the Company and Ceridian and (ii) do not and will not require any authorization, consent, approval or license from or any registration, qualification, designation, declaration or filing with, any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. 5.4. Valid and Binding Effect. This Amendment has been duly and validly executed and delivered by both the Company and Ceridian and constitutes the legal, valid and binding obligation of both the Company and Ceridian, enforceable in accordance with its terms. 5.5. Absence of Default. Both Ceridian and the Company acknowledge that as of the date of this Amendment, neither Ceridian nor Comdata has any grounds for not performing its obligations under the Agreement, and that through the date hereof any claims or rights to set off that either may have against the Executive are hereby waived in consideration of the Executive's agreement to enter into this Amendment. As of the date of this Amendment, the Executive is not aware of any such claims. 6. Miscellaneous. 6.1. Amendment to Agreement. The Agreement is hereby, and shall henceforth be deemed to be, amended, modified and supplemented in accordance with the provisions hereof, and the respective rights, duties and obligations under the Agreement shall hereafter be determined, exercised and enforced under the Agreement, as amended, subject in all respects to such amendments, modifications, and supplements and all terms and conditions of this Amendment. Initially capitalized terms used in this Amendment shall have the meanings ascribed thereto in the Agreement, as amended hereby, unless otherwise defined herein. 6.2. Ratification of the Agreement. Except as expressly set forth in this Amendment, all agreements, covenants, undertakings, provisions, stipulations, and promises contained in the Agreement are hereby ratified, readopted, approved, and 5 confirmed and remain in full force and effect. 6.3. No Implied Waiver. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver or modification of any provision of, or operate as a waiver of any right, power or remedy of the Executive under, the Agreement or prejudice any right or remedy that the Executive may have or may have in the future under or in connection with the Agreement. The representations and warranties of the Company and Ceridian contained in this Amendment shall survive the execution and delivery of this Amendment and the effectiveness hereof. 6.4. Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Tennessee. 6.5. Counterparts; Telecopy Execution. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile shall be equally as effective as delivery of a manually executed counterpart. Any party delivering an executed counterpart of this Amendment by facsimile shall also deliver a manually executed counterpart, but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment. IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed by their duly authorized officers or in their individual capacities as of the date first written above. CERIDIAN: EXECUTIVE: CERIDIAN CORPORATION /s/G. L. McTavish /s/Micheal E. Kotten George L. McTavish By: Micheal E. Kotten COMPANY: Its:VP Organization Resources COMDATA HOLDINGS CORPORATION /s/John A. Haveman By: John A. Haveman Its: VP & Asst Secretary 6 SCHEDULE I McTavish Severance Agreement Post-Merger Position and Title: Executive Vice President of Ceridian or any successor-in-interest; President and Chief Executive Officer of Comdata Network. Reporting To: Larry Perlman, Ceridian or any successor-in- interest Chairman, President and Chief Executive Officer. Salary and Benefits:Annual salary of $348,140. The Executive is eligible to participate in the 1996 Ceridian Executive Incentive Plan with a target annual payment, based on performance, of 40% of the Executive's year-end annualized salary. The maximum payout under the Plan is 60%. Stock Awards: Non-qualified stock options to purchase 25,000 shares of Ceridian common stock and a performance restricted stock award of 30,000 shares of common stock under Ceridian's 1993 Long-Term Incentive Plan. Supplementary Executive Benefits: The Executive will also be eligible for supplementary executive benefits of $25,000 per year, payable monthly ($2,083 per month) in addition to the Executive's base salary. 7 EX-10.10 4 AMENDED AND RESTATED 1993 LONG-TERM INCENTIVE PLAN AS AMENDED THROUGH JULY 26, 1995 CERIDIAN CORPORATION 1993 LONG-TERM INCENTIVE PLAN (As Amended and Restated as of May 10, 1995) 1. Purpose of Plan. The purpose of the Ceridian Corporation 1993 Long-Term Incentive Plan (as amended and restated as of May 10, 1995) (the "Plan") is to advance the interests of Ceridian Corporation (the "Company") and its stockholders by enabling the Company and its Subsidiaries to attract and retain persons of ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its economic objectives. 2. Definitions. The following terms will have the meanings set forth below, unless the context clearly otherwise requires: 2.1 "Board" means the Board of Directors of the Company. 2.2 "Broker Exercise Notice" means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer. 2.3 "Change of Control" means an event described in Section 12.1 of the Plan. 2.4 "Code" means the Internal Revenue Code of 1986, as amended. 2.5 "Committee" means the group of individuals administering the Plan, as provided in Section 3 of the Plan. 2.6 "Common Stock" means the common stock of the Company, par value $0.50 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3 of the Plan. 2.7 "Disability" means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code. 2.8 "Eligible Recipients" means all employees (including, without limitation, officers and directors who are also employees) of the Company or any Subsidiary. "Exchange Act" means the Securities Exchange Act of 1934, as 2.9 amended. 2.10 "Fair Market Value" means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote), the closing market price per share of the Common Stock as reported on the New York Stock Exchange Composite Tape on that date. 2.11 "Incentive Award" means an Option, Stock Appreciation Right, Restricted Stock Award or Performance Unit granted to an Eligible Recipient pursuant to the Plan. 2.12 "Incentive Stock Option" means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an "incentive stock option" within the meaning of Section 422 of the Code. 2.13 "Newly Hired Employee" means a person who has been an Eligible Recipient for 90 days or less. 2.14 "Non-Statutory Stock Option" means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not qualify as an Incentive Stock Option. 2.15 "Option" means an Incentive Stock Option or a Non- Statutory Stock Option. 2.16 "Participant" means an Eligible Recipient who receives one or more Incentive Awards under the Plan. 2.17 "Performance Goal" means the absolute or relative measure of one or more of the following alternatives as specified by the Committee in writing for any Performance Period, the achievement of which is a condition precedent to the vesting of a Performance Restricted Stock Award hereunder: Total Return to Stockholders; fully diluted earnings per share for the Company; or earnings before interest and taxes, return on equity or invested capital, or revenue growth for the Company or a specified Subsidiary or division of the Company. Any such Performance Goal shall be established by the Committee on or before the latest date permissible to enable the Performance Restricted Stock Award to qualify as "performance-based compensation" under Section 162(m). For purposes of this definition, any relative measure of Total Return to Stockholders shall utilize the Company's Performance Ranking Position, and other financial terms shall have the same meanings as used in the Company's financial statements. 2 2.18 "Performance Period" means the period of time during which Performance Goals are measured to determine the vesting of Performance Restricted Stock Awards. 2.19 "Performance Ranking Position" means the relative placement of the Company's Total Return to Stockholders as measured against (i) the Total Return to Stockholders of other companies in a nationally recognized index such as the S&P 500, or in a peer group of companies selected by the Committee prior to the commencement of a Performance Period, or (ii) the performance of such nationally recognized index itself. 2.20 "Performance Restricted Stock Award" means a Restricted Stock Award the vesting of which is conditioned upon the satisfaction of one or more Performance Goals. 2.21 "Performance Unit" means a right granted to an Eligible Recipient pursuant to Section 9 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, upon the achievement of established performance criteria. 2.22 "Previously Acquired Shares" means shares of Common Stock that are already owned by the Participant. 2.23 "Restricted Stock Award" means an award of Common Stock granted to an Eligible Recipient pursuant to Section 8 of the Plan that is subject to the restrictions on transferability and the risk of forfeiture imposed by the provisions of such Section 8. 2.24 "Retirement" means the termination (other than for "cause" as defined in Section 10.3(b) of the Plan) of a Participant's employment or other service on or after the date on which the Participant has attained the age of 55 and has completed 10 years of continuous service to the Company or any Subsidiary (determined in accordance with the retirement/pension plan or practice of the Company or Subsidiary then covering the Participant, provided that if the Participant is not covered by any such plan or practice, the Participant will be deemed to be covered by the Company's plan or practice for purposes of this determination). 2.25 "Section 162(m)" means Section 162(m) of the Code. 2.26 "Securities Act" means the Securities Act of 1933, as amended. 2.27 "Stock Appreciation Right" means a right granted to an Eligible Recipient pursuant to Section 7 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more shares of Common Stock and the exercise price of such shares under the terms of such Stock Appreciation Right. 2.28 "Subsidiary" means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant equity interest, as determined by the Committee. 3 2.29 "Tax Date" means the date any withholding tax obligation arises under the Code for a Participant with respect to an Incentive Award. 2.30 "Total Return to Stockholders" with respect to a company means the total return to a holder of the common stock of that company during a Performance Period as a result of his or her ownership of that stock during such Performance Period, such total return to include both the appreciation (or depreciation) in the per share price of such common stock during such Performance Period, and the per share fair market value of all dividends and distributions paid or distributed by such company with respect to such common stock during such Performance Period, assuming that all such dividends and distributions are reinvested in shares of such common stock at their fair market value on the last trading day of the month in which the dividend or distribution is paid or distributed. 3. Plan Administration. 3.1 The Committee. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, the Plan will be administered by a committee (the "Committee") consisting solely of not less than two members of the Board who are "disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act. To the extent consistent with corporate law, the Committee may delegate to any directors or officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Eligible Recipients who are subject to Section 16 of the Exchange Act. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be conclusive and binding for all purposes and on all persons, and no member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Incentive Award granted under the Plan. 3.2 Authority of the Committee. (a) In accordance with and subject to the provisions of the Plan, the Committee will have the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii) the nature and extent of the Incentive Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in which Incentive Awards will vest or become exercisable and whether Incentive Awards will be granted in tandem with other Incentive Awards) and the form of written agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions and other conditions to which the payment or vesting of Incentive Awards may be subject. In addition, 4 the Committee will have the authority under the Plan in its sole discretion to pay the economic value of any Incentive Award in the form of cash, Common Stock or any combination of both. (b) Except as otherwise provided in the remainder of this Paragraph 3.2(b), the Committee will have the authority under the Plan to amend or modify the terms and conditions of any outstanding Incentive Award in any manner, so long as the amended or modified terms are permitted by the Plan as then in effect (including the requirement under Section 6.2 that an Option exercise price will never be less than 100% of the Fair Market Value of the Common Stock on the date of grant), and any Participant adversely affected by such amended or modified terms has consented to such amendment or modification. No amendment or modification to an Incentive Award, however, whether pursuant to this Section 3.2 or any other provisions of the Plan, will be deemed to be a regrant of such Incentive Award for purposes of this Plan. The Committee shall not have the authority under the Plan to accelerate the exercisability or vesting of, or otherwise terminate or relax any restrictions relating to, any Incentive Award except in the case of death, Disability or Retirement of a Participant, or except to the extent that the exercise of such discretion by the Committee does not affect Incentive Awards involving, in the aggregate over the life of the Plan, more than 3% of the total number of shares of Common Stock authorized for issuance under the Plan. The Committee shall not have the authority under the Plan to authorize the grant of replacement Option or Stock Appreciation Right awards in substitution for pre- existing Incentive Awards of those types that have been or are to be surrendered and canceled at any time when the Fair Market Value of the Common Stock is less than the exercise price applicable to such surrendered and canceled Incentive Awards. [As amended through July 26, 1995] (c) In the event of (i) any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture (including a spin-off) or any other change in corporate structure or shares, (ii) any purchase, acquisition, sale or disposition of a significant amount of assets or a significant business, (iii) any change in accounting principles or practices, or (iv) any other similar change, in each case with respect to the Company (or any Subsidiary or division thereof) or any other entity whose performance is relevant to the grant or vesting of an Incentive Award, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) may, without the consent of any affected Participant, amend or modify the grant or vesting criteria of any outstanding Incentive Award that is based in whole or in part on the financial performance of the Company (or any Subsidiary or division thereof) or such other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors of the surviving corporation) following such event as prior 5 to such event; provided, however, that the amended or modified terms are permitted by the Plan as then in effect. 4. Shares Available for Issuance. 4.1 Maximum Number of Shares Available. Subject to adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 6,000,000 shares. The shares available for issuance under the Plan may, at the election of the Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury. 4.2 Limitation on Individual Awards in Any Taxable Year. The maximum number of shares of Common Stock that may be the subject of Incentive Awards made to any Eligible Recipient in any one taxable year of the Company shall not exceed 250,000 shares (the "Maximum Annual Grant"). 4.3 Accounting for Incentive Awards. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentive Awards will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Incentive Award that lapses, expires, is forfeited or for any reason is terminated unexercised or unvested and any shares of Common Stock that are subject to an Incentive Award that is settled or paid in cash or any form other than shares of Common Stock will automatically again become available for issuance under the Plan. 4.4 Adjustments to Shares and Incentive Awards. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustments (which determination will be conclusive) as to (i) the number and kind of securities available for issuance under the Plan, (ii) the Maximum Annual Grant, and (iii) in order to prevent dilution or enlargement of the rights of Participants, the number, kind and, where applicable, exercise price of securities subject to outstanding Incentive Awards. 5. Participation. Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the achievement of economic objectives of the Company or its Subsidiaries. Eligible Recipients may be granted from time to time one or more Incentive Awards, singly or in combination or in tandem with other Incentive Awards, as may be determined by the Committee in its sole discretion. Incentive Awards will be deemed to be granted as of the date specified in the grant 6 resolution of the Committee, which date will be the date of any related agreement with the Participant. 6. Options. 6.1 Grant. An Eligible Recipient may be granted one or more Options under the Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock Option. 6.2 Exercise Price. The per share price to be paid by a Participant upon exercise of an Option will be determined by the Committee in its discretion at the time of the Option grant but will not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant. Unless otherwise determined by the Committee, the per share exercise price of Options granted under the Plan will be equal to 100% of the Fair Market Value of one share of Common Stock on the date of grant. 6.3 Exercisability and Duration. An Option will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Option may be exercisable prior to six months (other than Options described in Section 6.6 of the Plan or as provided in Section 10 of the Plan) or after 10 years from its date of grant. Unless the Committee determines otherwise, an Option granted under the Plan will be exercisable for 10 years from its date of grant and will become exercisable on a cumulative basis with respect to one-third of the shares subject to such Option on each January 1 occurring at least six months after its date of grant. 6.4 Payment of Exercise Price. The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, Previously Acquired Shares or a combination of such methods. 6.5 Manner of Exercise. An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company, Attention: Corporate Treasury, at its principal executive office in Minneapolis, Minnesota and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.4 of the Plan. 6.6 Options or Stock in Lieu of Bonus. Without limiting in any way the authority of the Committee to establish the terms and conditions of Options or other Incentive Awards, the Committee may allow Eligible Recipients to elect to receive some or all of their annual cash bonus 7 in the form of Non-Statutory Stock Options or shares of Common Stock rather than cash. The Committee will have the sole authority to determine whether to allow such an election and to establish the terms and conditions to such an election, which terms and conditions will be set forth in the agreement evidencing such Options or Incentive Awards. 7. Stock Appreciation Rights. 7.1 Grant. An Eligible Recipient may be granted one or more Stock Appreciation Rights under the Plan, and such Stock Appreciation Rights will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. 7.2 Exercise Price. The exercise price of a Stock Appreciation Right will be determined by the Committee, in its discretion, at the date of grant but will not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant. 7.3 Exercisability and Duration. A Stock Appreciation Right will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Stock Appreciation Right may be exercisable prior to six months (other than as provided in Section 10 of the Plan) or after 10 years from its date of grant. Unless the Committee determines otherwise, a Stock Appreciation Right granted under the Plan will be exercisable for 10 years from its date of grant and will become exercisable on a cumulative basis with respect to one-third of the shares subject to such Stock Appreciation Right on each January 1 occurring at least six months after its date of grant. A Stock Appreciation Right will be exercised by giving notice in the same manner as for Options, as set forth in Section 6.5 of the Plan. 8. Restricted Stock Awards. 8.1 Grant. An Eligible Recipient may be granted one or more Restricted Stock Awards under the Plan, and such Restricted Stock Awards will be subject to such terms and conditions, consistent with the provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Restricted Stock Awards as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or a Subsidiary for a certain period, that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance criteria; provided, however, that any Restricted Stock Award made on or after May 10, 1995 to an Eligible Recipient other than a Newly Hired Employee must be a Performance Restricted Stock Award. Other than as provided in Section 10.4 of the Plan, (i) no Restricted Stock Award may vest prior to six months from its date of grant, and (ii) any Restricted Stock Award that is not a Performance Restricted Stock Award may vest only over a period of at least three years from the date such Award was granted, the rate at which the shares subject to such Award may vest during such period 8 shall not be more favorable to the Participant than vesting in equal annual installments, and the Participant must remain in the continuous employ or service of the Company or a Subsidiary during such period. [As amended through July 26, 1995] 8.2 Rights as a Stockholder; Transferability. Except as provided in Sections 8.1, 8.3 and 13.3 of the Plan, a Participant will have all voting, dividend, liquidation and other rights with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award under this Section 8 upon the Participant becoming the holder of record of such shares as if such Participant were a holder of record of shares of unrestricted Common Stock. 8.3 Dividends and Distributions. Unless the Committee determines otherwise in its sole discretion (either in the agreement evidencing the Restricted Stock Award at the time of grant or at any time after the grant of the Restricted Stock Award), any dividends or distributions (including regular quarterly cash dividends) paid with respect to shares of Common Stock subject to the unvested portion of a Restricted Stock Award will not be subject to the same restrictions as the shares to which such dividends or distributions relate and will be currently paid to the Participant. In the event the Committee determines not to pay such dividends or distributions currently, the Committee will determine in its sole discretion whether any interest will be paid on such dividends or distributions. In addition, the Committee, in its sole discretion, may require such dividends and distributions to be reinvested (and in such case the Participants consent to such reinvestment) in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions relate. 8.4 Enforcement of Restrictions. To enforce the restrictions referred to in this Section 8, the Committee may place a legend on the stock certificates referring to such restrictions and may require Participants, until the restrictions have lapsed, to keep the stock certificates, together with duly endorsed stock powers, in the custody of the Company or its transfer agent or to maintain evidence of stock ownership, together with duly endorsed stock powers, in a certificateless book-entry stock account with the Company's transfer agent for its Common Stock. 9. Performance Units. An Eligible Recipient may be granted one or more Performance Units under the Plan, and such Performance Units will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Performance Units as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or any Subsidiary for a certain period or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance criteria. The Committee will have the sole discretion 9 either to determine the form in which payment of the economic value of vested Performance Units will be made to the Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by the Participant of the form of such payment. 10. Effect of Termination of Employment or Other Service. 10.1 Termination Due to Death or Disability. In the event a Participant's employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability: (a) All outstanding Options then held by the Participant will become immediately exercisable in full and will remain exercisable for the remainder of their terms; (b) All Restricted Stock Awards then held by the Participant that have not vested as of such termination will be terminated and forfeited; and (c) All Performance Units and Stock Appreciation Rights then held by the Participant will vest and/or continue to vest and, with respect to Stock Appreciation Rights, will remain exercisable in the manner determined by the Committee and set forth in the agreement evidencing such Incentive Awards. 10.2 Termination Due to Retirement. Except as otherwise provided in Section 12 of the Plan, in the event a Participant's employment or other service with the Company and all Subsidiaries is terminated by reason of Retirement: (a) All outstanding Options then held by the Participant will continue to become exercisable in accordance with their terms; (b) All Restricted Stock Awards then held by the Participant that have not vested as of such termination will be terminated and forfeited; and (c) All Performance Units and Stock Appreciation Rights then held by the Participant will vest and/or continue to vest and, with respect to Stock Appreciation Rights, will remain exercisable in the manner determined by the Committee and set forth in the agreement evidencing such Incentive Awards. 10.3 Termination for Reasons Other than Death, Disability or Retirement. (a) Except as otherwise provided in Section 12 of the Plan, in the event a Participant's employment or other service is terminated with the Company and all Subsidiaries for any reason other than death, Disability or Retirement, or a Participant is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ or service of the Company or another Subsidiary), all rights of the Participant under the Plan and any agreements evidencing an Incentive Award will 10 immediately terminate without notice of any kind, no Options or Stock Appreciation Rights then held by the Participant will thereafter be exercisable and all Restricted Stock Awards then held by the Participant that have not vested will be terminated and forfeited; provided, however, that if such termination is due to any reason other than termination by the Company or any Subsidiary for "cause," all outstanding Options then held by such Participant will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event after the expiration date of any such Option) and all Performance Units and Stock Appreciation Rights will vest and/or continue to vest and, with respect to Stock Appreciation Rights, will remain exercisable in the manner determined by the Committee and set forth in the agreement evidencing such Incentive Awards. (b) For purposes of this Section 10.3, "cause" will be as defined in any employment or other agreement or policy applicable to the Participant or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement or material and deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any willful breach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any employment, service, confidentiality or noncompete agreement entered into with the Company or any Subsidiary. 10.4 Modification of Rights Upon Termination. Notwithstanding the other provisions of this Section 10, upon a Participant's termination of employment or other service with the Company and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised before or following such termination) but consistent with the limitations of Paragraph 3.2(b) of the Plan, cause Options or Stock Appreciation Rights (or any part thereof) then held by such Participant to become exercisable and/or remain exercisable following such termination of employment or service and Restricted Stock Awards and Performance Units then held by such Participant to vest and/or continue to vest following such termination of employment or service, in each case in the manner determined by the Committee. [Amended as of July 26, 1995] 10.5 Date of Termination of Employment or Other Service. Unless the Committee otherwise determines in its sole discretion, a Participant's employment or other service will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company or the Subsidiary for which the Participant provides employment or other service, as determined by the Committee in its sole discretion based upon such records. 11. Payment of Withholding Taxes. 11.1 General Rules. The Company is entitled to (a) withhold and deduct from future wages of the Participant (or from other amounts which may be due and owing to the Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts 11 necessary to satisfy any and all federal, state and local withholding and employment- related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (b) require the Participant promptly to remit the amount of such withholding to the Company before taking any action with respect to an Incentive Award. 11.2 Special Rules. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment-related tax obligation described in Section 11.1 of the Plan by electing to tender Previously Acquired Shares, a Broker Exercise Notice or a combination of such methods. 12. Change of Control. 12.1 Definitions. For purposes of this Section 12, the following definitions will be applied: (a) "Change of Control" will mean any of the following events: (i) a merger or consolidation to which the Company is a party if the individuals and entities who were stockholders of the Company immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of less than 50% of the total combined voting power for election of directors of the surviving corporation following the effective date of such merger or consolidation; (ii) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) in the aggregate of securities of the Company representing 25% or more of the total combined voting power of the Company's then issued and outstanding securities by any person or entity, or group of associated person or entities acting in concert; (iii) the sale of the properties and assets of the Company substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of the Company; (iv) the stockholders of the Company approve any plan or proposal for the liquidation of the Company; or (v) a change in the composition of the Board at any time during any consecutive 24 month period such that the "Continuity Directors" cease for any reason to constitute at least a 70% majority of the Board. For purposes of this clause, "Continuity Directors" means those members of the Board who either (1) were directors at the beginning of such consecutive 24 month period, or (2) were elected by, or on the nomination or recommendation of, at least a two-thirds majority of the then-existing Board of Directors. 12 (b) "Change of Control Action" will mean any payment (including any benefit or transfer of property) in the nature of compensation, to or for the benefit of a Participant under any arrangement, which is considered to be contingent on a Change of Control for purposes of Section 280G of the Code. As used in this definition, the term "arrangement" includes, without limitation, any agreement between a Participant and the Company and any and all of the Company's salary, bonus, incentive, restricted stock, stock option, compensation or benefit plans, programs or arrangements, and will include this Plan. (c) "Change of Control Termination" will mean, with respect to a Participant, any of the following events occurring within two years after a Change of Control: (i) Termination of the Participant's employment with the Company and all of its Subsidiaries by the Company or any Subsidiary for any reason, with or without cause, except for conduct by the Participant constituting (1) a felony involving moral turpitude under either federal law or the law of the state of the Company's incorporation or (2) the Participant's willful failure to fulfill his employment duties with the Company or any Subsidiary; provided that for purposes of this clause (2), an act or failure to act by the Participant shall not be "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that the Participant's action or omission was in the best interests of the Company or a Subsidiary; or (ii) Termination of employment with the Company and all of its Subsidiaries by the Participant for Good Reason. A Change of Control Termination shall not include a termination of employment by reason of death, Disability or Retirement. (d) "Good Reason" will mean a good faith determination by the Participant, in the Participant's sole and absolute judgment, that any one or more of the following events has occurred, without the Participant's express written consent, after a Change of Control: (i) A change in the Participant's reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control, or any removal of the Participant from, or any failure to re-elect the Participant to, any of such positions, which has the effect of diminishing the Participant's responsibility or authority; or (ii) A reduction by the Company or its Subsidiaries in the Participant's base salary as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter; or (iii) The Company or its Subsidiaries requiring the Participant to be based anywhere other than within twenty-five miles of the Participant's job location at the time of the Change of Control; or 13 (iv) Without replacement by a plan, program or arrangement providing benefits to the Participant equal to or greater than those discontinued or adversely affected: (1) the failure by the Company or its Subsidiaries to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee compensation or benefit plan, program or arrangement, in which the Participant is participating immediately prior to a Change of Control; or (2) the taking of any action by the Company or its Subsidiaries that would adversely affect the Participant's participation or materially reduce the Participant's benefits under any of such plans, programs or arrangements; or (v) The taking of any action by the Company or its Subsidiaries that would materially adversely affect the physical conditions existing at the time of the Change of Control in or under which the Participant performs his employment duties; or (vi) If the Participant's primary employment duties are with a Subsidiary of the Company, the sale, merger, contribution, transfer or any other transaction as a result of which the Company no longer directly or indirectly controls or has a significant equity interest in such Subsidiary; or (vii) Any material breach by the Company or one of its Subsidiaries of any employment agreement between the Participant and the Company or such Subsidiary. 12.2 Acceleration of Vesting. Subject to the "Limitation on Change of Control Compensation" contained in Section 12.3 of the Plan, in the event of a Change of Control Termination with respect to a Participant, and without further action of the Committee: (a) Each Option granted to such Participant that has been outstanding at least six months will become immediately exercisable in full and will remain exercisable until the expiration date of such Option. (b) Each Restricted Stock Award (including any Performance Restricted Stock Award) granted to such Participant that has been outstanding for at least six months will immediately become fully vested. (c) All Performance Units and Stock Appreciation Rights then held by such Participant will vest and/or continue to vest and, with respect to Stock Appreciation Rights, will remain exercisable in the manner determined by the Committee and set forth in the agreement evidencing such Incentive Awards. 12.3 Limitation on Change of Control Compensation. A Participant will not be entitled to receive any Change of Control Action which would, 14 with respect to the Participant, constitute a "parachute payment" for purposes of Section 280G of the Code. In the event any Change of Control Action would, with respect to the Participant, constitute a "parachute payment," the Participant will have the right to designate those Change of Control Action(s) which would be reduced or eliminated so that the Participant will not receive a "parachute payment." 12.4 Limitations on Committee's and Board's Actions. Prior to a Change of Control, the Participant will have no rights under this Section 12, and the Board will have the power and right, within its sole discretion to rescind, modify or amend this Section 12 without the consent of any Participant. In all other cases, and notwithstanding the authority granted to the Committee or Board to exercise discretion in interpreting, administering, amending or terminating this Plan, neither the Committee nor the Board will, following a Change of Control, have the power to exercise such authority or otherwise take any action that is inconsistent with the provisions of this Section 12. 13. Rights of Eligible Recipients and Participants Transferability. 13.1 Employment or Service. Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or Participant any right to continue in the employ or service of the Company or any Subsidiary. 13.2 Rights as a Stockholder. As a holder of Incentive Awards (other than Restricted Stock Awards), a Participant will have no rights as a stockholder unless and until such Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and the Participant becomes the holder of record of such shares. Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to such Incentive Awards as to which there is a record date preceding the date the Participant becomes the holder of record of such shares, except as the Committee may determine in its discretion. 13.3 Restrictions on Transfer. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of any Participant in an Incentive Award prior to the exercise or vesting of such Incentive Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. A Participant will, however, be entitled to designate a beneficiary to receive an Incentive Award upon such Participant's death, and in the event of a Participant's death, payment of any amounts due under the Plan will be made to, and exercise of any Options and Stock Appreciation Rights (to the extent permitted pursuant to Section 10 of the Plan) may be made by, the Participant's legal representatives, heirs and legatees. 15 13.4 Non-Exclusivity of the Plan. Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable. 14. Securities Law and Other Restrictions. Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Incentive Awards granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 15. Plan Amendment, Modification and Termination. The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Incentive Awards under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Rule 16b-3 under the Exchange Act, Section 422 of the Code or the rules of the New York Stock Exchange. No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Section 4.3 and Section 12.4 of the Plan. 16. Effective Date and Duration of the Plan. The Plan is effective as of February 3, 1993, the date it was adopted by the Board. The Plan will terminate at midnight on February 3, 1999, and may be terminated prior thereto by Board action, and no Incentive Award will be granted after such termination. Incentive Awards outstanding upon termination of the Plan may continue to vest, or become free of restrictions, in accordance with their terms. 16 17. Miscellaneous. 17.1 Governing Law. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota. 17.2 Successors and Assigns. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Participants. 17 EX-10.12 5 ANNUAL EXECUTIVE INCENTIVE PLAN Exhibit 10.12 Description of the Ceridian Corporation Annual Executive Incentive Plan The Company's Annual Executive Incentive Plan provides yearly cash bonuses to Company executives, although the Board's Compensation and Human Resources Committee (the "Committee") may, in its discretion, permit individuals to elect to receive part or all of their annual bonus in the form of stock options rather than cash. The annual determination of an individual executive's target bonus, expressed as a percentage of base salary, is based on a subjective assessment by the Committee of the responsibilities of the position, competitive practice and the Committee's desire to give greater weight to performance-based compensation at higher levels of responsibility within the Company. For 1995, target bonus percentages for executive officers ranged from 35% to 65% of base salary, with the maximum possible bonus generally one and one-half times the target amount and the threshold bonus one-half of the target amount. Of the total potential bonus, 80% consisted of a financial component, and 20% was based on a subjective assessment of the executive's individual performance in the areas of quality improvement and fostering work force diversity. The financial component consisted of a requirement that the Company achieve a specified level of earnings per share ("EPS") during 1995 and, for executive officers assigned to operating units, a requirement that the operating unit achieve specified financial goals, generally a specified level of pre-tax earnings. With respect to the financial component, bonus payments at, above or below the target percentages could be made depending on whether the financial performance of the Company (and, if applicable, the business unit to which the executive is assigned) met, exceeded or fell short of the applicable targeted financial goal. The targeted financial component of the bonus would be payable if budgeted earnings were achieved, but no bonus would be payable if an earnings threshold amount were not achieved. The Committee retains discretion to exclude the financial impact of unusual or extraordinary events from the calculation of the financial component of annual bonuses, and in 1995 excluded the impact of fourth quarter charges related to the Company's acquisition of Comdata. For 1995, payment of the financial and non-financial components of the annual incentive program ranged from below target to superior for the executive officers, resulting in bonus payments for executive officers ranging between 30% and 97.5% of base salary. The Committee also retains discretion to supplement an executive's annual incentive bonus if, in its judgment, such an action is warranted in individual circumstances. In 1995, such supplemental bonuses were paid to three executive officers. EX-10.17 6 COMDATA DEFERRED COMPENSATION PLAN EXHIBIT 10.17 COMDATA HOLDINGS CORPORATION UNFUNDED DEFERRED COMPENSATION PLAN 1. The Purpose of the Plan. The purpose of this Plan is to provide incentive to certain Key Executives who have contributed to the success of the Corporation and are expected to continue to contribute to such success in the future. The Plan generally provides Key Executives selected by the Committee with the opportunity to defer a portion of their regular and/or incentive compensation. 2. Definitions. As used herein, the following words shall have the meanings indicated unless otherwise defined or required by the context: (a) "Account" shall have the meaning set forth in Section 8 hereof. (b) "Board" shall mean the Board of Directors of Comdata Holdings Corporation. (c) "Committee" shall mean a committee selected by the Board pursuant to Section 4 hereof to administer the Plan. (d) "Corporation" shall mean, collectively, Comdata Holdings Corporation and its subsidiaries. (e) "Key Executive" shall mean any employee of the Corporation who qualifies as a management or highly compensated employee under Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. (f) "Participating Key Executive" shall mean any Key Executive who participates in the Plan. (g) "Plan" shall mean the Comdata Holdings Corporation Unfunded Deferred Compensation Plan. (h) "Plan Year" shall mean the calendar year, except that the first Plan Year shall begin on the effective date 1 of the Plan as set forth in Section 3 below and shall end on December 31, 1994. (i) "Trust Agreement" shall mean the trust agreement attached hereto as Exhibit A and incorporated herein by this reference. (j) "Trust Fund" shall mean the amounts deferred by the Participating Key Executives pursuant to Section 7 hereof and contributed to the Trustee by the Corporation pursuant to the Trust Agreement, plus all earnings thereon and less all expenses attributable thereto. (k) "Trustee" shall mean the party or parties designated as such under the Trust Agreement. 1. Effective Date. This Plan shall be effective as of April 1, 1994. 2. Administration of the Plan. The Board shall appoint not fewer than three directors to serve on the Committee which shall administer the Plan. The Committee shall administer the Plan in a nondiscriminatory manner, and its decisions shall be final as to all interested parties; provided, however, the Board may review any action of the Committee, and if the Board determines that any designation or other decision or act of the Committee is inequitable or contrary to the provisions of this Plan, it may reverse or modify such designation, decision or act. 3. Selection and Notification of Key Executives. Each calendar quarter during a Plan Year, the Committee shall select Key Executives who shall be eligible to participate in the Plan beginning as of the first day of the next succeeding calendar quarter. At any time before the first day of such calendar quarter, the Committee may add to or delete from such selections. Each Key Executive selected by the Committee hereunder shall be immediately notified by the Committee and shall be provided a copy of the Plan. 4. Election to Participate; Other Elections and Designations. (a) Upon receipt of the notification described in 2 Section 5 above, each Key Executive who desires to participate in the Plan shall file with the Committee prior to the first day of the calendar quarter to which such notification relates a written election as described in Section 7 below. Failure by the Key Executive to file the election described in the preceding sentence shall disqualify such executive from participating in the Plan until such time as he again receives notification pursuant to Section 5 above. (b) The Key Executive also may file, but is not required to file, in writing with the Committee (i) an irrevocable election, in accordance with Section 9 below, designating the method of distribution of the compensation deferred and (ii) a designation of beneficiary or beneficiaries. If the Key Executive fails to file the election described in clause (i) of the preceding sentence, then the Committee, in its sole discretion but within the limits set forth in Section 10 below, shall determine the manner of the distribution of his Account. If the Key Executive fails to file the beneficiary designation described in clause (ii) of such sentence, or if the beneficiary or beneficiaries designated by the Key Executive predecease the Key Executive, then the Key Executive's beneficiary shall be deemed to be his estate. Any beneficiary designation filed hereunder may be changed from time to time in the discretion of the Committee. 5. Deferral Election. Each Participating Key Executive shall file quarterly with the Committee a written election which shall specify that portion of his basic compensation and/or incentive compensation to be deferred. Elections hereunder shall be filed before the first day of each calendar quarter and shall apply to compensation earned during the calendar quarter next following the calendar quarter in which they are filed. Only compensation which on the date of the election has not been earned by the Participating Key Executive may be deferred hereunder. The Participating Key Executive's rights to compensation so deferred shall be nonforfeitable, and termination 3 of his employment with the Corporation for any reason shall not in any way diminish the amount of deferred compensation payable to the Participating Key Executive or alter the method or the time for payment or the beneficiary or beneficiaries thereof. The Corporation shall, from time to time but not less often than quarterly, pay to the Trustee an amount equal to the compensation deferred by each Participating Key Executive. 6. Trust Fund. The Trustee shall invest and reinvest the Trust Fund in accordance with the terms of this Plan and the Trust Agreement. At the option of the Corporation, the Corporation may pay from its funds, or may direct the Trustee to pay from the Trust Fund, all expenses of administering the Trust Fund, including Trustee's fees and expenses, and all taxes and other expenses attributable to the Trust Fund, all as determined by the Corporation. 7. Account Maintenance. The Committee shall cause an account (the "Account") to be kept in the name of each Participating Key Executive and each beneficiary of a deceased Participating Key Executive. Each Account shall reflect the amount of the compensation deferred by the Participating Key Executive pursuant to Section 7 above and shall be adjusted for its pro rata share of investment gains and losses and expenses and taxes paid from the Trust Fund pursuant to Section 8 above. 8. Distribution. Each Participating Key Executive shall be entitled to receive distribution of his Account upon the earlier to occur of the following events ("Triggering Events"): (i) the termination of the Participating Key Executive's employment with the Corporation for any reason, including without limitation retirement, resignation, involuntary limitation, death or disability, or (ii) the date on which the Participating Key Executive attains age sixty-five (65). At the election of the Participating Key Executive, payment of such executive's Account may be made in a lump sum or in monthly installments over not more than ten years; provided, however, that any such election 4 must be made prior to when the compensation to which the election relates is earned. Payment of the lump sum shall be made, and payment of the monthly installments shall begin, not later than the fifteenth day of the month next following the occurrence of a Triggering Event. If the Participating Key Executive's employment is terminated by reason of death, or if the Participating Key Executive dies prior to receiving distribution of his entire Account, such Account or the part thereof that has not been distributed shall be paid to the Participating Key Executive's beneficiary or beneficiaries. 9. Ownership of Assets; Relationship with Corporation. Notwithstanding anything herein to the contrary, Participating Key Executives shall have no right, title or interest whatsoever in or to the Accounts or any investments which the Corporation may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Corporation and any Key Executive or any other person. To the extent that any person acquires a right to receive payments from the Corporation under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Corporation. 10. Nonassignment. Except as provided in Section 10, the interest of any Participating Key Executive or beneficiary under this Plan shall not be assignable either by voluntary or involuntary assignment or by operation of law. 11. Indemnification. No employee, member of the Committee, or director of the Corporation shall have any liability for any decision or action if made or done in good faith, nor for any error or miscalculation unless such error or miscalculation is the result of his fraud or deliberate disregard of any provisions of this Plan. The Corporation shall indemnify each director, member of the Committee, and employee acting in good faith pursuant to this Plan against any loss or expense arising therefrom. 5 12. Termination and Amendment of the Plan. Although the Corporation intends to continue this Plan indefinitely, it reserves the right in the Board to amend, suspend, or terminate this Plan at any time; provided, however, that no such amendment shall adversely affect rights to receive any amounts to which Participating Key Executives or their beneficiaries have become entitled to prior to payment. 13. Governing Law. This Plan shall be construed and administered in accordance with and governed by the laws of the State of Tennessee. IN WITNESS WHEREOF, COMDATA HOLDINGS CORPORATION, for itself and for its subsidiaries listed on Exhibit A attached hereto, has caused the Plan to be executed by its duly authorized officer and adopted as of this 1st day of April, 1994. COMDATA HOLDINGS CORPORATION, for itself and for its subsidiaries listed on Exhibit A attached hereto /s/Russ Follis By: Russ Follis Its: Vice President, Human Resources and Administration 6 FIRST AMENDMENT TO THE COMDATA HOLDINGS CORPORATION UNFUNDED DEFERRED COMPENSATION PLAN WHEREAS, Comdata Holdings Corporation (the "Corporation") and those subsidiaries listed on Exhibit A attached hereto have adopted the Comdata Holdings Corporation Unfunded Deferred Compensation Plan (the "Plan"); WHEREAS, pursuant to Section 14 of the Plan, the Corporation has the right at any time to modify, alter or amend the Plan in whole or in part by instrument in writing duly executed by the Corporation; and WHEREAS, the Corporation has determined that certain amendments to the Plan are necessary and desirable and in the best interests of the Corporation. NOW, THEREFORE, effective January 1, 1995, Sections 11 through 15 of the Plan shall be amended by redesignating such sections as Sections 12 through 16, respectively, and by adding the following new Section 11: 11. Emergency Withdrawals. Emergency withdrawals by a Participating Key Executive shall be permitted in accordance with the provisions of this Section. Any such withdrawal shall be permitted at such time or times, and in such manner and form, as shall be uniformly and nondiscriminatorily established by the Committee. Withdrawals shall be permitted hereunder from a Participating Key Executive's Account in the event of an unforeseeable emergency; provided, however, that such withdrawals shall be permitted only to the extent reasonably needed to satisfy the emergency need. For purposes hereof, the term "unforeseeable emergency" shall mean a severe financial hardship to a Participating Key Executive resulting from a sudden and unexpected illness or accident to the Participating Key Executive or a dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986, as amended) of the Participating Key Executive, loss of the Participating Key Executive's property due to casualty, or other similar extraordinary and unforeseeable circumstance beyond the control of the Participating Key Executive. Withdrawals may not be made hereunder to the extent that an emergency may be relieved through reimbursement or compensation or otherwise, by liquidation of the Participating Key Executive's assets (to the extent the liquidation would not itself cause severe financial hardship), or by the cessation of deferrals under the Plan. 1 IN WITNESS WHEREOF, the Corporation for itself and those subsidiaries listed on Exhibit A has executed this First Amendment as of this 20 day of April, 1995. COMDATA HOLDINGS CORPORATION: /s/Peter D. Voysey By: Peter D. Voysey Its: Vice President, General Counsel and Secretary 2 EX-10.20 7 AGREEMENT FOR SYSTEMS OPERATIONS SERVICES This Amended and Restated Agreement for Systems Operations Services ("Agreement") is by and between Comdata Network, Inc., a corporation having a place of business at 5301 Maryland Way, Brentwood, Tennessee 37027 ("Comdata"), and Integrated Systems Solutions Corporation, {d/b/a ISSC, Inc.,} a wholly owned subsidiary of International Business Machines Corporation, having its headquarters at 44 South Broadway, White Plains, New York 10601 ("ISSC"). Comdata and ISSC agree that the Agreement for Systems Operations Services dated as of September 6, 1991, including all amendments thereto, is amended and restated in its entirety to read as follows: Comdata and ISSC agree that the following terms and conditions will apply to services provided by ISSC under this Agreement. Comdata and ISSC may be referred to individually as a "Party" and collectively as the "Parties." Table of Contents Section Title Page 1.0 Background and Objectives 2.0 Definitions, Documents and Term 2.1 General Definitions 2.2 Associated Contract Documents 2.3 Term 2.4 Renewal and Expiration 3.0 Overview 3.1 Transition of Services 3.2 Previously Acquired Assets 3.3 Acquired Assets 3.4 Leased Assets and Contracts 3.5 Software 3.6 Required Consents 3.7 Joint Verification 3.8 Other Obligations 3.9 Comdata Approvals and Notification 4.0 ISSC Responsibilities 4.1 ISSC Personnel 4.2 Standards 4.3 Efficient Use of Resources 4.4 Technological Improvements 4.5 Management and Control 4.6 Machines 4.7 Applications Software 4.8 Data Transmission(Lines/Circuits) 4.9 Software Services 4.10 Operations, Support and Maintenance 4.11 Consolidation and Relocation Services 4.12 Systems Management 4.13 Disaster Recovery 4.14 Production Services 4.15 Projects 4.16 DSM Help Desk 4.17 Audits 5.0 Comdata Responsibilities 5.1 Project Executive 5.2 Applications Software 5.3 Software Services 5.4 Facilities 5.5 Support Services 5.6 Other Responsibilities 5.7 CHC Guaranty 6.0 Charges and Expenses 6.1 Annual Services Charge 6.2 Cost of Living Adjustment 6.3 Services for Newly Acquired Comdata Affiliates 6.4 New Services 6.5 Replacement Services 6.6 Taxes 6.7 Services Transfer Assistance 6.8 Other Expenses and Charges 7.0 Invoicing and Payment 7.1 Annual Services Charge 7.2 COLA Invoicing 7.3 Accountability 7.4 Other Charges 7.5 Invoice 7.6 Proration 7.7 Refundable 7.8 Set-Off 8.0 Intellectual Property Rights 8.1 Ownership of Comdata Product Software 8.2 Other Materials 8.3 Assignment of Personnel and Use of Ideas 9.0 Confidentiality/Data Security 9.1 Confidential Information 9.2 Obligations 9.3 Exclusions 9.4 Protection of Comdata 9.5 Loss of Confidential Information 9.6 Limitation 10.0 Termination 10.1 Termination for Convenience 1 10.2 Termination upon Acquisition 10.3 Termination for Cause 10.4 Extension of Services 10.5 Other Rights Upon Termination 11.0 Liability 11.1 General Intent 11.2 Damages 11.3 Other Remedies 12.0 Warrant 12.1 Work Standards 12.2 Maintenance 12.3 Compliance with Obligations 12.4 Claims 12.5 Environmental 12.6 Bankruptcy 12.7 Non-Infringement 12.8 Ownership of Comdata Machines 12.9 Disclaimer 13.0 Indemnities 13.1 Indemnity by ISSC 13.2 Indemnity by Comdata 13.3 Cross Indemnity and Contribution 13.4 Indemnification Procedures 13.5 Subrogation 13.6 Exclusive Remedy 14.0 Insurance and Risk of Loss 14.1 Insurance 14.2 Risk of Loss 15.0 Publicity 16.0 Review Committee and Dispute Resolution 16.1 Joint Advisory Committee 16.2 Dispute Resolution 16.3 Continued Performance 17.0 General 17.1 Control of Services 17.2 Right to Perform Services for Others 17.3 Scope of Services 17.4 Amendments and Revisions 17.5 Force Majeure 17.6 Nonperformance 17.7 Remarketing 17.8 Waiver 17.9 Severability 17.10 Time Limitations for Action 17.11 Counterparts 17.12 Governing Law 17.13 Binding Nature and Assignment 17.14 Notices 17.15 No Third Party Beneficiaries 17.16 Other Documents 17.17 Headings SUPPLEMENT Annual Services Charge Termination Charges Enhancement Baseline Exhibit 1: Guaranty TABLE OF SCHEDULES Schedule Title Schedule A Applications Software Schedule B Systems Software Schedule C Comdata Machines Schedule E Support Services, Performance Standards and Operational Responsibilities Schedule F Acquired Assets, Leases, Licenses and Contracts Schedule G Disaster Recovery Services Schedule H Transition Plan Schedule I End User Locations Schedule J ISSC Charges, Measures of Utilization Schedule K Application Installation Standards Schedule L Security Procedures Schedule M DSM Help Desk Schedule N Projects Schedule O Affected Employees Schedule P Maintenance Terms Schedule Q Claims Schedule R End User Machines Subject to Maintenance Schedule S Bill of Sale Schedule T DSM Environment Schedule U ISSC Machines Subject to Baseline 2 1.0 Background and Objectives On September 6, 1991, Comdata and ISSC entered into an Agreement for Systems Operations Services ("Original Agreement") whereby ISSC assumed responsibility for Comdata's information system operations, certain application operations; systems administration services and systems integration services. After careful evaluation of ISSC's proposals and other alternatives, Comdata agrees to amend the Agreement for Systems Operations Services revising the scope of the Systems Operations Services being purchased by Comdata from ISSC. This Amended and Restated Agreement for Systems Operations Services supersedes the Original Agreement and all amendments thereto in its entirety and documents the terms and conditions under which Comdata agrees to purchase and ISSC agrees to provide such Services. 2.0 Definitions, Documents and Term 2.1 General Definitions As used in this Agreement: a) "Acquired Assets" means those machines, equipment and other goods purchased by ISSC from Comdata. Acquired Assets are listed in Section F-1 of Schedule F. b) "AD/M Services" means both applications Development and Applications Maintenance. c) "Affiliate" means, with respect to a Party, any entity at a time controlling, controlled by or under common control with, such Party. The term "Control" as used in this Agreement shall mean the legal, beneficial or equitable ownership, directly or indirectly. of more than 50% of the aggregate of all voting equity interests in such entity. d) "Amended Commencement Date" means May 1, 1995. e) "Annual Services Charge" means the fixed charge to Comdata for ISSC's provision of the Services and includes the quantity of Resource Units set forth under Baselines in the Supplement. f) "Applications Development" means the programming of: 1) any new applications software; 2) regulatory/statutory mandated changes; 3) version upgrades to Applications Software; and 4) changes or enhancements to existing Applications Software and DSM Applications Software. Programming effort shall include the pre and post development analysis, technical education, planning, design, coding, unit testing, installation, and programmers' technical documentation. g) "Applications Maintenance" means: 1) defect identification and fixes; and 2) installation of those fixes and updates provided by the Software vendor as part of normal maintenance service for which there is no additional cost to ISSC for the Software specified in Schedules A and T. h) "Applications Software" means those programs and programming, including all supporting documentation and media, that perform specific user related data processing and telecommunication tasks. Applications Software is listed in Schedule A. i) "Baseline" means the specified quantity of resources for a resource category included within the Annual Services Charge, as set forth in the Supplement and Schedule J. j) "Comdata Data Center" means the Machines and Software located at 5301 Maryland Way, Brentwood, Tennessee (the "Brentwood Facility") and 1421 Champion Drive, Carrollton, Texas {the "Dallas Facility") as of the Amended Commencement Date and at such other locations as may be established hereafter. k) "Comdata Machines" means machines, excluding DSM Machines, within the Data Center and Data Network that are owned, leased or rented and retained by Comdata after the Amended Commencement Date and that are used by ISSC so that ISSC may provide the Services. Comdata Machines are listed in Schedule C. l) "Comdata Network" consists of all machines, lines, cabling, and associated peripheral equipment used to connect the Data Center, via leased lines, common carrier facilities or public-switched networks, to the End User locations, including. but not limited to, controllers, channel extenders, multiplexors, lines, circuits and modems/DSUs, but does not include the ISSC Network m) "Comdata Product Software" means any software created solely by Comdata before or after the Amended Commencement Date or created on or after the Amended Commencement Date by ISSC or by ISSC and Comdata under this Agreement, including all supporting documentation, media and related materials, that, taken together in its substantial entirety, constitutes a commercial service offered by Comdata in its business, including but not limited to Express Cash, LoadMatcher, MOTRS, and any and all modifications, enhancements, updates, replacements and other derivative works thereof made pursuant to this Agreement, other than software, documentation, and other materials available under other ISSC or non-ISSC agreements. n) "Commencement Date" means September 6, 1991. o) "Contracts" means those written contractual arrangements under which Comdata received third party services for which ISSC has undertaken financial and administrative responsibility as of the Commencement Date. Contracts are listed in Section F-3 of Schedule F. p) "Data Center" means both the ISSC Data Center and the Comdata Data Center. The Data Center does not include the DSM Environment. q) The "Data Network" consists of the Comdata Network and the ISSC Network, but shall not include any software, equipment, tines, cabling or associated peripheral equipment relating to the Voice Systems of the voice or telecommunications network. The Data Network does not include the DSM Network. 3 r) "DSM" means Distributed Systems Management. s) "DSM Applications Software" means those programs and programming, including all supporting documentation and media, that perform specific user-related data processing on DSM Machines. DSM Applications Software is listed in Schedule T. t) "DSM Environment" means a combination of DSM machines, DSM Software, and DSM Network. u) "DSM Machines" means SUN servers and associated peripherals, and Novell servers and associated peripherals that are owned, leased, or rented and retained by Comdata prior to and after the Amended Commencement Date. DSM Machines are listed in Schedule T. v) "DSM Network" means the data network used by End Users to access DSM Machines. w) "DSM Software" means DSM Systems Software and DSM Applications Software. Comdata will continue to have financial and administrative responsibility for DSM Software licenses after the Amended Commencement Date. DSM Software is listed in Schedule T. x) "DSM Systems Software" means those programs and programming, including all supporting documentation and media, that perform tasks basic to the functioning of the DSM Machines. DSM Systems Software is listed in Schedule T. y) "Effective Date" means the date both Parties execute and deliver this Agreement. z) "End User Locations" means those locations in which End User Machines, equipment and associated software are located, which locations are facilities or floors in facilities outside the Data Center. aa) "End Users" means users of Services within Comdata and its Affiliates. bb) "End User Machines" means all workstations, terminals, LAN servers, printers and associated peripheral equipment located at End User Locations. cc) "Enhancements" means support, changes, enhancements, or modifications to Applications Software and DSM Software requested by Comdata or as otherwise required in accordance with ISSC's obligations under this Agreement. dd) "Intellectual Property Rights" means, collectively, patents, patent applications, copyrights, trade secrets, mask works, industrial design, rights, rights of priority and any other similar intangible rights. ee) "ISSC Data Center" means the Machines and Software located at 305 TechPark Drive, Suite 113, LaVergne, Tennessee (the "LaVergne Facility") as of the Amended Commencement Date and at such other locations as ISSC may establish hereafter. ff) "ISSC Machines" means machines within the Data Center and Data Network which are: 1) Acquired Assets; or 2) provided by ISSC on or after the Amended Commencement Date in order to meet its obligations under this Agreement. ISSC Machines which are located at Comdata facilities are listed in Schedule D. gg) "ISSC Network" means the IBM Model 37XX communications controllers, VRUs, Jupiter protocol converters, network monitoring equipment and associated peripheral equipment, but does not include the Comdata Network, the DSM Network, or End User Machines. hh) "Leased Assets" means those machines, other equipment and fixed assets leased by Comdata for which ISSC has undertaken financial and administrative responsibility as of the Amended Commencement Date. Leased Assets are listed in Section F-2 of Schedule F. ii) "Licenses" means those written contractual arrangements under which Comdata received the right to use and maintenance for software products for which ISSC has undertaken financial and administrative responsibility as of the Amended Commencement Date. Licenses are listed in Section F-3 of Schedule F. jj) "Losses" means all losses, liabilities, damages and claims (including taxes), and all related costs and expenses (including any and all reasonable attorneys' fees and reasonable costs of investigation, litigation, settlement, judgment, interest and penalties). kk) "Machines" means both Comdata Machines and ISSC Machines. ll) "Performance Standards" means the service levels and performance responsibilities under which the Services will be provided. The Performance Standards are described in Schedule E and detailed in separate service level agreements. mm) "Procedures Manual" means the manual describing the operating processes and procedures relating to the performance of the Services. nn) "Required Consents" means any consents or approvals required for the licensing or transfer of the right to use applicable facilities, space, equipment, Software or third party services to ISSC. oo) "Software" means Applications Software, Systems Software and DSM Software. pp) "Systems Operations Services" ("Services") means those functions and applications being transferred from Comdata pursuant to this Agreement, and those additional functions and applications which ISSC agrees to provide to Comdata and its Affiliates pursuant to this Agreement. Such Services are described in Sections 4, 5, 6.4, 6.5 and the referenced Schedules. qq) "Systems Software" means those programs and programming, including all supporting documentation and media, that perform tasks basic to the functioning of the data processing and communication equipment and which are required to operate the Applications Software or otherwise support the provision of Services by ISSC. Systems Software specifically excludes DSM Software. Systems Software is listed in Schedule B. 4 rr) "Voice Systems" means the telephony switches, VMUs, VRUs, and associated controllers, multiplexors and modems under the control and management, as of the Effective Date, of the ISO organization of Comdata, but does not include the Data Network, End User Machines, or any lines or devices comprising a public-switched network. 2.2 Associated Contract Documents This Agreement also includes: a) a Supplement ("Supplement") containing the charges, Term, and certain other necessary information; and b) Schedules A through U which will be updated by the Parties as necessary or appropriate during the Term. 2.3 Term The term of this amended and restated Agreement will begin as of 12:01 a.m. on the Amended Commencement Date and will end as of 12:00 midnight on April 30, 2005 (the "Term"), unless earlier terminated or extended in accordance with this Agreement. 2.4 Renewal and Expiration ISSC agrees to notify Comdata whether it desires to renew this Agreement and of the proposed prices and terms to govern such renewal not less than 18 months prior to the expiration of the Term. If ISSC notifies Comdata that it desires to renew this Agreement, Comdata agrees to inform ISSC in writing whether it desires to renew not less than 6 months prior to the expiration of the Term. If Comdata notifies ISSC that it desires to renew the Agreement, but the Parties are unable to agree upon renewal prices, terms and conditions as of six months prior to the expiration of the Term, this Agreement will be extended for one year in accordance with the then current terms and conditions. If the Parties are unable to reach agreement on renewal during such extension period, this Agreement will expire at the end of such extension period. 3.0 Overview 3.1 Transition of Services Transition of Services will be defined in Schedule H. 3.2 Previously Acquired Assets As of the Commencement Date, ISSC agreed to acquire. at the price specified in Schedules F-l, the Acquired Assets. Comdata warrants that it had clear title to Acquired Assets and all associated attachments, features and accessories and transferred the same to ISSC, free of all liens and encumbrances. Comdata also warrants that the Acquired Assets had been maintained in accordance with the applicable manufacturers' maintenance requirements and were performing in satisfactory operating condition. 3.3 Acquired Assets On the Amended Commencement Date, there will not be a transaction of Acquired Assets. If the Parties mutually agree to a purchase of Acquired Assets after the Amended Commencement Date, the Parties agree: a) ISSC will purchase the Acquired Assets for the price specified in a Bill of Sale; b) Comdata will warrant that it has clear title to the Acquired Assets and all associated attachments, features and accessories and will transfer the same to ISSC, free of all liens and encumbrances; c) Comdata will warrant that all Acquired Assets have been maintained in accordance with applicable manufacturer's maintenance requirements and are in good working order as of the date of the purchase of Acquired Assets; and d) Comdata will deliver to ISSC, con the date of the purchase of Acquired Assets, a Bill of Sale transferring title to the Acquired Assets. The form of the Bill of Sale is set forth in Schedule S of this Agreement. e) The Annual Services Charge will be revised based upon the effect of the purchase of Acquired Assets on ISSC's original cost assumptions. 3.4 Leased Assets and Contracts Subject to Comdata obtaining any Required Consents in accordance with Section 3.6, ISSC shall have financial and administrative responsibility during the Term for all Leased Assets and Contracts listed in Sections F-2 and F-3 of Schedule F, respectively. ISSC shall be responsible for the performance of all obligations of Comdata under the leases governing the Leased Assets and the Contracts, including payment of all related expenses attributable to periods on or after the Commencement Date, to the extent that such obligations were disclosed to ISSC on or before the Commencement Date through receipt by ISSC of a copy of the relevant documents. Comdata warrants that all obligations with respect to such leases and the Contracts accruing prior to or attributable to periods prior to the Commencement Date have been satisfied. Comdata shall, upon the request of ISSC from time to time, with the agreement of Comdata and to the extent permitted by the applicable agreement, terminate any leases or Contracts and ISSC shall reimburse Comdata for any termination charges or penalties. In the event Comdata does not agree to such termination of any leases or contracts, then Comdata shall reimburse ISSC for any increase in costs or lost savings ISSC would incur as a result of such action. 3.5 Software As of the Amended Commencement Date, Comdata will make the Software available to ISSC for the purpose of providing the Services. 5 As of the Amended Commencement Date, ISSC will continue to be responsible for managing the Applications Software Licenses and Systems Software Licenses listed in Section F-3 of Schedule F and for paying all related expenses, including the Applications Software maintenance fees and Systems Software maintenance fees, that are attributable to periods on or after the Amended Commencement Date. Subject to Comdata obtaining any Required Consents in accordance with Section 3.6 ISSC will comply with all obligations of Comdata, including those of nondisclosure, under any such Applications Software License or Systems Software License to the extent such obligations were disclosed to ISSC on or before the Amended Commencement Date through receipt by ISSC of a copy of the relevant documents. Comdata warrants that all of its obligations with respect to such Software Licenses accruing prior to the Amended Commencement Date have been satisfied. As of the Amended Commencement Date, Comdata will continue to be responsible for managing the DSM Software Licenses listed in Schedule C and for paying all related expenses, including the DSM Software maintenance fees, that are attributable to periods on or after the Amended Commencement Date. Subject to Comdata obtaining any Required Consents in accordance with Section 3.6, and excluding Comdata's responsibilities for management and payment as stated heretofore, ISSC will comply with all obligations of Comdata, including those of nondisclosure, under any such DSM Software License to the extent such obligations are disclosed to ISSC, before the end of the Transition Period as defined in Schedule H, through receipt by ISSC of a copy of the relevant documents. Comdata warrants that all obligations with respect to such Software Licenses have been satisfied. 3.6 Required Consents Comdata shall be responsible for obtaining all Required Consents necessary to enable ISSC to use the Software, Leased Assets and services provided by the Contracts. Comdata shall bear the costs, if any, of obtaining all Required Consents. In the event that any Required Consent is not obtained with respect to the Software Licenses, leases governing the Leased Assets or Contracts, then, unless and until such Required Consents are obtained, the Parties shall cooperate with each other in achieving a reasonable alternative arrangement for Comdata to continue to process its work with minimum interference to its business operations. 3.7 Joint Verification During the 90 day period following the Effective Date, ISSC and Comdata reserve the right to inventory, validate and update, any information that is reflected in or omitted from the attached Supplement or Schedules. If discrepancies are detected during such period, there shall be an equitable adjustment to the Annual Services Charge. If either Party disputes the discrepancy then the Parties will submit the matter to the Joint Advisory Committee for dispute resolution as specified in Section 16 of this Agreement. 3.8 Other Obligations Beginning on the Amended Commencement Date, Comdata will not enter into any new or amend, extend or terminate any existing agreements or arrangements, written or oral, affecting or impacting upon Affected Employees as defined in Schedule Q, Acquired Assets, leases governing the Leased Assets, Software Licenses, Contracts or Services as specified in the various Schedules to this Agreement, without the prior written consent of ISSC. 3.9 Comdata Approvals and Notification For those areas of the Services where Comdata: a) has reserved right-of-approval or consent or agreement; b) is required to provide notification; and/or c) is required to perform a responsibility set forth in this Agreement upon which ISSC's performance is dependent; and such approval, consent, notification or performance is delayed or withheld by Comdata without authorization or right beyond the period provided in this Agreement or the Schedules and such delay or withholding is not caused by ISSC and affects ISSC's ability to provide the Services under this Agreement, then Comdata will relieve ISSC of the responsibility for that portion of the Services and Comdata will reimburse ISSC for all additional expenses, if any, incurred during such period as a result thereof. For purposes of this Agreement, if a time period is not specified for any such approval, consent, agreement, notification or performance, then such time period shall be deemed to be not greater than five business days. 4.0 ISSC Responsibilities 4.1 ISSC Personnel ISSC will designate, prior to the Amended Commencement Date, an ISSC Project Executive to whom all Comdata's communications may be addressed and who has the authority to act for and bind ISSC and its subcontractors in connection with all aspects of this Agreement. 4.2 Standards Subject to the terms of this Agreement, ISSC agrees that its performance of the Services will meet or exceed each of the applicable Performance Standards. 4.3 Efficient Use of Resources ISSC shall take reasonable action, taking into account economic circumstances, to efficiently use resources that will be chargeable to Comdata under this Agreement including, but not limited to: a) making schedule adjustments (consistent with Comdata's priorities and schedules for the Services and ISSC's obligation to meet the Performance Standards); 6 b) delaying the performance of noncritical functions within established limits; and c) tuning or optimizing the systems used to perform the Services. 4.4 Technological Improvements In the event that there is a technological improvement that provides opportunities for additional savings, the Party identifying such improvement will request that ISSC perform a preliminary savings analysis. The Parties will then jointly review the results of this preliminary analysis and discuss the impact on each Party's performance hereunder, including any new hardware and/or software, other capital, one-time charges, or changes to other resources that may be required to take advantage of such technological improvements. If the Parties agree to implement changes in the Services rendered by ISSC hereunder to take advantage of some or all of such technological improvements, then the Parties will Jointly prepare a technology implementation plan that defines such changes and the timing and cost of their implementation, and such changes will be treated as Replacement Services, subject to Sections 6.5.a and 6.5.b. All activities spent by ISSC in performing the foregoing shall be chargeable against the Enhancement Baseline specified in the Supplement. Comdata will pay for any implementation costs related to Comdata's responsibilities as specified in the technology implementation plan. Comdata may choose to independently implement such changes referenced above. 4.5 Management and Control a) Within 180 days after the Amended Commencement Date, ISSC shall update the Procedures Manual to include the operating processes and procedures for the DSM Environment. 1) ISSC shall periodically update the Procedures Manual to reflect any changes in the operations or procedures described therein. Comdata shall have the right at any time during the term of this Agreement, upon reasonable notice and during normal business hours, to inspect the Procedures Manual, and ISSC will give due consideration to any reasonable suggestions of Comdata relating thereto. 2) ISSC shall perform the Services in accordance with the Procedures Manual. b) Commencing within 180 days after the Amended Commencement Date, ISSC will provide to Comdata a set of periodic reports which have been revised to include report data on the DSM Environment. At a minimum, these reports will include the following: 1) a monthly performance report documenting ISSC's performance with respect to the Performance Standards; 2) a monthly project schedule report; 3) a monthly change report setting forth a record of all Data Center, Data Network, and DSM Environment changes performed during the previous month; and 4) a monthly report describing Comdata's utilization of each resource category. ISSC will provide Comdata with such documentation and other information as may be reasonably requested by Comdata from time to time in order to verify the accuracy of the reports specified above. c) The Parties will continue to hold periodic meetings between representatives of Comdata and ISSC as established prior to the Amended Commencement Date. At a minimum, these meetings will include the following: 1) a weekly meeting among operational personnel to discuss ongoing issues relating generally to daily performance and planned or anticipated activities and changes; and 2) a monthly management meeting to review the performance report, the project, schedule report, the changes report, and such other matters as appropriate. 4.6 Machines ISSC will provide the Services using ISSC Machines, Comdata Machines, and DSM Machines. The provision of any additional or replacement Machines, including upgrades, is subject to the provisions of Sections 6.4 and 6.5. If ISSC determines in good faith that additional or replacement DSM machines or upgrades will be reasonably necessary for ISSC to perform the Services in accordance with the Performance Standards, then ISSC will propose to Comdata what additional or replacement DSM Machines or upgrades are needed, explain to Comdata in detail why they are needed, and determine the effect on ISSC's ability to meet the Performance Standards if some or all of them are not acquired by Comdata. Comdata will then either procure the necessary additional or replacement DSM Machines or upgrades, or the Parties will agree to appropriate adjustments to the Performance Standards that may be necessary in the event Comdata elects not to acquire some or all of the proposed additional or replacement DSM Machines or upgrades. The affected Performance Standard(s) will be suspended pending such procurement or adjustment as the case may be. ISSC retains all right. title and interest in and to all ISSC Machines, subject to Section 10.5 with respect to Comdata's rights upon termination or expiration of this Agreement. 4.7 Applications Software During the Term of this Agreement, ISSC will operate the Applications Software listed in Schedules A and T. In addition, ISSC will: a) install new versions of, releases of, or modifications to, Applications Software listed in Schedules A and T, in accordance with this Agreement, Schedule K and the Change Control Procedures; b) provide a level of Enhancements resources per year equal to the resource category (as defined in Schedule J) specified in the Supplement to perform AD/M Services as requested by Comdata or as otherwise required in accordance with ISSC's obligations under this Agreement Any resources required beyond this commitment will be chargeable to Comdata subject to the provisions of Sections 6.4 and 6.5; and 7 c) cooperate with Comdata or third parties engaged by Comdata to develop Applications Software and DSM Software. 4.8 Data Transmission (Lines/Circuits) The Parties agree that ISSC will act as an advisor to Comdata, and at Comdata's direction as its agent with respect to common carriers but will not itself be the subscriber or have financial responsibility for common carrier services. 4.9 Software Services ISSC will: a) operate, maintain and enhance, as necessary to perform in accordance with the Performance Standards and Sections 6.4 and 6.5, all Systems Software in the Data Center, Data Network and DSM Environment; b) apply preventive maintenance and program temporary fixes to correct defects in (i) the Systems Software running in the Data Center and Data Network, and (ii) the DSM Systems Software; c) provide or obtain new versions and releases, upgrades, replacements of additional Systems Software as ISSC deems necessary in order to perform the Services in accordance with the Performance Standards and Sections 6.4 and 6.5, subject to the following provisions: 1) ISSC will give Comdata at least thirty (30) days advance notice before any proposed new release or versions of Systems Software is to be installed and will discuss with Comdata the increases, if any, to the Annual Services Charge that will result from such new release or version of Systems Software; 2) ISSC will not install any new release or version of Systems Software until (i) all Applications Software has been tested to ensure compatibility with such new release or version of Systems Software, (ii) it has obtained Comdata's consent after confirming to Comdata that such testing has been successfully completed, and (iii) the Parties have agreed to any increases in the Annual Services Charge that will result from the use of such new release or version of Systems Software; and 3) Comdata reserves the right to request at any time that ISSC return for a reasonable period of time to use of an immediately preceding version or release of any Systems Software in rendering the Services to Comdata hereunder in the event that incompatibilities or other problems are discovered in operating the Applications Software under the new release or version of the Systems Software, even after Comdata has approved the use of such new version or release. If ISSC is unable to install any new release or version of Systems Software due to the foregoing provisions, then ISSC will be relieved of any affected Performance Standards. 4.10 Operations, Support and Maintenance ISSC will, as further defined in Schedule E and other applicable Schedules, perform the following: a) operate the Data Center using the Machines and Software; b) operate the Data Network, using the Machines and Software; c) operate the DSM Environment; d) provide maintenance services for ISSC Machines in the Data Center and Data Network and manage the maintenance contracts for the DSM Machines and the DSM Applications Software, which contracts will be paid directly by Comdata, unless otherwise agreed by the Parties; e) support the Data Network by operating a command center which will provide alarm monitoring, first level trouble analysis, problem recording, place service calls to vendors to perform corrective maintenance, provide vendor performance analysis, and manage problems to resolution; f) provide printable output to the Comdata distribution system located in the Data Center or transmit electronic print files to remote sites in accordance with Schedule E; and g) store, maintain and provide security for storage media (tapes and disk packs). 4.11 Consolidation and Relocation Services ISSC will install, rearrange and relocate equipment within the Data Center, Data Network, and DSM Environment as ISSC deems necessary in order to perform in accordance with the Performance Standards and in such a manner so as to minimize service level impact to End Users. Installation, rearrangement, and/or relocation of equipment within the DSM Environment requires prior approval from Comdata. 4.12 Systems Management ISSC will: a) perform capacity planning, performance analysis and tuning for the (i) Machines and Systems Software in the Data Center and Data Network, and (ii) DSM Machines and DSM Systems Software in the DSM Environment; b) create and maintain an inventory and configuration diagram of the Data Network and DSM Network; c) implement controls to effectively manage the Data Center and Data Network environments, and the DSM Environment, including change and problem management systems according to the Procedures Manual; 8 d) provide back-up and restore capability for data and programs maintained in the Data Center; e) provide back-up and restore functions for data and programs maintained in the DSM Environment; f) provide for systems access security through the use of appropriate security products for ISSC machines; and g) recommend an appropriate system-wide security solution. 4.13 Disaster Recovery ISSC will provide disaster recovery services in accordance with Schedule G. 4.14 Production Services ISSC will: a) schedule, control and monitor the running of production jobs to deliver the Services using scheduling and quality control procedures, as specified in the Procedures Manual; and b) follow procedures for scheduling and directing output of all production work (including workload and performance balancing), as specified in the Procedures Manual. 4.15 Projects ISSC will be responsible for the projects described in Schedule N to include project management, design, testing, documentation, implementation, training, etc. 4.16 DSM Help Desk ISSC will provide initial, single point-of-contact support to End Users to assist them with problem determination, tracking and resolution in accordance with Schedule M. 4.17 Audits ISSC will assist Comdata in meeting its audit and regulatory requirements, including providing access to the Data Center to enable Comdata and its auditors and examiners to conduct appropriate audits and examinations of the operations of ISSC relating to the performance of the Services to verify. a) the accuracy of ISSC's charges to Comdata; b) that ISSC is exercising reasonable procedures to control the resources provided by Comdata to ISSC such as heat, light and utilities utilized in providing Services to Comdata; and c) that Services are being provided in accordance with the Performance Standards. Such access will require 24 hour notice to ISSC and will be provided at reasonable hours, provided that any audit does not interfere with ISSC's ability to perform the Services in accordance with the Performance Standards. ISSC will provide access only to information reasonably necessary to perform the audit. ISSC shall not allow Comdata, its examiners or auditors access to other ISSC customers' or ISSC's proprietary data. ISSC will also assist Comdata's employees or auditors in testing Comdata's data files and programs, including, without limitation, installing and running audit software, subject to the provisions of Section 6. Subject to Sections 6 4 and 6.5, ISSC agrees to make any changes and take other actions which are necessary in order to maintain compliance with applicable laws or regulations. Comdata may submit additional findings or recommendations to ISSC for its consideration and ISSC shall consider such findings. If any audit or examination reveals that ISSC's invoices for the audited period are not correct for such period, ISSC shall promptly reimburse Comdata for the amount of any overcharges, or Comdata shall promptly pay ISSC for the amount of any undercharges. 5.0 Comdata Responsibilities 5.1 Project Executive Comdata agrees to designate, prior to the Commencement Date, a Project Executive to whom all ISSC communications may be addressed and who has the authority to act for and bind Comdata and its subcontractors in connection with all aspects of this agreement. 5.2 Applications Software During the Term, Comdata will be responsible for selecting, or defining requirements for, all Applications Software and DSM Applications Software including all software which executes on End User Machines. ISSC agrees to use any Applications Software and DSM Applications Software selected by Comdata, subject to the provisions of Schedule K Comdata will also retain financial and administrative responsibility for all DSM Software. Comdata shall have the right to audit, control and approve all new Applications Software and DSM Applications Software prior to its promotion into production. 5.3 Software Services If ISSC determines in good faith that new versions or releases, upgrades, replacements or additional DSM Software will be reasonably necessary for ISSC to perform the Services in accordance with the Performance Standards, the ISSC will propose to Comdata what new versions or releases, upgrades, replacements or additional DSM Software are - needed, explain to Comdata in detail why they are needed, and determine the effect on ISSC's ability to meet the Performance Standards if some or all of them are not acquired by Comdata. Comdata will then either procure the necessary additional or replacement versions or releases, upgrades, replacements or additional DSM Software, or the Parties will agree to appropriate adjustments to the Performance Standards that may be necessary in the event Comdata elects not to acquire some or all of the proposed new versions or releases, upgrades, replacements of additional DSM Software. The effected Performance Standard(s) will be suspended pending such procurement or adjustment as the case may be. 9 5.4 Facilities To enable ISSC to provide the Services, Comdata agrees: a) to provide, at no charge to ISSC, the use of the Comdata Data Center, Data Network, and DSM Environment facilities and only such additional space as may be reasonably necessary for the performance of the Services. This includes reasonable office space, storage space, raised floor space, telephone capability, office support services (e.g., janitorial and security), office supplies, copy center services, and furniture. Comdata shall be responsible for ensuring such Comdata facilities provide for a safe working environment, including compliance with national, state and local codes, ordinances, laws, authorities having jurisdiction and nationally recognized standards; b) to provide, for the Comdata Data Center, Data Network, and DSM Environment facilities located at premises under Comdata's management and control during the Term, all heat, light, power, air conditioning, UPS, and such other similar utilities as may reasonably be necessary for ISSC to perform the Services as described in this Agreement; c) to provide access to Comdata parking and cafeteria (if any) facilities for ISSC employees; d) if Comdata decides to relocate its current facility that houses the Comdata Data Center, Data Network, and DSM Environment, Comdata will provide comparable space, facilities and resources in the new location under the same terms and conditions of this Agreement. Any costs incurred by ISSC as a result of such relocation will be paid by Comdata; and e) following the expiration of termination of this Agreement, Comdata will allow ISSC the use, at no charge, of those Comdata facilities then being used to perform the Services for up to 60 days following the effective date of such expiration or termination (or from the last day of any Services Transfer Assistance period) to enable ISSC to affect an orderly transition of ISSC resources. It is understood that ISSC's use of the Comdata Data Center, DSM Environment, and other Comdata facilities does not constitute or create a leasehold interest, and all such usage will at all times be subject to and in compliance with Comdata's published security requirements and other published company procedures provided to ISSC prior to the Amended Commencement Date. When the Comdata Data Center and/or the other Comdata facilities are no longer being utilized by ISSC to perform the Services, Comdata's obligations set forth in this Section with respect to the Comdata Data Center and/or the other Comdata facilities will cease. 5.5 Support Services Comdata agrees to: a) perform its responsibilities in accordance with the Procedures Manual and Performance Standards and until such time as those documents are completed, in whole or in part, in accordance with Comdata's practices and policies as of the Amended Commencement Date; b) provide to ISSC, to the extent not otherwise sold, assigned or licensed to ISSC, for the purposes of meeting its obligations under this Agreement, full access to, and use of, Machines, Software, and DSM Environment on the terms and conditions set forth in this Agreement; and c) supply the End User Machines and software being used by the Affected Employees as of the Amended Commencement Date. Such machines and software shall remain the property of Comdata. Any replacement machines or software will be the responsibility of ISSC and such replacements will be the property of ISSC. 5.6 Other Responsibilities Comdata also agrees to: a) provide data, data entry, and coordinate such activities with ISSC's systems design and production functions as described in Schedule E; b) designate and document application information requirements, including report design and content, frequency of reports, and accessibility to information; c) provide additions, upgrades and replacements for all End User Machines; d) maintain and support all End User Machines; e) be responsible for all moves, adds and changes with respect to End User Machines; f) provide support to End Users for questions and problems related to Applications Software, as referred by the DSM Help Desk defined in Schedule M; g) provide personnel and equipment to reasonably ensure the physical security of Comdata facilities; h) be responsible for creation and administration of user access and password management and security programs; i) provide all preprinted forms; j) provide all paper forms and supplies required by End Users; k) pay all common carrier charges for local, long distance, and WATS (in and out) telecommunications services incurred in connection with the performance of Services for Comdata; l) be responsible for alt mail, messenger, postage, courier and print distribution services; m) be responsible for microfiche/microfilm supplies and retrieval and storage of any and all output; n) provide maintenance services for Comdata Machines and DSM Machines; and o) be responsible for such other Comdata activities and functions as are described in this Agreement. 5.7 CHC Guaranty Upon execution of the Agreement, Comdata shall cause Comdata Holdings Corporation ("CHC") to provide a guaranty to ISSC of all Comdata's obligations under this Agreement. Such guaranty shall be in the form attached as Exhibit 1 to the Supplement as "CHC Guaranty of Comdata's Obligations" and duly executed by an authorized representative of CHC. 10 6.0 Charges and Expenses 6.1 Annual Services Charge Comdata agrees to pay the Annual Services Charge specified in the Supplement for each year of the Term together with the other amounts as described in this Section 6 and set forth in the Supplement. 6.2 Cost of Living Adjustment Comdata agrees to pay ISSC a Cost of Living Adjustment ("CPI-U"), in accordance with Schedule J, beginning in the second January following the Amended Commencement Date if the actual cumulative year-to-year inflation increases. The Parties agree to use the December unadjusted Consumer Price Index, as published in the "Summary Data from the Consumer Price Index News Release" by the Bureau of Labor Statistics, U.S. Department of Labor, For All Urban Consumers, ("CPI-U"), for purposes of determining actual inflation. 6.3 Services for Newly Acquired Comdata Affiliates If Comdata acquires any additional Affiliate during the Term of this Agreement, and desires that ISSC provide Services under this Agreement to such Affiliate, subject to additional charges if acceptance of such responsibilities would require New Services as described in Section 6.4, then: a) ISSC will provide that Affiliate with Services in accordance with this Agreement; b) ISSC may, at its option, and with the consent of such Affiliate, purchase at a mutually agreed price any additional owned fixed assets owned by such Affiliate that are used to perform the functions that will be transferred to ISSC; c) ISSC may, upon mutual agreement of the Parties, use (subject to its undertaking of financial and administrative responsibility) any additional assets leased by the Affiliate and other contracts held by the Affiliate; and d) if ISSC elects to acquire or use such equipment, ISSC will operate and maintain such equipment. 6.4 New Services In the event that Comdata requests ISSC to perform functions different from, and in addition to, the Services ("New Services"), the charge to Comdata for ISSC performing such functions will be determined as follows: a) If the additional function requires only those resources within a current Baseline, the additional function will not be considered a New Service and will be accommodated under the existing Annual Services Charge. b) If the additional function requires resources not covered by an existing Baseline and/or requires additional start- up expenses, then such additional function will be considered New Services, and prior to performing such New Services: 1) ISSC will quote to Comdata the increase in the Annual Services Charge or other payment method that will be attributable to such New Services; and 2) Comdata, upon receipt of such quote, may then elect to have ISSC perform the New Services, and the Annual Services Charge and the Baselines will be adjusted, if necessary, to reflect such New Services. 6.5 Replacement Services In the event that Comdata requests ISSC to replace existing functions or ISSC recommends to Comdata the replacement of existing functions (the "Replacement Services"), such Replacement Services will be evaluated as follows: a) If the Replacement Services result in a net increased cost to ISSC, the Replacement Services will be treated as New Services and associated charges will be assessed and quoted as described in Section 6.4.b. b) If the Replacement Services result in a net decreased cost to ISSC, ISSC will propose a revised Annual Services Charge based upon the effect of the Replacement Services on ISSC's original cost assumptions. The revised Annual Services Charge will reflect the shared (on a 50/50 basis) net savings resulting from the Replacement Services. 6.6 Taxes a) The Annual Services Charge (if any) paid by Comdata are inclusive of any applicable sales, use, personal property or other taxes attributable to periods on or after the Commencement Date based upon or measured by ISSC's cost in acquiring or providing equipment, materials, supplies or services furnished or used by ISSC in performing or furnishing the Services, including without limitation, all personal property and use taxes, if any, due on ISSC Machines and Systems Software and sales tax, if any, due on ISSC's purchase of the Acquired Assets from Comdata. b) In the event that a sales, use, excise or services tax is assessed on the provision of the Services (or any New Services) by ISSC to Comdata or on ISSC's charges to Comdata under this Agreement, however levied or assessed, Comdata will be responsible for and pay the amount of any such tax. Comdata will also be responsible for paying all personal property or use taxes due on of with respect to Comdata Machines, End User Machines and Applications Software and for the payment of any excise taxes for Data Network lines and circuits. c) Each Party shall bear sole responsibility for all taxes, assessments and other real property-related levies on its owned or leased real property. d) The Parties agree to reasonably cooperate with each other to more accurately determine each Party's tax liability and to minimize such liability to the extent legally permissible. e) Each Party shall provide and make available to the other 11 any resale certificates, information regarding out-of- state sales or use of equipment, materials or services, and other exemption certificates or information reasonably requested by either Party. The Parties will also work together to segregate the Annual Services Charge into separate payment streams: 1) that for taxable Services; 2) that for nontaxable Services; 3) that for which a sales, use or similar tax has already been paid by ISSC; and 4) that for which ISSC functions merely as a paying agent for Comdata in receiving goods, supplies or services (including leasing and licensing arrangements) that otherwise are nontaxable or have previously been subject to tax. 6.7 Services Transfer Assistance It is the intent of the Parties that at the expiration or termination of this Agreement, ISSC will cooperate with Comdata to assist with the orderly transfer of the services, functions and operations provided by ISSC hereunder to another services provider or Comdata itself. Prior to expiration or termination of the Agreement, Comdata may request ISSC to perform and, if so requested, ISSC shall perform (except in the event of a termination due to a failure by Comdata to pay any amounts due and payable under this Agreement when due) services in connection with migrating the work of Comdata to another services provider or Comdata itself ("Services Transfer Assistance"). Services Transfer Assistance shall be provided until the effective date of expiration or termination with respect to the Services, and for expiration of termination related services other than those relating to the Services, for up to six additional months after the effective date of expiration or termination. Subject to Section 6.7(d) below, Services Transfer Assistance shall include, but not be limited to, providing Comdata and its Affiliates and their agents, contractors and consultants, as necessary, with services such as the following: a) Pre-migration Services 1) freezing all noncritical Software changes, 2) notifying all outside vendors of procedures to be followed during the turnover phase, 3) reviewing all Software libraries (tests and production) with the new service provider and/or Comdata, 4) assisting in establishing naming conventions for the new production site, 5) analyzing space required for the data bases and Software libraries, and 6) generating a tape and computer listing of the source code in a form reasonably requested by Comdata. b) Migration Services 1) unloading the production data bases, 2) delivering tapes of production data bases (with content listings) to the new operations staff, 3) assisting with the loading of the data bases, 4) assisting with the communications network turnover, if applicable, and 5) assisting in the execution of a parallel operation until the effective date of expiration or termination of this Agreement. c) Post-migration Services 1) answering questions regarding the Services on an "as needed" basis, and 2) turning over of any remaining Comdata owned reports and documentation still in ISSC's possession. d) ISSC shall provide the Services Transfer Assistance at no charge; provided, however, 1) if, prior to the expiration of termination of the Agreement, any Services Transfer Assistance provided by ISSC reasonably requires the utilization of additional resources that ISSC should not otherwise use in the performance of this Agreement, Comdata will pay ISSC for such usage as a New Service as defined in Section 6.4, 2) if the Services Transfer Assistance reasonably requires ISSC to incur expenses in addition to the expenses that ISSC would otherwise incur in the performance of this Agreement, net of the reduction in other expenses caused by providing such assistance, then Comdata shall reimburse ISSC for such additional expenses provided ISSC shall have given Comdata reasonable prior notice, and 3) if Comdata requests other services in addition to the Services Transfer Assistance after the expiration or termination date, ISSC will provide such other services at the then current hourly rate ISSC charges its customers for skilled engineering assistance for each person provided. 6.8 Other Expenses and Charges Comdata will be financially responsible for the following expenses, which are not included in the Annual Services Charge and are not subject to COLA: a) all expenses associated with occupancy of facilities, including land, real property leases, real property taxes, utilities and facilities-related services in accordance with Section 5.4; b) maintenance charges for End User Machines and additional Machines in excess of the Machines which ISSC agreed to maintain under Schedule P of this Agreement; c) charges by common carriers for local, long-distance, and WATS (in and out) telecommunications services incurred in connection with the performance of Services for Comdata; and d) telecommunications tariffs. Comdata will be financially responsible for all costs and expenses associated with its responsibilities specified in Section 5.0. Such costs and expenses are not included within the Annual Services Charge or any other charges payable by Comdata under this Agreement. 12 7.0 Invoicing and Payment 7.1 Annual Services Charge Invoices ISSC will invoice Comdata on a monthly basis the proportional amount of the Annual Services Charge for that month in advance. The invoice will state separately applicable taxes owed by Comdata, if any, by tax jurisdiction. 7.2 COLA Invoicing ISSC will invoice Comdata for COLA starting in the second January following the Amended Commencement Date and monthly thereafter in accordance with Section 6.2. 7.3 Accountability ISSC shall provide Comdata with such documentation and other information with respect to each invoice as may be reasonably requested by Comdata to verify that ISSC's charges to Comdata are accurate, correct and valid and are in accordance with the provisions of this Agreement. Whenever an ISSC charge is to be based on ISSC's cost for pass-through charges provided under this Agreement, ISSC will provide to Comdata, if so requested, information and documentation sufficient to substantiate ISSC's costs with respect to such charge. 7.4 Other Charges Any amount due under this Agreement for which a time for payment is not otherwise specified will be due and payable within 30 days after the date of the invoice. 7.5 Invoice Payment Comdata will pay each invoice by a method acceptable to ISSC within the calendar month, provided it receives the invoice on or before the tenth day of the month; otherwise, such payment shall be made within 30 days of the date of an invoice. In the event that any payments are not received by ISSC within five business days following the due date, a late fee equal to one percent of the amount of such payment per month shall also be paid to ISSC by Comdata. 7.6 Proration All periodic charges under this Agreement are to be computed on a calendar month basis, and will be prorated for any partial month, unless specifically stated otherwise in this Agreement. 7.7 Refundable Items a) Where Comdata has prepaid for a service or function for which ISSC is undertaking financial responsibility under this Agreement, ISSC will refund to Comdata, as soon as the amount is identified, that portion of such prepaid expense which is attributable to periods on and after the Commencement Date. b) If ISSC should receive during the Term any refund, credit or other rebate in respect of services or functions paid for by Comdata prior to the Commencement Date, ISSC will promptly notify Comdata of such refund, credit or rebate and will promptly pay to Comdata the full amount of such refund. credit or rebate. 7.8 Set-Off Except as specifically set forth elsewhere in this Agreement, with respect to any amount owed to Comdata by ISSC pursuant to this Agreement, ISSC may, at its option, pay that amount to Comdata by giving Comdata a credit against the charges otherwise payable to ISSC hereunder. Similarly, except as specifically set forth elsewhere in this Agreement, with respect to any amount owed to Comdata by ISSC pursuant to this Agreement, Comdata may, at its option, set off that amount as a credit against the monthly charges payable to ISSC hereunder. 8.0 Intellectual Property Rights 8.1 Ownership of Comdata Product Software Comdata shall be the sole and exclusive owner of all Comdata Product Software and, subject to ISSC's rights as set forth in Section 8.3 below, all copies thereof, and of all Intellectual Property Rights therein. ISSC hereby assigns and agrees to assign to Comdata all right and title, and all associated Intellectual Property Rights, in all Comdata Product Software. Subject to ISSC's rights as set forth in Section 8.3 below, (i) ISSC shall immediately return to Comdata all copies thereof upon any expiration or termination of this agreement and (ii) ISSC shall utilize the Comdata Product Software solely for the benefit of Comdata and its customers as provided hereunder, and shall not use the same, directly or indirectly, for the benefit of any other party or for any reason. ISSC agrees to assist and cooperate with Comdata in all reasonable respects and to execute documents and take such further acts reasonably requested by Comdata to acquire, transfer, maintain, and perfect its Intellectual Property Rights in the Comdata Product Software. 8.2 Other Materials Literary works or other works of authorship other than Comdata Product Software created under this Agreement and not available under other ISSC or non-ISSC agreements (hereafter, "Materials") shall be treated as follows: a) With respect to such Materials which ISSC has independently created, ISSC grants to Comdata: 1) an irrevocable, nonexclusive, world-wide, paid-up license to prepare derivative works based upon the Materials, and to internally use, execute, reproduce, display, perform and distribute the Materials and such derivative works, and 2) the right to sublicense third parties to do any of the foregoing for the sole benefit of Comdata. b) With respect to such Materials which Comdata has independently created, Comdata hereby grants to ISSC: 1) an irrevocable, non-exclusive, world-wide, paid-up license to prepare derivative works based upon the Materials, and to internally use, execute, reproduce, display, perform and distribute the materials and such derivative works. and 2) The right to sublicense third parties to do any of 13 the foregoing for the sole purpose of providing the Services to Comdata. c) Where any materials are jointly created by the Parties Comdata and ISSC will jointly have all right, title and interest, including ownership of copyright, in such Materials. Each Party may use the Materials internally for its own business purposes without accounting. d) The Parties agree to reproduce copyright legends which appear on any materials. e) Upon the expiration or termination of this agreement, so long as Comdata has fully performed all of its obligations under this Agreement and no material breach of the Agreement on the part of Comdata has occurred and remains uncured, ISSC will assign all right, title and interest in the Materials described in c) above, without additional charge, to Comdata, in a manner reasonably acceptable to both Parties, and Comdata shall, simultaneously with such assignment, grant to ISSC: 1) an irrevocable, non-exclusive, world-wide, paid-up license to prepare derivative works based upon the Materials, and to use, reproduce, display, perform and distribute the Materials and such derivative works, and 2) the right to sublicense third parties to do any of the foregoing. In the event that Comdata has not complied with the conditions to the assignment described in the preceding sentence, ISSC shall not be obligated to assign such Materials and may sell, distribute, market or use such Materials in any manner it deems appropriate. 8.3 Assignment of Personnel and Use of Ideas Subject to ISSC's obligations with respect to Comdata's Confidential Information, as set forth in Section 9, and applicable copyrights and patents, this Agreement shall not preclude ISSC from developing materials for or providing services to other customers who are engaged in businesses competitive to Comdata. Neither Party shall be liable for any payment to employees of the other company who conceive, or reduce to practice, inventions. Nothing contained in this Agreement shall restrict either Party from the use of any ideas, concepts, know-how, or techniques relating to data processing or network management which either Party, individually or jointly develops or discloses under this Agreement, subject to the provisions of Section 9.0, and Comdata hereby grants to ISSC a fully paid-up, irrevocable, non- exclusive, worldwide license to use, execute, reproduce, display, distribute internally and externally, create derivative works based upon, and practice any invention contained in, any portions of code, supporting documentation or related materials. of Comdata Product Software that embody any such ideas, concepts, know-how or techniques relating to data processing or network management, provided that such portions, both individually and collectively, are of general application and do not constitute a product of Comdata in their substantial entirety. Such grant includes the right and license to sublicense others to do some or all of the foregoing. However, except for licenses granted pursuant to this Section 8.0, neither this Agreement nor any disclosure made thereunder grants any license to either Party under any patents or copyrights of the other Party. 9.0 Confidentiality/Data Security 9.1 Confidential Information ISSC and Comdata each acknowledge that the other possesses and will continue to possess information that has been created, discovered, or developed by it or provided to it by a third party and which it considers to be proprietary and confidential and which has commercial value in its business and is not in the public domain. Except as otherwise specifically provided by the Parties, "Confidential Information" shall mean: a) all information marked confidential, restricted, or proprietary by either Party; and b) all electronically stored information, written information or oral information reduced to writing within a reasonable period of time and delivered to ISSC that relates to Comdata's and its Affiliates' customer lists, customer information, account information, business information regarding business planning and operations, and administrative, financial or marketing activities, and which is not governed by a separate confidentiality agreement between the Parties. 9.2 Obligations Except as otherwise specified in Schedule L, Comdata and ISSC will each use the same care to prevent the disclosure to third parties of the Confidential Information of the other as it employs to avoid disclosure, publication or dissemination of its own information of a similar nature. The Parties may disclose Confidential Information to their employees on a need to know basis provided the Parties have. an appropriate written confidentiality agreement with such employees. Notwithstanding the foregoing, the Parties may disclose such information to subcontractors involved in providing Services under this Agreement, where: a) such disclosure is necessary to permit the subcontractor to perform its duties hereunder, and b) the disclosing Party assumes full responsibility for the acts of omissions of its subcontractor, no less than if the acts or omissions were those of the disclosing Party. Any disclosure to subcontractors shall be under the terms and conditions as provided herein. Without limiting the generality of the foregoing, neither Party will publicly disclose the terms of this Agreement without the prior written consent of the other, except to the extent permitted by Section 9.3 and 15 hereof. Furthermore, neither ISSC nor Comdata may: a) make any use of or disclose the Confidential Information of the other which has been so identified except as contemplated by this Agreement; 14 b) or acquire any right in or assert any lien against the Confidential Information of the other; or c) refuse to promptly return, provide a copy of or destroy such Confidential Information upon the reasonable request of the other Party; provided, however, that either Party may, without limitation, use any ideas, concepts, know-how and techniques related to data processing or management in the development, manufacturing, and marketing of products and services, so long as such use does not infringe any patent rights or copyrights or disclose the identity of, or any business, financial of personnel information of, the other Party. 9.3 Exclusions Notwithstanding the foregoing, no obligation of confidentiality shall apply to any information which was, at the time of disclosure to it, in the public domain; after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving Party; was rightfully in the possession of the receiving Party at the time of disclosure to it; was received after disclosure to it from a third party who had a lawful right to disclose such information to it; in response to a valid order of a court or other governmental body of the United States or any political subdivision thereof; provided, however, that the Party making the disclosure pursuant to such order shall give written notice to the other Party promptly after receipt of such order and, if possible, without violation of any law, shall not disclose the information for a period of five days to permit the other party the opportunity to obtain a protective order preventing or limiting disclosure. It is understood that the receipt of Confidential Information under this Agreement will not limit or restrict assignment or reassignment of employees of ISSC and Comdata within or between the respective Parties and their Affiliates. 9.4 Protection of Comdata Confidential Information Any additional responsibilities of ISSC and Comdata with respect to protection of Comdata Confidential Information will be set forth in the Procedures Manual. 9.5 Loss of Confidential Information In the event of any loss of inability to account for Confidential Information, the receiving Party will promptly notify the disclosing Party. 9.6 Limitation ISSC will not be responsible for loss or mistransmission of data or for the security of data during transmission via public telecommunications facilities. 10.0 Termination 10.1 Termination for Convenience Subject to the other provisions of this Agreement, Comdata may terminate this Agreement upon at least 90 days prior written notice to ISSC. If Comdata terminates this Agreement prior to the expiration of the Term, other than as specified in Section 10.3, Comdata agrees to pay ISSC on the effective date of the termination, the Termination Charge, as specified in the Supplement, which the Parties agree is Comdata's sole and exclusive liability for such termination. Any termination charge will be prorated according to the following formula: [{(A-8)/12 months} x C] + B = Prorated Termination Charge. where: A = the Termination Charge specified in the Supplement for the year in which termination is effective; B = the Termination Charge specified in the Supplement for the year after the year in which termination is effective; and C = the number of months remaining during the year in which termination is effective. 10.2 Termination upon Acquisition If all or substantially all of the assets of Comdata are acquired by another entity which is not an Affiliate of Comdata or a change in control (as defined in the definition of Affiliate) occurs, and the new owner or owners elect not to continue this Agreement, Comdata may, within not more than 120 days after such acquisition, provide written notice of termination to ISSC. In such event, ISSC will provide Comdata termination assistance in accordance with Section 6.7, and Comdata will be obligated to pay the applicable prorated Termination Charge listed in the Supplement. 10.3 Termination for Cause Upon written notice, either Party may terminate this Agreement, without charge to the terminating Party, in the event of a material breach by the other. However, the Party seeking termination will provide the other Party with sufficient, reasonable written prior notice of such material breach and the opportunity to cure same, as follows: a) in the event of a failure to pay any amount due and payable under this Agreement when due, at least ten days, and b) in the event of any other material breach, at least 30 days. If the nature of any nonmonetary breach is such that it would be unreasonable to expect a cure within a 30 day period, the breaching Party shall be given an additional 15 days to cure such breach. In the event the material breach is not cured within the periods specified above after delivery of the notices the nonbreaching Party may terminate this Agreement, which termination shall be in writing, as of a date specified in such notice of termination. The terminating Party shall have all rights and remedies generally afforded by law or equity, subject to the limitations expressed in this Agreement. 15 10.4 Extension of Services Except in the case of a termination of this Agreement due to a material breach by Comdata, Comdata may once request and ISSC will extend the provision of Services for a period not to exceed 180 days beyond the effective date of termination or expiration. Such request must be in the form of a written notice received by ISSC not less than 60 days prior to the effective date of termination or expiration of the Agreement. Comdata will reimburse ISSC for all additional expenses, if any, incurred by ISSC as a result of ISSC's provision of such extended Services which are not otherwise covered by the Annual Services Charge or other charging methodology described herein. 10.5 Other Rights Upon Termination Provided Comdata is not in default of its obligations under this Agreement: a) ISSC agrees to sell to Comdata or its designee, upon Comdata's request, the ISSC Machines then currently being used by ISSC on a dedicated basis to perform the Services at fair market value, as determined by a mutually agreed upon appraisal. Comdata shall be responsible for any taxes associated with the purchase of such equipment. b) For Software proprietary to ISSC and not otherwise owned by or licensed to Comdata in accordance with Section 8 and not generally commercially available, ISSC will provide a license to Comdata and its Affiliates to whom ISSC is providing Services, for their internal use only, upon terms and prices to be mutually agreed upon by the Parties or, at Comdata's option. ISSC will recommend a mutually agreeable commercially available substitute to perform the same function. c) With respect to generally commercially available Software, if ISSC has licensed or purchased and is using any such Software solely for providing the Services to Comdata at the date of expiration or termination, Comdata will reimburse ISSC for initial license or purchase charges for such Software in an amount equal to the remaining unamortized cost of such Software, if any, depreciated over a five year life, and pay any transfer fee or charge imposed by any applicable vendor. d) ISSC will transfer or assign to Comdata or its designee, upon Comdata's request, on mutually acceptable terms and conditions, subject to the payment by Comdata of any transfer fee or charge imposed by the applicable vendors, any contracts applicable solely to services being provided to Comdata for maintenance, disaster recovery services and other necessary third party services (other than subcontractor services) then being used by ISSC to perform the Services. e) ISSC will provide Services Transfer Assistance pursuant to Section 6.7. 11.0 Liability 11.1 General Intent Each Party's and each of its subcontractor's entire liability to the other Party and its exclusive remedies are set forth in this Section and Section 13. Subject to the specific provisions of this Section, it is the intent of the Parties that each Party will be liable to the other Party for any damages incurred by the nonbreaching Party as a result of the breaching Party's failure to perform its obligations in the manner required by this Agreement. 11.2 Damages a) Each Party's and each of its subcontractor's liability for actual, direct damages resulting from its performance or nonperformance under this Agreement, regardless of the form of action, and whether in contract, tort (including, without limitation, negligence), warranty or other legal or equitable grounds, will be limited for each event which is the subject matter of the cause of action, to the Annual Services Charge during the three month period immediately preceding each such event. This limitation will not apply to: 1) any obligation or failure by Comdata to pay any amounts due or past due and owing to ISSC pursuant to the terms of this Agreement; 2) Losses by either Party for bodily injury or damage to real property or tangible personal property, as described in Section 13.3; 3) Losses incurred by ISSC caused by or arising out of the inaccuracy or untruthfulness of the representations and warranties of Comdata contained in this Agreement; and 4) either Party's obligation to defend and indemnify the other for intellectual property infringement Losses and Losses relating to tax liabilities, as provided in Sections 13.1(a) and (d) and 13.2(a) and (d), respectively. b) In no event will either Party have any liability whether based on contract, tort (including, without limitation, negligence), warranty or any other legal or equitable grounds, for any loss of interest, profit or revenue by the other Party or for any consequential, indirect, incidental, special, punitive or exemplary damages suffered by the other Party, arising from or related to this Agreement, even if such Party has been advised of the possibility of such losses or damages; provided, however, that this clause will not prevent either Party from recovering amounts owed under this Agreement. c) In no event will ISSC or its subcontractors be liable for any damages if and to the extent caused by Comdata's failure to perform its responsibilities, nor shall Comdata be liable for any damages if and to the extent caused by any failure to perform by ISSC or its subcontractors. 16 11.3 Other Remedies Notwithstanding anything to the contrary contained in this Section 11, each Party retains all equitable remedies available under applicable law to enforce its rights in connection with this Agreement, including rights upon termination or expiration of this Agreement. 12.0 Warranty 12.1 Work Standards In addition to the representations and commitments expressly made by ISSC in this Agreement, ISSC represents and warrants that all Services rendered hereunder will be performed in a workmanlike manner using qualified individuals in accordance with industry standards and practices reasonably applicable to the performance of such Services. 12.2 Maintenance ISSC represents and warrants that it will maintain Machines for which it has maintenance responsibilities hereunder in good operating condition and will undertake alt repairs and preventive maintenance in accordance with industry standards and practices. 12.3 Compliance with Obligations Comdata represents and warrants that its entry into this Agreement does not violate or constitute a breach of any of its contractual obligations with third parties. 12.4 Claims Comdata represents and warrants it has no knowledge or notice of any actual or threatened material claim s or action by, on behalf of, or related to, the Affected Employees, including, but not limited to, claims arising under the Occupational Safety and Health Administration, Equal Employment Opportunity Commission, National Labor Relations Board or Fair Labor Standards Act, or other applicable federal, state or local laws or regulations, except as such claims or actions are identified in Schedule 0. 12.5 Environmental Comdata represents and warrants that, to the best of its knowledge, the Comdata facilities used by ISSC hereunder are in substantial compliance with all applicable federal, state and local laws governing the storage, existence, discharge and handling of Hazardous Materials. "Hazardous Materials' means, at any time, a) any "hazardous substance" as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time (42 U.S.C. 9601 et seq.) and the regulations promulgated thereunder; b) any asbestos or asbestos-containing materials; c) petroleum, crude oil or any fraction thereof, natural gas or synthetic gas used for fuel; and d) any additional substances or materials which at such time are classified or considered to be hazardous or toxic under the laws of the state of Tennessee or Texas, as applicable. In the event that Hazardous Materials are discovered at the Comdata Facilities, and their presence is verified by an independent testing organization, during the Term of this Agreement, ISSC may cease the performance of that portion of the Services affected by such discovery if, in the reasonable judgement of ISSC, ISSC's ability to perform such portion of the services safely and properly is adversely impacted by the presence of such Hazardous Materials. Comdata shall be responsible for causing any violation of federal, state or local law with respect to the presence of such Hazardous Materials to be remedied. It is understood that matters relating to the investigation, detection, abatement and remediation of any Hazardous Materials discovered at the Comdata Facilities are not within the scope of this Agreement and that ISSC shall not be liable or responsible for any expense incurred by Comdata in this connection, unless the presence of the Hazardous Material-s was caused by ISSC or a subcontractor of ISSC. In such event, the provisions of this paragraph will not apply. 12.6 Bankruptcy Comdata agrees that the following shall constitute a material breach of this Agreement: If Comdata or CHC a) shall be the subject of an order for relief by the bankruptcy court, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or b) shall be the subject of, institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceedings relating to it or to all or any part of its property under the laws of any jurisdiction, and such proceeding(s) shall continue undismissed or unstayed for twenty (20) calendar days. 12.7 Non-infringement The Parties represent and warrant that they will perform their responsibilities under this Agreement in a manner that does not infringe, of constitute an infringement of or misappropriation of any patent, trade secret, copyright, trade mark, service mark, trade name or other proprietary right of any third party. 12.8 Ownership of Comdata Machines You represent that you are either the owner of each Comdata Machine or authorized by its owner to include it under this Agreement. 12.9 Disclaimer ISSC shall not be responsible for any inaccuracy of advice, reports, data or other products produced with or from data and/or software provided by you when such inaccuracy is caused by defective or erroneous data or software provided by you. Additionally, subject to the obligations contained in this Agreement, ISSC does not assume uninterrupted or error-free operation of Machines. 17 THIS IS A SERVICE AGREEMENT. EXCEPT AS PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER EXPRESS WARRANTIES, AND THERE ARE NO IMPLIED WARRANTIES MADE BY EITHER PARTY INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 13.0 Indemnities 13.1 Indemnity by ISSC ISSC agrees to indemnify, defend and hold harmless Comdata, its Affiliates and their respective officers, directors, employees, agents, successors and assigns, in accordance with the procedures set forth in Section 13.4, from any and all Losses incurred by any of the foregoing parties arising from or in connection with: a) any claims of infringement made against Comdata of any United States letters patent, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, alleged to have occurred because of equipment of software manufactured by ISSC or because of systems, products or other resources or items provided to Comdata by ISSC; provided that ISSC will not have any obligation with respect to any claims based upon 1) Comdata's modification of a program or a machine, or 2) Comdata's combination, operation, use or integration of an ISSC program or machine with machines, apparatus or programs not furnished by ISSC or its subcontractors; b) any and all amounts payable with respect to the Acquired Assets which are attributable to periods on or after the Effective Date; c) any duties or obligations to be performed on or after the Commencement Date by ISSC pursuant to any Contract; d) The inaccuracy or untruthfulness of any representative or warranty made by ISSC under this Agreement, and e) any amounts, including but not limited to taxes, interest and penalties, assessed against Comdata which are obligations of ISSC pursuant to Section 6.6. 13.2 Indemnity by Comdata Comdata agrees to indemnify, defend and hold harmless ISSC, its Affiliates and their respective officers, directors, employees. agents, successors and assigns, from any and all Losses incurred by any of the foregoing parties and arising from or in connection with: a) any claims of infringement made against any of the foregoing parties of any United States letters patent, or a trade secret, or any copy right, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, alleged to have occurred because of systems, products or other resources of items developed by Comdata and provided to ISSC hereunder; provided that Comdata will not have any obligations with respect to any claim based upon 1) ISSC's modification of a program developed by Comdata, or 2) ISSC's combination or integration of a program developed by Comdata with apparatus, machines or programs not developed by Comdata; b) any and all amounts payable with respect to the Acquired Assets which are attributable to periods prior to the Commencement Date; c) any duties or obligations to be performed prior to the Commencement Date by Comdata pursuant to any agreements regarding the Acquired Assets; d) the inaccuracy or untruthfulness of any warranty made by Comdata under this Agreement; and e) any amounts, including but not limited to taxes, interest and penalties, assessed against ISSC which are obligations of Comdata pursuant to Section 6.6. 13.3 Gross Indemnity and Contribution Each Party agrees to contribute to the amount paid or payable by the other Party for any and all Losses arising in favor of any person, corporation or other entity, including the Parties hereto and their employees, contractors and agents, on account of personal injuries, death or damage to tangible personal or real property in any way incident to, or in connection with or arising out of: a) this Agreement, b) the Services provided by ISSC hereunder, c) the presence of such Party, its employees, contractors or agents on the premises of the other Party, or d) the act or omission of such Party, its employees, contractors or agents, for which such Party is legally liable and in proportion to such Party's comparative fault in causing; such Losses. 13.4 Indemnification Procedures Promptly after receipt by any person entitled to indemnification under Sections 13 1 through 13.3 (an "Indemnified Party") of notice of the commencement (or threatened commencement) of any civil, criminal, administrative or investigative action or proceeding involving a claim in respect of which the Indemnified Party will seek indemnification pursuant to any such Section, the Indemnified Party shall notify the person that is obligated to provide such indemnification (an "indemnified Party") of such claim in writing. The Indemnifying Party shall be entitled to have sole control over the defense and settlement of such claim, provided that, within a reasonable period of time after receipt of such written notice, but not fewer than 10 days prior to the date on which a response to a summons and/or complaint is due, the Indemnifying Party notifies the Indemnified Party of its election to so assume full control. In the event the Indemnifying 18 Party notifies the Indemnified Party of its election so assume full control, then: a) the Indemnified Party may employ counsel at its own expense to participate in the defense of such claim; and b) the Indemnifying Party shall provide reasonable advance notice to the indemnified Party before entering into any settlement of such claim or ceasing to defend against such claim. If such settlement or cessation would cause injunctive relief to be imposed against the Indemnified Party, require the Indemnified Party to pay any monetary damage or require the Indemnified Party to grant a license to materials owned by such Party, the Indemnifying Party must obtain the Indemnified Party's prior written consent. After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that claim. If the Indemnifying Party does not assume sole control over the defense of a claim subject to such defense as provided in this Section 13.4, the Indemnifying Party may participate in such defense, at its sole expense, and the Indemnified Party shall have the right to defend the claim in such manner as it may deem appropriate, at the expense of the Indemnifying Party. 13.5 Subrogation In the event that an Indemnifying Party shall be obligated to indemnify an Indemnified Party pursuant to Sections 13 1 through 13.3, the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Indemnified Party with respect to the claims and defenses to which such indemnification relates. 13.6 Exclusive Remedy The indemnification rights of each Indemnified Party pursuant to Sections 13.1 through 13.3 shall be the exclusive remedy of such Indemnified Party with respect to the claims to which such indemnification relates. 14.0 Insurance and Risk of Loss 14.1 Insurance When this Agreement requires performance by ISSC's or Comdata's employees of subcontractors on the other Party's premises, the performing Party shall carry and maintain Worker's Compensation and Employer's Liability Insurance covering its employees or subcontractors engaged in such performance in amounts no less than required by law in the applicable location. The performing Party shall also carry any other insurance coverage which is required to insure against losses or damages caused by the performing Party's negligence, and any other insurance required by law or considered by the Party to be prudent and consistent with industry standards and practices. 14.2 Risk of Loss Comdata is responsible for risk of loss of, or damage to, Machines owned by Comdata. ISSC is responsible for risk of loss of, or damage to, Machines owned by ISSC. 15.0 Publicity Each Party will submit to the other all advertising, written sales promotion, press releases and other publicity matters relating to this Agreement in which the other Party's name or mark is mentioned or language from which the connection of said name or mark may be inferred or implied, and will not publish or use such advertising, sales promotion, press releases, or publicity matters without prior written approval of the other Party. However, either Party may include the other Party's name and a factual description of the work performed under this Agreement on employee bulletin boards, in its list of references and in the experience section of proposals to third parties, in internal business planning documents and in its annual report to stockholders, and whenever required by reason of legal, accounting or regulatory requirements. 16.0 Review Committee and Dispute Resolution 16.1 Joint Advisory Committee Within 30 days from the Effective Date, ISSC and Comdata agree to create a Joint Advisory Committee consisting of four people of the following titles from each Party: ISSC: 1) ISSC General Manager 2) ISSC Vice President of Transportation 3) ISSC Transportation Delivery Director 4) ISSC Project Executive Comdata 1) Chief Executive Officer 2) Chief Operations Officer 3) Chief financial Officer 4) Comdata Project Executive The Joint Advisory Committee will: a) annually review the operating and strategic plans prepared by the Project Executives; b) review, on an annual basis, performance objectives and measurements; c) provide advice and direction on technology changes; and d) discuss disputes between the Parties. 16.2 Dispute Resolution a) Any dispute between the Parties either with respect to the interpretation of any provision of this Agreement or with respect to the performance by ISSC or by Comdata hereunder shall be resolved as specified in this Section 16.2. 1) Upon the written request of either Party, each of the Parties will appoint a designated representative who does not devote substantially all of his or her time to performance under this Agreement, whose task it will be to meet for the purpose of endeavoring to resolve such dispute. 2) The designated representatives shall meet as often as 19 necessary to gather and furnish to the other all information with respect to the matter in issue which is appropriate and germane in connection with its resolution. 3) Such representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding relating thereto. 4) During the course of such negotiation, all reasonable requests made by one Party to the other for nonprivileged information reasonably related to this Agreement, will be honored in order that each of the Parties may be fully advised of the other's position. 5) The specific format for such discussions will be left to the discretion of the designated representatives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other Party. b) If the designated representatives cannot resolve the dispute, then the dispute shall be escalated to the President of Comdata and the President of ISSC, for their review and resolution. If the dispute cannot be resolved by such officers, then the Parties may initiate formal proceedings; however, formal proceedings for the judicial resolution of any such dispute may not be commenced until the earlier of: 1) the designated representatives concluding in good faith that amicable resolution through continued negotiation of the matter in issue does not appear likely; or 2) 30 days after the initial request to negotiate such dispute; or 3) 30 days before the statute of limitations governing any cause of action relating to such dispute would expire. c) Notwithstanding the foregoing provisions, neither Party will have any obligation to follow the dispute resolution procedures set forth in Sections 16.2.a and 16.2.b in the event that such Party desires to seek preliminary or temporary relief of an emergency nature, or in the case of a breach or threatened breach of the provisions of Section 9 hereof. 16.3 Continued Performance Except where clearly prevented by the area in dispute, both Parties agree to continue performing their respective obligations under this Agreement while the dispute is being resolved unless and until such obligations are terminated or expire in accordance with the provisions hereof. 17.0 General 17.1 Control of Services a) This Agreement shall not be construed as constituting either Party as partner of the other or to create any other form of legal association that would impose liability upon one Party for the act or failure to act of the other or as providing either Party with the right, power or authority (express or implied) to create any duty or obligation of the other Party. b) Each Party shall be responsible for the management, direction and control of its employees and such employees shall not be employees of the other Party. c) Except where this Agreement expressly provides that ISSC will perform certain identified Services as agent for Comdata, the Services will be under the control, management and supervision of ISSC. 17.2 Right to Perform Services for Others Each Party recognizes that ISSC personnel providing Services to Comdata under this Agreement may perform similar services for others and this Agreement shall not prevent ISSC from using the personnel and equipment not listed in Schedule U that is provided to Comdata under this Agreement for such purposes. ISSC may perform its obligations through its subsidiaries, Affiliates or through the use of ISSC-selected independent contractors; provided, however, that ISSC shall not be relieved of its obligations under this Agreement by use of such subsidiaries, Affiliates, or subcontractors. 17.3 Scope of Services The Services provided under this Agreement are for Machines and facilities located within the United States. 17.4 Amendments and Revisions No changes or modifications to this Agreement, its Supplement and Schedules may be made orally, but only by a written amendment or revision signed by both Parties. Any terms and conditions varying from this Agreement, its Supplement and Schedules on any order or written notification from either Party are void. 17.5 Force Majeure a) Neither Party shall be liable for any default or delay in the performance of its obligations hereunder. 1) if and to the extent such default or delay is caused, directly or indirectly, by fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions in the United States, strikes, lockouts, or labor difficulties, or any other similar cause beyond the reasonable control of such Party; or 2) provided such default or delay could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the nonperforming Party through the use of alternate sources, work-around plans or other means, (individually, each being a "Force Majeure Event"). b) In such event, the nonperforming Party will be excused 20 from any further performance or observance of the obligation(s) so affected for as long as such circumstances prevail and such Party continues to use commercially reasonable efforts to recommence performance or observance whenever and to whatever extent possible without delay. Any Party so delayed in its performance will immediately notify the other by telephone (to be confirmed in writing within five days of the inception of such delay) and describe at a reasonable level of detail the circumstances causing such delay. c) This Section 17.5 does not limit or otherwise affect ISSC's obligation to provide disaster recovery services in accordance with Schedule G; provided, however, that such Force Majeure Event does not also prevent ISSC's provision of the Services from recovery centers. If any Force Majeure Event substantially prevents, hinders, or delays performance of the Services necessary for the performance of Comdata's critical functions for more than 30 consecutive days, then at Comdata's option: 1) Comdata may procure such Services from an alternate source and ISSC will be liable for payment for such Services in excess of ISSC's charges under this Agreement for up to 180 days; or 2) this Agreement will terminate as of a date specified by Comdata in a written notice of termination to ISSC and Comdata will pay ISSC any unrecovered start-up costs, anticipated profit prorated to the date of termination, and any reasonable out-of-pocket expenses associated with ramp down transition costs, all subject to independent audit. In such case Comdata will not be liable for any Termination Charges as described in Sections 10.1 or 10.2. d) Except to the extent a Force Majeure event prevents Comdata from fulfilling its payment obligations under this Agreement, this Section 17.5 does not limit or otherwise relieve Comdata's obligation to pay any monies due ISSC under the terms of this Agreement. 17.6 Nonperformance To the extent any nonperformance by either Party of its nonmonetary obligations under this Agreement results from or is caused by the other Party's failure to perform its obligations under this Agreement, such nonperformance shall be excused. 17.7 Remarketing Comdata may not remarket all of any portion of the Services provided under this Agreement, or make all or any portion of the Services available to any party other than Comdata or its Affiliates without the prior written consent of ISSC. This section shall not be construed to prohibit Comdata from providing its services to its customers in the ordinary course of business, as contemplated by this Agreement. 17.8 Waiver No waiver of any breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provisions hereof. 17.9 Severability If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and such provision shall be deemed to be restated to reflect the original intentions of the Parties as nearly as possible in accordance with applicable law(s). 17.10 Time Limitations for Action Neither Party may bring an actions regardless of form, arising out of this Agreement more than two years after the cause of action has arisen or the date such cause of action was of should have been discovered. ISSC may not bring an action for nonpayment more than two years after the date the last payment was due. 17.11 Counterparts This Agreement shall be executed in duplicate counterparts. Each such counterpart shall be an original and both together shall constitute but one and the same document. 17.12 Governing Law This Agreement shall be governed by the laws of the State of New York as such laws are applied to contracts which are entered into and performed entirely within the State of New York. 17.13 Binding Nature and Assignment This Agreement will be binding on the parties hereto and their respective successors and assigns. For purposes of this Agreement, a change in control of a party or a sale of all or substantially all of the assets of a Party shall be deemed an assignment of this Agreement. Neither Party may, or will have the power to, assign this Agreement without the prior written consent of the other, except that each Party may assign its rights and obligations under this Agreement, without the approval of the other Party, to a) an Affiliate which expressly assumes such Party's obligations and responsibilities here under, or b) an entity which acquires all or substantially all of the assets or capital stock of such Party, so long as 1) such entity shall have a net worth, determined in accordance with generally accepted accounting principles consistently applied, after giving effect to such assignment, equal to or greater than such Party's net worth immediately prior to such assignment; and 21 2) such entity shall expressly assume such Party's obligations and responsibilities hereunder, provided that in the case of both (a) and (b) the assigning Party remains fully liable for and shall not be relieved from the full performance of all of its obligations under this Agreement. 17.14 Notices a) Under this Agreement whenever one Party is required or permitted to give notice to the other, such notice will be deemed given when delivered in hand, one day after being given to an express courier with a reliable system for tracking delivery, or three days after the day of mailing, when mailed by United States mail, registered of certified mail, return receipt requested, postage prepaid, or when sent by facsimile and thereafter delivered by one of the foregoing methods of delivery. b) Notifications will be addressed as follows: 1) For termination, breach or default, notify: In the case of ISSC: ISSC Project Executive Integrated Systems Solutions Corporation 305 TechPark Drive, Suite t 13 LaVergne, TN 37086 with a copy to: ISSC General Counsel 44 South Broadway White Plains, New York 10601 In the case of Comdata: Chief Executive Officer 5301 Maryland Way Brentwood, TN 37027 with a copy to: Comdata General Counsel 5301 Maryland Way Brentwood, TN 37027 2) For all other notices: In the case of ISSC: ISSC Project Executive Integrated Systems Solutions Corporation 305 TechPark Drive, Suite 113 LaVergne, TN 37086 In the case of Comdata: Comdata Project Executive 5301 Maryland Way Brentwood, TN 37027 Either Party hereto may from time to time change its address for notification purposes by giving the other prior written notice of the new address and the date upon which it will become effective. 17.15 No Third Party Beneficiaries Except as specified in Section 11 with respect to either Party's contractors or subcontractors, the Parties do not intend, nor will any clause be interpreted, to create for any third party any obligations to or benefit from either ISSC or Comdata. 17.16 Other Documents On or after the Commencement Date and the date(s) of any amendments or revisions hereto and at the request of the other Party, each Party shall furnish to the other such certificate of its Secretary, certified copy of resolutions of its Board of Directors, or opinion of its counsel as shall evidence that this Agreement or any amendment or revision hereto has been duly executed and delivered on behalf of such Party. a) During the Term and at the reasonable request of the other Party, each Party shall furnish to the other a certificate stating that: 1) this Agreement is in full force and effect; and 2) the other Party is not materially in breach hereof at such time. The Parties will execute and deliver or cause to be delivered such further documents as may reasonably be required for the purposes of assuring and confirming the rights hereby created or for facilitating the performance of the terms of the Agreement b) Comdata hereby appoints ISSC and its agents as its attorney-in-fact, with the full authority to act in its name and stead, for the limited purpose of executing, delivering and filing, in its name and on its behalf, financing statements and related filings (including, without limitation, UCC-1 statements) in connection with the provisions by ISSC of machines, equipment and software in performing the Services. This limited power of attorney shall be effective as of the Commencement Date and shall expire one year after the expiration or earlier termination of this Agreement. 17.17 Headings All headings herein and the table of contents are not to be considered in the construction or interpretation of any provision of this Agreement. This Agreement was drafted with the joint participation of both Parties and shall be construed neither against nor in favor of either, but rather in accordance with the fair meaning thereof. In the event of any apparent conflicts or inconsistencies between this Agreement or any Supplements, Schedules, Exhibits or other Attachments to this Agreement, to the extent possible such provisions shall be interpreted so as to make them consistent, and if such is not possible, the provisions of this Agreement shall prevail. 22 THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT, UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. FURTHER, THE PARTIES AGREE THAT THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES RELATING TO THIS SUBJECT SHALL CONSIST OF 1) THIS AGREEMENT. 2) THE SUPPLEMENT AND 3) THE SCHEDULES, INCLUDING THOSE MADE EFFECTIVE BY THE PARTIES IN THE FUTURE. THIS STATEMENT OF THE AGREEMENT SUPERSEDES ALL PROPOSALS OR OTHER PRIOR AGREEMENTS, ORAL OR WRITTEN AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER DESCRIBED IN THIS AGREEMENT. Accepted by: Accepted by: Integrated Systems Solutions Comdata Network, Inc. Corporation {d/b/a ISSC, Inc.} By /s/Robert W. Casey By /s/G. L. McTavish Authorized Authorized Robert W. Casey 08/18/95 G. L. McTavish 08/29/95 Name (Type or Print) Date Name (Type or Print) Date 23 Supplement Name and Address of Customer: Comdata Network, Inc. 5301 Maryland Way Brentwood, TN 37027 ISSC Address: IBM Branch Office Address: Integrated Systems Solutions Corporation IBM Corporation 44 South Broadway 150 Fourth Avenue, North White Plains, New York 10601 Nashville, TN 37219 Term Commencement Date: May 1, 1995 Term End Date: April 30, 2005 Contract Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Annual Services Charge Base Charge 9.920 18.624 17.040 17.040 17.040 17.040 17.040 17.040 17.040 17.040 5.680 ($ in Millions) Termination Charge 24.7 23.7 19.7 17.3 15.0 12.1 9.8 7.9 5.2 2.6 0.0 ($ in Millions) Enhancement Baseline 40,700 81,400 81,400 81,400 81,400 81,400 81,400 81,400 81,400 81,400 27,133 (FTE in hours)* * An FTE defined as 1850 person hours per year.
1 Exhibit 1 Guaranty THIS GUARANTY ("Guaranty"), dated August 2, 1995, is made by COMDATA HOLDINGS CORPORATION, a Delaware corporation, having its principal place of business at 5301 Maryland Way, Brentwood, TN 37027 ("Guarantor"), in favor of Integrated Systems Solution Corporation, d/b/a ISSC, Inc. a Delaware corporation having its principal place of business at 44 South Broadway, White Plains, New York 10601 ("ISSC"). Capitalized terms used in this Guaranty and not otherwise defined herein are used with the meanings set forth in that certain Amended and Restated Agreement for Systems Operations Services, of even date herewith, between ISSC and Comdata Network, Inc. ("Comdata") (such agreement, as it may from time to time be supplemented, modified and amended, being referred to in this Guaranty as the "Agreement"). ISSC is entering into the Agreement with Comdata to provide certain systems operations services to Comdata. Comdata is a wholly-owned subsidiary of Guarantor. To induce ISSC to enter into the Agreement with Comdata, Guarantor agrees as follows: 1. Guarantor absolutely and unconditionally guarantees the full performance of all obligations of Comdata under the Agreement, as such obligations may from time to time be supplemented, modified, amended, renewed and extended, and whether evidenced by new or additional documents (collectively, the "Guaranteed Obligations"). 2. All notices and other communications provided under this Guaranty shall be in writing and (a) delivered by nationally recognized express courier, (b) mailed by certified mail, return receipt requested or (c) personally delivered, to Guarantor or ISSC, as the case may be, at the following address: a. if to Guarantor: Comdata Holdings Corporation 5301 Maryland Way Brentwood, TN 37027 Attention: President 1 b. if to ISSC: Integrated Systems Solutions Corporation 44 South Braodway White Plains, New York 10601 Attention: Vice President and General Counsel or at any other address as may be designated by Guarantor or ISSC, as the case may be, in a written notice sent to the other in accordance with the Agreement. If any notice or other communication is given by (i) nationally recognized courier, it will be effective one day after delivery to such courier, (ii) mail, it will be effective on the earlier of receipt or the third day after deposit in the United States mail with first-class postage prepaid, or (iii) personal delivery, when delivered. 3. This Guaranty shall be binding on and insure to the benefit of Guarantor and its respective successors and assigns. 4. This Guaranty shall be governed by, and construed and enforced in accordance with, the laws of New York applicable to agreements made and to be performed entirely within said state. "GUARANTOR" COMDATA HOLDINGS CORPORATION By: _______________________ George L. McTavish Chairman and CEO 2 Schedules to Amended and Restated Agreement for Systems Operations Services SCHEDULE A - Applications Software SCHEDULE B Systems Software SCHEDULE C - Comdata Machines SCHEDULE D - ISSC Machines SCHEDULE E - Support Services, Performance Standards and Operational Responsibilities SCHEDULE F - Acquired Assets, Leases, Licenses and Contracts SCHEDULE G - Disaster Recovery Services SCHEDULE H - Transition Plan SCHEDULE I - End User Locations SCHEDULE J - ISSC Charges, Measures of Utilization and Financial Responsibilities SCHEDULE K - Application Installation Standards SCHEDULE L - Security Procedures SCHEDULE M - DSM Help Desk SCHEDULE N - Projects SCHEDULE O - Affected Employees SCHEDULE P - Maintenance Terms SCHEDULE Q - Claims SCHEDULE R - End User Machines Subject to Maintenance SCHEDULE S - Bill-of-Sale SCHEDULE T - DSM Environment SCHEDULE U - ISSC Machines Subject to Baseline 1 Schedule A Application Software Vendor Description Location Consumer Services Applications ISSC Development Agent Commission Checks Brentwood TN ISSC Development Credit Card Brentwood TN ISSC Development Credit Collections Brentwood TN Corporate Systems Applications ISSC Development ACH Brentwood TN ISSC Development Aging and Past Due Notices Brentwood TN ISSC Development Alliance Rebate System Brentwood TN ISSC Development Assorted PC Applications Brentwood TN ISSC Development Accounting Systems Brentwood TN ISSC Development Bank Reconciliation Brentwood TN ISSC Development CDI Connect Time Processing Brentwood TN ISSC Development CMO Commission Check System Brentwood TN ISSC Development CTS Invoicing, Reporting, & Commissions Brentwood TN ISSC Development Cash Applications Brentwood TN ISSC Development Comdata Borrowing Balance Reporting Brentwood TN ISSC Development Comdata Complete Brentwood TN ISSC Development Comdata Corporation Services Brentwood TN ISSC Development Credit Reporting Brentwood TN ISSC Development Data Export to SUN Brentwood TN ISSC Development Deposits Brentwood TN ISSC Development Disaster Recovery Brentwood TN ISSC Development Draft Processing Brentwood TN ISSC Development Equipment Billing System Brentwood TN ISSC Development Field Inventory Tracking Brentwood TN ISSC Development Fixed Assets Brentwood TN ISSC Development General Ledger Brentwood TN ISSC Development Invoice Processing Brentwood TN ISSC Development Loadmatcher Billing Brentwood TN ISSC Development Lockbox Processing Brentwood TN ISSC Development Order Routing Brentwood TN ISSC Development Permit A/R Processing Brentwood TN ISSC Development Production Control Brentwood TN ISSC Development Revenue Reporting Brentwood TN ISSC Development Sales Journal Brentwood TN ISSC Development Service Center Processing Brentwood TN 1 ISSC Development Settlement Processing Brentwood TN ISSC Development Super Driver Invoicing System Brentwood TN ISSC Development Telemar Processing Brentwood TN ISSC Development Telephone Accounting System Brentwood TN ISSC Development Traffic Analysis Brentwood TN ISSC Development Willis Corroon Check Reconciliation Brentwood TN Multiple Product Applications ISSC Development Assorted PC Applications Brentwood TN ISSC Development Autodial Brentwood TN ISSC Development Card Embossing Brentwood TN ISSC Development Carrier Dial In Brentwood TN ISSC Development Credit Process Brentwood TN ISSC Development Customer Maintenance Brentwood TN ISSC Development Draft Printing Brentwood TN ISSC Development Draft Process Brentwood TN ISSC Development Information Transfer Brentwood TN ISSC Development Order Process Brentwood TN ISSC Development PC Alliance Workstation Brentwood TN ISSC Development PC Downdisk Brentwood TN ISSC Development PC Remote Brentwood TN ISSC Development PC Voice Center Workstation Brentwood TN ISSC Development Point of Sales Brentwood TN ISSC Development LU 6.2/x.25 Communication Brentwood TN ISSC Development POS Terminal Software Brentwood TN ISSC Development Service Center Maintenance Brentwood TN ISSC Development S. C. Relationship Management Brentwood TN ISSC Development Voice Response Brentwood TN Third Party Software Info Management Association Telemar Brentwood TN Lawson General Ledger/Accounts Payable Brentwood TN Lawson Universe Brentwood TN Lawson Fixed Assets Brentwood TN Graphic Management Group\ GDCM-100 NW Library Dunn Arthur Associates U.S. LAA Toll Pricer Brentwood TN Dunn & Bradstreet Accounts Receivable Brentwood TN 2 United Communications QTEL 9000 Brentwood TN Microfocus Cobol Workbench Brentwood TN Microfocus Host Compatibility Brentwood TN Microfocus MF-370 Assembler Brentwood TN Microfocus MF-370 Production Brentwood TN Microfocus MF-AD /PC Brentwood TN Microfocus ProxMVS Brentwood TN Microfocus MF-CICS OS/2 Brentwood TN Microfocus Cobol Workbench Brentwood TN Transceiver Applications ISSC Development Fuel Tax Carrollton TX ISSC Development Permit Services Carrollton TX Transportation Applications ISSC Development Comm Manager Brentwood TN ISSC Development CMO Brentwood TN ISSC Development Credit Cards Brentwood TN ISSC Development Express Cash Brentwood TN ISSC Development Express Pay Brentwood TN ISSC Development Express Codes Brentwood TN ISSC Development Express Check Brentwood TN ISSC Development Fuel Brentwood TN ISSC Development Fuel Tax Brentwood TN ISSC Development Loadmatcher Brentwood TN ISSC Development Phone Brentwood TN ISSC Development PC/Fuel Tax Brentwood TN ISSC Development Q/Point to Point Brentwood TN ISSC Development RapFax Brentwood TN ISSC Development Transportation Reporting Brentwood TN ISSC Development Transportation Special Project Brentwood TN ISSC Development Tranz Brentwood TN ISSC Development Truck Fax Brentwood TN 3 Schedule B Systems Software Software Product Vendor Version Release Main Frame System in LaVergne. TN 3270 Super Optimizer BMC Software 2 5 Abend-Aid/MVS/Radar Compuware 6 1 Abend-Aid/Batch Compuware 6 3 Abend-Aid/CICS Compuware 5 4 ACF/NCP IBM Corporation 4 3.1 ACF/SSP IBM Corporation 3 5 ACF/SSP/EP IBM Corporation 2 o ACF/VTAM IBM Corporation 3 3 Answer Sterling Software Assembler IBM Corporation 2 1 BTAM/SP IBM Corporation 1 1 CA-One MVS Computer Associates 5 0 CA-Eleven MVS Computer Associates 1 4 CA-Seven MVS Computer Associates 2 9 CA-Share-Option 5 Computer Associates 2 5.2 CA-90's Services Computer Associates 1 2 Cache Reporter IBM Corporation 1 4 CEMT From Batch MacKinney Systems 4 9 CICS IBM Corporation 2 1.2 CICS Message MacKinney Systems 4 2 CICS/OLFU MacKinney Systems 3 2 CICS/Show & Tell II MacKinney Systems 1 0 CICS /SPY MacKinney Systems 1 1 DF/DSS IBM Corporation 2 5 DF/HSM IBM Corporation 2 6 DFP IBM Corporation 3 1.1 DFSORT IBM Corporation 1 11.1 DITTO IBM Corporation 1 3 DSF IBM Corporation 1 13 DYL/280 11 MVS Sterling Software 3 5 Enlighten Software Professionals EREP IBM Corporation 3 5 File-Aid/SPF/Batch/XE Compuware 7 1 GDDM IBM Corporation 2 3 GPARS IBM Corporation 1 2.1 GTF/PARS IBM Corporation 1 1.3 Info Management IBM Corporation 4 2 Info System IBM Corporation 4 2 ISPF IBM Corporation 3 5 ISPF/PDF IBM Corporation 3 5 Inspector-MVS-Reel Knowledgeware 5 0 ES2 IBM Corporation 2 2.3 Job Scan Diversified Software 6 1.B 1 Kwik-Key MacKinney Systems Listcat-Plus MacKinney Systems Netview IBM Corporation 1 3 Net-Worker R. M. Graphic Management Systems 1 4 Omegamon II for MVS Candle 3 Omegamon II for CICS Candle 3 OS PL/I Compiler IBM Corporation 2 3.1 OS/VS Cobol IBM Corporation 1 2.4 OS/VS2 IBM Corporation 3 8 PC File Xsfer IBM Corporation 1 1.1 Pinpoint-MVS-Reel Knowledgeware 5 0 PL1 to Cobol Conversion Business Information Systems RACF IBM Corporation 1 9 Radar Compuware 4 3.1 Recoder Knowledgeware 5 0 RMF IBM Corporation 3 5.1 RPG/II IBM Corporation 1 1 SF IBM Corporation 1 2 ivice Drct IBM Corporation 4 0 SLR IBM Corporation 3 3 SMP/E IBM Corporation 1 8 Supertracs/Combo Sterling Software 4 3.1 Supertracs/ISPF Sterling Software Sysview (FAQS) Legent Corporation 4 2 The Monitor for CICS Landmark Systems 8 2 TMF-Auditor/SQL USA Software TSO/E IBM Corporation 2 1 VPS IBM Corporation 6 2 VS Cobol II IBM Corporation 1 4 VTAM Printer Support System Levi, Ray & Shoup, Inc. X.25 NPSI IBM Corporation 2 0 Xpediter/CICS/Assembler/CICS/As Compuware 6 6 Expediter/TSO/Assembler Compuware 5 3 Tandem System in Carrollton, TX Exchange Remote Job Entry Tandem EM3270 Access Method Tandem X25AM X.25 Access Method Tandem AM3270 Access Method Tandem TR3271 Access Method Tandem AM6520 Access Method Tandem uardian 90XF Tandem P 6100 Tandem Measure Upgrade Tandem 2 Nonstop SQL (Qty 10) Tandem Netbatch Plus Tandem Cobol 85 Tandem IXF-Host Tandem Safeguard Tandem Enlighten Software Professionals Control Source/Library System Network Concepts Jupiter System in Brentwood, TN Operating System Jupiter 3 7 Bisync Suite Jupiter PBX Session Manager Jupiter Voice Response System in Brentwood, TN E-Maintenance Syntellect Gateway Syntellect onitor Syntellect AS-4OO in Brentwood, TN 5738 AS/400 Application Development IBM Credit Corporation 2 3 5738 AS/400 PC Support IBM Credit Corporation 2 3 3738 AS/400 Performance Tools IBM Credit Corporation 2 3 5738 AS/400 Query IBM Credit Corporation 2 3 5738 AS/400 S/38 Utilities IBM Credit Corporation 2 3 5738 Operating System 1400 IBM Credit Corporation 2 3 5738 RPG/400 IBM Credit Corporation 2 3 Open Connect/FTP Clients Open Connect Systems 2 2 Open Connect/FTP Servers Open Connect Systems 2 2 AS/400 Rumba/400 for Windows & OS/ IBM Credit Corporation 2 3 R/S 6000 in Brentwood, TN AIX IBM Credit Corporation 3 2.5 AIX Windows Environment IBM Credit Corporation 1 2.3 AIX Xstation Manager IBM Credit Corporation 1 4.1 CLEO RJT Software IBM Credit Corporation 3 AIX 6000 Performance Management IBM Credit Corporation 1 3/94.231 Voice Mail in Brentwood, TN all Processing Exchange Dytel 5 1 3 Telecom Equipment in Brentwood, TN Definity AT&T 3 2 R2V4 AT&T 2 2 UNIX Operating System AT&T 3 2.1 Call Management System AT&T Call Management System AT&T CMS AT&T 2.3.1 1.3 Telecom Equipment in Avon, CT R1V3 AT&T 2 2 Call Accounting System AT&T 300 2.1 Telecom Equipment in Cincinnati, OH R1V3 AT&T 2 2 Call Accounting System AT&T 300 2.1 Telecom Equipment in Dallas, TX R2V4 AT&T 2 1 UNIX Operating System AT&T 3 1 Call Management System AT&T 2.28 1.1 4 Schedule C Comdata Machines Description Model S/N # Andatco MICROP 211 15MQ1086402 AT&T 386 with Monitor AT&T 572 Printer 406152983 AT&T 715 BCS Terminal 2412824 AT&T G3R PBX AT&T Switchboard Console 302A1 94DR10601570 AT&T UPS for CMS Codaram 23 inch cabinet Drive 2113207042 Fujitsu Tape Drive M248581 JU220 Motorola CSU/DSU FT100S Motorola UDS AID Modems 212 Motorola UDS Modem Racks RM16 PDM Rack with Modems Racal Host Security Module SMC Elite 108T Concentrator 3608TB Sun Monitor 3651-1-1286-01 Sun Workstation 600-3295-1 1 Schedule C-1 Comdata Licensed Software Software Product Vendor R2V4 AT&T Call Management System AT&T Definity AT&T R2V4 AT&T UNIX Operating System AT&T CMS AT&T Call Management System AT&T Call Accounting System AT&T UNIX Operating System AT&T Call Accounting System AT&T R1V3 AT&T R1V3 AT&T Call Management System AT&T Accts Rec: E MVS Dunn & Bradstreet The Monitor for CICS Landmark Systems Fixed Asset System Lawson Associates Universe Lawson Associates General Ledger, Prt. Writer Lawson Associates Accounts Payable Lawson Associates Sysview (FAQS) Legent Corporation Control Source/Library System Network Concepts Open Connect/FTP Clients Open Connect Systems Open Connect/FTP Server Open Connect Systems Enlighten Software Professionals Enlighten Software Professionals Supertracs/ISPF Sterling Software Answer Sterling Software DYL/280 II MVS Sterling Software Supertracs/Combo Sterling Software E-Maintenance Syntellect Gateway Syntellect Monitor Syntellect Q-Tel 900 United Communications TMF-Auditor/SQL Group USA Software 1 Schedule D ISSC Machines DESCRIPTION MAKE MODEL SERIAL # 14.4 Modem Intel 1114 212415 15 Local Area Data Sets Micom 400LD 2 Cabinets Memotec A352382 2 Cabinets Memotec A352381 3270 CPU IBM 5271 107951 360CE Laptop IBM 2620 HBZ35 360CE Laptop IBM 2620 GZP75 360CE Laptop IBM 2620 GZT42 360CE Laptop IBM 2620 HCG62 360CE Laptop IBM 2620 GZR26 360CE Laptop IBM 2620 HCF71 360CE Laptop IBM 2620 GZV11 360CE Laptop IBM 2620 HCF84 360CE Laptop IBM 2620 GZR50 360CE Laptop IBM 2620 GZP51 5 DBU's AT&T 839 FILI 8 Local Area Data Sets Micom 400LD 8 Local Area Data Sets Micom 400LD 8 Modems AT&T MPDM 8 Port Modem Assembly Microcom SXCH 1103380273 3 Port Modem Rack with mode Microcom SX/CH 404585 AS400 Disk Drive IBM 9336 16654 AS400 Disk Drive IBM 9336 34632 AS400 RACK IBM 9309 B3730 Async Multiplexors Teleglobe DM-2200 D930413 Async Multiplexors Teleglobe MC-2200 D930359 Async Multiplexors Teleglobe MC-2200 D930361 Async Multiplexors Teleglobe DM-2200 D930412 Async Multiplexors Teleglobe DM-2200 D930414 AT&T Monitor on Feline AT&T 33141 Auto Attdt/Voice Mail Dytel 9600M 167AC Auto Attd/Voice Mail Dytel 9600M 196AC Autodial CPU Panasonic Business Partner Autodial CPU IBM PC Autodial CPU Clone Autodial CPU IBM PC Autodial CPU IBM PC Autodial CPU IBM PC Autodial CPU Panasonic Business Partner Autodial CPU Panasonic FX600F1 6GCKS03255 Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Clone Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU IBM PC Autodial CPU Panasonic Business Partner Autodial CPU CLONE Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU IBM PC Autodial CPU 18M PC Autodial CPU Panasonic Business Partner 1 Autodial CPU IBM PC Autodial CPU IBM PC Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU IBM PC Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU IBM PC Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Clone Autodial CPU 18M PC Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial CPU Panasonic Business Partner Autodial Modem Okidata Okitel 1200 9080326A Autodial Modem Okidata Okitel 1200 9080750A Autodial Modem Okidata Okitel 1200 9060202A Autodial Modem Okidata Okitel 1200 90616598 Autodial Modem Okidata Okitel 1200 9061662A Autodial Modem Okidata Okitel 1200 11721A Autodial Modem Okidata Okitel t200 9090386A Autodial Modem Okidata Okitel 1200 906t115A Autodial Modem Okidata Okitel 1200 9061186A Autodial Modem Okidata Okitel 1200 9061066A Autodial Modem Okidata Okitel 1200 9061117A Autodial Modem Okidata Okitel 1200 9061660A Autodial Modem Okidata Okitel 1200 9061112A Autodial Modem Okidata Okitel 1200 9061064A Autodial Modem Okidata Okitel 1200 9090387A Autodial Modem Okidata Okitel 1200 909024EA Autodial Modem Okidata Okitel 1200 9061189A Autodial Modem Okidata Okitel 1200 9080301A Autodial Modem Okidata Okitel 1200 9080689A Autodial Modem Okidata Okitel 1200 9070072A Autodial Modem Okidata Okitel 1D0 9061658A Autodial Modem Okidata Okitel 1200 9070064A Autodial Modem Okidata Okitel 1200 9061185A Autodial Modem Okidata Okitel 1200 9061663A Autodial Modem Okidata Okitel 1200 9090243A Autodial Modem Okidata Okitel 1200 9070190A Autodial Modem Okidata Okitel 1200 9061114A Autodial Modem Okidata Okitel 1200 9061653A 2 Autodial Modem Okidata Okitel 1200 9061116A Autodial Modem Okidata Okitel 1200 9090244A Autodial Modem Okidata Okitel 1200 9090246A Autodial Modem Okidata Okitel 1200 9080303A Autodial Modem Okidata Okitel 1200 9080681A Autodial Modem Okidata Okitel 1200 9061011A Autodial Modem Okidata Okitel 1200 9091385A Autodial Modem Okidata Okitel 1200 9061187A Autodial Modem Okidata Okitel 1200 9090241A Autodial Modem Okidata Okitel 1200 9061068A Autodial Modem Okidata Okitel 1200 9061205A Autodial Modem Okidata Okitel 1200 909024lA Autodial Modem Okidata Okitel 1200 11722A Autodial Modem Okidata Okitel 1200 9061065A Autodial Modem Okidata Okitel 1200 9061188A Autodial Modem Okidata Okitel 1200 9080566A Autodial Modem Okidata Okitel 1200 9061661A Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome 3 Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor IBM Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodial Monitor Panasonic Monochrome Autodialer Racal Vadic Autodialer Racal Vadic Autodialer Racal Vadic Autodialer Racal Vadic Aux Cabinet AT&T J543886N 13534 Aux Cabinet AT&T J58886N 68306 Bridge Retix 4810 0446D1 Bridge Retix 4810 04411E Cabinet AT&T 25545 Card Expansion Unit IBM 4577 18679 Card Expansion Unit IBM 5030 35094 rd Read Punch IBM 1442 40958 rd Sorter IBM 83 unknown Cartridge Tape Drives IBM 3480 62805 Cartridge Tape Drives IBM 3480 65439 Cassette Drive IBM 7207 46581 CMS Console AT&T 4425 614259424L CMS System 11 AT&T XM140SS 9950126 COAX Mux IBM 3299 4210 COAX Mux IBM 3299 52863 Communication Controller IBM 3725 1636 Communication Controller IBM 3725 697 Communication Equipment OTC 850XL 78938 Communication Equipment Memotec 224 Series II Communication Equipment Memotec MP9000 1182 Communication Equipment Memotec MP9000 1180 Communication Equipment Memotec MC508 AB1023 Communication Equipment Memotec DM 456 A81728 Communication Switch IBM 3728 7064 Communication Switch IBM 3728 7063 Communications Controller IBM 3274 15962 Communications Controller IBM 3274 G3242 Communications Controller IBM 3274 F1282 Communications Controller IBM 3274 G6855 Communications Controller IBM 3274 87088 Communications Controller IBM 3274 G3243 Communications Controller IBM 3274 F4513 Communications Controller IBM 3274 G3245 Communications Controller IBM 3174 N7791 Communications Processor Jupiter NPSD614/A W00151 Communications Processor Jupiter NPSS608/A W00118 Communications Processor Jupiter INlPSD614/A W00216 Communications Processor Jupiter NPS9614/A W00130 Communications Processor Jupiter FJPS9614/A W00528 Communications Processor Jupiter NPSS614/A W00129 4 Communications Switch IBM 3728 7172 Communications Switch IBM 3728 7115 Communications Switch IBM 3728 7114 Communications Stitch IBM 3728 7116 Comm. Controller IBM 3726 580 Comm. Controller IBM 3726 198 Controller IBM 3725 7925 Controller IBM 3274 E4008 Controller Telex 2742C 10433 Controller IBM 3274 H8113 Controller IBM 3274 E4007 Controller IBM 3274 34724 Controller IBM 3274 E3286 Controller IBM 3274 D4217 Controller IBM 3274 E4006 Controller IBM 3274 H5210 Controller IBM 3274 F0621 Controller IBM 3274 G8127 Controller IBM 5394 8510 Controller IBM 3274 F10818 Controller IBM 3274 H4349 Controller IBM 3274 E6315 Controller IBM 3725 7393 Controller IBM 3274 F3750 Controller IBM 3274 F2397 Controller IBM 3274 E0408 Controller IBM 3274 90129 Controller IBM 3274 84466 Controller IBM 3274 17768 Controller Telex 274C2 10431 Controller Telex 2742C 10430 Controller IBM 3274 F0936 Controller IBM 3274 90940 Controller IBM 3274 D8801 CPU IMS 486DX50 DX501932 CPU IMS 486DX2/66 2125M CPU IMS 486DX33 486DX331701 CPU IMS 486DX50 DX214331 CPU AT&T WGS6286 89570900940 CPU IMS 486DX50 DX50702 CPU IMS 486DX2/66 2126M CPU IMS 486DX33 486DX331702 CPU IMS 486DX50 DX214343 CPU IMS 486DX50 48650071052 CPU IMS 486DX50 4865007125 CPU AT&T 6286 6413600 CPU IMS 486DX50 4865007122 CPU IMS 486DX2/66 2123M CPU AT&T WGS6386 895708005977 CPU IMS 386 SM256169212 CPU IMS 486SX33 11178 CPU IMS 486DXS DX214333 CPU IMS 486DX50 4865007123 CPU IMS 486DX50 DX501935 CPU IMS 486DXS0 DX50934 CPU IMS 486DX50 DX501932 CPU AT&T WGS6286 6450506 CPU IMS 486DX50 4865007095 CPU IMS 486DX33 486DX3311 CPU IMS 486DX50 DX501931 CPU MacIntosh IICI F2188CMF9803LL/A CPU IMS 486DX50 4865007105 CPU IMS 486DX33 11179 CPU IMS 486DX50 48650070951 CPU IMS 486DXS0 DX50931 CPU AT&T WGS6286 6441947 CPU IMS 486DX2/66 2437M CPU MacIntosh IICI F10342A3740 CPU IMS 486DX2/66 2127M CPU IMS 486DX50 4865007124 CPU DSH 486DX/33 1246 CPU IMS 4436SX25 486250613 CPU IMS 486DX2/66 2505S CPU IMS 486DX2/66 2128M CPU AT&T WGS6286 6424742 CPU AT&T WGS62-XP1330 6444730 CPU IMS 486DX33 486DX331703 CPU AT&T PC7300 370429045 CPU IMS 486DX50 DX501930 CPU IMS 486DX50 486500712 CPU IBM S1960 35160 CPU IMS 486DX50 DX50933 CPU IMS 486DX50 DX50701 CPU IMS 486DX246 486660713 CPU IMS 386SX 114838 CPU IMS 486DX50 DX214332 CPU IMS 486DX50 DX50701011 CPU Computrend 38S33 AM9480-0326 CPU AT&T WGS6286 6450304 CPU AST BRAVO 5 TWA1066749 CPU IMS 486DX50 214344 CPU UDS V.3225 59044 CPU Computrend 386 PC 9242-0725 CPU IMS 486DX50 7865007126 CPU IMS 486DX50 4865007121 CPU IMS 486DX33 486DX331704 CPU FastData 486SX25 33920 CPU FastData 486SX25 339211 CPU AST Bravo 286 TWA1090453 CPU AT&T 6286WGS 6426763 CPU FastData 486XC25 337767 CPU CCDI 926212R CPU FastData 486SX25 337765 CPU CCDI 92621-SH CPU CCDI 926214H CPU IBM 5160 5107108 CPU Wyse 1079012 CPU FastData 486SX25 337768 CPU FastData 486SX25 339208 CPU AST Bravo 286 166676 CPU IBM PS/2 62959 CPU IMS 486DX2/66 2436M CPU IMS 486DX2/66 25095 CPU Leading Edge D3SC 14011203213 CPU Vanguard 386SX25 9210009800 CPU IBM 8580 8020579 CPU FastData 486SX25 337766 CPU ICAS 486DX50 214345 CPU AT&T 286 6443811 CPU (Feline) AT&T 6286 6426598 CPU-CMS AT&T 4425 614259519L CPU-CMS AT&T 3B2-600 880C05952417 CPU-CMS AT&T 3B2-600 880C0295 CPU-CMS) Black Black CSU/DSU MS 337A4785 CTX Monitor CTX 6468 42306261 Data Set Ark EASI1B 3764178 Data Set Codex LS1 9600 63109 Datascope Digilog 320 380901D Digital Switch Panel Spectron Disk Mux DSU Eazy TM421187A Disk Drive IBM 9335 B5D09 Disk Drive IBM 9335 B4E3B Disk Drive IBM 9335 C4ERDE Disk Drive IBM 9335 B5ECC Disk Drive IBM 9335 D382F Disk Drive IBM 9335 83431 Disk Drive Rack IBM 9309 23478 Disk Drive Rack IBM 9309 82674 Disk Drive Rack IBM 9309 23628 Disk Drives IBM 9335 84243 Disk Drives IBM 9335 A2CF6 Diskette Drive IBM 9331 15353 DS1 Test Set Plantronics Wilcom T30801A 1743 Duplicated Common Control C AT&T J58886K 13521 Ext Scsi Drive Micropolis 1.7 GB 4011229075 Ext Tape Drive Connor 2 GB LBA10440 Fax Machine Murata F-50 F5Y01200021031L Fax Machine Okifax OKIFAX 800 130898 Fax Machine Okifax 800 130903 G2 CMS Workstation AT&T 1204990 Generators PILLER GENERATOR 1136358 Generators PILLER PARALLEL UNIT Generators PILLER GENERATOR 1182295 HDMS MICROCOM HSMS 445045 HDMS MICROCOM HDMS 444931 Info Window IBM 3476 19345 lk Jet Printer HP 550C SG39N260GD Inspector MCPU Graham Magnetics 650000R2 4105 Laptop IMS 386SX Laptop D0002403 Laptop P.C. Zenith ZFL-181 8351118602 Laptop P.C. Toshiba T1000 11832590 Laser Printer H.P. LaserJet III 3104JD4268 Laser Printer H.P. LaserJet III 3105J32921 LDDS Black Box LD485S LDDS Black Box ME711B 923P5032 LDDS Black Box ME711B 915P1772 MAU IBM 8228 WK099 MAU IBM 8228 XT367 MAU IBM 8228 WK095 MAU IBM 8228 87BDV MAU IBM 8228 468DW Microfilm Reader Northwest 575 H046849 Modem IBM 5853 24843 Modem Multitech V.32 2024189 Modem IBM 5853 75591 Modem IBM 5853 24836 Modem IBM 5853 24844 Modem IBM 5853 24839 Modem Microcom AX/2400C 1303161468 Modem IBM 5853 24762 Modem Everex 24E 0945A-00 Modem AT&T 4024 89MG10015230 Modem UDS V.3225 44568 Modem IBM 5853 24835 Modem IBM 5853 9506 Modem MultiTech V.32 2031278 Modem AST 2X2400 393 Modem Okidata CLP296 OO90084 Modem IBM 5853 24756 Modem UDS 32X 7455 Modem IBM 5853 24841 Modem IBM 5866 93871 Modem Black Box SW010B 613016996 Modem IBM 5853 24840 Modem UDS V.3225 5034 Modem MultiTech MT1432 3203726 Modem IBM 5853 24838 Modem IBM 5853 24761 Modem Okidata CLP296 90119 Modem IBM 5853 24761 Modem UDS 9648T OO8690 Modem AST 2X2400 US000495 Modem IBM 5855 24842 Modem UDS V.3225 36019 Modem IBM 5853 24837 Modem AST 2X2400 US000619 Modem Okidata CLP296 90101 Modem Microcom AX-2400C 14030-28420 Modem 2400 Microcom AX2400/C D31309124 Modem 2400 Microcom AX2400/C B313131213 Modem Cabinet ROCKWELL G36800/A Modem Eliminators Black Box RM700A 037P1771 Modem Eliminators Black Box RM700A 13401112 Modem Eliminators Black Box RM7008 040P2128 Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo VDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem Rack with 16 V.32 Mo UDS RM16M Modem-CMS AT&T 890C01950710 Modem-CMS AT&T 890C02950224 Module Control Cabinet AT&T J58886B 33384 Module Control Cabinet AT&T J58886B 68308 Module Control Cabinet AT&T J58886B 13528 Module Control Cabinet AT&T J58886B 68309 Module Control Cabinet AT&T J58886B 68311 Module Control Cabinet AT&T J58886B 13532 Module Control Cabinet AT&T J58886B 68307 Module Control Cabinet AT&T J58886B 68310 Module Control Cabinet AT&T J58886B 13530 Monitor IBM 8512 120828 Monitor CTX 6468 42306729 Monitor CTX 6468 35101243 Monitor CTX 1461 32001622 Monitor CTX SVGA 6468ES A10-42401996 Monitor Panasonic Business Partner Monitor VIEWSONIC 7031 1623486294 Monitor CTX SVGA 6468ES A1042402071 Monitor CTX 5486 249009343 Monitor CTX 6468 42003727 Monitor Samsung 4571 504010 Monitor CTX 1451 402051 Monitor CTX SVGA 6468ES A10-42402011 Monitor CTX 1452 40806612 Monitor AST VGA C1492 Monitor CTX 1451 40806612 Monitor AT&T 329M 888610007109 Monitor Mitak SVGA N-30109634 Monitor AST Monitor Tatung monochrome 90700171 Monitor CTX 1451 4050345 Monitor AST CVGA 14771 Monitor AT&T Monitor Leading Edge CMON.28 501012018617 Monitor IBM PC Monitor IBM 5153 394699 Monitor ADC MM411 1450038065 Monitor CTX SVGA COLOR A40-24702129 Monitor CTX SVGA COLOR A40-31203863 Monitor CTX CVP-5468A K40-24900042 Monitor CTX SVGA COLOR A40-30201294 Monitor MacIntosh Monitor CTX CVP-5468A K40-24900093 Monitor CTX SVGA COLOR A40-31201268 Monitor Viewsonic 6E 3720800129 Monitor Magnavox Professional Monitor CTX SVGA COLOR A70-23100792 Monitor AT&T Monochrome 885408039197 Monitor AT&T CRT 313 1795023 Monitor CTX SVGA COLOR A40-31203958 Monitor CTX CVP-5468A K40-24900007 Monitor CTX SVGA 6468ES A10-42402053 Monitor AT&T Monochrome 88547031115 Monitor CTX CVP-5468A A40-3023285 Monitor CTX SVGA COLOR A40-31203855 Monitor CTX SVGA COLOR A40-31405011 Monitor Viewsonic 7031 1620156510 Monitor CTX SVGA COLOR A70-S3100638 Monitor CTX SVGA COLOR A40-31404983 Monitor AT&T Monitor CTX SVGA COLOR A70-23100528 Monitor CTX SVGA COLOR A40-31203878 Monitor CTX SVGA COLOR A40-31203879 Monitor CTX CVP-5468A K40-24900110 Monitor Arcus CM-1402A 4310310088 Monitor AT&T Monitor AT&T WGS6286 6424742 Monitor AT&T Monochrome 898610029645 Monitor CTX SVGA COLOR A40-31203106 Monitor CTX SVGA COLOR A40-23400727 Monitor CTX SVGA COLOR a40-24702128 Monitor CTX CVP-5468A A40-30601131 Monitor CTX SVGA COLOR A40-31101227 Monitor IBM 5272 F7634 Monitor CTX SVGA COLOR A40-31101119 Monitor CTX SVGA COLOR A40-31404955 Monitor CTX SVGA COLOR A40-23100614 Monitor Viewsonic 6E 1814020715 Monitor CTX CVP-5468A A40-30201275 Monitor AST 0024UIC1545 Monitor CTX 1451 4050338 Monitor CTX 1451 40401033 Monitor CTX CVP-5468A A40-30601146 Monitor Viewsonic 7031 1620156638 Monitor Panasonic Business Partner Monitor CTX SVGA COLOR A40-31203885 Monitor CTX SVGA COLOR A40-25302334 Monitor IBM 5272 A1966 Monitor CTX SVGA COLOR A40-30600652 Monitor Premio Premio 96460168 Monitor AT&T CRT 314 885402005606 Monitor CTX CVP-5468A A40-30203245 Monitor AT&T Monitor AT&T CRT 314 885402008286 Monitor CTX CVP-5468A K40-24900006 Monitor CTX SVGA COLOR A40-25001692 Monitor CTX SVGA COLOR A40-30201303 Monitor CTX CVP-5468A K40-24900134 Monitor CTX 1451 40401049 Monitor CTX 1451 3470556 Monitor CTX SVGA 41960118 Monitor Panasonic Business Partner Monitor for Remote Print Arcus CM-1042 4310310087 Multi Port Spooler II Black Box P1523 9051856 Multiplexor IBM 3299 C8933 Multiplexor IBM 3299 C8874 Multiplexor IBM 3299 C2715 Multiplexor IBM 3299 C9923 Multiplexor IBM 3299 C8916 Multiplexor IBM 3299 C8993 Multiplexor IBM 3299 C0421 Multiplexor IBM 3299 C2176 Multiplexor IBM 3299 C8929 Multi-Protocol Intellegent Hub IBM 8250 93478 NEC Digital DS3 Multiplexor RC-28D 2345 Notebook Computer Avanti 25 103799 Notebook Computer Avanti 25 103779 Notebook Computer CTX EzBOOK 87795 Overhead Projector 3M 910 918441 PCM-CIA Token Ring Card IBM 9339 10762 Plazma screen IBM 3290 AT795 Plazma screen IBM 3290 A7783 Plotter HP 7475A 2325A75918 Plotter IBM 6180 A6273 Port Cabinet AT&T J58886C 68313 Port Cabinet AT&T J58886C 13533 Port Cabinet AT&T J58886C 68317 Port Cabinet AT&T J58886C 33386 Port Cabinet AT&T J58886C 68312 Port Cabinet AT&T J58886C 68315 Port Cabinet AT&T J58886C 13529 Port Cabinet AT&T J58886C 13531 Port Cabinet AT&T J58886C 68318 Port Cabinet AT&T J58886C 25543 Port Cabinet AT&T J58886C 25544 Port Cabinet AT&T J58886C 683t4 Port Cabinet AT&T J58886C 68316 Power Display 17 IBM 3818 12230 Power Display 17 IBM 3818 1410 Power Dist Unit Controlled Power 72C8DLX7SSD D2035990 Power Dist Unit Controlled Power 72C8DLX125SD D10041990 Printer Okidata m1182plus 812a0099092 Printer Okidata GE525OU 901A0100269 Printer Panasonic KXP10911 7KKALH83608 Printer Okidata GE5251B 504A0042040 Printer Hewlett Packard LaserJet III 3001A36328 Printer Okidata GE5250U 008A1146340 Printer Okidata GES2E0U 904A0115897 Printer IBM 6262 12562 Printer Panasonic KXP1091 6EKACU60363 Printer Okidata GE5250U 006A1132525 Printer NEC Pinwriter P6 580297732 Printer OMS LPP-410-1 2210 Printer Okidata GE5250B 706B03759125 Printer Okidata GE5250U 904A1016057 Printer Okidata GE5250 907A1039300 Printer IBM 4201 51472 Printer Okidata GE5250U 902A1001243 Printer Panasonic KX-P10911 7KKALH82773 Printer Epson LQ810 OA50205661 Printer Epson FX1050 OE10072002 Printer IBM PC Graphics 96542 Printer Okidata GE5250U 911A1080148 Printer Okidata GE5250B 812B0502092 Printer NEC P6 580264939NY Printer IBM 6262 12563 Printer Epson LX-810 P80SA OA50205636 Printer Okidata 182 115899 Printer Panasonic KX-P4410 LASER 2LMBRK56957 printer Okidata GE52500 010A1187163 Printer Okidata GES250B 706B0379134 Printer IBM Pro Printer 3478438 Printer Okidata GE5250U 101A1216563 Printer Okidata GE5250U 101A1213595 Printer Okidata GE5250U 909A1062377 Printer IBM 4201 35636 Printer Okidata 5250 1025615 Printer Epson LQ810 OA50205655 Printer Okidata 182 1039120 Printer NEC Pinwriter P6 580297691 Printer Okidata GE5250U 911A1080612 Printer Okidata GE5250U 901A0100281 Printer IBM 3287 H0987 Printer QMS PS810 2357 Printer OKIDATA 182 115897 Printer IBM 3812 51946 Printer IBM 5533 10775 Printer IBM Proprinter 44614 Printer Star NP10 270070310212 Printer Okidata GES250U 904A0115908 Printer Epson LQ850 0F21000830 Printer IBM 3820 966 Printer Okidata 182 1156346 Printer 18M 4029030 D0277 Printer Okidata 182 1062387 Printer IBM 4224 34741 Processor IBM 9406 28135 Protocol Converter Vendata Resolver VIII 1276 Protocol Converter IBM 5208 11826 Protocol Converter IBM 5208 12394 Protocol Converter IBM 3708 7280 Rapfax CPU AT&T Monochrome Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T Monochrome Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T WGS6 286 6450490 Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS 6425828 Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax CPU AT&T 6286 WGS Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Rapfax Monitor AT&T Monochrome Remote Print PC DSH RM\100 1245 Risc 6000 IBM 7013 39433 SCSI Dataswitch Dataswitch DDS1022 1259 Series 8 Multiple Modem Syste AJ M8 3073 Shredder DESTROYIT 2206 S rs Black Box TL604 N/A Stat 24 MUX Black Black Stat 24 Stat 24 MUX Black Black Stat 24 Stat 24 MUX Black Black Stat 24 SVGA Monitor CTX 6468 43704096 SVGA Monitor CTX 1451 44200849 SVGA Monitor CTX 6468 42309554 SVGA Monitor CTX 1451 44201208 SVGA Monitor C5X 1451 44201204 Switch Sys 75 AT&T SD-66983-01 10000230540 Sync Multiplexors Teleglobe MC508 C930054 Sync Multiplexors Teleglobe MC508 C930052 System 85 - R2V5 AT&T Generic II 5683190 S/1 Cabinet #10 IBM 4997 22538 S/1 Cabinet #2 IBM 4997 39522 S/1 Cabinet #3 IBM 4997 47248 S/1 Cabinet #4 IBM 4997 38812 S/1 Cabinet #5 IBM 4997 31890 S/1 Cabinet #6 IBM 4997 none S/1 Cabinet #7 IBM 4997 32833 S/1 Cabinet #8 IBM 4997 20857 Tape Control Unit IBM 3480 19067 Tape Drive Colorado Mem Trakker 250 50174274 Tape Drive Cypher 995 C900050975 Tape Drive Colorado Mem Trakker 250 50174267 Tape Drive IBM 3422 A6620 Tape Drive (Cart) IBM 3480 64494 Tape Drive (Cart) IBM 3480 64221 Tape Unit IBM 3420 M1974 Tape Unit IBM 3420 72517 Tape Unit IBM 3420 M5954 Terminal IBM WY-50 20557 Terminal Memorex-TElex 1192F 99494 Terminal HP 700-43 3041A06695 Terminal IBM 3197 EP390 Terminal Lear Seigler ADM-31 411229 Terminal Wyse WY-50 1161860 Terminal Televideo 905 22A-A88112979E Terminal IBM 3180 EZ287 Terminal HP 700-43 3101A07561 Terminal IBM 3727 A5747 Terminal IBM 3191 W5164 Terminal IBM 3191 W5211 Terminal IBM 3197 EP399 Terminal IBM 3205 1591 Terminal IBM 3178 GW816 Terminal Wyse 1055821 Terminal IBM 3191 W5150 Terminal DIGITAL VT220 TA733L0255 Terminal Console Wyse WY-50 10501543 Terminal Server Xylogics Annex 3 47306 Time Mulpxr Cabinet AT&T J58886F 13536 TMS/RMI Cabinet AT&T J58886F 68320 Transmission Test Set HP 4935A 2314A04999 Typewriter IBM Selectric II Typewriter IBM 670X 50th Anniversary UDS 801 UDS 801 A/C 7862 UDS Modem UDS V.3225 40055 UPS APC 600 B93060527671 UPS APC 600 B94104177550 UPS APC 600 B93060527635 V4 CMS Workstation AT&T 1204988 Videodisk Player Sony LDP-1450 813736 Videodisk Player Sony LDP-1450 813511 Voice Response Cabinet Syntellect Emperor 23465 Voice Response Cabinet Syntellect Emperor 23077 Voice Response Cabinet Syntellect Emperor 23636 Voice Response Cabinet Syntellect Emperor 22857 Voice Response Cabinet Syntellect Emperor 21886 Voice Response Cabinet Syntellect Emperor 22859 Voice Response Cabinet Syntellect Emperor 23025 Voice Response Unit Syntellect Premier 23378 Voice Response Unit Syntellect Premier 21830 Voice Response Unit Syntellect Premier 22794 Voice Response Unit Syntellect Premier 21642 Voice Response Unit Syntellect Premier 23261 Voice Response Unit Syntellect Premier 21988 Voice Response Unit Syntellect Premier 21615 Voice Response Unit Syntellect Premier 23798 Voice Response Unit Syntellect Premier 23144 Voice Response Unit Syntellect Premier 22978 Voice Response Unit Syntellect Premier 25004 Voice Response Unit Syntellect Premier 22446 Voice Response Unit Syntellect Premier 23386 Voice Response Unit Syntellect Premier 23264 Voice Response Unit Syntellect Premier 23145 Voice Response Unit Syntellect Premier 23137 Voice Response Unit Syntellect Premier 23142 Voice Response Unit Syntellect Premier 22070 Voice Response Unit Syntellect Premier 23092 Voice Response Unit Syntellect Premier 22549 Voice Response Unit Syntellect Premier 23173 Voice Response Unit Syntellect Premier 22792 Voice Response Unit Syntellect Premier 22936 Voice Response Unit Syntellect Premier 23824 Voice Response Unit Syntellect Premier 25220 Voice Response Unit Syntellect Premier 23146 Voice Response Unit Syntellect Premier 21983 Voice Response Unit Syntellect Premier 21796 Voice Response Unit Syntellect Premier 23807 Voice Response Unit Syntellect Premier 21401 Voice Response Unit Syntellect Premier 23826 Voice Response Unit Syntellect Premier 22791 Voice Response Unit Syntellect Premier 21637 Voice Response Unit Syntellect Premier 23718 Voice Response Unit Syntellect Premier 23174 Voice Response Unit Syntellect Premier 23263 Voice Response Unit Syntellect Premier 22732 Voice Response Unit Syntellect Premier 23269 XStation 140 IBM 7010 25117 Printer Okidata 5250 394494 Terminal AT&T 53D4102AA 901300903594 Digital Analyser Cook NT7M25AA G06-22-423 Printer Okidata 250U 1038790 MPDM AT&T SD-10327-01 4009625 Switch AT&T Sys 75 030-005-595-2 Monitor AT&T CRT314 885403011193 Modem AT&T MPDM SD1D32741 CPU AT&T 6300 170154 Monitor AT&T 56D 187102529L Modem AT&T 2224CEO 91P058821786 CPU-CMS AT&T 3B2-400 860C10951221 Digital Announcer AT&T NT7M100AA G0916103 CPU-CAS AT&T 300 6446082 Modem AT&T 2192 89MG10007830 Digital Announcer AT&T 2680 G0917006 Digital Announcer AT&T 2680 G0916105 Switch Sys 75 AT&T SD66969-01 Printer Okidata ML182 1038785 Terminal Tandem 6526 AEU19 Printer Okidata 182 80280436541 Terminal Tandem 6526 ARR52 Terminal Tandem 6526 ABZ17 Printer Data Products LM 615 2926A07972 Printer Tandem 5516 2629A00953 Printer Tandem 5516 2629A01058 Terminal Tandem 6526 ABB65 printer HP Laserjet IV USBB107356 PC Dell 486SX25 2GR57 Laser Printer HP Laserjet III 3303J84130 Paper White Monitor CornerStone DP120 1696-D PC Dell 486DX2-50 2CZDJ Paper White Monitor CornerStone DP120 14719 Laser Printer HP Laserjet IV USBB108231 Laser Printer HP Laserjet III 304BA34500 Paper White Monitor CornerStone DP120 19377-D Laser Printer HP Laserjet III 3034J84169 PC Dell 486DX2-50 2CZDG Terminal Tandem 6526 AVM94 Terminal Tandem 6532 10153 PC Dell 486DX2-50 2CZ93 PC Dell 4B6DX2-50 2CZCX PC Dell 486DX2-50 2CZCT PC Dell 486DX2-50 2CZD7 PC Dell 486DX2-50 2GR55 PC Dell 486DX2-50 2CZ8M PC Dell 486DX2-50 2CZ98 PC Dell 486DX2-50 2CZ9X PC Dell 486DX2-50 2CZ91 Printer Tandem LA34-DA 83990 PC Dell 486DX2-50 2CZ9N PC Dell 486/66 3444T PC Dell 486/66 340SN PC Dell 486/66 2CXNR PC Dell 486/66 2CY13 Terminal Tandem 6526 A72883 Terminal Tandem 6531 24737H139 Paper White Monitor CornerStone DP120 1582-D K1000 CPU w/32MB Tandem H12ZTT Paper White Monitor CornerStone DP120 14701 Disk Drive Tandem 4240 TJ47110 PC Dell 486SX25 2GR63 Paper White Monitor CornerStone DP120 1701-D CLX Tape Cabinet Tandem Tape Drive Tandem 5107 3008A02025 CLX Cabinet 1 Tandem K1000 CPU w/32MB Tandem H12ZUJ Disk Drive Tandem 4250 SR708515 Disk Drive Tandem 4240 TJ29334 PC Dell 486SX25 2GRSV Disk Drive Tandem 4230 S08KEZ MFC Controller Tandem 3681 9122 MFC Controller Tandem 3681 8691 Ethernet Controller Tandem 3612 H0S4NN 3606 Controller Tandem 3606 4702 PC Dell 486DX2-50 2CZDC 3606 Controller Tandem 3606 1424 Paper White Monitor CornerStone DP120 1579-D PC Dell 486SX25 2GR5X Paper White Monitor CornerStone DP120 16241-D PC Dell 486SX25 2CBR5D PC Dell 486SX25 2GR61 Paper White Monitor CornerStone DP120 14786-D PC Dell 486SX25 2GR59 Paper White Monitor CornerStone DP120 14717 PC Dell 486SX25 2GR5Z Paper White Monitor CornerStone DP120 19372-D PC Dell 486SX25 2GRSC Paper White Monitor CornerStone DP120 15101-D Paper White Monitor CornerStone DP120 19373-D Paper White Monitor CornerStone DP120 1700-D Paper White Monitor CornerStone DP120 20302-D PC Dell 486SX25 2GR5H PC Dell 486SX25 2GR58 Paper White Monitor CornerStone DP120 16238-D PC Dell 486SX25 2GR67 Paper White Monitor CornerStone DP120 20300-D PC Dell 486SX25 2GR56 PC Dell 486DX2-50 2CZDK Control Unit HP 3274 K7014 Optical Library HP C1710C-100 3268A0015G Printer HP Laserjet III USSB035817 Terminal Tandem 6526 AE622 Printer Okidata 182 907A1038943 Flat Screen Monitor NEC 3FGX 15" .281024 M31588A PC Dell 486DX2-50 2CZCY Flat Screen Monitor NEC 3FGX 15" .28 1024 M31537A Controller- pc cards IBM 5294 55273 PC Dell 486DX2-50 2CZCW Terminal Tandem 6526 AVK42 INX 5000 3Slot Chassis Racal INX5000 10084198 Personal Computers Tandem 6AX40 6AX40 Scanner Fujitsu M3093E 2288 Monitor Dell 15FS 15" .28 1024 33480125 PC Tandem MLAD 20141116 PC Tandem 386SX16 UPS7022645 PC Tandem 386SX16 UPS7022641 PC Tandem 386SX16 UPS7019883 Controller- pc cards IBM 5394 8548 24 Post Ethernet Hub Racal INX5000 12 Port Ethernet Hub Racal INX5000 Terminal Tandem 6526 AO239 ROM Burner Yamaha Disk Drive - 2000 MB Tandem 4510 COLPMU 2GB External Drive Seagate N3039593 2GB External Drive Seagate N3013687 Tape Racks Monitor Viewsonic 15" monitor Monitor Viewsonic 17" SVGA Tape Backup System Dell Pentium PC Dell Laser Printer HP Laserjet III 3120J57723 Pentium PC Dell Dimension P-90 dem Memory Upgrade Tandem Optical Jukebox Model 40T HP C1700T 3332A00396 Modem Hayes internal N Wallace Modem Hayes internal T Kipp Modem Hayes internal A Ables Printer Okidata 182 206A0057817 Personal Computers Tandem 6AX40 A-JEC70 Printer Okidata 182 206A0034Z4 CD-ROM Tandem 1 X60002793 Terminal Tandem 6530 10863 PC Dell 486DX2-50 2CZB9 Terminal Tandem 6526 ML64 Terminal Tandem TS-530 2101155 Flat Screen Monitor NEC 3FGX 15" .28 1024 M11525A Terminal Tandem 6526 AH3774 Printer Data Products LM615 2904A07061 Terminal Tandem 6530 13205 Personal Computers Tandem 6AX40 A-1292 Flat Screen Monitor NEC 3FGX 15" .28 1024 M31596A Laser Printer H.P. LaserJet III 3105466J32922 Printer TI 820 482005164 Rack #4 Tandem Rack #3 Tandem Rack #2 Tandem Rack #1 Tandem CO-ROM Tandem 1X60004361 Controller - pc cards IBM 5294 55275 Printer Okidata 182 206A0057793 Terminal Tandem TS 530 2104748 Terminal Tandem 6530 NONE Scanner Fujitsu M3096E 1137 Terminal Tandem TS-530 2277894 Printer Okidata 320 1 02C048581 Flat Screen Monitor NEC 3FGX 15" .28 1024 M31590A Controller- pc cards IBM 5294 55274 PC Dell 486DX2-50 2CZCQ Monitor Dell 15FS 15" .28 1024 324A5335 PC Dell 486DX2-50 2CZD3 PC Dell 486DX2-50 2CZDQ Flat Screen Monitor NEC 3FGX 15t .28 1024 M33033A PC Dell 486SX25 2GR64 Optical Drive HP C171 6C Corsair 5.25 3264ACL1936 Terminal Tandem 6526 AJ240 Terminal Tandem TS-530 2185354 Controller- pc cards IBM 5294 55447 PC Dell 486DX2-50 2CZBL Printer Okidata 182 906A1025774 3601 Controller Tandem 3601 HOPMBU 3606 Controller Tandem 3606 444 Disk Drive - 2000 MB Tandem 4510 COLPM5 Disk Drive - 2000 MB Tandem 4510 COLPM3 MFC Controller Tandem 3681 HOS03A K1000 CPU w/32MB Tandem K1000 H128KD K1000 32MB Memory Board Tandem K1000 H1251S K1000 CPU w/32MB Tandem K1000 H1231J K1000 32MB Memory Board Tandem K1000 HOXEOH Disk Drive Tandem 4230 S08KEW Disk Drive Tandem 4230 S08KEN 3606 Controller Tandem 3606 4600 MFC Controller Tandem 3681 HORZYL 3601 Controller Tandem 3601 FJ04V8R 3606 Controller Tandem 3606 4596 3606 Controller Tandem 3606 4218 3601 Controller Tandem 3601 HORVBZ 32 port Mux Racal Milgo Omnimux 322 ZW02037 32 port Mux Racal Milgo Omnimux 322 ZW03911 32 port Mux Racal Milgo Omnimux 322 ZW06215 CLX Cabinet 1 Tandem 3606 Controller Tandem 3606 4550 DSU Racal Milgo 556RD AES2386 Ethernet Controller with Trans Tandem T/3613-1 HORVMO MFC Controller Tandem 3681 13702 3605 controller Tandem 3605 5412 3602 Controller Tandem 3602 HOS7KE Disk Controller Tandem 3126 V03RDE Controller Tandem 3126 V031N0 Cabinet 1A Tandem Disk Drive Tandem 4250 SR285436 Disk Drive Tandem 4250 SR285439 3606 Controller Tandem 3606 5320 Disk Drive Tandem 4250 4424623 Disk Drive Tandem 4250 44241O4 MFC Controller Tandem 3681 21342 MFC Controller Tandem 3681 21334 3606 Controller Tandem 3606 7828 3506 Controller Tandem 3606 6858 32 port Mux Racal Milgo Omnimux 322 ZW05951 DSU Racal Milgo 556RD AES5515 DSU Racal Milgo 556RD AES7X9 Disk Drive Tandem 4220 S03E7E Port Cabinet AT&T J5886C 29721 Gateway 2000 Color Notebook Gateway 2000 9312851S8 1959522 CPU-CMS AT&T 3B2/400 88OCD3951541 System Managment Terminal AT&T J58889K1 Aux Cabinet AT&T J58886N 29717 Module Control Cabinet AT&T J58886K 29722 Module Control Cabinet AT&T J58886B 29719 System 85 AT&T J588B6B 29718 Time Mulpxr Cabinet AT&T J58886F 29723 Modem Hayes external A0015106K788 System 85 AT&T J58886C 29720 High Speed Laser Printer XEROX 4850 200021 High Speed Laser Printer XEROX 4850 200020 Modem Racal-Vadic V12422PA-SVC CBJK4728 Modem Racal-Vadic V12422PA-SVC CBJK4709 Drive - 2000 MB Tandem 4510 COLPKL m Hayes external A0015105K787 Controller IBM 3274 D0416 DSU Racal Milgo 556RD AES2870 12 Port Ethernet Hub RACAL INX5000 16 Port Terminal Server RACAL INX5000 12 Port Ethernet Hub RACAL INX5000 INX 5000 3Slot Chassis RACAL INX5000 10083205 16 Port Terminal Server RACAL INX LINK 12 Port Ethernet Hub RACAL INX5000 24 Port Ethernet Hub RACAL INX5000 Diagnostic Mux RACAL EOM APP4687 INX 5000 3Slot Chassis RACAL INX5000 10083028 Printer IBM 3812 33452 Bridge RACAL RNX6300 BIK0274 Tape Drive Super Array 14102 Cartridge Tape Drive Novadyne 5180NLC C900052128 Cartridge Tape Drive Novadyne 5180NLC C800013141 Monitor NEC 3V14".26 1024 3406091KA Controller - pc cards IBM 5394 8542 MFC Controller Tandem 3681 13709 Tape Drive Cabinet Novadyne Disk Drive Tandem 4220 WE124949 MFC Controller Tandem 3681 V03S4H Cabinet 4 Tandem K1000 CPU w/32MB Tandem K1000 H14N1M K1000 CPU w/32MB Tandem K1000 H13JAN K1000 32MB Memory Board Tandem K1000 H125K2 K1000 32MB Memory Board Tandem K1000 HOW888 MFC Controller Tandem 3681 V03S6K Tape Controller Tandem 3214 V0194W Ethernet Controller Tandem 3215 H156WJ Tape Drive Tandem 5107 3008A02163 Disk Controller Tandem 3128 V00U4D Disk Controller Tandem 3128 H0XWK7 CLX Cabinet 3A Tandem Disk Drive Tandem 4240 B031329 MFC Controller Tandem 3681 13628 MFC Controller Tandem 3681 13578 Tape Drive Tandem 5107 3008A01756 CLX Tape Cabinet Tandem 3606 Controller Tandem 3606 4595 Disk Drive -1038 MB Tandem 4500 CO6VSL Disk Drives Tandem 4220 Disk Drive - 2000 MB Tandem 4510 COKYUP Disk Drive - 2000 MB Tandem 4510 COKYUL Disk Drive - 2000 MB Tandem 4510 C0LPMV Disk Drive - 2000 MB Tandem 4510 C0LPM1 Disk Mosaic W/Pedistal - 18 D Tandem 4500 Disk Drive -1038 MB Tandem 4500 CO6860 Disk Drive -1038 MB Tandem 4500 CO6VSK Disk Drive -1038 MB Tandem 4500 C06VS9 Disk Drive -1038 MB Tandem 4500 C06VTC Disk Drive -1038 MB Tandem 4500 C06VSV Disk Drive -1038 MB Tandem 4500 C06VSH Disk Drive -1038 MB Tandem 4500 C06VSD Disk Drive -1038 MB Tandem 4500 C06VSB Disk Drive -1038 MB Tandem 4500 C06VSA 3606 Controller Tandem 3006 4601 Disk Drive -1038 MB Tandem 4500 C06042 3606 Controller Tandem 3606 4591 3606 Controller Tandem 3606 4589 3606 Controller Tandem 3606 4586 3606 Controller Tandem 3681 13633 3606 Controller Tandem 3681 13624 3606 Controller Tandem 3606 V00T09 3606 Controller Tandem 3606 18666 3606 Controller Tandem 3606 5960 3606 Controller Tandem 3606 4587 3606 Controller Tandem 3606 968 3606 Controller Tandem 3606 4324 Disk Drives Tandem 4240 626166 CLX Cabinet 2 Tandem K1000 CPU w/32MB Tandem K1000 H123LX K1000 32MB Memory Board Tandem K1000 H11W9H K1000 32MB Memory Board Tandem K1000 H11W93 Controller Tandem 3606 4545 K1000 CPU w/32MB Tandem K1000 HOZZT8 Disk Drive Tandem 4230 SO8KEV 3606 Controller Tandem 3606 4598 Disk Drive Tandem 4240 B035193 CLX Cabinet 2A Tandem Disk Drive Tandem 4240 B03708A 3606 Controller Tandem 3606 4541 Disk Controller Tandem 3128 V03RDL CLX Cabinet 3 Tandem K1000 CPU w/32MB Tandem K1000 H12ZY5 K1000 32MB Memory Board Tandem K1000 H11W9B K1000 CPU w/32MB Tandem K1000 H08L8X K1000 32MB Memory Board Tandem K1000 H0XEOE MFC Controller Tandem 3681 13712 Tape Controller Tandem 3214 H0M5L4 3605 Controller Tandem 3605 9095 Disk Controller Tandem 3128 V03SRC 3606 Controller Tandem 3606 3861 MFC Controller Tandem 3681 13707 Tape Drive 3420 M7343 Tape Drive 3420 51671 Cartridge Tape Unit IBM 3480 B0125 Cartridge Tape Unit IBM 3480 Cartridge Tape Unit IBM 3480 66941 3390 18M 339O A1078 3390 IBM 3390 B2161 Cartridge Tape Unit IBM 3480 69616 Cartridge Tape Unit IBM 3480 21645 Controller IBM 3174 AA466 Controller IBM 3174 AW594 Controller IBM 3174 N7807 Controller IBM 3174 N3521 Tape Unit IBM 3420 51672 Controller IBM 3174 N0153 Cartridge Tape Unit IBM 3480 69620 Disk Controller IBM 3990 32355 Tape Drive IBM 3480 70773 3390 IBM 3390 B2260 Cartridge Tape Unit IBM 3480 65184 Printer IBM 3287 4421 Cartridge Tape Unit IBM 3480 66786 Cartridge Tape Unit IBM 3480 16595 Tape Unit IBM 3420 M17336 Tape Unit IBM 3420 89287 Tape Drive IBM 3480 50588 Tape Drive IBM 3480 73272 Disk Controller IBM 3880 97570 DASD IBM 3380 TU368 DASD IBM 3380 TU416 DASD IBM 3380 TU430 DASD IBM 3380 AE799 DASD IBM 3390 A4946 DASD IBM 3380 TU415 DASD IBM 3380 TU395 Disk Controller IBM 3880 97682 DASD IBM 3380 AE682 Printer IBM 3287 C4777 Power Unit IBM 3089 45841 DASD # IBM 3380 TU432 DASD IBM 3390 B4105 Tape Unit IBM 3420 M7378 Tape Drive IBM 3480 23706 DASD IBM 3380 M9983 Autodial/Modem IBM 3864 48202 Tape Unit IBM 3420 38514 Data Station IBM 3741 57542 Communication Search IBM 3728 7772 Controller IBM 3174 AW604 Disk Controller IBM 3990 40263 Disk Drives IBM 3390 A4007 Disk Drives IBM 3390 B6383 Autodial Modem IBM 3864 65581 Disk Drives IBM 3390 B6376 Tape Unit IBM 3420 50412 CPU IBM 5273 25635 Disk Controller IBM 3990 32644 DASD IBM 3390 B4028 Cartridge Tape Unit IBM 3480 53497 Power Unit IBM 3089 47115 Communication Switch IBM 3728 7772 Power Unit IBM 3089 47752 Front End Processor IBM 3725 10389 Power Unit IBM 3089 47425 Tape Drive IBM 3480 50586 Power Unit IBM 3089 47753 Processor Unit IBM 3092 85275 Power Controller IBM 3097 75017 Communication Switch IBM 3728 7776 Communication Switch IBM 3728 7773 Front End Processor IBM 3725 1812 Front End Processor IBM 3725 8443 Communication Switch IBM 3728 7775 Communication Switch IBM 3728 7774 Front End Processor IBM 3725 8851 Tape Control Unit IBM 3803 21493 Communications Controller IBM 3174 N3514 Front End Processor IBM 3725 5433 Processor IBM 3090 75017 Power Controller IBM 3097 75018 Front End Processor IBM 3725 5584 Communication Switch IBM 3728 7777 Voice Response Unit Syntellect Premier 22723 Voice Response Unit Syntellect Premier 22728 Voice Response Unit Syntellect Premier 23121 Voice Response Unit Syntellect Premier 22726 Voice Response Unit Syntellect Premier 23175 Voice Response Cabinet Syntellect Emperor 23740 Voice Response Unit Syntellect Premier 22678 Voice Response Unit Syntellect Premier 22729 Voice Response Unit Syntellect Premier 23030 Voice Response Unit Syntellect Premier 23808 Voice Response Unit Syntellect Premier 23806 Schedule E Support Services, Performance Standards and Operational Responsibilities Section E-1 Support Services I. INTRODUCTION This Schedule describes the Data Center and Data Network Performance Standards which ISSC is required to meet while performing the Services. It describes the support services, Performance Standards and operation responsibilities which ISSC is required to meet while performing the Services. ISSC also has certain responsibilities with respect to system availability, on- line and batch services, distribution services, Software maintenance, network operations and support, systems management, and other services comprising the Services. This schedule also describes the responsibilities of Comdata. All capitalized terms used but not defined in this Schedule E shall have the meanings given them in the Agreement. II. SYSTEMS MANAGEMENT CONTROLS ISSC will provide to Comdata, and ISSC and Comdata will mutually agree on and use, the Systems Management Control ("SMC") Procedures as the standard set of disciplines for managing information systems. The SMC procedures shall be included in the Procedures Manual. ISSC will administer each SMC discipline. In general, ISSC's SMC responsibilities shall include the following processes: A. Batch Management - for controlling production batch work including the scheduling of resources, the processing of data and transactions. Setup and scheduling shall be performed and controlled by ISSC in accordance with the Procedures Manual. B. Capacity Management - for the development and maintenance of tactical and strategic plans to ensure that the Data Center and Data Network environments accommodate Comdata's growing or changing business requirements. Periodically, ISSC will provide capacity management and resource usage information to Comdata in order to assist Comdata in determining if the capacity of the existing CPU(s), associated DASD, tape, other peripheral equipment attached to such processing unit(s), network equipment and peripherals as specified in Schedule U need to be increased. C. Change Management - to assess if the change is necessary, validate the adequacy of the acceptance test, schedule the promotion into the test environment, notify the appropriate functions and verify successful implementation. D. Configuration Management - for processing hardware and Software configuration changes and maintaining lists and diagrams of systems configurations in the Procedures Manual. ISSC will provide revised configurations to Comdata upon Comdata's reasonable request. E. Inventory Management - of the ISSC Machines (including incoming and outgoing) in the Data Center and Data Network. This activity is to include, but not be limited to, serial number tracking, vendor coordination and maintenance. F. On-Line Management - for coordinating the appropriate skills, information, tools and procedures required to manage on-line networks and their supporting hardware and software systems. G. Performance Management - to monitor, measure. analyze and report systems performance as it compares to the Performance Standards. Where warranted, ISSC may make changes to the Applications Software and with the advance consent of Comdata, ISSC may make changes to the DSM Applications Software to enable system performance improvement. H. Problem Management - to identify, record, track, and correct issues impacting service delivery, recognize recurring problems, address procedural issues and contain or reduce the impact of problems that occur. ISSC will organize/chair daily problem management meetings in accordance with the Problem Management Procedures. ISSC shall research the causes of operational problems, and provide Comdata s management with recommendations regarding the correction of such problems and take actions to correct the problems. I. Recovery Management - for planning, establishing and testing the recovery procedures required to provide the Services to End Users in the event of a failure. The intent of this process is to anticipate and minimize the impact of systems resource failure through the development of predefined, documented procedures and software/hardware recovery capabilities. Comdata instructions on what and how to recover shall be provided to ISSC and included in the Procedures Manual. III. SYSTEMS/OPERATIONS RESPONSIBILITIES A. Application Processing The standards for application processing are as follows: 1. ISSC will make available and process on-line and batch jobs and programs, including scheduled and unscheduled as well as End User initiated processing, as provided in this Schedule E. a. ISSC will run production batch processing jobs so that on-line applications which are dependent on batch processing will-be available as scheduled. b. ISSC will coordinate and modify schedules for special requests. c. ISSC will provide the environment for Comdata personnel to execute test jobs. Comdata will designate personnel to be included in the contact list in the Procedures Manual if applications support is required. Comdata shall keep such contact list current. d. ISSC will, construct on-line test environments which will allow Comdata's test staff self-control over its test system resources, with minimal dependency on ISSC support and intervention. 2. ISSC will maintain job scheduling and cooperate with Comdata by responding to reasonable special processing requests and new processing requirements. 3. ISSC will maintain and update file back-up and recovery procedures pertaining to DASD volumes. Such procedures shall provide, at a minimum: a. ISSC will maintain, if any, libraries for systems, production, test, development and End Users in accordance with the Procedures Manual. b. ISSC will conduct back-up and recovery procedures for DASD volumes so as to minimize impact on scheduled operations. c. ISSC will archive all inactive DASD user files automatically as defined by Comdata procedures existing as of the execution of this Agreement. 4. ISSC will provide and maintain application libraries used to perform the Services in accordance with the Procedures Manual. 5. ISSC will provide back out services for both hardware and Software in accordance with the Change Management Procedures. 6. ISSC will notify Comdata of scheduled and unscheduled system downtime in accordance with Change Management and On-line Management processes. 7. ISSC will provide data storage and retention support for Data Center data in accordance with mutually defined data retention requirements to be included in the Procedures manual. Such requirements shall be no less rigorous than data storage and retention procedures in effect as of the Commencement Date. B. Documentation ISSC is responsible for: 1. updating and maintaining the Procedures Manual in consultation with Comdata; 2. reviewing operations documentation for adherence to operational procedures and standards; 3. periodically distributing to Comdata employees, information bulletins regarding new or changed operations and procedures; 4 updating and maintaining Command Center documentation and procedures and distributing to appropriate Comdata personnel; and 5. developing operations documentation for all Systems Software. C. Fraud and Abuse ISSC will assist Comdata and its agents with fraud and abuse detection. protection and control measures with respect to the Data Center, the Data Network, and the DSM Environment. Subject to Comdata's responsibility set forth in the Agreement. ISSC will recommend and assist in implementing data security enhancements where a computer service, hardware, or software product poses a threat to the operating environments or where the confidentiality of corporate information may be at risk. D. Production Control and Quality Assurance 1. ISSC will perform production program transfers from test library to production library (when installed) as authorized through the quality assurance process and by Comdata. ISSC will monitor application processing for post-transfer problems, and will resolve any discrepancies. 2. ISSC will update the scheduler data base as required to reflect changes to the production environment. 3. ISSC will monitor scheduler related incidents, and develop and recommend refinements and revisions to the scheduler data base. 4. ISSC will review new production jobs and JCL for correctness and conformance to mutually agreed to standards of efficient resource utilization. 5. ISSC will organize/chair weekly change management meetings in accordance with the Change Management Procedures. IV. OTHER SERVICES A. Command Center ISSC will provide a single point of contact for End User support as provided by Comdata as of the Amended Commencement Date to assist in problem determination, problem source identification and problem resolution. ISSC will manage the problem to resolution utilizing the Problem Management process and tools to assure that problems have ownership through resolution and that defined problem escalation paths are used. B. Technology ISSC will assist Comdata in the review of vendor proposals affecting ISSC's ability to provide the Services to ensure existing and future systems' compatibility with changing industry standards. ISSC will consult with Comdata regarding new telecommunications and data processing systems, as appropriate. C. Vendor Liaison and Product Assessment ISSC will maintain contact with vendors providing data processing or telecommunications services or products in order to keep abreast and apprise Comdata of the latest; technological product developments. ISSC will share with Comdata all information reasonably believed by ISSC to be related to the Services provided under this Agreement or reasonably requested by Comdata that is related to the Services provided under this Agreement, regarding pre- release information, strategic directions, and future product announcements and directions, and position papers or technical papers, that the ISSC Project Executive is aware of and are not otherwise subject to restrictions on disclosure. D. Service Review Meetings ISSC will participate in service review meetings with vendors and service providers providing services relating to this Agreement, as reasonably requested by Comdata. ISSC will conduct, record and distribute to Comdata representatives the minutes of service review meetings relating to the scope of ISSC's responsibilities in the format and level of detail reasonably satisfactory to ISSC and Comdata. Schedule E Support Services, Performance Standards and Operational Responsibilities Section E-2 Data Center and Data Network Performance Standards I. INTRODUCTION This Section E-2 further describes: A. certain duties, obligations and responsibilities of ISSC including, but not limited to, on-line application availability, host on-line response time, data network operations and other activities comprising the Services; B. the Performance Standards for defined applications and Services which ISSC is required to meet during the Term of this Agreement; and C. certain responsibilities of Comdata. ISSC will utilize standard measurement tools to monitor the performance levels described below. If ISSC's performance differs from the agreed to delivery level found in the Service Level Agreements, ISSC will be liable for Performance Standard debits or credits. By the tenth business day of each month, ISSC will submit to Comdata a report or set of reports assessing ISSC's performance against the Performance Standards during the previous calendar month. ISSC will also be responsible for promptly investigating and correcting failures to meet Performance Standards by: D. initiating problem investigations to identify root causes of failures; E. promptly reporting problems to Comdata that reasonably could be expected to have a material adverse effect on Comdata operations; and F. making written recommendations to Comdata for improvement in procedures. ISSC shall identify root causes, correct problems and minimize recurrences of missed Performance Standards for which it is responsible. Comdata will correct and minimize the recurrence of problems for which Comdata is responsible and which prevent ISSC from meeting the Performance Standards. ISSC shall be relieved of any Performance Standard(s) and any associated Performance Standards debits where ISSC's failure to meet the Performance Standard(s) is due to: 1. Comdata's failure to perform its obligations under this Agreement; or 2. circumstances that constitute a force Majeure Event pursuant to Section 17.5 of the Agreement. II. DEFINITIONS For purposes of this Schedule E, the following terms shall have the following meanings: A. "Availability" means actual Uptime plus Excusable Downtime divided by Scheduled Uptime. For purposes of determining whether ISSC's performance meets any Availability Performance Standard, ISSC's Availability performance will be measured based on a monthly average during each month of the Terms to be calculated once monthly within ten business days following the end of each calendar month. B. "Excusable Downtime" means of the Scheduled Uptime, the aggregate number of hours in any month during which the Network and/or each defined critical Application is down due to action or inaction by Comdata or due to a Force Majeure Event (as defined in Section 17.5 of the Agreement). C. "Host System" means ISSC Machines and related Systems Software. D. "Scheduled Downtime" means of the Scheduled Hours, the aggregate number of hours in any month during which the Network and/or each defined critical application is scheduled to be unavailable for use by End Users due to such things as preventive maintenance, system upgrades, etc. Scheduled Downtime must be mutually agreed to by the Parties. E. "Scheduled Hours" means the days of the week and hours per day that the Network and/or each defined critical Application is scheduled to be available for use by End Users, subject to adjustment for mutually agreed upon Scheduled Downtime. III. PERFORMANCE STANDARDS A. On-Line Applications Availability and Scheduled Hours: On- line Application services will be scheduled to be available 24 hours a day, 7 days a week, 365 days a year, except for Scheduled Downtime and Excusable Downtime. B. Data Network Availability and Scheduled Hours: The Data Network will be scheduled to be available 24 hours a day, 7 days a week, 365 days a year, except for Scheduled Downtime and Excusable Downtime. C. Voice Network Availability and Scheduled Hours: The Voice Network will be scheduled to be available 24 hours a day, 7 days a week, 365 days a year, except for Scheduled Downtime and Excusable Downtime. D. Scheduled Batch Services: ISSC will perform scheduled batch processing services. ISSC's commitment to the batch services Performance Standards is contingent upon ISSC's receipt from Comdata of critical inputs by the designated time, and successful completion of the appropriate application batch job stream Comdata recognizes that its deviation from scheduled batch job streams may result in batch output not being available by the scheduled time. The critical inputs for each batch processing job shall be mutually agreed upon. E. Unscheduled Batch Services: ISSC will perform on-request or on-demand batch jobs for Comdata. Each of the Unscheduled Batch Services shall be initiated by ISSC subject to a written and properly authorized request from Comdata for such services. ISSC is responsible for notifying the Comdata contact person(s) when batch output will not be available by the scheduled time. The Comdata interface contact will notify the appropriate End Users as necessary. Comdata recognizes that its deviation from scheduled batch job streams may result in batch output not being available by the scheduled time resulting in impact to on-line availability. F. DSM Environment: ISSC will operate the DSM Environment in a manner which is equal to or better than Comdata's historical performance prior to the Amended Comencement Date. Comdata agrees to provide to ISSC DSM Environment historical performance data as soon as practical after the Amended Commencement Date. Starting with the first full month after Comdata has provided to ISSC such historical performance data, and for a period of 180 days thereafter, ISSC and Comdata shall measure and monitor the DSM Environment resource utilization with the intent of using such measured activity to validate Comdata's historical data and for establishing DSM Environment Performance Standards. Schedule F-1 Acquired Assets Description Vendor Model Serial # Voice Response Unit Syntellect Premier 22549 Voice Response Unit Syntellect Premier 22446 Terminal WYSE WY-50 20557 Voice Response Unit Syntellect Premier 21796 Voice Response Unit Syntellect Premier 22678 Datascope ele Spectro D2000 1433620 Printer Tandem 5516 2629A00953 CPU Wyse 1079012 CD-ROM Tandem 1X60002793 Terminal Tandem 6526 ABZ17 Personal Computers Tandem 6AX40 A-JK70 Terminal Tandem 6526 A72883 Terminal Tandem 6526 AEU19 Terminal Tandem 6526 AJ240 Printer Tandem LA34-DA 83990 Terminal Tandem 6526 AH3774 Voice Response Cabinet Syntellect Emperor 21886 Terminal Tandem 6526 AO239 Personal Computers Tandem 6AX40 A-1292 Voice Response Unit Syntellect Premier 21983 CD-ROM Tandem 1X60004361 Voice Response Unit Syntellect Premier 22070 Laptop P.C. Zenith ZFL-181 8351118602 Terminal Tandem 6531 24737H139 Terminal Tandem 6526 AVK42 Voice Response Unit Syntellect Premier 21988 Personal Computers Tandem 6AX40 6AX40 Terminal Tandem 6526 ARR52 Printer Tandem 5516 2629A01058 Voice Response Unit Syntellect Premier 22732 Voice Response Unit Syntellect Premier 23807 Voice Response Unit Syntellect Premier 25220 Voice Response Unit Syntellect Premier 25004 Voice Response Unit Syntellect Premier 23121 Voice Response Cabinet Syntellect Emperor 23025 Voice Response Unit Syntellect Premier 23030 Voice Response Cabinet Syntellect Emperor 23077 Voice Response Unit Syntellect Premier 23092 Terminal Tandem 6532 10153 Voice Response Unit Syntellect Premier 22936 Terminal Tandem 6530 10863 Voice Response Unit Syntellect Premier 23137 Voice Response Unit Syntellect Premier 23142 Voice Response Unit Syntellect Premier 23144 Voice Response Unit Syntellect Premier 22978 Voice Response Cabinet Syntellect Emperor 22859 Voice Response Unit Syntellect Premier 23146 Protocol Converter Vendata Resolver VIII 1276 Printer TI 820 482005164 Laptop P.C. Toshiba T1000 12719691 Terminal Tandem 6526 ML64 Terminal Wyse WY-50 1161860 Terminal Console Wyse WY-50 10501543 Voice Response Cabinet Syntellect Emperor 22857 Modem UDS 9648T 008690 Voice Response Unit Syntellect Premier 22791 Voice Response Unit Syntellect Premier 22792 Voice Response Unit Syntellect Premier 22794 Voice Response Unit Syntellect Premier 23145 Controller Telex 2742C 10433 Voice Response Unit Syntellect Premier 23173 Voice Response Unit Syntellect Premier z3826 Voice Response Unit Syntellect Premier 22729 Voice Response Cabinet Syntellect Emperor 23740 Voice Response Unit Syntellect Premier 23798 Voice Response Unit Syntellect Premier 23806 Laptop P.C. Toshiba T1000 11832590 Voice Response Unit Syntellect Premier 22728 Voice Response Cabinet Syntellect Emperor 23636 Voice Response Unit Syntellect Premier 22726 Voice Response Unit Syntellect Premier 22723 Voice Response Unit Syntellect Premier 23808 Voice Response Unit Syntellect Premier 23824 Voice Response Unit Syntellect Premier 23718 Voice Response Cabinet Syntellect Emperor 23465 Controller Telex 274C2 10431 Modem UDS V.3225 40057 Voice Response Unit Syntellect Premier 23174 Voice Response Unit Syntellect Premier 23175 Voice Response Unit Syntellect Premier 23261 Voice Response Unit Syntellect Premier 23263 Controller Telex 2742C 10430 Voice Response Unit Syntellect Premier 23386 Voice Response Unit Syntellect Premier 23264 Terminal Televideo 905 22A-A88112979E Voice Response Unit Syntellect Premier 23269 Voice Response Unit Syntellect Premier 23378 Voice Response Unit Syntellect Premier 21830 DASD IBM 3380 31696 Voice Response Unit Syntellect Premier 21642 Voice Response Unit Syntellect Premier 21637 DASD IBM 3380 M9983 Tape Unit IBM 3420 M1974 Tape Unit IBM 3420 M5954 Disk Drive IBM 3380 M6707 Tape Unit IBM 3420 M7336 Tape Unit IBM 3420 M7378 Disk Drive IBM 3380 M9883 Terminal IBM 3192 RK061 Disk Drive IBM 3380 J6120 Terminal IBM o191 W5165 Terminal IBM 3191 W5172 Comm. Controller IBM 3726 198 Comm. Controller IBM 3726 580 Communication Controller IBM 3725 697 Terminal IBM 3205 1591 Control Unit IBM 3274 K7014 Controller IBM 3274 H5210 Controller IBM 3274 H8113 Modem IBM 5801 6242 Controller IBM 3274 F3750 Terminal IBM 3197 EP399 Controller IBM 3274 F0621 Controller IBM 3274 F0936 Disk Drive IBM 3380 F0962 Disk Drive IBM 3380 F0983 DASD IBM 3380 F3075 Controller IBM 3274 F6015 Controller IBM 3274 H4349 Controller IBM 3274 F6016 Disk Drive IBM 3380 G0120 Disk Drive IBM 3380 G0206 Disk Drive IBM 3380 G0214 Controller IBM 3274 G8127 Controller IBM 3274 H0818 Communication Controller IBM 3725 1636 Modem IBM 5853 9506 Controller IBM 3274 E6315 Modem IBM 5853 24843 Modem IBM 5853 24836 Modem IBM 5853 24838 Modem IBM 5853 24839 Modem IBM 5853 24840 Modem IBM 5853 24841 Modem IBM 5853 24842 Modem IBM 5853 24844 Modem IBM 5853 24762 S/1 Cabinet #7 IBM 4997 32833 Printer IBM 3812 33452 Printer IBM 3812 33537 Controller IBM 3274 34724 Printer IBM 4224 34741 CPU IBM S1960 35160 Modem IBM 5853 24835 Disk Controller IBM 3880 23475 Modem IBM 5853 24756 Autodial/Modem IBM 3864 11240 Tape Control Unit IBM 3803 15087 Protocol Converter IBM 5208 11826 Protocol Converter IBM 5208 12394 Printer IBM 6262 12562 Printer IBM 6262 12563 Switching Unit IBM 2914 13613 CPU IBM 4381 13947 Tape Controller IBM 3705 15805 S/1 Cabinet #10 IBM 4997 22538 Controller IBM 3274 17768 CPU IBM 8550 17915 Info Window IBM 3476 19345 S/1 Cabinet #8 IBM 4997 20857 Diskette Reader I/O Unit IBM 3540 21050 Tape Control Unit IBM 3803 21493 Terminal IBM 3197 EP390 Controller IBM 3274 E4007 Controller IBM 3274 E4008 Tape Unit IBM 3420 38514 CPU AT&T WGS6286 6458552 CPU AT&T S628-XP1 6444730 CPU AT&T WGS6286 6450304 CPU & Monitor AT&T 286 6450316 RAPFAX CPU AT&T WGS6286 6450490 CPU AT&T WGS6286 6450506 CPU AT&T WGS6286 6458460 CPU AT&T PC7300 370429045 CPU AT&T 286 6443811 CPU AT&T WGS6386 895708005977 Modem Eliminators Black Box RM700A 037P1771 Modem Eliminators Black Box RM700A 040P2128 Modem Black Box 87BSPN671 LDDS Black Box ME711B 915P1772 LDDS Black Box ME711B 923P5032 CPU AT&T WGS6286 6443918 CPU AT&T WGS6286 6441947 CPU AT&T WGS6286 6442000 Modem Eliminators Black Box RM700A 13401112 CPU AST BRAVO 5 TWA1066749 Monitor ADC MM411 1450038065 DataSet Ark EAS11B 3764-178 CPU AST Bravo 286 TWA1090453 Modem AST 2X2400 US000495 Modem AST 2X2400 US000619 Modem AST 2X2400 347 Modem AT&T 4024 89MG10015230 CPU AT&T 6286WGS 6426763 System 85 AT&T J58886C 29720 CPU AT&T 6286 6413600 CPU AT&T WGS6286 6424742 Monitor AT&T WGS6286 6424742 RAPFAX CPU AT&T 6286 WGS 6425828 PC AT&T 6286WGS 6426146 Multi Port Spooler II Black Box P1523 9051856 Modem Black Box SW0108 613016996 Controller IBM 3274 E4006 Disk Drive IBM 3380 B1083 Disk Drive IBM 3380 A2829 DASD IBM 3380 A5677 Disk Drive IBM 3380 A6798 Disk Drive IBM 3380 A6898 Plazma screen IBM 3290 A7783 Plazma screen IBM 3290 A7795 Disk Drive IBM 3380 B3623 Terminal HP 70043 3041A06695 DASD IBM 3380 B5733 Controller IBM 3274 D4217 Controller IBM 3274 D8801 Controller IBM 3274 E0408 Disk Drive IBM 3380 E1658 Controller IBM 3274 E3286 Terminal HP 70043 3101A07561 Modem Everex 24E 0945A-00 Printer wlett Packa LaserJet111 3001A36328 CPU CCDI 926212R Terminal DIGITAL VT220 TA733L0255 CPU CCDI 926214H CPU CCDI 92621-SH CPU Computrend 386 PC 9242-0725 Printer ata Product LM615 2904A07061 Printer ata Product LM 615 2926A07972 Datascope Digilog 320 380901D Auto Attd/Voice Mail Dytel 9600M 167AC Printer Epson FX1050 OE10072002 Auto Attd/Voice Mail Dytel 9600M 196AC Printer Epson P12PA 00D0036627 Printer Epson LQ810 OA50205661 Printer Epson LQ850 OF21000830 Printer Epson X-810 P80S OA50205636 Printer Epson LQ810 OA50205655 Printer IBM 4201 35636 S/1 Cabinet #4 IBM 4997 38812 Voice Response Unit Syntellect Premier 21615 S/1 Cabinet #2 IBM 4997 39522 AUTODIAL MODEM Okidata Okitel 1200 9061186A AUTODIAL MODEM Okidata Okitel 1200 9061112A AUTODIAL MODEM Okidata Okitel 1200 9061114A AUTODIAL MODEM Okidata Okitel 1200 9061115A AUTODIAL MODEM Okidata Okitel 1200 9061116A AUTODIAL MODEM Okidata Okitel 1200 9061117A AUTODIAL MODEM Okidata Okitel 1200 906118EA AUTODIAL MODEM Okidata Okitel 1200 9061187A AUTODIAL MODEM Okidata Okitel 1200 9061066A AUTODIAL MODEM Okidata Okitel 1200 9061188A AUTODIAL MODEM Okidata Okitel 1200 9061189A AUTODIAL MODEM Okidata Okitel 1200 9061205A AUTODIAL MODEM Okidata Okitel 1200 9061653A AUTODIAL MODEM Okidata Okitel 1200 9061658A AUTODIAL MODEM Okidata Okitel 1200 9061659A AUTODIAL MODEM Okidata Okitel 1200 9061068A AUTODIAL MODEM Okidata Okitel 1200 9061064A AUTODIAL MODEM Okidata Okitel 1200 9061065A AUTODIAL MODEM Okidata Okitel 1200 9061661A Printer Okidata GE5250B 812B0502092 AUTODIAL MODEM Okidata Okitel 1200 11722A Printer Okidata GE5251B 504A0042040 Printer Okidata GE5250B 706B03759125 Printer Okidata GE5250B 706B0379134 Printer Okidata 182 802B0436541 printer Okidata m1182plus 812aO099092 Printer Okidata GE5250U 901A0100269 AUTODIAL MODEM Okidata Okitel 1200 9061011A Printer Okidata GE525OU 901A0100281 Printer Okidata GE5250U 902A1001243 Printer Okidata GES2E0U 904A0115897 Printer Okidata GES250U 904A0115908 Printer Okidata GE5250U 904A1016057 AUTODIAL MODEM Okidata Okitel 1200 9060202A AUTODIAL MODEM Okidata Okitel 1200 9061660A AUTODIAL MODEM Okidata Okitel 1200 9061663A AUTODIAL MODEM Okidata Okitel 1200 9061602A Printer Okidata GE5250U 101A1216563 Printer Panasonic KXP10911 7KKALH83608 Printer Okidata GE5250U 911A1080612 Modem Okidata CLP296 0090084 Fax Machine Okifax 800 130903 AUTODIAL CPU Panasonic FX600F1 6GCKB03255 Printer Panasonic KX-P10911 7KKALH82773 Printer Panasonic KX-P10911 7KKALH82780 DS1 Test Set tronics Wil T30801A 1743 Printer Okidata GE5250U 909A1062377 Printer QMS LPP-410-1 2210 Printer QMS PS810 2357 32 port Mux Racal Milgo mnimux 32 ZW03911 32 port Mux Racal Milgo mnimux 32 ZW05951 MODEM CABINET OCKWELL G36800-A Voice Response Unit Syntellect Premier 21401 Printer Okidata GE5250U 911A1080148 AUTODIAL MODEM Okidata Okitel 1200 9090387A AUTODIAL MODEM Okidata Okitel 1200 9091385A Printer Okidata 182 906A1025774 AUTODIAL MODEM Okidata Okitel 1200 9080303A AUTODIAL MODEM Okidata Okitel 1200 9070064A AUTODIAL MODEM Okidata Okitel 1200 9070072A AUTODIAL MODEM Okidata Okitel 1200 9070190A Printer Okidata 182 907A1038943 Printer Okidata GE5250 907A1039300 AUTODIAL MODEM Okidata Okitel 1200 9080301A AUTODIAL MODEM Okidata Okitel 1200 9080681A AUTODIAL MODEM Okidata Okitel 1200 9090386A AUTODIAL MODEM Okidata Okitel 1200 9080689A AUTODIAL MODEM Okidata Okitel 1200 9090241A AUTODIAL MODEM Okidata Okitel 1200 9090243A AUTODIAL MODEM Okidata Okitel 1200 9090244A AUTODIAL MODEM Okidata Okitel 1200 9090245A AUTODIAL MODEM Okidata Okitel 1200 9090246A AUTODIAL MODEM Okidata Okitel 1200 11721A Printer Okidata GE5250U 101A1213595 Card Read Punch IBM 1442 40958 Disk Controller IBM 3880 59890 Disk Controller IBM 3880 54962 Controller pc cards IBM 5294 55273 Controller pc cards IBM 5294 55274 Controller pc cards IBM 5294 55447 Disk Controller IBM 3880 56902 Data Station IBM 3741 57542 Disk Controller IBM 3880 60245 Printer IBM 4201 53512 DASD IBM 3380 60769 CPU IBM PS/2 62959 Tape Unit IBM 3420 72517 Modem IBM 5853 75591 Printer IBM Proprinter 76956 Controller IBM 3274 77824 Disk Controller IBM 3880 54327 Tape Unit IBM 3420 51672 Printer IBM 3812 51946 Controller IBM 3274 84121 Controller IBM 3274 43007 Disk Controller IBM 3880 41252 Comm. Controller IBM 3705 41606 Disk Controller IBM 3880 42258 Disk Controller IBM 3880 42477 Tape Controller IBM 3705 42749 Controller IBM 3274 43006 Tape Controller IBM 3705 43231 Printer IBM 4201 51472 Printer IBM Proprinter 44614 S/1 Cabinet #3 IBM 4997 47248 Disk Controller IBM 3880 47495 Disk Controller IBM 3880 49787 Tape Unit IBM 3420 50412 Printer IBM 4201 51437 Controller IBM 3274 83109 Controller IBM 3274 84466 Printer Okidata GE52500 010A1187163 Printer NEC Pinwriter P6 580247946NY Modem Microcom AX-2400C 14030-28420 8 Port Modem Rack with modems Microcom SX/CH 404585 HDMS ICROCO HDMS 444931 8 PORT MODEM ASSEMBLY ICROCO SXCH 1103380273 Modem Multitech V.32 2024189 Fax Machine Murata F-50 F5Y01200021031L Printer NEC Pinwriter P6 580263900 Printer NEC Pinwriter P6 530034634 2 Cabinets Memotec A352381 Printer NEC Pinwriter P6 580297500 Printer NEC Pinwriter P6 580297691 Printer NEC Pinwriter P6 580297732 Microfilm Reader Northwest 575 H046849 Printer Okidata GE5250U 006A1132525 Printer Okidata GE5250U 008A1146340 2 Cabinets Memotec A352382 CPU Macintosh IICI 2188CMF9803LL/ Tape Unit IBM 3420 89287 CPU IMS 386SX 114838 Controller IBM 3274 89475 Controller IBM 3274 90129 Controller IBM 3274 90940 Modem IBM 5866 93871 CPU IMS 386-Sx 386SX25715924 CPU IMS 386-SX 386S>(25715928 Communications Processor Jupiter NPS9614/A W00129 Communications Processor Jupiter NPS9608/A W00118 CPU Macintosh IICI F10342A3740 Communications Processor Jupiter NPS9614/A W00130 Communications Processor Jupiter NPS9614/A W00151 Communications Processor Jupiter NPS9614/A W00216 Communications Processor Jupiter NPS9614/A W00528 Terminal Lear Seigler ADM-31 411229 CPU Zeos AIC-286 4110 Card Expansion Unit IBM 4577 18679 Schedule F-2 Leases Vendor ID # Description AT&T Credit Corporation 3019 Cabinet AT&T Credit Corporation 3016 Call Management System AT&T Credit Corporation 3017 Telecom Equipment AT&T Credit Corporation 3018 Circuit Pack AT&T Credit Corporation 3032 Telecom Equipment AT&T Credit Corporation 3020 Telecom Equipment AT&T Credit Corporation 3014 PBX Additions AT&T Credit Corporation 3033 Telecom Equipment AT&T Credit Corporation 3035 Telecom Equipment AT&T Credit Corporation 3038 Telecom Equipment AT&T Credit Corporation 3015 PBX Additions AT&T Credit Corporation 3013 System 85 AT&T Credit Corporation 3004 System 85 AT&T Credit Corporation 2008 PBX Additions AT&T Credit Corporation 2012 Circuit Packs El Camino Resources* ES8-CDN System 85 El Camino Resources* ES7-CDN Gateway Software El Camino Resources* ES7-CDN Infobot *Formerly Bell Atlantic Systems Schedule F-3 Contracts Description Vendor Maintenance PBX at Rotec, Avon, CT AT&T Maintenance Dallas CMS AT&T Maintenance Dallas PBX AT&T Maintenance Brentwood G-2 AT&T Maintenance Brentwood V-4 AT&T 3270 Super Optimizer BMC Software PL1 to Cobol Conversion Business Information Systems Maintenance PBX/Telecom Equipment Cincinnati OH Cincinnati Bell MVS Seven Computer Associates MVS Eleven Computer Associates MVS One Computer Associates Share-Option 5 Computer Associates IBM 3540 Disk Reader Data Processing Equipment Job Scan - + Diversified Software Accounts Receivable Dun & Bradstreet GDCM-100/NW Library Graphic Management Group Net-Worker R.M Graphic Management Group CM-90 Graphic Management Group 5728 AS/400 Application Development Tools IBM Credit Corporation 5728 AS/400 PC Support IBM Credit Corporation 5728 AS/400 Performance Tools IBM Credit Corporation 5728 AS/400 Query IBM Credit Corporation 5728 AS/400 S/38 Utilities IBM Credit Corporation 5728 Operating System /400 IBM Credit Corporation 5728 RPG/400 IBM Credit Corporation 5730 AS/400 Implement-Add Top IBM Credit Corporation 5730 AS/400 Implementation IBM Credit Corporation The Monitor for CICS Landmark Systems Universe Lawson Associates General Ledger, Print Writer Lawson Associates Accounts Payable Lawson Associates Fixed Asset System Lawson Associates Sysview (FAQS) Legent Corporation FAQS/ASO For VSE Legent Corporation U.S. L.A.A. Toll Pricer Lynn Arthur Associates Kwik-Key MacKinney Systems Show & Tell 11 MacKinney Systems CICS Spy MacKinney Systems CICS Message MacKinney Systems CICS CEMT from Batch MacKinney Systems LFU/CICS MacKinney Systems Listcat-Plus MacKinney Systems Maintenance Memotech Control Source/Library System Network Concepts, Inc. Carrollton Network Racal-Datacom, inc. Enlighten Software Professionals Answer Sterling Software DYL/280 II MVS Sterling Software Supertracs/ISPF Sterling Software Supertracs/Combo Sterling Software Monitor Syntellect E-Maint Syntellect Gateway Syntellect Dytel Voice Mail Syntellect Q-TEL 9000 United Communications Group TMF-Auditor/SQL USA Software Schedule G Disaster Recovery Services Section G-1 A. Introduction ISSC will be responsible for the provision of Disaster Recovery capability and services to Comdata for Comdata's MVS mainframe services It is ISSC's intent to provide Disaster Recovery services for Critical Applications at a level of performance which will allow Comdata to restore and continue those functions which are vital to the continuation of Comdata's business operations during a declared Disaster. ISSC will make commercially reasonable efforts to meet the Performance Standards during such Disaster. No performance credits or debits will be applicable during such Disaster. B. Definitions 1. "Configuration" means the hardware and Software designated for the support of the Critical Applications during a declared Disaster. 2. "Critical Applications" means the applications specified by Comdata to support Comdata's vital business functions in the event of a Disaster. 3. "Disaster" means any unplanned interruption of information processing for Comdata, due to causes beyond the control of Comdata or ISSC, which significantly impairs the ability of ISSC to operate the Critical Applications at the Data Center. Examples are: a. loss of the building to fire; b. loss of power to the facility due to tornado damage; and c. inability to access the facility due to a chemical spill, etc. 4. "Disaster Recovery" means the restoration, at a location other than the Data Center, of Critical Applications following a declared Disaster. 5. "Recovery Center" means the facility from which ISSC provides Disaster Recovery services. C. Services 1. Disaster Recovery Plan The plan for recovering the Critical Applications, necessary for continuation of the vital business processes of Comdata will be completed within 180 days from the Amended Commencement Date, will be subject to the mutual approval of the Parties, and will include, but not be limited to, the following: - a brief description of the critical services and functions, including a prioritized listing of the Critical Applications; - the hardware and Software comprising the Configuration; - the hardware and Software necessary for connection to the Data Network; - ISSC's and Comdata's recovery responsibilities; - contact listings of key personnel; - identification of recovery teams; - recovery scenarios; - criteria for Disaster declaration, recovery and testing: - names of those individuals who are authorized by each Party to declare a Disaster; - backup process and components, - notification procedures; - recovery information, procedures, schedules, etc.; - testing results and any required corrective action plans; and - procedures for maintaining the Disaster Recovery Plan. ISSC will provide a representative who is knowledgeable in Disaster Recovery planning and the Disaster Recovery Plan for the Services covered by this Agreement to serve as a single point of contact for Comdata's Disaster Recovery related communications and activities The ISSC representative will be responsible for the development and maintenance of the Disaster Recovery Plan and will ensure safe storage and distribution of copies as follows: a. off-site vital records storage; b. Comdata's Disaster Recovery coordinator; c. ISSC's Disaster Recovery coordinator; and d. ISSC Project Office. ISSC, in cooperation with Comdata, will review and update, if necessary, the Disaster Recovery Plan on an annual basis or as warranted by business and/or technical changes to ensure compatibility with Comdata's and ISSC's overall Disaster Recovery strategies and related plans. Any additional updates which are necessary as a result of actions by Comdata may be considered New Services. ISSC, in cooperation with Comdata, will test the Disaster Recovery Plan at least twice during the first year and annually thereafter to ensure the plan remains practicable and current. ISSC will notify Comdata at least twenty (20) days in advance before performing a test of the Disaster Recovery Plan, and Comdata will be entitled to observe such tests and to participate where appropriate. Results of the tests will be documented in writing and a copy supplied to Comdata promptly. Disaster Recovery testing will be coordinated with Comdata and ISSC will provide Comdata with a report of the test results following each Disaster Recovery test. 2. Data Center Recovery The declaration of a Disaster will require mutual agreement of the representatives designated by ISSC and Comdata and specified in the Disaster Recovery Plan. In the event of a declared Disaster, ISSC will take immediate action to prepare the Recovery Center for use and will provide the agreed to required resources to support Comdata's Critical Applications. Restoration of Services for the Critical Applications will be provided within 24 hours after a Disaster is declared and will include, but not be limited to: a. delivering the data and Software archived in off-site storage to the Recovery Center designated in the Disaster Recovery Plan or at such other location as may be established by ISSC thereafter; b. rerouting the data communications circuits to the Recovery-Center; c. operating the Critical Applications on the Configuration at the Recovery Center; and In the event of a Disaster, access to the Recovery Center or other recovery facility will be on a first-come-first- served basis and may be shared with other subscribers also experiencing a Disaster. Comdata will be provided priority access over: a. customers who are not Disaster Recovery services customers; b. customers who have scheduled testing; and c. customers who subsequently notify the Recovery Center that they have declared a Disaster. If the Recovery Center specified in Section C.2(a) above is not available when a Disaster is declared. Disaster Recovery services will be provided at another Recovery Center or at an ISSC internal information processing facility. 3. Data Network Recovery Comdata, in cooperation with ISSC, will develop a Data Network recovery plan to be completed within 180 days of the Amended Commencement Date. The Data Network recovery plan will utilize the strategy for redundancy currently in place and during a disaster will only be recoverable to the extent to which Comdata has implemented that plan. ISSC is not responsible for End User recovery. 4. Resources and Growth The resources for Disaster Recovery services are the current capacities. Growth in the capacity will be provided at a rate necessary to support the the new capacity and will be considered a replacement service. 5. New Services Additional services, including DSM Disaster Recovery, functions or capacity will be added at the request of Comdata subject to Section 6.4 of the Agreement. Schedule G Disaster Recovery Services Section G-2 Configuration The detail Configuration will be maintained in the Disaster Recovery plan. This plan will be reviewed with Comdata in conjunction with the annual test. Schedule G Disaster Recovery Services Section G-3 Critical Applications The Comdata critical applications will be supplied by Comdata and maintained in the Disaster Recovery plan. This list will be reviewed at least yearly in conjunction with the annual test. Schedule H Transition Plan TRANSITION MANAGEMENT PLAN 1. OVERVIEW There will be a three month transition period ("Transition Period") beginning on the Amended Commencement Date. The Transition Period may be extended with mutual agreement of the Parties. During the Transition Period. ISSC will be responsible for; - providing the Services; and - reimbursing Comdata for the base salary paid to and direct benefit costs for each Affected Employee until the earlier of the following: - the date of employment with ISSC; or - the date the Affected Employees who decline employment with ISSC who 1) voluntarily resign from Comdata or 2) are reassigned by Comdata to perform work other than in direct support of the Services, or 3) ISSC notifies Comdata that the work being performed by the Affected Employee in direct support of the Services is no longer required. Such date to be no later than three months after the Commencement Date. During the first 60 days of the Transition Period, the Parties will commence and complete a written plan to be mutually agreed upon for the transition of the necessary staff and resources from Comdata to ISSC. Comdata will cooperate with ISSC in accomplishing all aspects of the transition, including the commitment of the resources necessary to complete the the transition during the Transition Period and will continue to provide support to the Services until the transition is completed. Comdata will use reasonable efforts to maintain staffing to support the DSM Environment. By no later than 60 days after the Effective Date ISSC may consider those Comdata employees listed on Schedule O (the "Affected Employees") for employment with ISSC. ISSC will be solely responsible for making any hiring decisions regarding the Affected Employees. ISSC will hire those Affected Employees receiving offers who: - are employed by Comdata as of the date the offer is made; - meet ISSC's customary preemployment screening procedures for health, drug and background criteria; and - accept the offer of employment from ISSC within ten days from the date the offer is made. All Affected Employees remaining on Comdata's payroll shall perform their duties under the direction and control of Comdata and will be treated as Comdata employees for all purposes throughout the Transition Period; provided. however, that nothing herein shall be interpreted so as to relieve ISSC of its obligations to provide the Services as of the Amended Commencement Date. Replacements for the Affected Employees shall be selected by ISSC as it deems necessary, and ISSC shall have financial responsibility for salary and benefits for replacements of Affected Employees. Each offer of employment to an Affected Employee shall include an initial base salary not less than the base salary each such Affected Employee currently receives from Comdata Such offers will include the benefits package available to similarly situated ISSC employees. 2. INTRODUCTION The Transition Plan will address the migration of certain functions currently being performed by Comdata to ISSC These include: - Comdata's DSM Environment. - Network management of the Harris switch located in Newberry, South Carolina with off hours support from Comdata. The Transition Plan will describe and outline: - the goals, expectations and individual objectives of the project, - the technical assumptions and dependencies inherent in the project, and - the timeliness activity dates and people responsible for individual tasks throughout the transition. The Plan will be modified as new requirements emerge and additional constraints demand. Revised versions of the Plan will be provided to Comdata first and second line managers responsible for the transition project for their review. 3. GOALS AND EXPECTATIONS The goal of this transition project is for ISSC to assume the responsibilities, listed above, which are currently being performed by Comdata. Support and operational services provided by the ISSC will range from technical activities such as software support and operational monitoring to the implementation and management of the SMC disciplines in the DSM Environment. 4. METHODOLOGY The Project Management Methodology is based on a matrix management system with resources assigned by Comdata and ISSC. Major project activities will be assigned to the appropriate resource as designated by Comdata and/or ISSC. Each major activity will have a stand-alone project plan which will be integrated into the overall Transition Plan by the ISSC Transition Manager and assigned staff. 5. ROLES AND RESPONSIBILITIES a. ISSC Responsibilities ISSC is responsible for the development and implementation of the Transition Plan. Responsibilities include management of project status meetings and the tracking of all tasks. Regular updates to Comdata management will be provided b. Comdata Responsibilities - Comdata will be required to assign personnel to the Transition Management Team. - Comdata personnel currently performing the functions referenced in this schedule will continue to perform those functions until such time as they are transitioned to ISSC. Schedule I End User Locations Affiliate City Trendar Nashville, Tennessee Transceiver Network, Inc. Carrollton, Texas Transceiver Cincinnati, Ohio Cal Permits, Inc. San Bernardino, California Consumer Services Pleasantville, New Jersey Consumer Services Las Vegas, Nevada Consumer Services Reno, Nevada Saunders Leasing Birmingham, Alabama Cash Control Newberry, South Carolina ROTEC Avon, Connecticut **This list does not include point of sale locations. Schedule J ISSC Charges, Measures of Utilization and Financial Responsibilities I. Introduction This Schedule J describes the methodology for calculating any extra charge with respect to the Services being provided to Comdata pursuant to this Agreement, other than those Services which may be provided to Comdata on a pass- through billing basis or to the extent this Agreement expressly provides otherwise. The Annual Services Charge ("ASC"), as adjusted by the Cost of Living Adjustment ("COLA") and any related charge agreed to as set forth in Section 6.2 of the Agreement are intended, in the aggregate to compensate ISSC for all of the resources used in providing the Services. In addition, this Schedule J describes the measures of resource utilization and the tracking thereof. All capitalized terms used and not defined in this Schedule J shall have the same meanings given them in the Agreement, Supplement or other Schedules. II. Annual Services Charge The Annual Services Charge is the fixed charge to Comdata for ISSC's provision of the Services. Beginning on the Amended Commencement Date and monthly thereafter, ISSC will invoice Comdata in advance for the proportional amount of the Annual Services Charge due ISSC for that month. The monthly amount will be calculated by dividing the Annual Services Charge specified in the Supplement for that period by the number of months or portion thereof in that period III. Cost of Living Adjustment The Parties agree to use the December unadjusted Consumer Price Index, as published in the "Summary Data from the Consumer Price Index News Release" by the Bureau of Labor Statistics, U.S. Department of Labor, For All Urban Consumers, ("CPI-U"), for purposes of determining actual inflation. ISSC will calculate the Cost of Living Adjustment beginning in January following the Amended Commencement Date using the factor specified below, (the "COLA Factor"). If such factor is in excess of zero, CO A monies will be due ISSC for the applicable period. The COLA is applied and payable monthly on a prospective basis (e.g., the actual inflation for year 1995 will determine the COLA for 1996) on the Annual Services Charge and will include any extra charges payable by Comdata under this Agreement for the subsequent calendar year. The COLA Factor will be determined as soon as practicable after the end of each calendar year and the COLA will be calculated as follows: A. Actual Inflation: ISSC will calculate the COLA by comparing the change in the year-to-year CPI-U with the CPI-U for the December preceding the Amended Commencement Date, (the "Base Year Index"). For each year of the Term, the actual CPI-U for the December prior to the year for which COLA is being calculated, (the "Actual Inflation"), is compared to the Base Year Index set forth in the Supplement. If the Actual Inflation is equal to or less than the Base Year Index, then no COLA is due. However, if the Actual Inflation is greater than the Base Year Index, then COLA will be applied to the Annual Services Charge and other expenses due ISSC. For example purposes, we will assume that the actual CPI-Us for December of each of the first few years are: Base 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year CPI-U 149.70 154.00 151.00 163.50 168.80 B. COLA Factor: COLA is equal to the Cola Factor times the monies due ISSC (ASC plus extra charges) for each month of the calendar year succeeding the calendar year during which Actual Inflation is greater than the Base Year Index. The COLA Factor is calculated as follows: COLA Factor = {((Actual Inflation - Base Year Index)/Base Year Index) x 0.90} Where: Actual Inflation = The CPI-U for December preceding the calendar year for which COLA is being calculated. Base Year Index = The CPI-U for the December preceding the Amended Commencement Date. 0.90 = The portion of the charges that are inflation sensitive. C. COLA Calculation: Following is an example for calculating the COLA for years beginning January 1, 1996 for an Agreement having a 1995 Commencement Date using the Actual Inflation, Base Year Index and COLA Factor specified above: As you can see, there will be COLA for calendar years 1996, 1997 and 1998 as the Actual Inflation for their preceding years is greater than the Base Year Index, i.e., Decembers 1995, 1996 and 1997 CPI-Us (154.00, 151.00 and 163.50) are greater than the Base Year Index (149.70). To determine the COLA monies due. in addition to the other charges, for January of 1996 where the monthly prorated portion of the ASC for January is S1,400,000 and there are no extra charges applicable, the calculation will be as follows: COLA = ASC x {COLA Factor} COLA = $1,400,000 x {((154.00- 149.70)/149.70) x 0.90} COLA = $1,400,000 x {((4.30)/149.70) x 0.90} COLA = $1,400,000 x {(0.0287) x 0.90} COLA = $1,400,000 x {0.0258} COLA = $36,120.00 The COLA for each month of each year in which COLA is due is calculated as above substituting the appropriate monthly monies and COLA Factors based upon the calendar year. In the event the Bureau of Labor Statistics stops publishing the CPI-U or substantially changes its content and format. the Parties will substitute another comparable index published at least annually by a mutually agreeable source. If the Bureau of Labor Statistics merely redefines the base year for the CPI-U from 1982-84 to another year, the Parties will continue to use the CPI-U, but will convert the Base Year Index to the new base year by using an appropriate conversion formula. ISSC will invoice Comdata for COLA, if any, starting in January 1997 and monthly thereafter as specified in Section 7.2 of the Agreement. IV. Units of Measure for Resource Categories Starting at the Amended Commencement Date and monthly thereafter, ISSC will measure, track and report usage of resources in the categories listed below. A. CPU Utilization: Resource usage for this category will be the capacity of the existing CPU(s), associated DASD, tape, other peripheral equipment attached to such processing unit(s), network equipment and peripherals as specified in Schedule U. Additional capacity, whether needed for: 1. Increased processing requirements for existing users; 2. maintaining agreed upon service levels for Comdata End Users; 3. processing requirements for new users; 4. processing requirements for additional applications development and maintenance; or 5. processing new applications, will be the responsibility of Comdata or, at Comdata's request, will be provided by ISSC as New Services pursuant to Section 6.4 of the Agreement. In the event Comdata's utilization of resources provided under this Agreement impact's ISSC's ability to meet a Performance Standard, then the Parties will discuss whether additional resource capacity or other course of action will alleviate the impact upon ISSC's ability to meet the Performance Standard. ISSC will be relieved of such Performance Standard to the extent affected until the earlier of: a) Comdata's resource utilization reverts to Comdata's utilization prior to the impact upon ISSC's ability to meet the Performance Standard; or b) Comdata implements, at its expense, the corrective measures discussed by the Parties, or ISSC implements such corrective measures at Comdata's request and subject to Section 6.4 of the Agreement. If Comdata is either unable or does not wish to implement, or have ISSC implement, the corrective measures discussed by the Parties, and if Comdata's resource utilization does not revert to the utilization prior to the impact upon ISSC's Performance Standard, Comdata and ISSC will create a mutually agreed-upon environment against which a benchmark will be taken, both prior and subsequent to the change in utilization, in order that a) the affected Performance Standard can be adjusted accordingly; or b) Comdata and ISSC mutually agree on a new Performance Standard. B. Voice Systems. The "Voice Resource Baseline" ("VRB") of the Voice Systems shall be the capacity of such systems as of the Effective Date. To the extent Comdata requires services, features or functions in excess of those which can be provided by the Voice Systems as configured as of the Effective Date (e.g., additional line cards, memory or larger switches), ISSC will provide such services, features or functions, all of which will be charged to Comdata as New Services or Replacement Service pursuant to Sections 6.4 and 6.5 of the Agreement C. DSM Environment: Resource usage for this category will be the capacity of the DSM Environment specified in Schedule C for the Comdata Machines specified in Schedule C. Comdata is responsible for additional capacity at existing DSM Network Locations and for any new DSM Network locations. D. DSM Help Desk: The DSM Help Desk for the DSM Environment will be staffed by 2 FTEs on prime shift (Monday to Friday) only The number of calls will be tracked and reported to Comdata monthly, however there is no baseline of calls for this category. At Comdata s request, additional FTE's will be provided by ISSC as New Services pursuant to Section 6.4 of the Agreement, or as Replacement Services pursuant to Section 6.5 of the Agreement. E. AD/M Services: The Parties have agreed that they will use full time equivalent ("FTE") person-years to measure the quantity of AD/M Services delivered by ISSC to Comdata. An FTE equals 1850 hours (exclusive of holidays, vacation time, sick leave or other personal time off) of AD/M Services per year or 154.1 hours per month. The quantity of FTEs included in the Annual Services Charge is specified in the AD/M Services Baseline in the Supplement. On a two year cycle, or as mutually agreed upon, the Parties will conduct a strategic planning session during which Comdata's Applications Development and Maintenance direction will be reviewed, prioritized and AD/M Services resources allocated according to the mutually agreed upon AD/M schedule. In addition, the Parties will periodically review the AD/M Resource Category quantity and skills mix and mutually agree upon the required changes if any, to provide support for the upcoming year(s). The results of the strategic planning sessions and other Comdata AD/M forecasts will determine AD/M Services resource deployment and will be the basis for determining additional charges, if any. If Comdata requires AD/M Services resources in addition to the planned AD/M Services resources referenced above, ISSC shall provide these AD/M Services resources as New Services pursuant to Section 6.4 in the Agreement. Alternatively, ISSC and Comdata will jointly evaluate the reassignment of existing AD/M Services resources to determine if current Projects may be re-prioritized to accommodate additional short term AD/M Projects. ISSC will provide and use a formal change control procedure to document and monitor changes to Project estimates and schedules. Schedule K Application Installation Standards Comdata agrees that Software provided to ISSC for execution, operational support and/or AD/M Services will conform to the following standards: 1. DSM Environment - Standards and conventions will be developed by ISSC and Comdata within six months of the Effective Date. These standards will include: - LAN Configurations - Software standards - Back out and recovery procedures - Application Documentation standards. - Operational run procedures - All DSM Software developed by ISSC, Comdata or any third party must conform to these standards. 2. Software other than DSM Software - Current standards and conventions will be updated by ISSC and Comdata within six months of the Effective Date. These standards will include: - File allocation and naming conventions - Sysout classes - Job execution classes - Forms standards - Accounting fields - Job Name standards - User Acceptance Testing, in the appropriate test environment. to ensure accuracy and conformity to specifications - Final sign-off for acceptance of the Application Software - Any other standards mutually agreed upon and documented within the existing "Standards Manual". - Back out and recovery procedures will be documented - On a minimum two year cycle, coincident with the ISP. these standards and conventions will be reviewed and mutually agreed upon between Comdata and ISSC. Schedule L Security Procedures and Responsibilities ISSC will: 1. install, maintain and upgrade (with financial responsibility as otherwise provided for in this Agreement) new or existing Systems Software for data access control; 2. implement the functions and features of the access control software which will satisfy Comdata's security standards and practices as defined in the Procedures Manual; 3. identify the protection requirements for operating system resources and implement this protection via the access control software; 4. use the system access granted to ISSC employees only to the extent necessary to perform activities required by this Agreement; 5. restrict access to the Data Center to authorized personnel only; 6. conduct periodic reviews of the Data Center access logs for unusual occurrences and perform follow-up activities; 7. implement controls which protect printed output from unauthorized access while under ISSC's control; 8. provide storage and security for portable storage media including, but not limited to, tapes and disk packs under ISSC's control; 9. keep abreast of the latest concepts and techniques associated with system and data security; and 10. review security policies and procedures for effectiveness and recommend improvements. Comdata will: 1. provide ISSC with Comdata's most recent data security standards and practices and updates as they occur; 2. identify the protection requirements for application resources and protect them via the access control software; 3. identify the protection requirements for End User data and protect it via the access control software; 4. establish. change, deactivate and remove logon IDs and associated access authorities; 5. reset logon ID passwords and disclose passwords to authorized personnel; 6. periodically review logon IDs and remove those for which management authorization no longer exists; 7. review, approve and grant requests for privileged user authorities; 8. periodically review privileged user authorities and remove those for which management approval no longer exists; 9. implement and maintain security controls for those subsystems which do not use the access control software for their security; 10. keep abreast of the latest concepts and techniques associated with system and data security: 11. review security policies and procedures for effectiveness and recommend improvements; and 12. have financial responsibility for Systems Software for data access control as otherwise provided for in this Agreement. AS/400 Resources ISSC will control operation System Software installs, upgrades and maintenance. ISSC will have on-line security file administration responsibility to grant read, write, create, and scratch access to the ISSC operating system files, libraries, and Application Software dependent on proper registration. ISSC will have on-line security file administration responsibility to create End User ID's (i.e. on-line responsibility to update the security file). ISSC will have on-line security file administration responsibility to grant read, write, create, and scratch access to Comdata business application files and libraries (i.e. on-line responsibility to update the security file). ISSC will control and be responsible for the AS/400 Security Officer ("QSECOFR") user ID. Use of the user class of *SECOFR and/or the special authority ALLOBJ within other user ID s will be restricted to ISSC. When ISSC is performing security administration functions (user ID processing and password authorization), the *SECADM user class and *SECACDM special authority will be restricted to ISSC user ID's. Comdata will relinquish the QSECOFR user ID and remove *SECOFR user class and the special authority ALLOBJ from any other user ID's or allow ISSC to remove these authorizations from existing user profiles. When ISSC is performing security administration functions (user ID processing and password authorization), the *SECADM user class and *SECADM special authority will be removed from Comdata user ID's. Comdata will validate new users, password resets and their associated library access. Schedule M DSM Help Desk ISSC will staff and support a level one help desk in support of the DSM Environment. The DSM Help Desk will be staffed during prime shift only as defined below. Calls placed during off shift will be routed to and logged by the command center. ISSC's responsibilities are described below. DSM Help Desk The DSM Help Desk will perform first level problem determination, resolution and/or tracking for Comdata End Users and other support personnel who are using on-line or batch services provided within the DSM Environment. The staff will perform the following functions: 1. Initiate a Problem Management Record ("PMR") to document service outages; 2. provide preliminary problem determination; 3. classify the PMR with a severity level classification, as defined in the Procedures Manual; 4. perform dispatch of vendor or ISSC resources, as appropriate. All problems are dispatched during the Prime Shift hours (described below). Only severity 1 and severity 2 problems are dispatched during Off Shift hours (described below). 5. update Comdata with complete and accurate systems status; 6. recycle, start and stop devices. 7. report on the status of batch jobs upon request; 8. manage and monitor daily data transmissions; 9. notify designated Comdata personnel of systems or equipment failures, or of an emergency, according to the Procedures Manual: 10. maintain and distribute an updated help desk telephone number listing as required; 11. dispatch local and long distance carriers for line problems; and 12. provide a monthly report to Comdata assessing ISSC's help desk performance. Hours of Operation The DSM Help Desk hours will be Prime Shift Monday - Friday 0800 - 1700 Central Time, excluding holidays Off Shift and all hours not covered in Prime Shift. Comdata Responsibilities Comdata will be responsible for the following: 1. Applications training: 2. Designating Comdata personnel to answer questions and resolve problems not within the scope of the Help Desk (e.g. calls from point of sale locations and other Comdata customers), and otherwise assist Help Desk personnel. 3. maintaining an updated Comdata contact listing for use by help desk personnel; 4. providing support for all End User Equipment; 5. providing support, training, problem determination, and problem resolution for applications resident on End User Equipment which have not been developed by ISSC. 6. Software and configuration management for End User Equipment and End User applications. 7. assisting in the resolution of recurring problems which are the result of End User errors; and 8. performing password administration for End Users, including password resets. 9. reporting problems to the DSM Help Desk. Baseline This agreement provides two (2) full-time equivalents to provide DSM Help Desk support on a level-of-effort basis. If additional resources are needed, they will be supplied as New Services or Replacement Services pursuant to Section 6.4 and 6.5, respectively, of the Agreement. Schedule N Projects Introduction ISSC is assuming responsibility for the application development and related projects set forth in this Schedule (the "Projects") as part of the Annual Services Charge and within the quantity of FTE's specified in the AD/M Services Baseline in the Supplement. It is acknowledged by Comdata that information with respect to the requirements and specifications for each of the Projects is in summary form and will be subject to the joint verification period as described in Section 3.7 of the Agreement ISSC Responsibilities 1. MVS mainframe installation, configuration and support of the following: - TCP/I P communication software. - DB2 relational database software. Any products chosen to replace the products specified above will be treated as Replacement Services as defined in Section 6.5. 2. Project Management responsibility for the following areas: - One Project Manager assigned for projects such as BSI, UNISYS and TATA development. - One Project Manager assigned for Trendar development, until December, 1995. 3. Development of a transition plan for Year 2000 processing. 4. Scheduled use of TeamFocus environment utilizing on-site resources. ISSC/Comdata Responsibilities 1. JAD (Joint Application Design) support for the E-NADS (Electronic New Account Data Sheet) project will be provided by appropriate ISSC and Comdata personnel. 2. ISSC will perform a replacement study for the Autodial and RapFax platforms with support and assistance from Comdata's Product Center. 3. ISSC will perform a security review, including MVS mainframe and Sun system access, within 60 days of the Effective Date. Comdata participation will be required. 4. Information Strategic Plan (ISP) - Within 60 Days of the Effective Date. an ISP will be scheduled using Solution/2000 methodology within the TeamFocus environment. Comdata Executive, Product Center and other Comdata Associates participation will be required. The ISP will be complete within four months of initiation. - Each 2 years, the ISP will be revalidated using existing on-site resources from both ISSC and Comdata. 5. Application Projects - PIDRAS (Permit Image Disaster Recovery) - Master Software - Enhanced CDI (Carrier Dial-In) - A pilot D82 project will be jointly identified and defined. Development will be performed by ISSC, with testing and participation from Comdata personnel. Schedule O Affected Employees Ira Childress Larry Long Percy Owens Schedule P Maintenance Services Comdata and ISSC agree that the following terms and conditions will apply to maintenance service provided by ISSC for Machines and Software under this Agreement. 1. Machines Required to be Maintained By ISSC at No Additional Charge For the purposes of this Section 1, Required Maintenance Machine(s) means ISSC-owned machines for which ISSC is obligated to provide maintenance services under Section 4.10(d) of the Agreement. At no additional charge to Comdata, ISSC shall perform all maintenance services necessary to keep the Required Maintenance Machines in good operating condition and operating in accordance with applicable manufacturers' warranties and performance standards. The required maintenance services shall include but not be limited to preventive maintenance, regularly scheduled maintenance and service, and prompt repair or replacement of Required Maintenance Machines not performing in accordance with the applicable manufacturers' warranties and performance standards. 2. Maintenance by ISSC of Software Pursuant to Sections 4.9 and 4.10 of the Agreement, ISSC shall perform all maintenance services necessary to keep the ISSC licensed Software performing in accordance with applicable manufacturers' warranties and performance standards. This shall include but not be limited to regular updating, installation of new versions and new releases in accordance with this Agreement, error correction services and emergency responses. Subject to Section 5.2 of the Agreement, ISSC, at Comdata's request. will also perform the above maintenance services for Comdata licensed software. This activity will either be chargable against the Enhancement Baseline specified in the Supplement or provided as a New Service. 3. Comdata's Responsibilities Comdata agrees to provide a suitable environment for Machines located at End User Locations, as specified by the Machines' manufacturers, if any are included within the Services. Comdata will provide ISSC reasonable access to Machines so that ISSC may provide on-site services. Comdata agrees to inform ISSC of changes in a Machine's location if Comdata performs a move, add or change with respect to a Machine. Comdata shall perform all maintenance services neccessary to keep Comdata Machines and the DSM Machines in good operating condition and operating in accordance with applicable manufacturers' warranties and performance standards. The required maintenance services shall include but not be limited to preventive maintenance, regularly scheduled maintenance and service. and prompt repair or replacement of Comdata Machines not performing in accordance with the applicable manufactures' warranties and performance standards. In the event Comdata does not perform such maintenance services, Comdata will relieve ISSC of the responsibility for that portion of the Services affected by the lack of performance and shall reimburse ISSC for all additional expenses. if any, incurred during such period of non-performance. Subject to Section 5.6 of the Agreement, ISSC, at Comdata s request, will also perform the above maintenance services for Comdata Machines or the DSM Machines. This activity will either be chargable against the Enhancement Baseline specified in the Supplement or provided as a New Service. Schedule Q Claims NONE Schedule R End User Machines Subject to ISSC Maintenance Vendor Description S/N # Location Dell 453SE System Unit 2CY13 Carrollton Dell 45CSE System Unit 2CXNR Carrollton Dell 486/D50 SYSTEM UNIT 2CZCY Carrollton Dell 486/D50 SYSTEM UNIT 2CZCW Carrollton Dell 486/D50 SYSTEM UNIT 2CZB9 Carrollton Dell 486/D50 SYSTEM UNIT 2CZBL Carrollton Dell 486/D50 SYSTEM UNIT 2CZCO Carrollton Dell 486/D50 SYSTEM UNIT 2CZDO Carrollton Dell 486/D50 SYSTEM UNIT 2CZDK Carrollton Dell 486/D50 SYSTEM UNIT 2CZ9N Carrollton Dell 486/D50 SYSTEM UNIT 2CZ93 Carrollton Dell 486/D50 SYSTEM UNIT 2CZ9X Carrollton Dell 486/D50 SYSTEM UNIT 2CZ98 Carrollton Dell 486/D50 SYSTEM UNiT 2CZ8M Carrollton Dell 486/D50 SYSTEM UNIT 2CZDG Carrollton Dell 486/D50 SYSTEM UNIT 2CZD7 Carrollton Dell 486/D50 SYSTEM UNIT 2CZCT Carrollton Dell 486/D50 SYSTEM UNIT 2CZCX Carrollton Dell 486/D50 SYSTEM UNIT 2CZDB Carrollton Dell 486/D50 SYSTEM UNIT 2CZDC Carrollton Dell 486/D50 SYSTEM UNIT 2CZDJ Carrollton Dell 486/D50 SYSTEM UNIT 2CZ91 Carrollton Dell 486/D50 SYSTEM UNIT 2GR55 Carrollton Dell 486/D50 SYSTEM UNIT 2GR56 Carrollton Dell 486/D50 SYSTEM UNIT 2GR57 Carrollton Dell 486/D50 SYSTEM UNIT 2GR58 Carrollton Dell 486/D50 SYSTEM UNIT 2GR59 Carrollton Dell 486/D50 SYSTEM UNIT 2GR5C Carrollton Dell 486/D50 SYSTEM UNIT 2GR5D Carrollton Dell 486/D50 SYSTEM UNIT 2GR5H Carrollton Dell 486/D50 SYSTEM UNIT 2GR5V Carrollton Dell 486/D50 SYSTEM UNIT 2GR5X Carrollton Dell 486/D50 SYSTEM UNIT 2GR5Z Carrollton Dell 486/D50 SYSTEM UNIT 2GR61 Carrollton Dell 486/D50 SYSTEM UNIT 2GR63 Carrollton Dell 486/D50 SYSTEM UNIT 2GR64 Carrollton Dell 486/D50 SYSTEM UNIT 2GR67 Carrollton NEC Monochrome VGA Monitor 2 N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton NEC MultiSync3FGX 14" Monitor N/A Carrollton Kofax Compression Board, 2.5 MB N/A Carrollton Kofax Compression Board, 1.5 MB N/A Carrollton Kofax Printer Option Board with Cable N/A Carrollton Cornerstone Paper White Monitor DP120 19" 147B6-D Carrollton Cornerstone Paper White Monitor DP120 19" 20300-D Carrollton Cornerstone Paper White Monitor DP120 19" 19377-D Carrollton Cornerstone Paper White Monitor DP120 19" 20302-D Carrollton Cornerstone Paper White Monitor DP120 19" 15101-D Carrollton Cornerstone Paper White Monitor DP120 19" 19373-D Carrollton Cornerstone Paper White Monitor DP120 19" 14719 Carrollton Cornerstone Paper White Monitor DP120 19" 20299-D Carrollton Cornerstone Paper White Monitor DP120 19" 19372-D Carrollton Cornerstone Paper White Monitor DP120 19" 14717 Carrollton Cornerstone Paper White Monitor DP120 19" 16283-D Carrollton Cornerstone Paper White Monitor DP120 19" 16241-D Carrollton Cornerstone Paper White Monitor DP120 19" 14701 Carrollton Cornerstone Paper White Monitor DP120 19" 1701-D Carrollton Cornerstone Pdper White Monitor DP120 19" 1582-D Carrollton Cornerstone Paper White Monitor DP120 19" 1579-D Carrollton Cornerstone Paper White Monitor DP120 19" 1696-D Carrollton Cornerstone Paper White Monitor DP120 19" 1700-D Carrollton HP Optical Disc Drive PC1-MFMH 3264AC1936 Carrollton HP Optical Jukebox C1710M 3268A0015G Carrollton HP Laser Jet III Printer N/A Carrollton Fijitsu Scanner M3093E 1137 Carrollton Schedule S Bill-of-Sale Comdata Network, Inc., a corporation having a place of business at 5301 Maryland Way, Brentwood, Tennessee ("Seller"), for consideration of _______________ ($______) the receipt of which is hereby acknowledged, paid by INTEGRATED SYSTEMS SOLUTIONS CORPORATION, a wholly owned IBM subsidiary, having its headquarters at 44 South Broadway, White Plains, New York 10601 ("Purchaser"), by this Bill-of-Sale does sell, transfer, grant and convey to Purchaser, its successors and assigns, all of Seller's right, title and interest in and to the equipment, goods and other assets (all of the foregoing being hereinafter collectively referred to as the "Property"), made and effective as of ______________ ___, 199__. Seller warrants that it has clear title to the Property free of any liens and encumbrances. IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale as of the ___ day of _________, 199__. Comdata Network, Inc. By _____________________________ Authorized Signature ________________________________ Name (Type or Print) Date Schedule T-1 DSM Machines Description Vendor SPARCserver 20 (cdev-ii) SUN 12.0GB SCSI Disk Storage SUN 12.0GB SCSl Disk Storage SUN 3.6GB Disk Drive (109 drives) Andataco Stacking Tape Drives (4 units) Exabyte SPARC 10 SUN SPARC 10 SUN MADO/MAX Tape Drive MADD SPARC 1000 (cdm02) SUN SPARC 1000 (ECHO) SUN SPARC 1000 (cdm03) SUN SPARC 1000 (cdm02) SUN SPARCstation 5 (SNIAGW1) SUN SPARCstation 5 (SNIAGW2) SUN SPARCstation 5 (SNIAGW3) SUN SPARCclassic (NIS Server) SUN SPARCclassic (3480serv) SUN Model 200T Optical Disk Library Hewlett Packard Model 200T Optical Disk Library Hewlett Packard Schedule T-2 DSM Systems Software Description Vendor SYBASE Database release 4.9 runtime license SYEASE SYBASE SYSTEM10 runtime license SYBASE SY8ASE SYSTEM10 development license SYBASE ISOFAX Modem software Bristol Group SUN OS release 4.1.3 Operating System SUN SOLARIS Operating System SUN SNA Gateway Open Connec 5250 Gateway Open Connec AUTOPLAN Schedule T-3 DSM Applications Software Description Vendor Comdata, Brentwood, TN THS Transaction History Broadway Seymour IMS Check Imaging System Broadway Seymour Workflow Bank Recon, Credit, Collections Broadway Seymour COLD Report Retrieval Broadway Seymour MOTRS/TMM Unisys 3270 Emulation Broadway Seymour AMASSins Imaging Retrieval (2 Versions) Broadway Seymour Permit Image and Fax Management End User Application Microsoft Windows #3.1 Carrollton, TX Microsoft DOS 5.0 Carrollton, TX Novell Netware (50 user lic Carrollton, TX Optika Image Filer Carrollton, TX Optika ImageFinder Carrollton, TX Optika JukeBox Server Carrollton, TX Optika PrintServer Carrollton, TX Optika FaxServer Carrollton, TX Borland C++/Application Fr Carrollton, TX Symantec Object Graphics Libr Carrollton, TX Microsoft Windows 3.1 Softwa Carrollton, TX XID Xtend License Carrollton, TX XID Xpedite License Carrollton, TX XID Image Interface Libr Carrollton, TX Master Software Multi-mode Carrollton, TX Schedule U ISSC Machines Subject to Baseline SYSTEM DESCRIPTION MAKE TYPE MODEL SERIAL # AS/400 Card Expansion Unit IBM 4577 18679 AS/400 Card Expansion Unit IBM 5030 35094 AS/400 Disk Drive Rack IBM 9309 OO2 23628 AS/400 Disk Drive Rack IBM 9309 OO2 23467 AS/400 AS400 RACK IBM 9309 OO2 3730 AS/400 Disk Drive Rack IBM 9309 OO2 AS/400 Diskette Drive IBM 9331 OO1 160c4 AS/400 Disk Drive IBM 9335 A01 160c4 AS/400 Disk Drive IBM 9335 B01 160c4 AS/400 Disk Drive IBM 9335 B01 160c4 AS/400 Disk Drive IBM 9335 B01 160c4 AS/400 Disk Drives IBM 9335 A01 160c4 AS/400 Disk Drive IBM 9335 B01 160c4 AS/400 Disk Drives IBM 9335 A01 160c4 AS/400 Disk Drive IBM 9335 B01 160c4 AS/400 AS/400 Disk Drive IBM 9336 20 4271135 AS/400 AS/400 Disk Drive IBM 9336 20 160c4 AS/400 Processor IBM 9406 B60 160c4 MVS Power Unit IBM 3089 003 47752 MVS Power Unit IBM 3089 003 47752 MVS Power Unit IBM 3089 40J 47752 MVS Processor IBM 3090 003 47752 MVS Processor Unit IBM 3092 003 47752 MVS Power Controller IBM 3097 003 47752 MVS Power Controller IBM 3097 003 47752 MVS Controller IBM 3174 11L AW604 MVS Controller IBM 3174 11R AA4660 MVS Controller IBM 3174 11R N7807 MVS Controller IBM 3174 11L N3521 MVS Controller IBM 3174 11L N0153 MVS Controller IBM 3174 11L AW594 MVS DASD IBM 3380 AK4 AE682 MVS DASD IBM 3380 BK4 TU395 MVS DASD IBM 3380 BK4 TU432 MVS DASD IBM 3380 BK4 TU416 MVS DASD IBM 3380 BK4 TU368 MVS DASD IBM 3380 AK4 AE799 MVS DASD IBM 3380 BK4 TU430 MVS DASD IBM 3380 BK4 TU415 MVS DASD IBM 3390 A38 A4946 MVS DASD IBM 3390 B3C B4028 MVS Disk Drives IBM 3390 B3C B6383 MVS Disk Drives IBM 3390 A38 A4007 MVS 3390 IBM 3390 B3C B2161 MVS 3390 IBM 3390 A38 A1078 MVS 3390 IBM 3390 B3C B2260 MVS DASD IBM 3390 B3C B4105 MVS Disk Drives IBM 3390 B3C B6376 MVS Tape Drive IBM 3420 008 51671 MVS Tape Drive IBM 3420 008 M7343 MVS Tape Unit IBM 3420 008 M7378 MVS Tape Drive IBM 3422 A01 A6620 MVS Tape Drive IBM 3480 A22 23706 MVS Cartridge Tape Drive IBM 3480 B22 65439 MVS Tape Drive IBM 3480 B22 73272 MVS Tape Drive IBM 3480 B22 70773 MVS Tape Drive IBM 3480 BS2 50588 MVS Tape Drive IBM 3480 B22 50586 MVS Tape Control Unit IBM 3480 A22 19067 MVS Cartridge Tape Drive IBM 3480 B22 62805 MVS Tape Drive (Cart) IBM 3480 B22 64494 MVS Tape Drive (Cart) IBM 3480 B22 64221 MVS Cartridge Tape Unit IBM 3480 B22 69616 MVS Cartridge Tape Unit IBM 3480 BS2 B0125 MVS Cartridge Tape Unit IBM 3480 B22 69620 MVS Cartridge Tape Unit IBM 3480 B22 64384 MVS Cartridge Tape Unit IBM 3480 B22 66941 MVS Cartridge Tape Unit IBM 3480 B22 53497 MVS Cartridge Tape Unit IBM 3480 B22 66786 MVS Cartridge Tape Unit IBM 3480 A22 16595 MVS Cartridge Tape Unit IBM 3480 822 65184 MVS Cartridge Tape Unit IBM 3480 A22 21645 MVS Diskette Reader 1/0 Unit IBM 3540 001 21050 MVS Communication Controller IBM 3725 001 697 MVS Front End Processor IBM 3725 001 8443 MVS Controller IBM 3725 001 7393 MVS Controller IBM 3725 001 7925 MVS Front End Processor IBM 3725 001 10389 MVS Front End Processor IBM 3725 001 5584 MVS Front End Processor IBM 3725 001 B51 MVS Front End Processor IBM 3725 001 5433 MVS Communication Controller IBM 3725 001 1636 MVS Front End Processor IBM 3725 001 1812 MVS Comm. Controller IBM 3726 001 580 MVS Comm. Controller IBM 3726 001 198 MVS Terminal IBM 3727 94432 MVS Terminal IBM 3727 700 85334 MVS Terminal IBM 3727 700 8C078 MVS Terminal IBM 3727 700 SC168 MVS Communication Switch IBM 3728 001 7773 MVS Communication Switch IBM 3728 001 7775 MVS Communication Switch IBM 3728 001 7774 MVS Communication Switch IBM 3728 001 7772 MVS Communication Switch IBM 3728 001 7776 MVS Communications Switch IBM 3728 001 7114 MVS Communications Switch IBM 3728 001 7116 MVS Communication Switch IBM 3728 001 7777 MVS Communications Switch IBM 3728 001 7172 MVS Communications Switch IBM 3728 001 7115 MVS Communication Switch IBM 3728 001 7063 MVS Communication Switch IBM 3728 001 7064 MVS Tape Control Unit IBM 3&03 002 21493 MVS Autodial/Modem IBM 3864 48202 MVS Autodial/Modem IBM 3864 65581 MVS Disk Controller IBM 3880 J23 97570 MVS Disk Controller IBM 3880 J23 97682 MVS Disk Controller IBM 3990 J03 32355 MVS Disk Controller IBM 3990 G03 32644 MVS Disk Controller IBM 3990 G03 40269 MVS Printer IBM 6262 T14 12562 MVS Printer IBM 6262 T14 12563 TANDEM Optical Drive HP C1716C Corsair 5.25 3264ACL1936 TANDEM Scanner Fujitsu M3096E 1137 TANDEM Optical Library HP C1710C-100 3268A0015G TANDEM CD-ROM Tandem 1X60002793 TANDEM CD-ROM Tandem 1X600CS4361 TANDEM Rack #1 Tandem TANDEM Rack #2 Tandem TANDEM Rack #3 Tandem TANDEM Rack #4 Tandem TANDEM Terminal Tandem 6526 ML64 TANDEM Personal Computers Tandem 6AX40 A-1292 TANDEM Terminal Tandem 6530 10863 TANDEM Terminal Tandem 6530 13205 TANDEM Printer Data Products LM615 2904A07061 TANDEM Terminal Tandem 6526 AH3774 TANDEM Terminal Tandem TS-530 2101155 TANDEM Terminal Tandem TS-530 2277894 TANDEM Terminal Tandem 6530 NONE TANDEM Control Unit IBM 3274 K7014 TANDEM Optical Jukebox Model 40T HP C1700T 3332A00396 TANDEM 12 Port Ethemet Hub RACAL INX5000 TANDEM 24 Port Ethemet Hub RACAL INX5000 TANDEM Scanner Fujitsu M3093E 2288 TANDEM CLX Cabinet 2 Tandem TANDEM K1000 CPU w/32MB Tandem K1000 HOZZT8 TANDEM K1000 32MB Memory Board Tandem K1000 H11W93 TANDEM K1000 32MB Memory Board Tandem K1000 H11W9H TANDEM K1000 CPU w/32MB Tandem K1000 H123LX TANDEM 3606 Controller Tandem 3606 4324 TANDEM 3606 Controller Tandem 3606 968 TANDEM Disk Drive Tandem 4220 WE124949 TANDEM 3606 Controller Tandem 3606 4586 TANDEM 3606 Controller Tandem 3606 4587 TANDEM 3606 Controller Tandem 3606 4598 TANDEM 3606 Controller Tandem 3606 5960 TANDEM Disk Drives Tandem 4220 TANDEM Disk Drive Tandem 4220 S03E7E TANDEM 3606 Controller Tandem 3606 VOOTO9 TANDEM Ethemet Controller with Transceiver Tandem T/3613-1 HORVMO TANDEM Disk Drive Tandem 4250 4424104 TANDEM Disk Drive Tandem 4250 4424623 TANDEM Disk Drive Tandem 4250 SR285436 TANDEM Disk Drive Tandem 4250 SR285439 TANDEM Disk Controller Tandem 3126 V031NO TANDEM CLX Cabinet 1A Tandem TANDEM MFC Controller Tandem 3681 13709 TANDEM Disk Controller Tandem 3126 V03RDE TANDEM 3~2 Controller Tandem 3602 HOS7KE TANDEM 3605 controller Tandem 36Q5 5412 TANDEM MFC Controller Tandem 3681 13702 TANDEM 3606 Controller Tandem 3606 18666 TANDEM MFC Controller Tandem 3681 13633 TANDEM MFC Controller Tandem 3681 13624 TANDEM MFC Controller Tandem 3681 21334 TANDEM 3606 Controller Tandem 3606 4589 TANDEM 3&06 Controller Tandem 3606 444 TANDEM 5606 Controller Tandem 3606 3861 TANDEM 3606 Controller Tandem 3606 4541 TANDEM 3606 Controller Tandem 3606 4545 TANDEM 3606 Controller Tandem 3606 4595 TANDEM 396 Controller Tandem 3606 4591 TANDEM K1000 CPU w/32MB Tandem K1000 H12ZY5 TANDEM 3606 Controller Tandem 3606 4601 TANDEM MFC Controller Tandem 3&81 13578 TANDEM MFC Controller Tandem 3681 13628 TANDEM Disk Drive Tandem 4240 B031329 TANDEM K1000 32MB Memory Board Tandem K1000 H11W9B TANDEM Disk Drive Tandem 4230 S08KEV TANDEM Disk Controller Tandem 3128 V03SRC TANDEM Disk Drives Tandem 4240 626166 TANDEM Disk Drive Tandem 4240 B035193 TANDEM CLX Cabinet 2A Tandem TANDEM Disk Controller Tandem 3128 V03RDL TANDEM 3605 Controller Tandem 3605 9095 TANDEM Tape Controller Tandem 3214 HOM5L4 TANDEM K1000 32MB Memory Board Tandem K1000 HOXEOE TANDEM MFC Controller Tandem 3681 13707 TANDEM MFC Controller Tandem 3681 13712 TANDEM Disk Drive Tandem 424() BO3708A TANDEM K1000 CPU w/32MB Tandem K1000 H08L8X TANDEM MFC Controller Tandem 3681 21342 TANDEM 3606 Controller Tandem 3606 7828 TANDEM Disk Controller Tandem 3128 HOXWK7 TANDEM Cartridge Tape Drive Novadyne 5180NLC C800013141 TANDEM Controller IBM 3274 D0416 TANDEM Tape Drive Cabinet Novadyne TANDEM Cartridge Tape Drive Novadyne 5180NLC C900052128 TANDEM Tape Drive Super Array 14102 TANDEM 24 Post Ethemet Hub RACAL INX5000 TANDEM High Speed Laser Printer XEROX 4850 200020 TANDEM High Speed Laser Printer XEROX 44350 200021 TANDEM 12 Port Ethemet Hub RACAL INX5000 TANDEM 16 Port Terminal Server RACAL INX5000 TANDEM 12 Port Ethemet Hub RACAL INX5000 TANDEM 3606 Controller Tandem 3606 6858 TANDEM K1000 CPU w/32MB Tandem K1000 H1231J TANDEM MFC Controller Tandem 3681 HOS03A TANDEM Disk Drive Tandem 4230 S08KEN TANDEM Disk Drive Tandem 4230 S08KEW TANDEM K1000 32MB Memory Board Tandem K1000 HOXEOH TANDEM K1000 CPU w/32MB Tandem K1000 H128KD TANDEM K1000 32MB Memory Board Tandem K1000 H1251S TANDEM 3606 Controller Tandem 3606 4600 TANDEM CLX Cabinet 1 Tandem TANDEM 3601 Controller Tandem 3601 H04VBR TANDEM 3606 Controller Tandem 3606 4550 TANDEM 3606 Controller Tandem 3606 5320 TANDEM MFC Controller Tandem 3681 HORZYL TANDEM 3606 Controller Tandem 3606 4596 TANDEM INX 5000 3Slot Chassis RACAL INX5000 10083205 TANDEM 12 Port Ethemet Hub RACAL INX5000 TANDEM 16 Port Terminal Server RACAL INX5000 TANDEM 396 Controller Tandem 3606 4218 TANDEM 3601 Controller Tandem 3601 HORVBZ TANDEM CLX Cabinet 3A Tandem TANDEM CLX Cabinet 3 Tandem TANDEM Disk Controller Tandem 3128 V00U4D TANDEM Tape Controller Tandem 3214 V0194W TANDEM Ethemet Controller Tandem 3215 H156WJ TANDEM CUM Tape Cabinet Tandem TANDEM CLX Cabinet 1 Tandem TANDEM Tape Drive Tandem 5107 3008A02025 TANDEM Disk Drive - 2000 MB Tandem 45t0 COKYUL TANDEM Disk Drive - 1038 MB Tandem 45t}0 C06VSH TANDEM Disk Drive - 1038 MB Tandem 4500 C06VSV TANDEM 3601 Controller Tandem 3601 H0PMBU TANDEM Disk Drive - 1038 MB Tandem 4500 C06VSD TANDEM 3606 Controller Tandem 3606 1424 TANDEM Disk Drive - 1038 MB Tandem 4500 C06042 TANDEM 3606 Controller Tandem 3606 4702 TANDEM Disk Drive - 1038 MB Tandem 4500 C06VSB TANDEM Disk Drive - 1038 MB Tandem 4500 C06VTC TANDEM Disk Drive - 2000 MB Tandem 4510 COLPMU TANDEM Disk Drive- 1038 MB Tandem 4500 C06860 TANDEM Disk Drive- 1038 MB Tandem 4500 C06VS9 TANDEM Disk Drive- 1038 MB Tandem 4500 C06VSL TANDEM Disk Drive - 2000 MB Tandem 4510 COLPM1 TANDEM Disk Drive - 2000 MB Tandem 4510 COLPMV TANDEM Disk Drive - 2000 MB Tandem 4510 COKYUP TANDEM Disk Drive - 1038 MB Tandem 4500 C06VSK TANDEM Disk Drive - 2000 MB Tandem 4510 COUPM5 TANDEM Disk Drive - 2000 MB Tandem 4510 COLPKL TANDEM Disk Drive - 2000 MB Tandem 4510 COLPM3 TANDEM Disk Drive- 1038 MB Tandem 4500 C06VSA TANDEM Ethemet Controller Tandem 3612 HOS4NN TANDEM Disk Drive Tandem 4230 S08KEZ TANDEM K1000 32MB Memory Board Tandem K1000 H125K2 TANDEM K1000 CPU w/32MB Tandem K1000 H13JAN TANDEM Disk Drive Tandem 4250 SR708515 TANDEM K1000 CPU w/32 MB Tandem H12ZTT TANDEM K1000 32MB Memory Board Tandem K1000 HOW888 TANDEM Disk Drive Tandem 4240 TJ29334 TANDEM K1000 CPU w/32MB Tandem H12ZUJ TANDEM Disk Controller Tandem 3681 V03S6K TANDEM Disk Controller Tandem 3681 V03S4H TANDEM Disk Drive Tandem 4240 TJ47110 TANDEM Disk Mosaic W/Pedistal - 18 Drive Tandem 4500 TANDEM CLX Tape Cabinet Tandem TANDEM MFC Controller Tandem 3681 9122 TANDEM Tape Drive Tandem 5107 3008A02163 TANDEM Tape Controller Tandem 3681 8691 TANDEM Tape Drive Tandem 5107 3008A01756 TANDEM K1000 CPU w/32MB Tandem K1000 H14N1M TANDEM CLX Cabinet 4 Tandem Page 56 EX-10.21 8 TELECOMMUNICATIONS SERVICES AGREEMENT EXHIBIT 10.21 WORLDCOM TELECOMMUNICATIONS SERVICE AGREEMENT This Telecommunications Service Agreement (this "Agreement") is made as of the 1st day of December, 1994 (the "Effective Date"), by and between WORLDCOM, INC. d/b/a LDDS/WorldCom, a Georgia corporation with its principal place of business located at 515 East Amite, Suite 200, Jackson, Mississippi 39201-2702 ("WorldCom"), and COMDATA NETWORK, INC., a Maryland corporation, and a wholly owned subsidiary of Comdata Holdings Corporation, a Delaware corporation, with its principal place of business located at 5301 Maryland Way, Brentwood, Tennessee 37027 ("CNI") and COMDATA TELECOMMUNICATIONS SERVICES, INC., a Delaware corporation, and a wholly owned subsidiary of CNI, with its principal place of business located at 5301 Maryland Way, Brentwood, Tennessee 37027 ("CTS"). For purposes of this Agreement, CNI and CTS are collectively referred to as "Customer". In consideration of the mutual promises and covenants set forth in this Agreement the parties agree as follows: 1. Services: 1.1 WorldCom will provide Customer certain telecommunications services as further described on Exhibit "A" attached hereto (the "Services") to Customer pursuant to LDDS Communications, Inc. (now known as WorldCom, Inc.) FCC Tariff No. 1, FCC Tariff No. 2 and applicable state tariffs, all as may be amended from time to time (the "Tariffs"). All of the terms and conditions of the Tariffs now or hereafter in effect are incorporated in this Agreement. In the event that any provision set forth in this Agreement conflicts with the terms and conditions of any of the Tariffs, WorldCom agrees to tariff the provision in the applicable Tariff. If WorldCom fails to file any tariff as described herein which is required to be filed, Customer shall have the right to terminate this Agreement without any further liability. 1.1.1 Any additional Services not covered in this Agreement (e.g., frame relay, Canadian origination) that WorldCom subsequently provides for resale will be made available to Customer upon terms and conditions generally available to WorldCom's other resale customers. 1.2 This Agreement will not be construed to impose obligations upon WorldCom to Customer's customers (each, an "End User") or to create rights enforceable by End Users against WorldCom. 1.3 WorldCom will provide Customer certain billing services, including without limitation the preparation and mailing of invoices to Customer's End Users (the "Billing Services"). The Billing Services shall be the reasonably substantial equivalent billing services that WorldCom Page 1 of 11 currently uses as of the Effective Date of this Agreement to provide billing to WorldCom's customers including without limitation, any enhancements to such Billing Services which are generally available as determined by WorldCom ("Billing System"). Customer's access to, and use of the Billing Services shall be provided by WorldCom at no charge provided that the rates contained in Schedule A, attached hereto, remain unchanged. In the event Customer requests modifications to the Billing Services outside the scope of the Billing Services being offered by WorldCom, Customer agrees to pay WorldCom the costs for such modifications. 1.4 WorldCom appoints Customer a WorldCom agent to sell enhanced features at WorldCom tariffed rates as shown in Schedule B attached hereto (the "Enhanced Features"). Customer will receive a fifty percent (50%) commission (the "Commission") on all sales of Enhanced Features. WorldCom may waive Enhanced Feature charges for Customer's End Users from time to time. The Commission due to Customer will be applied as an offset to Customer's invoice for rates charged to Customer for Customer's use of the services listed in Schedule B. 1.5 The WorldCom Standard Implementation Schedule for the Services ("Implementation Schedule"), which may be amended from time to time, will be as set forth in Schedule C, attached hereto. Said Implementation Schedule is non- binding and is only provided for informational purposes. 2. Term; Termination: 2.1 The term of this Agreement will commence as of December 1, 1994, and end on January 22, 2003 (the "Term"). Unless either party gives written notice to the other party at least one hundred and twenty (120) days prior to the end of the Term, the Term will continue on a month to month basis until this Agreement is terminated by either party on at least one hundred and twenty (120) days prior written notice to the other party. Except as provided in Subsections 8.2 or 8.3 below, in the event Customer terminates this Agreement prior to the end of the Term, Customer agrees to pay WorldCom twelve and one-half percent (12 1/2%) of the average of the last twelve (12) months measured usage charges times the number of full months remaining in the Term (the "Contract Deficiency Charge"). 2.2 In the event that (i) there is a change in control of Customer such that Customer is acquired or purchased, whether by stock purchase, asset purchase, merger or otherwise, and such acquisition or purchase is approved by the appropriate regulatory authorities ("Customer Acquisition/Purchase") and (ii) pursuant to such Customer Acquisition/Purchase, Customer obtains access to an alternate rate plan which results in an overall savings over current charges paid to WorldCom pursuant to this Agreement WorldCom may make such adjustments to the rates contained herein to provide an equivalent overall savings. In the event that WorldCom dos not make such adjustment, then Page 2 of 11 Customer may, within sixty (60) days after Customer Acquisition/Purchase, at its election, terminate this Agreement upon ten (10) days prior written notice to WorldCom without incurring further liability to WorldCom. 3. Transition of Services Upon Termination or Expiration. 3.1 Upon termination or expiration of this Agreement for any reason, WorldCom shall expend reasonable efforts to avoid any substantial disruption of Customer's telecommunications services and shall take such actions at no additional cost to WorldCom as may be reasonably necessary to facilitate the uninterrupted transfer of the Services provided for herein to another telecommunications provider. 4. Rates; Minimum Yearly Usage Commitment. 4.1 Commencing with the Effective Date and continuing through the end of the Term, rates for the Services will be as set forth in Schedule A, attached hereto. Services provided by WorldCom which are not listed in Schedule A shall be at the rates and terms (i) set forth in WorldCom's applicable Tariffs, or (ii) generally available to WorldCom's other similarly situated customers (collectively referred to as "Non-Contract Services"). 4.2 Commencing with the Effective Date, and continuing through the end of the Term of this Agreement, Customer will pay to WorldCom the greater of (i) the amount actually incurred by Customer for Services and Non-Contract Services pursuant to paragraph 4.1 of this Agreement or (ii) ten million dollars ($10,000,000) ("Minimum Annual Commitment"). In the event there is a substantial change in the regulatory environment of Customer's business, including without limitation the banking, gaming and telecommunications environments, which substantially prohibits Customer's performance under this Agreement, WorldCom agrees to negotiate with Customer in good faith concerning the reduction of the Minimum Annual Commitment as described herein. Further, in the event there is a substantial technological change in the telecommunications industry and based on the purchase of a new product or offering Customer's rates for Services hereunder would be significantly reduced, WorldCom agrees to negotiate with Customer concerning the purchase of such product or offering and the reduction of the Minimum Annual Commitment described herein, provided WorldCom continues to receive the same percentage of Customer's traffic after such reduction as it did prior to such technological change. Finally, in the event CTS completely ceases providing telecommunications services, WorldCom agrees to reduce the Minimum Annual Commitment described herein by an amount equal to the product obtained by multiplying (i) the previous three (3) months' average usage charges for Services purchased by Customer under this Agreement which are attributable to CTS by (ii) twelve (12). CTS agrees to provide WorldCom reasonable and sufficient documentation to substantiate the Services attributable to CTS hereunder. Page 3 of 11 4.3 The rates set forth herein shall not be modified during the Term of this Agreement. Notwithstanding the immediately above sentence, WorldCom may, upon at least ninety (90) days prior written notice to Customer, increase any rate set forth in this Agreement so as to offset an increase to WorldCom in the costs of providing the Services either directly or indirectly that is caused solely by changes in the rules, regulations or operating procedures of any governmental or regulatory authority. 4.4 During the Term Customer (which for purposes of this Subsection 4.4 shall include all Comdata affiliates existing as of October 15, 1995, including without limitation, CNI, CTS and Comdata Holdings Corporation) agrees to purchase from LDDS at least eighty percent (80%) of Customer's internal corporate traffic as well as Customer's resale traffic, excluding ETS (an AT&T aggregator currently providing services to Customer) traffic existing as of December 1, 1994; provided, however, Customer's obligation under this paragraph 4.4 shall not exceed twenty million dollars ($20,000,000) in any twelve (12) month consecutive period, nor be less than the Minimum Annual Commitment contained in paragraph 4.2. 4.5 Beginning as of December 1, 1994 and continuing through the Term of this Agreement, Customer will pay to WorldCom the following monthly recurring rates for all existing and new Customer premises equipment: Dialers: $20.00 per month Channel Banks $500 installation/$400 per month One Year Minimum on Channel Banks. The above charges will be reduced after three (3) years of being in service to the cost of maintenance charges only. 4.6 During the Term, WorldCom agrees to waive all WorldCom installation charges (i.e., excluding any third party installation charges) for Services ordered by Customer hereunder provided such Services are used solely by Customer or its affiliates for internal use (i.e., not for resale). 5. Billing and Payment of Charges: 5.1 Customer will pay all charges for the Services provided by WorldCom within forty-five (45) days of the date of the invoice (the "Due Date"). In the event that Customer fails to make any required payment in full on or before the fifteenth (15th) day following the Due Date, Customer shall pay a late fee in the amount of the lesser of one and one- half percent (1 1/2%) of the unpaid principal balance per month or the maximum lawful rate allowable under the applicable state tariff. If Customer disagrees with an invoice for any of the Services, Customer shall promptly pay the amount that it believes to be correct and, at the same time, notify WorldCom in writing of the basis for and amount in dispute. Failure to notify WorldCom of a disputed charge Page 4 of 11 will result in all charges being deemed correct. WorldCom and Customer shall promptly address any disputed claim and use their best efforts to resolve the disputed amount. In the event Customer fails to make any non-disputed payment in accordance with the terms of this Section 5.2, WorldCom may provide Customer with written notice of interruption of service. If by (i) the third (3rd) day following receipt of written notice of interruption of service, or (ii) the thirty-sixth (36th) day after the Due Date (which ever shall last occur), Customer fails to make payment of such non- disputed amount in full, WorldCom may interrupt service to Customer until such time as the non-disputed amount is received by WorldCom. Such interruption, if any, by WorldCom pursuant to this Section 5.1 shall in no event be deemed a breach of WorldCom' obligations under this Agreement. Failure of WorldCom to exercise its right to give notice of interruption and/or to interrupt service shall in no event be deemed a waiver of WorldCom' rights to payment hereunder. 5.2 It is the Customer's non-delegable duty to pay any and all taxes or duties of any kind or nature whatsoever relative to or in any way resulting from the performance of this Agreement. Notwithstanding the above, as an additional service to the Customer, WorldCom agrees to do the following: 5.2.1 make advance payments of Customer's taxes billed through the WorldCom-provided standard IX Plus billing environment unless Customer provides appropriate documentation to WorldCom which evidences an exemption therefor. Customer agrees to reimburse WorldCom for all such tax or duty payments made by WorldCom within ten (10) days of Customer's receipt of each WorldCom invoice detailing such advanced payment, together with a surcharge amounting to one-half of one percent (1/2%) of the total of each invoice; 5.2.2 prepare billings to Customer's End Users for telecommunications services provided hereunder in accordance with rates provided by Customer which shall include taxes calculated in accordance with the relevant tax statutes applicable to each End User; remit said tax payments to the appropriate taxing authorities; and provide Customer with accurate documentation related thereto. 5.2.3 Nothing herein shall be construed to imply that WorldCom agrees to assume liability for any act of commission or omission with regard to Customer' obligations or duties to governmental authorities or End Users. Customer agrees to indemnify and hold WorldCom harmless with respect to any claim, levy, charge or liability whatsoever in connection with WorldCom's performance of the above- stated service. 5.4 Customer's obligation to pay all undisputed charges billed by WorldCom is absolute and unconditional under any and all circumstances. 5.5 Customer will provide WorldCom with all necessary tax exemption certificates in a form acceptable to the Page 5 of 11 applicable taxing authority or pay all necessary taxes at such time as such taxes become due. 6. Service Interruptions: 6.1 The Services will meet or exceed quality of service standards (including, but not limited to, standards for call set-up time, unintended disconnects, trunk capacity and audio quality) in the long distance telephone industry in the United States of America. If Customer, in its good faith judgment, determines that the Service does not materially meet such standards and that WorldCom is solely responsible for such failure, Customer may terminate the affected Service upon at least thirty (30) days prior written notice to WorldCom provided that such failure in not cured by WorldCom within thirty (30) days of the date of such notice. In such case, Customer's Minimum Annual Commitment shall be reduced for the remainder of the Term by an amount equal to the product obtained by multiplying (i) the previous three (3) months' average usage charges for such terminated Service by (ii) twelve (12). 6.2 Notwithstanding paragraph 6.1 above, Customer may terminate this Agreement upon fifteen (15) days prior written notice, if (i) substantially the same service problems with respect to the telecommunications services provided hereunder recur during any consecutive sixty (60) day period, notwithstanding the thirty (30) day cure provision set forth in Section 6.1 hereof, or (ii) upon verified twelve (12) hour prior notification to the WorldCom Trouble Reporting Center, if Customer is required to utilize the services of an alternate telecommunications provider for a period of twenty-four (24) hours or longer due to service problems with respect to the telecommunications services provided hereunder by WorldCom. 6.3 WORLDCOM SHALL NOT BE LIABLE FOR DAMAGES OR INTERRUPTIONS OF SERVICE CAUSED BY OR RESULTING FROM ANY ACT OF GOD OR OTHER UNCONTROLLABLE FORCE. UNCONTROLLABLE FORCE IS ANY CAUSE BEYOND THE CONTROL OF WorldCom, INCLUDING BUT NOT LIMITED TO, FLOOD, EARTHQUAKE, STORM, LIGHTNING, FIRE, EPIDEMIC, WAR, RIOT, CIVIL DISTURBANCE, SABOTAGE, OR RESTRAINT, INJUNCTION OR RESTRICTION BY ANY FEDERAL OR STATE COURT, AGENCY, ADMINISTRATIVE BODY, OR PUBLIC AUTHORITY, OR A LAWFUL ORDER ENTERED IN ANY LAWSUIT OR REGULATORY PROCEEDING WHICH EFFECTS A RESTRAINT OF WORLDCOM'S PERFORMANCE UNDER THIS AGREEMENT. WORLDCOM SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, SPECIAL, ACTUAL, OR PUNITIVE DAMAGES, OR FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER ARISING OUT OF ANY DEFECTS OR ANY OTHER CAUSE. THIS WARRANTY AND THESE REMEDIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OR REMEDIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 6.4 Notwithstanding Section 6.1, Customer's damages for any service interruption or delay by WorldCom not caused by any Page 6 of 11 Act of God or uncontrollable force as describe in Section 6.3 above shall not exceed the average of two (2) days billing under this Agreement prior to the event of interruption or the actual amount of the damages, whichever is less. However, where an applicable state tariff calls for a different calculation of damages, the provisions of the state tariff will govern. 6.5 Except as provided otherwise in this Agreement, WorldCom makes no representations or warranties as to its abilities to process service activation submissions. WorldCom will provide Customer's customers an equivalent standard of service as WorldCom provides its customers. 7. Letters of Agency: 7.1 Customer will obtain a valid and acceptable letter of agency ("LOA") from each End User whose ANI Customer submits to WorldCom. 7.2 Customer is entirely responsible for the validity of each LOA that it submits as well as for the correctness of the information that is contained in such LOA. Customer understands that any inaccuracies in such information may result in lengthy delays in the activation of the subject ANI. 7.3 Customer will notify each End User that WorldCom is the primary interexchange carrier that is providing Services to Customer. 8. Rights and Obligations Upon Either Party's Breach: 8.1 In the event Customer is in material breach of this Agreement, including without limitation (i) Customer's failure to pay undisputed charges when due as provided in Section 5 above, and (ii) Customer's failure on three (3) separate occasions to act as WorldCom requests after making a material misrepresentation to a third party or End User concerning the Services purchased by Customer hereunder, and fails to cure such breach within ten (10) days after receipt of notice of such breach, WorldCom may: 8.1.1 terminate this Agreement effective immediately in which case the Contract Deficiency Charge will be immediately due and payable; and 8.1.2 upon termination of the Agreement as provided in (i), contact each End User directly for the purpose of notifying such End User that WorldCom will no longer provide long distance telephone services to Customer, that WorldCom will provide long distance telephone service to it pursuant to the Tariffs and that WorldCom will continue to provide such service unless such End User notifies its LEC to change its long distance telephone service to another primary interexchange carrier. Page 7 of 11 8.2 In the event WorldCom is in material breach of this Agreement, and fails to cure such breach within thirty (30) days after receipt of notice of such breach, Customer may terminate this Agreement effective immediately without any further liability. 8.3 This Agreement shall automatically terminate effective immediately if: 8.3.1 Either party becomes insolvent, files a petition in bankruptcy or makes an assignment for the benefit of creditors; 8.3.2 Either party applies for or consents to the appointment of a trustee or receiver, or a trustee or receiver is appointed for Customer; or 8.3.3 Bankruptcy, insolvency or liquidation proceedings are commenced against either party and such proceedings are not discharged or dismissed within thirty (30) days after such commencement. 9. Confidential Information: 9.1 Each party understands that in performing this Agreement it may have access to private or confidential information relating to the other party or such other party's Customers End Users ("Confidential Information"). Each party agrees that the Confidential Information will: 9.1.1 remain the exclusive property of the disclosing party; 9.1.2 not to be copied, published or disclosed to others; 9.1.3 be used solely in the performance of this Agreement; and 9.1.4 be returned to the disclosing party upon termination of this Agreement. 10. Regulatory Requirements: 10.1 Customer represents and warrants that it has obtained, or will undertake promptly and diligently to obtain, any and all Certificates of Public Necessity, authority or other consents ("Authority") which are required by the states and jurisdictions within which Customer currently provides or intends to provide long distance service to End Users or others. If requested by WorldCom, Customer will provide copies of said Authority before submitting any ANIs to WorldCom. When Customer is in the process of obtaining said Authority, Customer shall provide copies of the Authority to WorldCom as soon as it becomes available. In the event that Customer is permanently or temporarily denied Authority in any particular state or jurisdiction and/or is prohibited from providing long distance or other telecommunications services within that state or jurisdiction, then Customer Page 8 of 11 shall within 24 hours notify WorldCom of said denial via facsimile and via U.S. Mail. Customer agrees to indemnify and hold WorldCom harmless with respect to any and all damages, demands. suits, causes of action, liability, losses, assessments, fees, levies, charges, or any other claims whatsoever which are asserted against WorldCom with regard to the failure of Customer to obtain the aforementioned Authority. 11. Notices: 11.1 Any notice required by this Agreement will be effective and deemed delivered (i) three (3) business days after posting with the United States Postal Service when mailed by certified mail, return receipt requested, properly addressed and with the correct postage, (ii) one (1) business day after pick-up by the courier service when sent by overnight courier, properly addressed and prepaid or (iii) one (1) business day after the date of the sender's electronic confirmation of receipt when sent by facsimile transmission. 11.2 Notices will be sent to the addresses or FAX numbers set forth in this Agreement, unless either party notifies the other in writing of an address or FAX number change. 12. General: 12.1 Neither party may assign this Agreement or any of its obligations without the prior written consent of the other party hereto. Notwithstanding anything to the contrary contained herein, Customer may assign this Agreement or any of its obligations to an affiliate of Customer provided Customer remains liable for the financial obligations contained herein, including without limitation, the Minimum Annual Commitment and the Contract Deficiency Charge. 12.2 Customer may not subcontract with other persons or entities to undertake any of Customer's obligations that are set forth in this Agreement provided however, that this Section 12.2 shall not prohibit Customer from contracting with third parties with respect to reselling and marketing activities for Customer's telecommunications services. 12.3 This Agreement is a Georgia agreement and is governed by and interpreted according to the laws of the state of Georgia applicable to Georgia agreements, except to the extent that the Communications Act of 1934, as amended and is interpreted and applied by the Federal Communications Commission, applies. 12.4 Neither party will be liable for failure to perform its obligations hereunder due to causes beyond its control, including accidental damage to WorldCom's network, acts of God, laws or requirements of any government or national emergencies. 12.5 If any of the provisions of this Agreement are determined to be invalid, the remaining provisions will still be valid. Page 9 of 11 12.6 Headings are used in this Agreement for convenience only and are not to be used to interpret this Agreement or any of its provisions. 12.7 This Agreement will be deemed effective only upon full execution of this Agreement by each of the parties. This Agreement may be modified only pursuant to a writing that is signed by each of the parties. 12.8 This Agreement is subject to all applicable existing and future laws, rules and regulations of any governmental authority. 12.9 Each party represents and warrants that it has the full legal and regulatory authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement, and that this Agreement is not in conflict with any other agreement to which such party is bound. 12.10 In any action arising out of or relating to this Agreement, the prevailing party will be entitled to recover its reasonable attorneys' fees and other costs in addition to any other relief that may be awarded. 12.11 This Agreement contains the full understanding of the parties and supersedes any prior agreements including the August 30, 1991 agreement, the October 18, 1991 addendum to the August 30, 1991 agreement, and the July 21, 1993 notice, between the parties. 12.12 Each party hereto shall have the right to contract with a third party to inspect and audit, during regular business hours and upon written request, any relevant books and records of the other party hereto for the purpose of verifying payments made or to be made hereunder or confirming the performance of such party. The inspection and audit rights granted pursuant to this Section shall remain in full force and effect during the Term of this Agreement and for a period of three (3) months following the date of expiration or termination of this Agreement., upon written request, during regular business hours. 12.13 None of the provisions of this Agreement is intended to create nor shall be deemed or construed to create any relationship between the parties hereto other than that of independent entities contracting with each other hereunder solely for the purpose of effecting the provisions of this Agreement. Neither of the parties hereto, nor any of their respective employees, shall be construed to be the agent, employer, or representative of the other. WorldCom and Customer agree that WorldCom is only providing the services under this Agreement as an independent contractor. IN WITNESS WHEREOF, the parties have signed this Agreement and the individuals signing below represent that they have the authority to sign for and on behalf of the respective parties. COMDATA NETWORK, INC. WORLDCOM, INC. BY: /s/Edward A. Barbieri BY: /s/Diana Day NAME: Edward A. Barbieri NAME: Diana Day TITLE: President and Cief TITLE: Senior Vice President Operating Officer DATE: October 18, 1995 DATE: October 18, 1995 FAX: 615-370-7614 FAX: 601-974-8450 Page 10 of 11 COMDATA TELECOMMUNICATIONS SERVICES, INC. BY: /s/Edward A. Barbieri NAME: Edward A. Barbieri TITLE: President and Cief Operating Officer DATE: October 18, 1995 FAX: 615-370-7614 Page 11 of 11 EX-10.22 9 CREDIT AGREEMENT CREDIT AGREEMENT Dated as of December 12, 1995, Among CERIDIAN CORPORATION, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and THE FINANCIAL INSTITUTIONS PARTIES HERETO Arranged By BA SECURITIES, INC. With THE BANK OF NEW YORK and FIRST BANK NATIONAL ASSOCIATION, as Lead Managers TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS................................................1 1.01 Defined Terms.........................................1 1.02 Other Interpretive Provisions........................19 (a) Defined Terms...................................19 (b) The Agreement...................................19 1.03 Accounting Principles................................20 ARTICLE II THE CREDITS...............................................20 2.01 Amount and Terms of Commitments......................20 (a) The Committed Loans ............................20 (b) The Letters of Credit...........................20 (c) Participation; Old Letters of Credit............21 2.02 Loan Accounts........................................21 2.03 Procedure for Committed Borrowings...................21 2.04 Letter of Credit Requests............................22 2.05 Extension of Letters of Credit.......................23 2.06 Conversion and Continuation Elections for Committed Borrowings...........................................23 2.07 Bid Borrowings.......................................24 2.08 Procedure for Bid Borrowings.........................25 2.09 Voluntary Termination or Reduction of Commitments....28 2.10 Optional Prepayments................................ 28 2.11 Repayment............................................29 2.12 Repayment of Letter of Credit Drawings...............29 2.13 Default in Reimbursement of Issuing Bank.............30 2.14 Interest.............................................31 2.15 Fees.................................................31 (a) Fees Payable to BofA and the Agent...............31 (b) Commitment Fees..................................32 (c) Letter of Credit Fees............................32 (d) Fees under the Existing Company Credit Agreement.33 2.16 Computation of Fees and Interest.....................33 2.17 Payments by the Company..............................33 2.18 Payments by the Banks to the Agent...................34 -i- 2.19 Sharing of Payments, Etc.............................34 2.20 Pro Rata Treatment. ................................35 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY....................35 3.01 Taxes................................................35 3.02 Illegality...........................................37 3.03 Increased Costs and Reduction of Return..............38 3.04 Funding Losses.......................................38 3.05 Inability to Determine Rates.........................39 3.06 Substitution of Banks................................39 3.07 Survival.............................................40 ARTICLE IV CONDITIONS PRECEDENT......................................40 4.01 Conditions to Effectiveness and Initial Advances of Loans and Issuances of Letters of Credit up to an Aggregate Exposure of $75 Million....................40 (a) Credit Agreement................................40 (b) Resolutions; Incumbency.........................40 (c) Organization Documents; Good Standing...........40 (d) Legal Opinion...................................41 (e) Certificate.....................................41 (f) Payment of Fees and Expenses....................41 (g) Subsidiary Guaranty.............................41 (h) Merger..........................................41 (i) Existing Indebtedness...........................42 (j) Pro Forma Financial Statements..................42 (k) Indebtedness....................................42 (l) Approvals and Consents..........................42 (m) Compliance Certificate..........................42 (n) Other Documents................................ 42 . 4.02 Conditions to Advances of Loans and Issuances of Letters of Credit in Excess of $75 Million of Aggregate Exposure..........42 (a) After Comdata Debt Retired......................43 (b) Before Comdata Debt Retired.....................43 (i) Debt Tender Offer..........................43 (ii) Approvals and Consents.....................43 (iii)Legal Opinion..............................44 (iv) Non-Tendered Senior Notes and Senior Subordinated Debentures....................44 (v) Junior Subordinated Notes..................44 -ii- 4.03 Conditions to All Credit Extensions..................44 (a) Notice of Borrowing or Continuation/Conversion..44 (b) Notice of Acceptance............................44 (c) Letter of Credit Request........................45 (d) Continuation of Representations and Warranties..45 (e) No Existing Default.............................45 ARTICLE V REPRESENTATIONS AND WARRANTIES............................45 5.01 Corporate Existence and Power........................45 5.02 Corporate Authorization; No Contravention............46 5.03 Governmental Authorization...........................46 5.04 Binding Effect.......................................46 5.05 Litigation...........................................47 5.06 No Default...........................................47 5.07 ERISA Compliance.....................................47 5.08 Title to Properties..................................48 5.09 Taxes................................................48 5.10 Financial Condition..................................48 5.11 Environmental Matters................................49 5.12 Regulated Entities...................................49 5.13 No Burdensome Restrictions...........................50 5.14 Solvency.............................................50 5.15 Labor Relations......................................50 5.16 Copyrights, Patents, Trademarks and Licenses, etc....50 5.17 Material Subsidiaries and Equity Investments.........50 5.18 Insurance............................................50 5.20 Full Disclosure......................................51 ARTICLE VI AFFIRMATIVE COVENANTS.....................................51 6.01 Financial Statements.................................51 6.02 Certificates; Other Information......................51 6.03 Notices..............................................52 6.04 Preservation of Corporate Existence, Etc.............53 6.05 Maintenance of Property..............................54 6.06 Insurance............................................54 6.07 Payment of Obligations...............................54 6.08 Compliance with Laws.................................54 6.09 Inspection of Property and Books and Records.........55 6.10 Environmental Laws...................................55 -iii- 6.11 Use of Proceeds......................................55 6.12 Additional Guarantors................................55 6.13 Further Assurances...................................56 ARTICLE VII NEGATIVE COVENANTS........................................56 7.01 Limitation on Liens..................................56 7.02 Mergers, Consolidations and Dispositions of Assets...57 7.03 Cash Investments; Minority Investments...............59 7.04 Indebtedness.........................................59 7.05 Contingent Obligations...............................59 7.06 Use of Proceeds......................................59 7.07 Hostile Acquisitions.................................59 7.08 Lease Obligations....................................60 7.09 Consolidated Net Worth...............................60 7.10 Fixed Charge Coverage Ratio..........................60 7.11 Leverage Ratio.......................................60 7.12 Change in Business...................................60 7.13 Accounting Changes...................................60 7.14 Contracts of Subsidiaries............................60 ARTICLE VIII EVENTS OF DEFAULT.........................................61 8.01 Event of Default.....................................61 (a) Non-Payment.....................................61 (b) Representation or Warranty......................61 (c) Specific Defaults...............................61 (d) Other Defaults..................................61 (e) Cross-Default...................................61 (f) Insolvency; Voluntary Proceedings...............61 (g) Involuntary Proceedings.........................62 (h) ERISA...........................................62 (i) Monetary Judgments..............................62 (j) Ownership.......................................62 (k) Subsidiary Guaranty.............................63 8.02 Remedies.............................................63 8.03 Rights Not Exclusive.................................63 -iv- ARTICLE IX THE AGENT.................................................63 9.01 Appointment and Authorization........................63 9.02 Delegation of Duties.................................64 9.03 Liability of Agent...................................64 9.04 Reliance by Agent....................................64 9.05 Notice of Default....................................65 9.06 Credit Decision......................................65 9.07 Indemnification......................................66 9.08 Agent in Individual Capacity.........................66 9.09 Successor Agent......................................67 ARTICLE X MISCELLANEOUS.............................................67 10.01 Amendments and Waivers..............................67 10.02 Notices.............................................68 10.03 No Waiver; Cumulative Remedies......................68 10.04 Costs and Expenses..................................68 10.05 Indemnity...........................................69 (a) General Indemnity...............................69 (b) Survival; Defense...............................69 10.06 Marshalling; Payments Set Aside.....................70 10.07 Successors and Assigns..............................70 10.08 Assignments, Participations, etc....................70 10.09 Set-off.............................................72 10.10 Automatic Debits of Fees............................72 10.11 Notification of Addresses, Lending Offices, Etc.....72 10.12 Counterparts........................................72 10.13 Severability........................................73 10.14 No Third Parties Benefited..........................73 10.15 Time................................................73 10.16 GOVERNING LAW AND JURISDICTION......................73 10.17 WAIVER OF JURY TRIAL................................73 10.18 Entire Agreement....................................74 10.19 Interpretation......................................74 10.20 Term of Agreement...................................74 10.21 Foreign Currency Conversion.........................74 -v- SCHEDULES Schedule 1.01 Old Letters of Credit Schedule 2.01 Bank Commitments Schedule 4.01 Indebtedness Schedule 5.05 Litigation Schedule 5.07 ERISA Disclosures Schedule 5.10 Contingent Obligations and Partnerships Schedule 5.11 Environmental Matters Schedule 5.17 Subsidiaries and Material Subsidiaries Schedule 5.17(A) Minority Investments Schedule 7.02 Assets Permitted to be Disposed of as of the Closing Date EXHIBITS Exhibit A Compliance Certificate Exhibit B Assignment Agreement Exhibit C Invitation for Competitive Bids Exhibit D Letter of Credit Application Exhibit E Notice of Borrowing Exhibit F Notice of Conversion/Continuation Exhibit G Subsidiary Guaranty Exhibit H Competitive Bid Request Exhibit I Competitive Bid Exhibit J-1 Opinion of Counsel to Company Exhibit J-2 Opinion of Counsel to Company Exhibit K Bid Loan Note -vi- CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of December 12, 1995 by and among Ceridian Corporation, a Delaware corporation (the "Company"), the several financial institutions from time to time parties to this Agreement (collectively, the "Banks"; individually, a "Bank") and Bank of America National Trust and Savings Association, as Agent for the Banks. WHEREAS, the Banks have agreed to make available to the Company a revolving credit facility upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the Company, the Banks and the Agent hereby agree as follows: ARTICLE I DEFINITIONS I.1 Defined Terms. In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Absolute Rate" has the meaning specified in subsection 2.08(c). "Absolute Rate Auction" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.08. "Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate determined with reference to the Absolute Rate. "Acquisition Corp." means Convoy Acquisition Corp., a Delaware corporation. "Affected Bank" has the meaning specified in Section 3.06. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of 15% or more of the voting equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person. "Agent" means BofA in its capacity as agent for the Banks hereunder, and any successor agent appointed pursuant to Section 9.09.. "Agent-Related Persons" means BofA and any successor agent arising under Section 9.09, together with their respective Affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on the signature page hereto in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 10.02. "Aggregate Commitment" means the combined Commitments of the Banks, in the initial amount of Three Hundred Twenty-Five Million Dollars ($325,000,000), as such amount may be reduced from time to time pursuant to this Agreement. "Aggregate Exposure" means at any time, the sum of (a) the aggregate principal amount of outstanding Committed Loans and Bid Loans, plus (b) the aggregate undrawn face amount of all outstanding Letters of Credit, plus (c) the aggregate amount of drawings made under Letters of Credit for which the applicable Issuing Bank has not yet been reimbursed. "Agreement" means this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Applicable Commitment Fee Percentage," "Applicable Financial L/C Percentage," "Applicable Margin" and "Applicable Performance L/C Percentage" mean the percentages (the "Applicable Percentages") specified in the table below after applying the rules of application which immediately follow the table: Company's Actual or Implied Senior Unsecured Long-Term Debt Rating (S&P/Moody's): Applicable Level I Level Level Level Level V Percentages: BBB- II III IV B+/B1 /Baa3 BB+/Ba1 BB/Ba2 BB- and and /Ba3 Below Above Applicable 0.175% 0.225% 0.25% 0.275% 0.35% Commitment Fee Percentage Applicable 0.475% 0.65% 0.80% 1.0% 1.375% Financial L/C Percentage Applicable Margin: Base Rate 0% 0% 0% 0% 0.375% Committed Loans Applicable Margin: 0.475% 0.65% 0.80% 1.0% 1.375% Offshore Rate Committed Loans Applicable 0.2375% 0.325% 0.40% 0.50% 0.6875% Performance L/C Percentage where the following rules of application shall apply: -2- (a) the Company's senior unsecured long-term debt rating as in effect on the last business day of any calendar month shall be used to determine the Applicable Percentages for the immediately succeeding calendar month; (b) if at any time S&P and Moody's assign different senior unsecured long-term debt ratings to the Company, the Applicable Percentages shall be determined based on the higher of such ratings if the lower of such ratings is not more than two ratings levels lower than the higher, and shall be determined based on the lower of such ratings if the lower of such ratings is more than two ratings levels lower than the higher; (c) if at any time only one Rating Agency assigns a senior unsecured long-term debt rating to the Company, that rating shall be used to determine the Applicable Percentages; (d) if at any time neither Rating Agency assigns a senior unsecured long-term debt rating to the Company, but either or both Rating Agencies rate the Company's preferred stock, then the Applicable Percentages shall be determined utilizing such preferred stock rating(s) in accordance with the foregoing table and rules of applicability except that each ratings level specified in the table for senior unsecured long-term debt shall be adjusted two ratings levels lower for application to the Company's preferred stock; (e) if at any time neither Rating Agency assigns a senior unsecured long-term debt rating to the Company and neither Rating Agency rates the Company's preferred stock, then the Applicable Percentages shall be determined utilizing Level V in the table above; and (f) as of the Closing Date, the Applicable Percentages shall be determined utilizing Level II until adjusted as provided herein. "Arranger" means BA Securities, Inc. "Assignee" is defined in subsection 10.08(a). "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the non- duplicative allocated cost of internal legal services and all disbursements of internal counsel. "BAI" means Bank of America Illinois, an Illinois chartered bank. "Bank" (a) has the meaning specified in the introductory clause hereto and (b) also includes any financial institution becoming a party hereto by execution of an assignment and acceptance agreement in accordance with Section 10.08. "Bank Affiliate" means a Person engaged primarily in the business of commercial banking and that is a Subsidiary of a Bank or of a Person of which a Bank is a Subsidiary. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. S 101, et seq.). -3- "Base Rate" means the higher of: (a) the rate of interest publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." It is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; and (b) 0.50% per annum above the latest Federal Funds Rate. Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Committed Loan" means a Committed Loan that bears interest based on the Base Rate. "Bid Borrowing" means a Borrowing hereunder consisting of one or more Bid Loans made to the Company on the same day by one or more Banks. "Bid Loan" means a Loan by a Bank to the Company under Section 2.07, which may be an IBOR Bid Loan or an Absolute Rate Bid Loan. "Bid Loan Lender" means, in respect of any Bid Loan, the Bank making such Bid Loan to the Company. "Bid Loan Note" has the meaning specified in Section 2.02. "BofA" means Bank of America National Trust and Savings Association, a national banking association. "Borrowing" means a borrowing hereunder consisting of Loans of the same Type and, other than in the case of Base Rate Committed Loans, having the same Interest Period made to the Company on the same day by the Banks under Article II, and may be a Committed Borrowing or a Bid Borrowing. "Borrowing Date" means any date on which a Borrowing occurs under Section 2.03 or 2.08, or any date on which a Letter of Credit is issued under Section 2.04. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not -4- having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Expenditures" means, for any period, the aggregate of all capitalized software costs and all expenditures by the Company and its Subsidiaries for the acquisition of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) as shown in the Company's consolidated statements of cash flow for such period in accordance with GAAP. "Capital Lease" has the meaning specified in the definition of Capital Lease Obligations. "Capital Lease Obligations" means all monetary obligations of the Company or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease ("Capital Lease"). "Cash Equivalents" means: (b) securities issued or fully guaranteed or insured by the United States Government or any agency thereof having maturities of not more than six months from the date of acquisition; (c) certificates of deposit, time deposits, Eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than six months, issued by any Bank, or by any U.S. commercial or investment bank or broker having combined capital and surplus of not less than $100,000,000 whose short term securities are rated at least A-1 by S&P and P-1 by Moody's; and (d) commercial paper or promissory notes of an issuer rated at least A-1 by S&P or P-1 by Moody's and in either case having a tenor of not more than three months. "Closing Date" means December 12, 1995. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder as from time to time in effect. "Comdata" means Comdata Network, Inc., a Maryland corporation. "Comdata Holdings" means Comdata Holdings Corporation, a Delaware corporation. "Commitment" means (a) as to each Bank executing this Agreement on the Closing Date, its commitment to extend credit to the Company in the amount set forth opposite its name on Schedule 2.01 (as such amount may be reduced from time to time in accordance with Section 2.09 or Section 10.08) and (b) as to each financial institution becoming a Bank hereunder pursuant to -5- Section 10.08, its commitment to extend credit in the amount agreed upon in the assignment and acceptance agreement entered into by it in accordance with Section 10.08. "Commitment Percentage" means, as to any Bank, the percentage derived by dividing such Bank's Commitment by the Aggregate Commitment. "Committed Borrowing" means a Borrowing hereunder consisting of Committed Loans made on the same day by the Banks ratably according to their respective Commitment Percentages and, in the case of Offshore Rate Committed Loans, having the same Interest Period. "Committed Loan" means a Loan by a Bank to the Company under subsection 2.01(a), and may be an Offshore Rate Committed Loan or a Base Rate Committed Loan (each, a "Type" of Committed Loan). "Competitive Bid" means an offer by a Bank to make a Bid Loan in accordance with subsection 2.08(b). "Competitive Bid Request" is defined in subsection 2.08(a). "Compliance Certificate" means a certificate delivered to the Agent by the Company pursuant to subsection 6.02(a), substantially in the form of Exhibit A attached hereto. "Consolidated Fixed Charges" means, at any time, (a) Consolidated Interest Expense for the four fiscal quarters ending on or before the date of determination, plus (b) Current Maturities of Long Term Debt measured as of the last day of the fiscal quarter ending on or before the date of determination (but excluding principal payable under the Loan Documents), plus (c) dividends paid on preferred stock issued by the Company (including the Preferred Stock) for the four fiscal quarters ending on or before the date of determination, as determined in accordance with GAAP. "Consolidated Indebtedness" means, at any time, all amounts which would, in accordance with GAAP, be included as Indebtedness on a consolidated balance sheet of the Company and its Subsidiaries as of such time. "Consolidated Interest Expense" means, for any period, gross consolidated interest expense for such period (including all commissions, discounts, fees and other charges in connection with Letters of Credit) for the Company and its Subsidiaries. "Consolidated Net Income (Loss)" means, for any period, all amounts which would, in accordance with GAAP, be included in net income (loss) on the consolidated income statement of the Company and its Subsidiaries for such period. "Consolidated Net Worth" means, at any time, with respect to the Company and its Subsidiaries, shareholders' equity on the date of determination as determined in accordance with GAAP (except that the effects of direct charges or credits to shareholders' equity related to accounting for pensions ("FAS 87") and foreign currency translation ("FAS 52") are to be disregarded). -6- "Consolidated Total Assets" means, at any time, the total consolidated assets of the Company and its Subsidiaries measured as of the last day of the fiscal quarter ending on or before the date of determination, as determined in accordance with GAAP. "Contingent Obligation" means, as to the Company or any of its Subsidiaries, (a) any Guaranty Obligation of that Person; (b) any reimbursement obligation of that Person with respect to a standby letter of credit, surety bond, banker's acceptance or similar instrument; (c) any obligation of that Person to purchase any materials, supplies or other property from, or to obtain the services of, another Person (other than the Company or one of its Subsidiaries) if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered; and (d) all Indebtedness (other than that of the Company or any of its Subsidiaries) secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by the Company or any such Subsidiary; but in all events excluding obligations of the type described in clauses (a) through (d) above to the extent that reserves or liabilities have been established therefor in the Company's consolidated financial statements. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion Date" means any date on which the Company elects to convert a Base Rate Committed Loan to an Offshore Rate Committed Loan or to convert an Offshore Rate Committed Loan to a Base Rate Committed Loan. "Credit Extension" means a Borrowing, a continuance or conversion of Loans or the issuance of or purchase of a participation under subsection 2.01(c) in a Letter of Credit. "Credit Extension Date" means the date on which a Credit Extension is made. "Current Maturities of Long Term Debt" means the principal portion of any Indebtedness with a maturity date in excess of one year that is due within the next 12 months. "Debt Tender Offer" means the offer by Comdata to purchase for cash all of its outstanding Senior Notes and all of its outstanding Senior Subordinated Debentures, and the related solicitation of consents to amend the related indentures, as set forth in the Offer to Purchase. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Dollars", "dollars" and "$" each mean lawful money of the United States. -7- "Domestic Lending Office" means, with respect to each Bank, the office of that Bank designated as such in the signature pages hereto or such other office of the Bank as it may from time to time specify to the Company and the Agent. "EBIT" means, for any period, for the Company and its Subsidiaries determined in accordance with GAAP, the sum of (a) Consolidated Net Income (Loss), plus (b) Consolidated Interest Expense, plus (c) provision for income taxes to the extent included in the determination of Consolidated Net Income (Loss), and minus (d) interest income, all determined on a consolidated basis for the Company and its Subsidiaries; provided, however, that Consolidated Net Income (Loss) shall be computed for these purposes without giving effect to extraordinary losses or gains or losses or gains from discontinued operations. "EBITDA" means, for any period, for the Company and its Subsidiaries on a consolidated basis, determined in accordance with GAAP, the sum of (a) EBIT plus (b) depreciation and amortization expenses. "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; and (c) any Bank Affiliate. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the alleged or actual presence, placement, migration, spillage, leakage, disposal, discharge, emission or release of any Hazardous Material at, in, or from property, whether or not owned by the Company, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations, registration requirements and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental and land use matters or health and safety matters involving Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder as from time to time in effect. -9- "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate". "Event of Default" means any of the events or circumstances specified in Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934, and regulations promulgated thereunder. "Existing Comdata Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of March 3, 1995 by and among Comdata, Comdata Holdings, BT Commercial Corporation, as agent, and the financial institutions parties thereto, as amended. "Existing Company Credit Agreement" means that certain Second Amended and Restated Credit Agreement dated as of May 23, 1995 by and among the Company, BofA, as agent, and the financial institutions parties thereto. "Extension" is defined in Section 2.05. "Extension Refusal Date" is defined in Section 2.05. "Federal Funds Rate" means, 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)". 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. -9- Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such previous 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 time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any successor thereto. "Financial L/C" means, with respect to any Letter of Credit, a "financial standby letter of credit" as such term is defined in the Adequacy Guidelines For Bank Holding Companies: Risk-Based Measure, 12 C.F.R. Part 225, Appendix A, III.D (1993) and as the definition of such term may be amended from time to time prior to issuance of any such Letter of Credit. Such term is described in the 1993 Code of Federal Regulations as "irrevocable obligations of the banking organization to pay a third-party beneficiary when a customer (account party) fails to repay an outstanding loan or debt instrument (direct credit substitute)." "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" means, collectively, Comdata Holdings, Comdata and any domestic Material Subsidiary that executes the Subsidiary Guaranty pursuant to Section 6.12. "Guaranty Obligation" means, as applied to the Company or any of its Subsidiaries, any agreement of the Company or any such Subsidiary to guarantee the Indebtedness of a Person other than the Company or any of its Subsidiaries (the "primary obligor"), or any obligation or undertaking of the Company or any such Subsidiary which, in economic effect, is substantially equivalent to a guarantee of the primary obligor's Indebtedness ("primary obligations"), including any obligation of the Company or any such Subsidiary, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such -11- primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, hazardous chemicals, special waste, hazardous substance, hazardous material, regulated substance, or toxic substance, or petroleum or petroleum derived substance or waste. "IBOR Auction" means a solicitation of Competitive Bids setting forth an IBOR Bid Margin pursuant to Section 2.08. "IBOR Bid Loan" means any Bid Loan that bears interest at a rate based upon the IBO Rate. "IBOR Bid Margin" has the meaning specified in subsection 2.08(c)(ii)(C). "IBO Rate" has the meaning specified in the definition of "Offshore Rate". "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the Ordinary Course of Business pursuant to ordinary terms); (c) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); and (e) all Capital Lease Obligations. Indebtedness owed to the Company by its Subsidiaries, by one Subsidiary to another or by the Company to a Subsidiary shall not constitute Indebtedness. "Indemnified Person" has the meaning specified in subsection 10.05(a). "Indemnified Liabilities" has the meaning specified in subsection 10.05(a). "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case for clause (a) and (b) above, undertaken under U.S. Federal, State or foreign law, including the Bankruptcy Code. "Interest Payment Date" means (a) as to any Base Rate Committed Loan, the first Business Day of January, April, July and October, each date on which such Committed Loan is converted into an Offshore Rate Committed Loan, and the Termination Date; -11- (b) as to any Offshore Rate Committed Loan, the last day of each Interest Period applicable to such Loan and, if any such Interest Period exceeds three months, the date that falls three months after the beginning of such Interest Period; (c) as to any Absolute Rate Bid Loan or any IBOR Bid Loan, the last day of each Interest Period applicable to such Loan and any intervening dates prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Lender in the applicable Competitive Bid. "Interest Period" means, (a) as to any Offshore Rate Loan, the period commencing on the Business Day such Loan is disbursed, or (in the case of any Offshore Rate Committed Loan) on the Conversion Date on which such Loan is converted into or continued as an Offshore Rate Committed Loan, and ending on the date one, two, three or six months thereafter, as selected by the Company in its Notice of Borrowing, Notice of Conversion/Continuation or Competitive Bid Request, as the case may be; and (b) as to any Absolute Rate Bid Loan, a period of not less than 14 days and not more than 365 days as selected by the Company in the applicable Competitive Bid Request; provided, however, that: (a) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless, in the case of an Offshore Rate Loan, 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; (b) any Interest Period pertaining to an Offshore Rate Loan 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 (c) no Interest Period shall extend beyond the Termination Date. "Investment" of a Person means the outstanding amount of any loan, advance, extension of credit (other than loans, advances or extensions of credit arising in the Ordinary Course of Business), or the amount of any contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership or membership interests, notes, debentures or other securities of any other Person made by such Person. "Invitation for Competitive Bids" means a solicitation for Competitive Bids, substantially in the form of Exhibit C attached hereto. "Issuing Bank" means, with respect to each Letter of Credit, BAI (or any of its Affiliates including BofA) or such other Bank which may issue a Letter of Credit. "IRS" means the Internal Revenue Service or any entity succeeding to any of its principal functions under the Code. "Joint-Applicant" means, with respect to any Letter of Credit, a Subsidiary of the Company which together with the Company signs a Letter of Credit Application. -12- "Junior Subordinated Notes" means Comdata's 11% Junior Subordinated Extendible Notes due 1997. "Lending Office" means, with respect to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, opposite its name on the applicable signature page hereto, or such other office or offices of the Bank as it may from time to time notify the Company and the Agent in writing. "Letter of Credit" means (a) a standby letter of credit issued under this Agreement by the Issuing Bank for the account of the Company and (b) any Old Letter of Credit outstanding on the Closing Date, including an Extension of any letter of credit. "Letter of Credit Application" means a letter of credit application and agreement in form and substance satisfactory to the Issuing Bank. Attached hereto as Exhibit D is the initial form of Letter of Credit Application. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or other security interest (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease Obligation and any financing lease having substantially the same economic effect as any of the foregoing) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an Operating Lease. "Loan" means an extension of credit by a Bank to the Company pursuant to Article II, and may be a Committed Loan or a Bid Loan. "Loan Documents" means this Agreement, the Notes, the Letter of Credit Applications, the Subsidiary Guaranties, and all documents delivered to the Agent or any Bank in connection herewith or therewith, as such instruments, agreements and documents may be amended, supplemented, restated, modified or renewed from time to time. "Majority Banks" means (a) at any time prior to the Termination Date, Banks then having 51% or more of the Commitments and (b) at all other times, Banks then holding 51% or more of the then aggregate unpaid principal amount of the Credit Extensions. "Margin Stock" means "margin stock" as such term is defined in Regulation G, T, U or X of the Federal Reserve Board. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (b) a material adverse effect upon the validity or enforceability against the Company or any Guarantor of any of the Loan Documents. "Material Subsidiary" means at any time any Subsidiary of the Company the assets of which are 10% or more of Consolidated Total Assets (or the equivalent thereof in another currency). -13- "Merger" means the merger of Acquisition Corp. with and into Comdata Holdings pursuant to the Plan of Merger. "Merger Documents" means the Plan of Merger and all instruments, agreements and documents executed and delivered in connection with the Plan of Merger. "Moody's" means Moody's Investors Service, Inc. and any successor thereto. "Multiemployer Plan" means a "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "Notes" means the Bid Loan Notes. "Notice of Borrowing" means a notice given by the Company to the Agent pursuant to Section 2.03, in substantially the form of Exhibit E attached hereto. "Notice of Conversion/Continuation" means a notice given by the Company to the Agent pursuant to Section 2.06, in substantially the form of Exhibit F attached hereto. "Notice of Lien" means any "notice of lien" or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "Obligations" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by the Company or any Guarantor to any Bank, the Agent, or any other Person required to be indemnified under any Loan Document, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, the issuance of a Letter of Credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "Offer to Purchase" means the Offer to Purchase and Consent Solicitation Statement of Comdata dated November 22, 1995 relating to the Senior Notes and Senior Subordinated Debentures as it may subsequently be amended (including any amendments to increase the tender offer consideration), but without giving effect to any amendments thereto relating to the amendments or waivers to the Indentures (as defined therein) proposed thereby. "Offshore Lending Office" means with respect to each Bank, the office of such Bank designated as such in the signature pages hereto or such other office of such Bank as such Bank may from time to time specify to the Company and the Agent. -14- "Offshore Rate" means, for each Interest Period in respect of Offshore Rate Loans comprising part of the same Borrowing, an interest rate per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the following formula: Offshore Rate = IBO Rate 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means (a) with respect to Offshore Rate Committed Loans, the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%) in effect on the date the IBO Rate for such Interest Period is determined (whether or not applicable to any Bank) 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; (b) with respect to IBOR Bid Loans, 0%; and "IBO Rate" means for any Interest Period with respect to an IBOR Bid Loan or Offshore Rate Committed Loan, the rate of interest per annum determined by the Agent as the rate of interest at which dollar deposits in the approximate amount of, in the case of IBOR Bid Loans, the IBOR Bid Loans to be borrowed in such Bid Loan Borrowing, and, in the case of Offshore Rate Committed Loans, the Offshore Rate Committed Loan to be made by BofA, and having a maturity comparable to such Interest Period, would be offered by BofA's Grand Cayman Branch, Grand Cayman B.W.I., to major banks in the offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. (New York City time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Committed Loan" means any Committed Loan that bears interest based on the Offshore Rate. "Offshore Rate Loan" means an IBOR Bid Loan or an Offshore Rate Committed Loan. "Old Letters of Credit" means letters of credit issued by BofA or BankAmerica International under the Existing Company Credit Agreement and outstanding on the Closing Date, all of which are listed on Schedule 1.01 attached hereto. "Operating Lease" means, as applied to any Person, any lease of property which is not a Capital Lease. "Ordinary Course of Business" means, in respect of any transaction involving the Company or any Subsidiary of the Company, the ordinary course of such Person's business, as -15- conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of designations or instrument relating to the rights of preferred shareholders of such corporation, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. "Other Taxes" has the meaning specified in subsection 3.01(b). "Participant" has the meaning specified in subsection 10.08(d). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan, as defined in Section 3(2) of ERISA, subject to Title IV of ERISA, which the Company or any ERISA Affiliate sponsors or maintains, or to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan, as described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years; but excluding in all cases any Multiemployer Plan. "Performance L/C" means, with respect to any Letter of Credit, a "performance standby letter of credit" as such term is defined in the Adequacy Guidelines For Bank Holding Companies: Risk-Based Measure, 12 C.F.R. Part 225, Appendix A, III.D (1993) as the definition of such term may be amended from time to time prior to issuance of any such Letter of Credit. Such term is described in the 1993 Code of Federal Regulations as "irrevocable obligations of the banking organization to pay a third-party beneficiary when a customer (account party) fails to perform some other contractual non-financial obligation." "Permitted Liens" is defined in Section 7.01. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA, which the Company or any ERISA Affiliate sponsors or maintains, or to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions, and includes any Pension Plan or Multiemployer Plan. "Plan of Merger" means that certain Agreement and Plan of Merger dated as of August 23, 1995 by and among the Company, Acquisition Corp. and Comdata Holdings. "Preferred Stock" means the Company's 5-1/2% Cumulative Convertible Exchangeable Preferred Stock, par value $100 per share. -16- "Purchase" means any transaction, or any series of related transactions, consummated on or after the Closing Date, by which the Company or any of its Subsidiaries (a) acquires any ongoing business or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets, merger or otherwise, or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership or membership interests of a partnership or limited liability company, respectively. "Rate Contracts" means interest rate and currency swap agreements, cap, floor and collar agreements, interest rate insurance, currency spot and forward contracts and other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates. "Rating Agency" means S&P and Moody's. "Replacement Bank" has the meaning specified in Section 3.07. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations promulgated thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of any arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means the chief executive officer, the chief financial officer, the president, any executive vice president, the controller or the treasurer of the Company. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies and any successor thereto. "SEC" means the Securities and Exchange Commission, or any successor thereto. "Senior Notes" means Comdata's 12-1/2% Senior Notes due 1999. "Senior Subordinated Debentures" means Comdata's 13- 1/4% Senior Subordinated Debentures due 2002. "Solvent" means, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the fair value of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Conveyances Act (as enacted in the State of Illinois); (b) the present fair saleable value of -17- the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "Stated Amount" means, with respect to any Letter of Credit, at any date of determination thereof, the maximum aggregate amount available for drawing thereunder plus the aggregate amount of all unreimbursed payments and disbursements under such Letter of Credit. "Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Subsidiary Guaranty" means the Subsidiary Guaranty executed and delivered by each Guarantor in the form of Exhibit G attached hereto together with each additional guaranty in substantially such form executed and delivered by a domestic Material Subsidiary pursuant to Section 6.12, in each case as amended, restated, supplemented or otherwise modified from time to time. "Taxes" has the meaning specified in subsection 3.01(a). "Termination Date" means the earlier to occur of: (b) November 30, 1998; and (c) the date on which the Aggregate Commitment terminates in accordance with Section 2.09 or Section 8.02. "Transferee" has the meaning specified in subsection 10.08(e). "Type" has the meaning specified in the definition of "Committed Loan". "UCC" means the Uniform Commercial Code as in effect in the State of Illinois. "United States" and "U.S." each means the United States of America. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being -18- made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both. I.2 Other Interpretive Provisions. (a) Defined Terms. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described. (b) The Agreement. (i) The words "hereof", "herein", "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 subsection, section, schedule and exhibit references are to this Agreement unless otherwise specified. (ii) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term "including" is not limiting and means "including without limitation". In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (iii) Unless otherwise expressly provided herein, (A) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (B) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (iv) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (v) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided, any reference to any action of the Agent or the Banks by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion." (vi) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they -19- shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in their preparation. I.3 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed in accordance with GAAP as in effect from time to time, but all financial computations required under this Agreement shall be made in accordance with GAAP as in effect and applied by the Company on September 30, 1995, consistently applied, except to the extent otherwise agreed upon by the parties hereto. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE CREDITS II.1 Amount and Terms of Commitments. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, the Company may borrow, repay and reborrow Loans and obtain the issuance of Letters of Credit. (a) The Committed Loans. From time to time on any Business Day during the period from the Closing Date to the Termination Date, each Bank severally agrees, on the terms and conditions hereinafter set forth, to make Committed Loans to the Company in an aggregate outstanding amount not to exceed at any time the amount of such Bank's Commitment Percentage of the difference between (i) the Aggregate Commitment minus (ii) the sum of (A) the aggregate principal amount of all outstanding Committed Loans and Bid Loans, plus (B) the aggregate undrawn face amount of all outstanding Letters of Credit and plus (C) the aggregate amount of drawings made under Letters of Credit for which the applicable Issuing Bank has not yet been reimbursed. (b) The Letters of Credit. The Issuing Bank agrees, on the terms and conditions hereinafter set forth, on any Business Day on or prior to the Termination Date, to issue Letters of Credit for the account of the Company and, if applicable, a Joint-Applicant, in a face amount not in excess at any time of the Aggregate Commitment, minus the sum of (i) the aggregate principal amount of all outstanding Loans, plus (ii) the aggregate undrawn face amount of all outstanding Letters of Credit, plus (iii) the aggregate amount of drawings made under Letters of Credit for which the applicable Issuing Bank has not yet been reimbursed; provided, however, that (A) in no event may the Stated Amount of Letters of Credit issued to support worker's compensation obligations of the Company and its Subsidiaries exceed $10,000,000 at any one time and (B) in no event may the aggregate Stated Amount of all Letters of Credit outstanding exceed $75,000,000 at any time. BAI may, at its option, fulfill its Commitment to issue Letters of Credit by arranging for the issuance of Letters of Credit by an Affiliate of BAI. Any Letter of Credit issued by an Affiliate of BAI shall be deemed to be issued by BAI for the purpose of BAI's fulfilling its Commitment and retaining a proportionate interest in Letters of Credit pursuant to subsection (c) of this Section 2.01. -20- (c) Participation; Old Letters of Credit. Each Bank (other than the Issuing Bank) agrees to purchase a participation (i) in each Letter of Credit on the date of issuance of such Letter of Credit and (ii) in each amendment increasing the face amount of a Letter of Credit after the issuance thereof, on the date of such amendment, in an amount equal to its Commitment Percentage. The Issuing Bank shall retain a proportionate interest in the amount of its Commitment Percentage in each Letter of Credit after such purchase of participations. With respect to Old Letters of Credit, upon the effectiveness of this Agreement pursuant to Section 4.01, each Bank (other than the Issuing Bank) shall be deemed to have purchased a participation in the amount of its Commitment Percentage in such Old Letters of Credit and such Old Letters of Credit shall be deemed to be Letters of Credit existing under this Agreement. II.2 Loan Accounts. (a) The Committed Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank shall be conclusive absent manifest error of the amount of the Committed Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Committed Loans. At the request of any Bank, the Company shall execute and deliver a promissory note in form and substance satisfactory to the Company and such Bank to reflect the Committed Loans evidenced by such loan accounts or records. (b) The Bid Loans made by each Bank shall be evidenced by one or more notes ("Bid Loan Notes"), in addition to the loan accounts referenced in subsection 2.02(a). Each such Bank shall endorse on the schedules annexed to its Bid Loan Note the date, amount and maturity of each Bid Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Bank is irrevocably authorized by the Company to endorse its Bid Loan Note and each Bank's record shall be conclusive absent manifest error; provided, however, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Bid Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Bid Loan Note to such Bank. II.3 Procedure for Committed Borrowings. (a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice (or telephonic notice, promptly confirmed by a writing) delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to (i) 9:30 a.m. (Chicago time) two Business Days prior to the requested Borrowing date, in the case of Offshore Rate Committed Loans and (ii) 10:30 a.m. (Chicago time) on the same Business Day of such proposed Borrowing, in the case of Base Rate Committed Loans, specifying: (A) the amount of the Committed Borrowing, which shall be in an aggregate minimum principal amount of $5,000,000 or any multiple of $1,000,000 in excess thereof; (B) the requested Borrowing Date, which shall be a Business Day; -21- (C) whether the Committed Borrowing is to be comprised of Offshore Rate Committed Loans or Base Rate Committed Loans; and (D) the duration of the Interest Period applicable to such Committed Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Committed Borrowing, such Borrowing shall consist of Base Rate Committed Loans, regardless of the type of Loans requested by the Company; (b) Upon receipt of the Notice of Borrowing, the Agent will promptly notify each Bank thereof and of the amount of such Bank's Commitment Percentage of the Committed Borrowing. (c) Each Bank will make the amount of its Commitment Percentage of each Committed Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 1:00 p.m. (Chicago time) on the Borrowing date requested by the Company in funds immediately available to the Agent. The proceeds of all such Committed Loans will then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent. (d) Unless the Majority Banks shall otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan be made as, converted into or continued as an Offshore Rate Loan. (e) After giving effect to any Committed Borrowing, conversion or continuation, there shall not be more than ten different Interest Periods in effect in respect of all Committed Loans and all Bid Loans then outstanding. II.4 Letter of Credit Requests (a) Whenever the Company wishes to have the Issuing Bank issue a Letter of Credit, the Company shall deliver to the Issuing Bank a Letter of Credit Application with appropriate insertions, signed by the Company, and, if such Letter of Credit is also to be issued for the account of a Joint-Applicant, signed by the Joint-Applicant. Such Letter of Credit Application shall be delivered at least two and not more than fifteen Business Days prior to the requested date of issuance, except as provided in clause (iv) in the proviso to Section 2.05. Requests for amendments to Letters of Credit shall be submitted in writing at least two and not more than fifteen Business Days prior to the requested amendment date. If at any time the Issuing Bank is not the Agent, a copy of such Letter of Credit Application shall be delivered to the Agent as well. The Agent shall deliver notice of the request for the issuance of a Letter of Credit to all other Banks and copies thereof to all such Banks which have requested such copies. In each Letter of Credit Application, the Company shall designate whether the Letter of Credit is a Financial L/C or a Performance L/C and whether, if it is a Financial L/C, it is being issued to support worker's compensation obligations of the Company and its Subsidiaries. The determination of the Issuing Bank and the Agent as to such designation shall be made at or prior to the time such Letter of Credit is issued, shall be conclusive in the event of any disagreement with the Company with respect thereto and shall -22- govern during the term of this Agreement, notwithstanding any subsequent change in the definition of any such term in the applicable regulations. (b) Letters of Credit may be Financial L/Cs or Performance L/Cs, and all Letters of Credit shall be denominated in Dollars. No Letter of Credit shall have a final expiration date later than the earlier of (i) one year from the date issuance or (ii) the Termination Date. (c) The Agent shall deliver to the Company a copy of each Letter of Credit issued and each amendment thereto and shall also promptly deliver a copy thereof to each other Bank which has requested such a copy. Each Letter of Credit shall provide that payment thereunder shall not be made earlier than three Business Days after receipt of any documents demanding payment thereunder. 2.05 Extension of Letters of Credit. If (a) any Letter of Credit provides that the term thereof will be automatically extended or renewed (by issuance of a substitute Letter of Credit or otherwise) unless notice is given by the Issuing Bank on or before a specified date (hereinafter called the "Extension Refusal Date") that such Issuing Bank will not permit such extension or renewal or (b) the Company requests the extension or renewal of any other Letter of Credit, then for purposes of Sections 2.01, 2.04, and 4.03 of this Agreement, any such renewal or extension granted by the Issuing Bank (hereinafter called an "Extension") shall be deemed to be the issuance of a new Letter of Credit and such issuance shall be deemed to occur on the Extension Refusal Date in the case of a Letter of Credit described in clause (a) above, or the date of such request in the case of a Letter of Credit described in clause (b) above; provided, however, that (i) such extension shall not cause the respective Letter of Credit to expire later than the earlier of (A) one year from the extension date or (B) the Termination Date; (ii) the Extension shall not be deemed to cause any duplication of the amount of such Letter of Credit for purposes of determining compliance with subsection 2.01(b); (iii) the Issuing Bank shall receive at least ten but not more than thirty Business Days' prior written notice of such Extension, and the accompanying Letter of Credit Application shall state that it relates to such Extension and shall specify the related Extension Refusal Date, if any; and (iv) no document need be delivered by the Issuing Bank pursuant to subsection 2.04(c) with respect to any Letter of Credit described in clause (a) above unless the terms of such Letter of Credit so require. 2.06 Conversion and Continuation Elections for Committed Borrowings. (a) Prior to the Termination Date, the Company may, upon irrevocable written notice (or telephonic notice, promptly confirmed by a writing) to the Agent in accordance with subsection 2.06(b): (i) elect, as of any Business Day, in the case of Base Rate Committed Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Committed Loans, to convert any such Committed Loans (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Committed Loans of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Offshore Rate Committed Loans having Interest Periods expiring on such day (or any -23- part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, however, that if the aggregate amount of Offshore Rate Committed Loans has been reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, such Offshore Rate Committed Loans shall automatically convert into Base Rate Committed Loans, and on and after such date the right of the Company to continue such Committed Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation in accordance with Section 10.02 to be received by the Agent not later than (i) 9:30 a.m. (Chicago time) at least two Business Days in advance of the Conversion Date or continuation date, if the Committed Loans are to be converted into or continued as Offshore Rate Committed Loans; and (ii) 10:30 a.m. (Chicago time) on the Conversion Date, if the Committed Loans are to be converted into Base Rate Committed Loans; specifying: (A) the proposed Conversion Date or continuation date; (B) the aggregate amount of Committed Loans to be converted or continued; (C) the Type of Committed Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Committed Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Committed Loans, the Company has failed to select a new Interest Period to be applicable to such Offshore Rate Committed Loans or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Base Rate Committed Loans effective as of the expiration date of such current Interest Period. (d) Upon receipt of a Notice of Conversion/ Continuation, the Agent will promptly notify each Bank thereof, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Committed Loans with respect to which the notice was given held by each Bank. (e) Unless the Majority Banks shall otherwise consent, during the existence of a Default or Event of Default, the Company may not elect to have a Committed Loan converted into or continued as an Offshore Rate Committed Loan. II.7 Bid Borrowings. In addition to Committed Borrowings pursuant to Section 2.01, each Bank severally agrees that the Company may, as set forth in Section 2.08, from time to time request the Banks prior to the Termination Date to submit offers to make Bid Loans to the Company; provided, however, that the Banks may, but shall have no obligation to, submit such offers and the Company may, but shall have no obligation to, accept any -24- such offers; and provided, further, that at no time shall (a) the outstanding aggregate principal amount of all Bid Loans made by all Banks, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, plus the aggregate undrawn face amount of all outstanding Letters of Credit, plus the aggregate amount of drawings made under Letters of Credit for which the applicable Issuing Bank has not yet been reimbursed exceed the Aggregate Commitment; (b) the outstanding aggregate principal amount of all Bid Loans made by all Banks exceed 75% of the Aggregate Commitment; or (c) the number of Interest Periods for Bid Loans then outstanding plus the number of Interest Periods for Committed Loans then outstanding exceed ten. 2.08 Procedure for Bid Borrowings. (a) When the Company wishes to request the Banks to submit offers to make Bid Loans hereunder, it shall transmit to the Agent by facsimile transmission a notice in substantially the form of Exhibit H attached hereto (a "Competitive Bid Request") so as to be received no later than 11:00 a.m. (Chicago time) (i) four Business Days prior to the date of a proposed Bid Borrowing in the case of an IBOR Auction, or (ii) one Business Day prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying: (A) the date of such Bid Borrowing, which shall be a Business Day; (B) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof; (C) whether the Competitive Bids requested are to be for IBOR Bid Loans or Absolute Rate Bid Loans or both; and (D) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.08(c), the Company may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than once in any period of five Business Days. (b) Upon receipt of a Competitive Bid Request, the Agent will promptly send to the Banks by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by the Company to each Bank to submit Competitive Bids offering to make the Bid Loans to which such Competitive Bid Request relates in accordance with this Section 2.08. (c) (i) Each Bank may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this subsection 2.08(c) and must be submitted to the Agent by facsimile transmission at the Agent's office for notices set forth on the signature pages hereto not later than (A) 8:30 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an IBOR Auction or (B) 8:30 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction; provided, however, that Competitive Bids submitted by BofA (or any Affiliate of BofA) in the capacity of a Bank may be submitted, and may only be submitted, if BofA or such Affiliate notifies the Company of the terms of the offer or -25- offers contained therein not later than (1) 8:15 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an IBOR Auction or (2) 8:15 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction. (ii) Each Competitive Bid shall be in substantially the form of Exhibit I attached hereto, specifying therein: (A) the proposed date of Borrowing; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (1) may be equal to, greater than or less than the Commitment of the quoting Bank, (2) must be $5,000,000 or in multiples of $1,000,000 in excess thereof, and (3) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) in case the Company elects an IBOR Auction, the margin above or below the IBO Rate (the "IBOR Bid Margin") offered for each such Bid Loan, expressed in multiples of 1/1000th of one basis point to be added to or subtracted from the applicable IBO Rate and the Interest Period applicable thereto; (D) in case the Company elects an Absolute Rate Auction, the rate of interest per annum expressed in multiples of 1/1000th of one basis point (the "Absolute Rate") offered for each such Bid Loan; and (E) the identity of the quoting Bank. A Competitive Bid may contain up to three separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Competitive Bids. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit I or does not specify all of the information required by subsection (c)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in subsection (c)(i). (d) Promptly on receipt and not later than 9:00 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing in the case of an IBOR Auction, or 9:00 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Agent will notify the Company of the terms (i) of any Competitive Bid submitted by a Bank that is in accordance with subsection 2.08(c), and (ii) of any Competitive -26- Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Bank with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in subsection 2.08(c). The Agent's notice to the Company shall specify (i) the aggregate principal amount of Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Request; and (ii) the respective principal amounts and IBOR Bid Margins or Absolute Rates, as the case may be, so offered. Subject only to the provisions of Sections 3.02, 3.05 and 4.03 and the provisions of this subsection (d), any Competitive Bid shall be irrevocable except with the written consent of the Agent given on the written instructions of the Company. (e) Not later than 9:30 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an IBOR Auction, or 9:30 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Company shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection 2.08(d). The Company shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. The Company may accept any Competitive Bid in whole or in part; provided, however, that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing must be $5,000,000 or in any integral multiple of $1,000,000 in excess thereof; (iii) acceptance of offers may only be made on the basis of ascending IBOR Bid Margins or Absolute Rates within each Interest Period, as the case may be; and (iv) the Company may not accept any offer that is described in subsection 2.08(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Banks with the same IBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in such multiples, not less than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Agent of the amounts of Bid Loans shall be conclusive in the absence of manifest error. (g) (i) The Agent will promptly notify each Bank having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the date of the Bid Borrowing. (ii) Each Bank which has received notice pursuant to subsection 2.08(g)(i) that its Competitive Bid has been accepted shall make the amounts of such Bid Loans available -27- to the Agent for the account of the Company at the Agent's Payment Office, by 1:00 p.m. (Chicago time) on such date of Bid Borrowing, in funds immediately available to the Agent for the account of the Company at the Agent's Payment Office. (iii) Promptly following each Bid Borrowing, the Agent shall notify each Bank of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Company and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Company and the Banks shall furnish such information to the Agent as the Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from the Company for payment of all amounts owing hereunder. (h) If, on or prior to the proposed date of Borrowing, the Commitments have not been terminated and if, on such proposed date of Borrowing all applicable conditions to funding referenced in Sections 3.02, 3.05 and 4.03 are satisfied, the Banks whose offers the Company has accepted will fund each Bid Loan so accepted. Nothing in this Section 2.08 shall be construed as a right of first offer in favor of the Banks or to otherwise limit the ability of the Company to request and accept credit facilities from any Person (including any of the Banks), provided that no Default or Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities. 2.09 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than three Business Days' prior written or telephonic (promptly confirmed with a writing) notice to the Agent given prior to 11:00 a.m. (Chicago time) (which notice shall be irrevocable), terminate or permanently reduce the Aggregate Commitment by an aggregate minimum amount of $10,000,000 or any integral multiple of $5,000,000 in excess thereof; provided, however, that no such reduction or termination shall be permitted if, after giving effect thereto and to any prepayments of Committed Loans made on the effective date thereof, the sum of the then outstanding principal amount of the Loans and the Stated Amount of the then outstanding Letters of Credit would exceed the Aggregate Commitment then in effect and, provided, further, that once reduced in accordance with this Section 2.09, the Aggregate Commitment may not be increased. Any reduction of the Aggregate Commitment shall be applied to each Bank's Commitment in accordance with such Bank's Commitment Percentage. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. II.10 Optional Prepayments. (a) Subject to Section 3.04, the Company may, at any time or from time to time, upon at least one Business Day's notice to the Agent with respect to Base Rate Committed Loans and at least three Business Days' notice to the Agent with respect to Offshore Rate Committed Loans, ratably prepay Committed Loans in whole or in part, in an aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof. Each such notice shall be delivered no later than 11:00 a.m. (Chicago time). Such notice of prepayment shall specify the date and amount of such prepayment and the type of Committed Loans being prepaid. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify -29- each Bank thereof and of such Bank's Commitment Percentage of such prepayment. Such notice may be given by telephone, promptly confirmed by a writing. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. (b) Bid Loans may not be voluntarily prepaid. 2.11 Repayment. The Company shall repay to the Banks in full on the Termination Date the aggregate principal amount of the Loans outstanding on the Termination Date. The Company shall repay each Bid Loan on the last day of the relevant Interest Period. 2.12 Repayment of Letter of Credit Drawings (a) With respect to each Letter of Credit, (i) when a draft or other demand for payment is received by the Issuing Bank, it shall promptly give notice thereof by telecopy or telephone to the Agent and the Company; (ii) when a payment is made by the Issuing Bank, it shall promptly give notice thereof to the Company and the Agent by telephone or telecopy; and (iii) the Company agrees, and shall cause each Joint-Applicant through its execution of a Letter of Credit Application to agree, to promptly reimburse the Issuing Bank (by making payment to the Agent for the account of such Issuing Bank) on the date of any payment or disbursement made by such Issuing Bank under such Letter of Credit for such payment or disbursement; provided, however, that the Company shall not be deemed to be in default of this subsection 2.12(a) or subsection 8.01(a) with respect to any such reimbursement obligation prior to the second Business Day after it has been notified that the related payment or disbursement has been made by the Issuing Bank. Any amount not reimbursed (by making payment to the Issuing Bank) on the date of such payment or distribution by the Issuing Bank shall bear interest from and including the date of such payment or disbursement to but not including the date the Issuing Bank is reimbursed by the Company therefor, payable on demand, at a rate per annum equal to (A) the Base Rate from time to time in effect for each day through the third Business Day after the Company's receipt of the notice provided for in subsection (a)(i) above, and (B) the Base Rate plus 2% per annum for each day thereafter. (b) Subject to the terms and conditions of this Agreement, the Company may use the proceeds of a Loan hereunder to so reimburse the Issuing Bank. If on or before the first Business Day after receipt of the notice required pursuant to subsection 2.12(a)(i), the Company requests a Loan to which it is entitled under the terms of this Agreement for the purpose of paying the related reimbursement obligation and in an amount sufficient to fully pay such reimbursement obligation, then the Company shall not be deemed to be in default of its reimbursement -29- obligations under this Section or subsection 8.01(a) even though such Loan is not made until a subsequent Business Day (pursuant to the notice provisions of Section 2.03 or 2.08). (c) The Company's obligation to reimburse the Issuing Bank for payments and disbursements made by the Issuing Bank under any Letter of Credit shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Company or a Joint-Applicant may have or have had against the Issuing Bank (or the Agent or any other Bank), including, without limitation, failure of the Issuing Bank to comply with subsections (a)(i) and (ii) of this Section, any defense based on the failure of the demand for payment under such Letter of Credit to conform to the terms of such Letter of Credit or the legality, validity, regularity or enforceability of such Letter of Credit or any defense based on the identity of the transferee of such Letter of Credit or the sufficiency of the transfer if such Letter of Credit is transferable; provided, however, that the Company shall not be obligated to reimburse such Issuing Bank for any wrongful payment or disbursement made under any Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuing Bank or any of its officers, employees or agents. (d) The Company agrees that it will promptly examine the copy of each Letter of Credit (and any amendments thereto) sent to it by the Issuing Bank, as well as any and all instruments and documents delivered to the Company from time to time, and in the event the Company has any claim of non-compliance with the Company's instructions or of discrepancies or other irregularity, the Company will promptly notify the Issuing Bank and the Agent thereof in writing, and the Company and any Joint-Applicant shall be deemed by their execution and delivery of the related Letter of Credit Application to have waived any such claim against the Issuing Bank unless such prompt notice is given. (e) Unless specified to the contrary in the relevant Letter of Credit Application, or any amendment to a Letter of Credit, the Company and each Joint-Applicant agree by their execution of such application that the Issuing Bank and its correspondents may receive and accept (i) any item drawn or presented under such Letter of Credit or other document otherwise in order, issued or purportedly issued by an agent, executor, trustee in bankruptcy, receiver or other representative of the party who is authorized under such Letter of Credit to issue such item or other document, as complying with the terms of such Letter of Credit and (ii) documents which on their face appear to comply with the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or by later Uniform Customs and Practice fixed by later Congresses of the International Chamber of Commerce as in effect on the date the related Letter of Credit is issued. 2.13 Default in Reimbursement of Issuing Bank (a) If the Issuing Bank is not reimbursed by the Company for any payment or disbursement under a Letter of Credit, the Agent shall promptly notify each of the other Banks of such unreimbursed payment or disbursement, and upon such notice the other Banks shall promptly on the same day (or the next Business Day if such notice is received after 10:00 a.m., Chicago time) provide the Agent with immediately available funds in Dollars for the account of such Issuing Bank, covering such Bank's Commitment Percentage of such payment or disbursement. If the Agent -30- subsequently receives from the Company or any Joint-Applicant any reimbursement of such payment or disbursement, the Agent shall promptly remit to each Bank its Commitment Percentage of such reimbursement. All interest payments received by the Issuing Bank or the Agent on account of reimbursements under this Agreement shall be promptly distributed by the Agent to the Issuing Bank and the other Banks pro rata according to their respective Commitment Percentages (except to the extent that the Issuing Bank was not promptly reimbursed by any such Bank). (b) The obligation of each Bank to provide the Agent with such Bank's pro rata share of the amount of any payment or disbursement made by the Issuing Bank under any outstanding Letter of Credit shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which such Bank may have or have had against the Issuing Bank (or the Agent or any other Bank), including, without limitation, any defense based on the failure of the demand for payment under such Letter of Credit to conform to the terms of such Letter of Credit or the legality, validity, regularity or enforceability of such Letter of Credit or any defense based on the identity of the transferee of such Letter of Credit or the sufficiency of the transfer if such Letter of Credit is transferable; provided, however, that the Banks shall not be obligated to reimburse such Issuing Bank for any wrongful payment or disbursement made under any Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of such Issuing Bank or any of its officers, employees or agents. 2.14 Interest. (a) Subject to subsection 2.14(c), each Committed Loan shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be, plus the Applicable Margin for Base Rate Committed Loans or Offshore Rate Committed Loans, as the case may be. Subject to subsection 2.14(c), each Bid Loan shall bear interest on the outstanding principal amount thereof from the relevant Borrowing Date at a rate per annum equal to the IBO Rate plus (or minus, as the case may be) the IBOR Bid Margin, or at the Absolute Rate, as the case may be. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Committed Loans pursuant to Section 2.10 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand. (c) While any Event of Default exists or after acceleration of the Obligations, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Obligations due and unpaid at a rate per annum equal to the Base Rate plus 2%. 2.15 Fees. (a) Fees Payable to BofA and the Agent. The Company shall pay to the Agent for the Arranger's and the Agent's own account fees in the amounts and at the times set forth in a letter agreement between the Company, BofA and the Arranger dated October 20, 1995. -31- (b) Commitment Fees. The Company shall pay to the Agent for the account of each Bank a commitment fee of the Applicable Commitment Fee Percentage per annum on the average daily unused portion of such Bank's Commitment, computed as of the end of each calendar quarter in arrears based upon the daily utilization for that quarter as calculated by the Agent. Such commitment fee shall accrue from the Closing Date to the Termination Date and shall be due and payable quarterly in arrears on the fifteenth day after the end of each calendar quarter through the Termination Date, with the first payment due on January 16, 1996 and the final payment to be made on the Termination Date; provided, however, that, (i) in connection with any reduction of Commitments pursuant to Section 2.09, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction, with the next succeeding quarterly payment being calculated on the basis of the period from the reduction date to the end of the quarter in which such reduction occurs and (ii) in connection with any termination of the Commitments pursuant to Section 2.09 or Article VIII, the accrued commitment fee shall be paid on the date on which the termination takes place. The commitment fees provided in this subsection shall accrue at all times after the Closing Date, including at any time during which one or more conditions in Article IV are not met. For purposes of calculating the commitment fee, the principal amount of outstanding Committed Loans and the Stated Amount of outstanding Letters of Credit shall be deemed utilization of the Commitments, but the principal amount of outstanding Bid Loans shall not be deemed utilization of the Commitments. (c) Letter of Credit Fees. (i) The Company shall pay to the Agent for the account of the Banks, pro rata, a fee, according to their respective Commitment Percentages, with respect to all Letters of Credit issued for the account of the Company. Such fee shall be computed as of the end of each calendar quarter as follows: (x) With respect to all Financial L/Cs, the Applicable Financial L/C Percentage per annum of the daily average Stated Amount of each such Letter of Credit; and (y) With respect to Performance L/Cs, the Applicable Performance L/C Percentage per annum of the daily average Stated Amount of such Performance L/Cs. Such Letter of Credit fees shall be payable in arrears on the fifteenth day after the end of each calendar quarter for Letters of Credit outstanding during such quarter, with the first such payment due on January 16, 1996, and on the expiration of the last Letter of Credit outstanding under this Agreement. (ii) The Company shall pay to the Issuing Bank for its sole account: (x) In arrears on the fifteenth day after the end of each calendar quarter, with the first such payment due on January 16, 1996, and on the expiration of the last Letter of Credit issued by the Issuing Bank and outstanding under this Agreement, an issuance fee of 0.15% per annum of the daily average Stated -32- Amount of all Letters of Credit issued by the Issuing Bank and outstanding during the preceding calendar quarter; and (y) From time to time, upon the amendment of any Letter of Credit, such fees as the Issuing Bank customarily charges in connection therewith at the times customarily charged by the Issuing Bank. (d) Fees under the Existing Company Credit Agreement. On the Closing Date, the Company shall pay to the Agent the fees owed under the Existing Company Credit Agreement which have not heretofore been paid. 2.16 Computation of Fees and Interest. (a) All computations of interest payable in respect of Base Rate Committed Loans at all times as the Base Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) The Agent will, with reasonable promptness, notify the Company and the Banks of each determination of an Offshore Rate; provided, however, that any failure to do so shall not relieve the Company of any liability hereunder or provide the basis for any claim against the Agent. (c) Each determination of an interest rate by the Agent pursuant hereto shall be conclusive and binding on the Company the Banks in the absence of manifest error. II.17 Payments by the Company. (a) All payments (including prepayments) to be made by the Company on account of principal, interest, fees and other amounts required hereunder, including reimbursement of drawings under Letters of Credit, shall be made without set-off, recoupment or counterclaim and shall, except as otherwise expressly provided herein, be made to the Agent for the ratable account of the Banks at the Agent's Payment Office, in dollars and in immediately available funds, no later than 1:00 p.m. (Chicago time) on the dates specified herein. The Agent will promptly distribute to each Bank its Commitment Percentage (or other applicable share as expressly provided herein) of such principal, interest, fees or other amounts, in like funds as received. Any payment which is received by the Agent later than 1:00 p.m. (Chicago time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be; subject to the provisions set forth in the definition of "Interest Period" herein. -33- (c) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full as and when required hereunder, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company shall not have made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate as in effect for each such day. 2.18 Payments by the Banks to the Agent. (a) Unless the Agent shall have received notice from a Bank on the Closing Date or, with respect to each Borrowing after the Closing Date, at least one Business Day prior to the date of any proposed Borrowing, that such Bank will not make available to the Agent as and when required hereunder for the account of the Company the amount of that Bank's Commitment Percentage of the Committed Borrowing or that Bank's Bid Loan, as the case may be, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the next Business Day following the date of such Borrowing make such amount available to the Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection 2.18(a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the Borrowing Date for all purposes of this Agreement. If such amount is not made available to the Agent on the next Business Day following such Borrowing Date, the Agent shall notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date. 2.19 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of any Credit Extension made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Commitment Percentage (or other share contemplated hereunder) of payments on account of the Credit Extensions obtained by all the Banks, such Bank shall forthwith (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Credit Extensions made by -34- them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's Commitment Percentage (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.19 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.19 and will in each case notify the Banks following any such purchases or repayments. 2.20 Pro Rata Treatment. All Committed Borrowings and repayments shall be effected so that after giving effect thereto all Committed Loans shall be pro rata among the Banks according to their Commitment Percentages. All participations and Letters of Credit shall be effected so that after giving effect thereto all participations in each Letter of Credit shall be pro rata among the Banks according to their Commitment Percentages. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 Taxes. (a) Subject to subsection 3.01(g), any and all payments by the Company to each Bank or the Agent under this Agreement shall be made free and clear of, and without deduction or withholding for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, such taxes (including income taxes or franchise taxes) imposed on or measured by such Bank's or the Agent's net income (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). (b) In addition, the Company shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). (c) Subject to subsection 3.01(g), the Company shall indemnify and hold harmless each Bank, the Issuing Bank and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.01) paid by such Bank, the Issuing Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or -35- were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date any Bank, the Issuing Bank or the Agent makes written demand therefor, except that the Company shall not be required to make such payment within 30 days if (i) no Default or Event of Default has occurred and is continuing and (ii) the Company is diligently contesting such Taxes or Other Taxes and has agreed in writing to the satisfaction of each Bank, the Issuing Bank and the Agent to pay to each such Bank, the Issuing Bank and the Agent all such penalties, fines and interest incurred by such Bank, the Issuing Bank and the Agent as a result of the Company's actions and the resulting delay in payment. Notwithstanding the foregoing, if at any time a Default or Event of Default occurs and is continuing, each Bank, the Issuing Bank and the Agent may request the Company, and the Company shall, make payment under this indemnification within 10 days from the date such Bank, the Issuing Bank or the Agent makes written demand therefor. In any event, the obligations owed by the Company under this subsection (c) shall be paid not later than the Termination Date, unless otherwise agreed by the affected Bank and the Company. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then, subject to subsection 3.01(g): (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Company shall make such deductions, and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (e) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (f) Each Bank which is a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) agrees no later than the Closing Date (or, in the case of a Bank which becomes a party hereto pursuant to Section 10.08 after the Closing Date, the date upon which the Bank becomes a party hereto) to deliver to the Company through the Agent two accurate and complete signed originals of Internal Revenue Service Form 1001, 4224 or any successor thereto, as appropriate, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments under this Agreement free from withholding of United States Federal income tax. (g) The Company shall not be required to pay any additional amounts in respect of United States Federal income tax pursuant to subsection 3.01(d) to any Bank for the account of any Lending Office of such Bank: -36- (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank to comply with its obligations under subsection 3.01(f) in respect of such Lending Office; or (ii) if such Bank shall have delivered to the Company the forms referred to in subsection 3.01(f), and such Bank shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such forms. (h) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection 3.01(d), then such Bank shall use its reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 3.2 Illegality. (a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, the obligation of that Bank to make Offshore Rate Loans (including in respect of any IBOR Bid Loan as to which the Company has accepted such Bank's Competitive Bid, but as to which the Borrowing Date has not arrived) shall be suspended until the Bank shall have notified the Agent and the Company that the circumstances giving rise to such determination no longer exists. (b) If a Bank determines that it is unlawful for such Bank to maintain any Offshore Rate Loan, the Company shall prepay in full all Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.04. (c) If the Company is required to prepay any Offshore Rate Loan immediately as provided in subsection 3.02(b), then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Committed Loan. (d) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Committed Loans. -37- (e) Before giving any notice to the Agent pursuant to this Section 3.02, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 3.3 Increased Costs and Reduction of Return. (a) If any Bank determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there is any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Committed Loans or issuing or participating in any Letter of Credit, then the Company shall be liable for, and shall from time to time, upon demand therefor by such Bank (with a copy of such demand to the Agent), pay to the Agent for the account of such Bank, upon receipt of a certificate from such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. Such certificate shall set forth the amount owed to such Bank by the Company under this subsection (a), shall explain the reason the payment is required and shall be conclusive absent manifest error. (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank, with any Capital Adequacy Regulation; reduces or would reduce the rate of return on such Bank's capital as a consequence of its Commitment, the Loans, the Letters of Credit or its participation therein to a level below that which such Bank could have achieved but for such introduction, change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) then, upon demand of such Bank (with a copy to the Agent), the Company shall pay to the Bank, from time to time as specified by the Bank, upon receipt of a certificate from such Bank, additional amounts sufficient to compensate the Bank for such reduction. Such certificate shall set forth the amount owed to such Bank by the Company under this subsection (b), shall explain the reason the payment is required and shall be conclusive absent manifest error. 3.4 Funding Losses. The Company agrees to reimburse each Bank and to hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment or required prepayment of principal of any Offshore Rate Loan (including payments made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Committed Loan after the Company has given a Notice of Borrowing or a Notice of Conversion/Continuation; -38- (c) the failure of the Company to make any prepayment of any Committed Loan after the Company has given a notice in accordance with Section 2.10; (d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan or Absolute Rate Bid Loan on a day which is not the last day of the relevant Interest Period with respect thereto; (e) the automatic conversion under Section 2.06 of any Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last day of the relevant Interest Period; or (f) the conversion pursuant to Section 2.06 of any Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last day of the respective Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. Solely for purposes of calculating amounts payable by the Company to the Banks under this Section 3.04, each Offshore Rate Committed Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the IBO Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. 3.5 Inability to Determine Rates. If the Agent determines that for any reason adequate and reasonable means do not exist for ascertaining the IBO Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan or that the IBO Rate applicable pursuant to subsection 2.14(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks of funding such Loan, the Agent will forthwith give notice of such determination to the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing, Notice of Conversion/Continuation or notice of acceptance of an offer with respect to an IBOR Bid Loan. If the Company does not revoke such notice, the Banks shall make, convert or continue the Offshore Rate Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Offshore Rate Loans shall be made, converted or continued as Base Rate Committed Loans instead of Offshore Rate Loans. 3.6 Substitution of Banks. Upon the receipt by the Company from any Bank (an "Affected Bank") of a claim for compensation pursuant to Sections 3.01, 3.02 or 3.03, the Company may: (i) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitments but no Bank shall be required to do so; or (ii) designate an Eligible Assignee satisfactory to the Company and the Agent to acquire and assume all or part of such Affected Bank's Loans and Commitments (a "Replacement Bank"). Any such designation of a Replacement Bank under clause (ii) shall be subject to the prior written consent of the Agent, and such Replacement Bank shall comply with Section 10.08 as if it were an Assignee. -39- 3.7 Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. ARTICLE IV CONDITIONS PRECEDENT 4.1 Conditions to Effectiveness and Initial Advances of Loans and Issuances of Letters of Credit up to an Aggregate Exposure of $75 Million. This Agreement shall not become effective until, and the obligation of (i) each Bank to make its initial Committed Loans hereunder and (ii) the Issuing Bank to issue, and of each Bank to purchase a participation in, the initial Letter of Credit, is subject to the condition that (A) the Agent shall have received on or before the Closing Date the items set forth in subsections (a) through (n) below in form and substance satisfactory to the Agent and each Bank in sufficient copies for each Bank and (B) the condition that the events set forth in subsections (h), (i) and (l) below shall have been, or shall be concurrently, completed to the satisfaction of the Agent and the Banks: (a) Credit Agreement. This Agreement, executed by each party thereto (provided that the Agent may accept a facsimile transmitted signature page from any Bank (to be confirmed promptly by receipt of originally executed pages) which shall bind such Bank with the same force and effect as an originally executed signature page from such Bank); (b) Resolutions; Incumbency. Each of the following documents: (i) copies of the resolutions of the board of directors of the Company and each Guarantor, or any duly authorized committee thereof, approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and the transactions contemplated hereby, and authorizing the Credit Extensions, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company and such Guarantor; and (ii) a certificate of the Secretary or Assistant Secretary of the Company and each Guarantor, certifying the names and true signatures of the officers of the Company and such Guarantor authorized to execute, deliver and perform, as applicable, this Agreement and all other Loan Documents to be delivered by each such Person hereunder; (c) Organization Documents; Good Standing. Each of the following documents: (i) the articles or certificate of incorporation and the bylaws of the Company and each Guarantor as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company or such Guarantor as of the Closing Date; and (ii) a good standing certificate for the Company and each Guarantor from the Secretary of State (or similar, applicable Governmental Authority) of its state of -40- incorporation and, with respect to the Company, the state of Minnesota, and, with respect to Comdata, the states of Tennessee, Nevada and New Jersey. (d) Legal Opinion. The opinions of John A. Haveman, counsel to the Company, and of Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel to the Guarantors, addressed to the Agent and the Banks, substantially in the form of Exhibit J-1 attached hereto; (e) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date as though made on and as of such date both before and after giving effect to the Merger; (ii) no Default or Event of Default exists or would result from the initial Borrowing; and (iii) except as disclosed in filings by the Company and Comdata Holdings with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1994, on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, on Form 8-K dated August 24, 1995 and in a Joint Proxy Statement/Prospectus dated November 9, 1995, there has occurred since December 31, 1994, no event or circumstance that has resulted or could reasonably be expected to result in a material adverse change in the financial condition, business, operations, properties or prospects of the Company and its Subsidiaries or of Comdata Holdings and its Subsidiaries; and (iv) all of the conditions precedent set forth in Section 4.01 on the part of the Company or any Subsidiary of the Company to be satisfied have been satisfied in full as of the Closing Date; (f) Payment of Fees and Expenses. The Company shall have paid all fees due on the Closing Date, together with the Agent's Attorney Costs incurred up to and including the Closing Date; (g) Subsidiary Guaranty. The Subsidiary Guaranty executed by Comdata Holdings and Comdata. (h) Merger. The closing of the transactions contemplated by the Plan of Merger shall have occurred pursuant to the terms and conditions of the Plan of Merger; the Plan of Merger shall not have been amended in a manner that is, in the reasonable judgment of the Agent and the Banks, adverse to the interests of the Banks; the Plan of Merger shall have been approved by the boards of directors of the Company, Acquisition Corp. and Comdata Holdings, all requisite shareholder approvals of the Merger shall have been obtained in accordance with the Plan of Merger and all Requirements of Law, and all other conditions to the Merger in the Plan of Merger shall have been satisfied without giving effect to any waiver thereof not approved in writing by the Agent and the Banks; and the Agent and -41- each Bank shall have received satisfactory evidence of the filing and acceptance of a properly executed certificate of merger with the Delaware Secretary of State. (i) Existing Indebtedness. All loans and letters of credit outstanding under, and all other amounts due in respect of, the Existing Comdata Credit Agreement and the Existing Company Credit Agreement shall have been repaid in full or canceled (except that the Old Letters of Credit shall be deemed to exist and continue under this Agreement); the commitments thereunder shall have been permanently terminated and all obligations thereunder and any security interests relating thereto shall have been discharged; and the Agent shall have received reasonably satisfactory evidence of such repayment, termination and discharge; (j) Pro Forma Financial Statements. Pro forma consolidated financial statements of the Company after giving effect to the Merger and the consummation of the other transactions contemplated hereby as of (i) September 30, 1995 as contained in the Ceridian Corporation and Comdata Holdings Corporation Joint Proxy Statement/Prospectus of Ceridian Corporation dated November 9, 1995 and (ii) December 31, 1995 as contained in the October 1995 Confidential Information Memorandum delivered to each of the Banks; (k) Indebtedness. After giving effect to the Merger and the other transactions contemplated hereby, the Company and its Subsidiaries shall have outstanding no Indebtedness or preferred stock as of the Closing Date other than (i) the Obligations, (ii) the Preferred Stock and (iii) other Indebtedness set forth on Schedule 4.01 hereto; (l) Approvals and Consents. All requisite or necessary governmental authorities and third parties shall have approved or consented to the Merger and the other transactions contemplated hereby to the extent required, all such approvals and consents shall remain in effect and all applicable appeal periods shall have expired, and there shall be no governmental or judicial action, actual or threatened, that has a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Merger or the other transactions contemplated hereby; (m) Compliance Certificate. An estimated pro forma Compliance Certificate as of December 31, 1995 after giving effect to the Merger and the consummation of the other transactions contemplated hereby. (n) Other Documents. Such other approvals, opinions or documents as the Agent or any Bank may reasonably request. Notwithstanding the foregoing, from and after the satisfaction in full by the Company and its Subsidiaries of the conditions precedent set forth in this Section 4.01, the Aggregate Exposure shall exceed $75,000,000 only if and to the extent that the Company is in compliance with Section 4.02. 4.2 Conditions to Advances of Loans and Issuances of Letters of Credit in Excess of $75 Million of Aggregate Exposure. The obligation of each Bank to make Committed Loans hereunder and of the Issuing Bank to issue, and of each Bank to purchase participations in, Letters of Credit, in any amount which would cause the Aggregate Exposure to exceed $75,000,000 at any time, and the obligation of each Bank to receive through the Agent the initial and any subsequent Competitive Bid Requests, is subject to the prior or concurrent satisfaction of (i) the conditions specified in either subsection (a) or (b) below in the case of Committed Loans and Letters of Credit and (ii) the conditions specified in subsection (a) below in the case of Competitive Bid -42- Requests, in each case in accordance with the governing indentures and all applicable Requirements of Law and subject to the prior or concurrent receipt of the applicable items set forth below by the Agent and the Banks, in form and substance reasonably satisfactory to the Agent and the Banks: (a) After Comdata Debt Retired. All outstanding Senior Notes, Senior Subordinated Debentures and Junior Subordinated Notes shall have been repurchased or redeemed and canceled or defeased (contractually or, in the case of the Senior Notes and Senior Subordinated Debentures, "in substance") by Comdata and/or the Company, proceeds of Loans shall have been utilized to effect any such repurchase, redemption or defeasance and to pay all interest and premiums in connection therewith, supplemental indentures to the indentures governing the Senior Notes and the Senior Subordinated Debentures shall have been duly executed and delivered by all necessary parties which contain the amendments to such indentures specified in the Offer to Purchase, and the Agent shall have received a certificate of a Responsible Officer of the Company specifying the actions taken to retire or defease the full amount of each of the Senior Notes, the Senior Subordinated Debentures and the Junior Subordinated Notes and certifying that Loan proceeds were used to effect such actions and that such indentures have been duly executed and delivered by all necessary parties; (b) Before Comdata Debt Retired. So long as the conditions specified in subsection 4.02(a) remain unsatisfied, the Company shall only be entitled to obtain, and the Banks shall only be obligated to make, Committed Loans the principal amount of which would result in an Aggregate Exposure in excess of $75,000,000 (the "Debt Retirement Loans") subject to the prior or concurrent satisfaction of the conditions specified in subsections (i) through (iv) below with respect to Debt Retirement Loans relating to the Senior Notes and Senior Subordinated Debentures and subsection (v) below with respect to Debt Retirement Loans relating to the Junior Subordinated Notes: (i) Debt Tender Offer. There shall have been validly tendered and not withdrawn prior to the expiration date of the Debt Tender Offer at least a majority in principal amount of the Senior Notes outstanding and a majority in principal amount of the Senior Subordinated Debentures outstanding, supplemental indentures to the indentures governing the Senior Notes and Senior Subordinated Debentures shall have been duly executed and delivered by all necessary parties which contain the amendments to such indentures specified in the Offer to Purchase, and proceeds of Loans shall be irrevocably deposited (by the Company or by Comdata through an intercompany loan and/or capital contribution from the Company) with the depositary under the Debt Tender Offer in an amount sufficient to make payment for all Senior Notes and Senior Subordinated Debentures so tendered (including payment of principal, accrued interest, tender premium and consent premium), all in accordance with the Offer to Purchase, the governing indentures and all applicable Requirements of Law; (ii) Approvals and Consents. All requisite or necessary governmental authorities and third parties shall have approved or consented to the Debt Tender Offer to the extent required, all such approvals and consents shall -43- remain in effect and there shall be no governmental or judicial action, actual or threatened, that has a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Debt Tender Offer; (iii) Legal Opinion. An opinion of John A. Haveman, counsel to the Company, and of Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel to the Guarantors, addressed to the Agent and the Banks substantially in the form of Exhibit J-2 hereto; (iv) Non-Tendered Senior Notes and Senior Subordinated Debentures. With respect to Senior Notes and Senior Subordinated Debentures which are not tendered and purchased pursuant to the Debt Tender Offer, the Company shall be entitled at any time after the completion of the Debt Tender Offer and after the due execution and delivery of supplemental indentures to the indentures governing the Senior Notes and the Senior Subordinated Debentures by all necessary parties which contain the amendments to such indentures specified in the Offer to Purchase, to utilize the proceeds of Debt Retirement Loans to repurchase, redeem or defease (contractually or "in substance") any and all such remaining Senior Notes and Senior Subordinated Debentures; and (v) Junior Subordinated Notes. The Junior Subordinated Notes shall have been called for redemption and proceeds of Loans shall be irrevocably deposited (by the Company or by Comdata through an intercompany loan and/or capital contribution from the Company) with the trustee for the holders of the Junior Subordinated Notes in an amount sufficient to pay and discharge the entire indebtedness on such notes (including principal, premium and interest) as of the redemption date, such that the Junior Subordinated Notes and the related indenture shall be contractually defeased upon such deposit, all in accordance with the governing indenture and all applicable Requirements of Law. Notwithstanding the foregoing, at no time shall the Aggregate Exposure in excess of $75,000,000 exceed the sum of (i) the aggregate principal amount of the Junior Subordinated Notes which have been paid in full and discharged or legally defeased, plus (ii) the aggregate principal amount of the Senior Notes and Senior Subordinated Debentures which have been purchased and canceled or defeased legally or "in substance" as described above and plus (iii) the aggregate amount of interest, fees and premium paid in connection with the transactions described in clauses (i) and (ii) above; provided, however, that upon the satisfaction of the conditions precedent set forth in subsection 4.02(a), the Aggregate Exposure may exceed $75,000,000 without restriction as provided above in this sentence on the terms and conditions set forth in this Agreement. 4.3 Conditions to All Credit Extensions. The obligation of each Bank to make any Credit Extension to be made by it hereunder is subject to the satisfaction of the following conditions precedent on the date of the relevant Credit Extension: (a) Notice of Borrowing or Continuation/Conversion With respect to each Committed Borrowing, the Agent shall have received a Notice of Borrowing or a Notice of Continuation/Conversion, as applicable; (b) Notice of Acceptance. With respect to each Bid Borrowing, the Agent shall have received notice of acceptance of the offer(s) by the Company pursuant to subsection 2.08(e); -44- (c) Letter of Credit Request. With respect to each request for the issuance or amendment of a Letter of Credit, the Issuing Bank shall have received (and in the event the Issuing Bank is not the Agent, the Agent shall have received) (i) a Letter of Credit Application, with all blanks completed, signed by the Company and any Subsidiary of the Company also requesting the issuance of such Letter of Credit and (ii) a written certificate signed by a Responsible Officer, designating the Letter of Credit as a Financial L/C or a Performance L/C and indicating whether such Letter of Credit supports worker's compensation obligations; (d) Continuation of Representations and Warranties. The representations and warranties made by the Company contained in Article V shall be true and correct on and as of such Credit Extension Date with the same effect as if made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); provided, however, that the Company shall not represent or warrant as to subsection 5.10(c) on the date of any Credit Extension which only involves a conversion or continuation of an existing Loan and/or the extension of a Letter of Credit and does not require an advance of a new Loan by the Banks; and (e) No Existing Default. No Default or Event of Default shall exist or shall result from such Credit Extension. Each such Notice of Borrowing, Notice of Continuation/Conversion, notice of acceptance with respect to any Bid Loan offer or Letter of Credit Application submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice or application and as of the date of each Credit Extension that the conditions in this Section 4.03 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.1 Corporate Existence and Power. (a) Each of the Company and each Material Subsidiary: (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (ii) has the power and authority and all material governmental licenses, authorizations, consents and approvals to own its assets and carry on its business and to execute, deliver, and perform its obligations under the Loan Documents and the Merger Documents; -45- (iii) is duly qualified as a foreign corporation, licensed 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 or license, except where the failure to be so qualified, licensed or in good standing would not adversely affect the business or operations of the Company or such Subsidiary in any significant manner; and (iv) is in compliance with all material Requirements of Law applicable to it. (b) Each Subsidiary of the Company which is not a Material Subsidiary: (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (ii) has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets and carry on its business; (iii) is duly qualified as a foreign corporation, licensed 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 (iv) is in compliance with all material Requirements of Law applicable to it; except where any failure to comply with the requirements of this subsection (b) would not, individually or in the aggregate, result in a Material Adverse Effect. 5.2 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company and the Guarantors of this Agreement and each other Loan Document to which such Person is a party have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Requirement of Law applicable to the such Person. 5.3 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any Guarantor of this Agreement or any other Loan Document. 5.4 Binding Effect. This Agreement and each other Loan Document to which the Company or any of its Subsidiaries is a party, when executed and delivered, will constitute the legal, -46- valid and binding obligations of the Company and any of its Subsidiaries to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.5 Litigation. Attached hereto as Schedule 5.05 is a list of all material litigation in which the Company or any Subsidiary is a plaintiff or a defendant as of the Closing Date. Except as provided in Part A of Schedule 5.05, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement, or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) would reasonably be expected to have a Material Adverse Effect (and taking into account the reasonable likelihood of an adverse decision). No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.6 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. Neither the Company nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect. 5.7 ERISA Compliance. Except as referenced or provided for in either Schedule 5.05 or Schedule 5.07 attached hereto: (a) To the best knowledge of the Company, no facts or circumstances exist which would reasonably be expected to have a Material Adverse Effect in connection with the failure of any Plan, or the failure of the Company, an ERISA Affiliate or any Person with regard to the Plan, to comply with the applicable provisions of ERISA, the Code and other Federal or state law. The Company and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or would, if determined adversely to the Company or any Plan, reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or would reasonably be expected to result in a Material Adverse Effect. -47- (c) To the best knowledge of the Company (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) neither the Company nor any ERISA Affiliate has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither the Company nor any ERISA Affiliate has incurred, nor reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 5.8 Title to Properties. As of the Closing Date, the property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens. 5.9 Taxes. The Company and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP and no Notice of Lien has been filed or recorded. There is no proposed tax assessment against the Company or any of its Subsidiaries which would, if the assessment were made, have a Material Adverse Effect. 5.10 Financial Condition. (a) The audited consolidated financial statements of the Company and its Subsidiaries dated December 31, 1994 and the unaudited consolidated financial statements of the Company and its Subsidiaries dated September 30, 1995: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (ii) are complete, accurate and fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby. (b) The audited consolidated financial statements of Comdata Holdings and its Subsidiaries dated December 31, 1994 and the unaudited consolidated financial statements of Comdata Holdings and its Subsidiaries dated September 30, 1995: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (ii) are complete, accurate and fairly present the financial condition of Comdata Holding's and its Subsidiaries as of the date thereof and results of operations for the period covered thereby. -48- (c) Except as disclosed in filings by the Company and Comdata Holdings with the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1994, on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, on Form 8-K dated August 24, 1995 and in a Joint Proxy Statement/Prospectus dated November 9, 1995, since December 31, 1994, there has been no Material Adverse Effect. (d) Attached hereto as Schedule 5.10 is a list of (i) Contingent Obligations of the Company and its consolidated Subsidiaries and Comdata Holdings and its consolidated Subsidiaries and (ii) general partnership interests owned by the Company and its consolidated Subsidiaries and Comdata Holdings and its consolidated Subsidiaries, showing the aggregate liabilities of such partnerships and Contingent Obligations on a pro forma basis as of November 30, 1995 after giving effect to the consummation of the Merger and the other transactions contemplated hereby. As of the Closing Date, neither the Company and its consolidated Subsidiaries nor Comdata Holdings and its consolidated Subsidiaries have incurred any material Contingent Obligations except for those set forth on Schedule 5.10. 5.11 Environmental Matters. (a) The on-going operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws, except such non-compliance which would not (if enforced in accordance with applicable law) result in liability that would reasonably be expected to have a Material Adverse Effect. (b) As of the Closing Date, except as specifically disclosed on Schedule 5.11, none of the Company, any of its Subsidiaries or any of their respective present property or operations is subject to any outstanding written order from or agreement with any Governmental Authority nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material. (c) Except as specifically disclosed on Schedule 5.11, there are no Hazardous Materials or other conditions or circumstances existing with respect to any property, or arising from operations of the Company or any of its Subsidiaries that would reasonably be expected to give rise to Environmental Claims with a potential liability of the Company and its Subsidiaries that in the aggregate for any such condition, circumstance or property would reasonably be expected to have a Material Adverse Effect. 5.12 Regulated Entities. None of the Company, any Person controlling the Company, or any Subsidiary of the Company, is (a) an "investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness, except that certain Persons who may be deemed to control the Company, Comdata Holdings or Comdata are registered investment companies within the meaning of the Investment Company Act of 1940. -49- 5.13 No Burdensome Restrictions. Neither the Company nor any of its Subsidiaries is a party to or bound by any Contractual Obligation, or subject to any charter or corporate restriction, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 5.14 Solvency. The Company and each of its Material Subsidiaries are Solvent. 5.15 Labor Relations. There are no strikes, lockouts or other labor disputes against the Company or any of its Subsidiaries, or, to the best of the Company's knowledge, threatened against or affecting the Company or any of its Subsidiaries, and no significant unfair labor practice complaint is pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them before any Governmental Authority which, in any case, could reasonably be expected to have a Material Adverse Effect. 5.16 Copyrights, Patents, Trademarks and Licenses, etc Except for any failure to comply with the requirements of this Section 5.16 which would not, individually or in the aggregate, result in a Material Adverse Effect: (a) the Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person; (b) to the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed by the Company or any of its Subsidiaries infringes upon any rights held by any other Person; and (c) except as specifically disclosed on Schedule 5.05 attached hereto, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed. 5.17 Material Subsidiaries and Equity Investments. As of the Closing Date, the Company has no Subsidiaries other than the Subsidiaries set forth on Schedule 5.17 attached hereto. The Company has no Material Subsidiaries other than as set forth on Schedule 5.17 or as disclosed to the Agent and the Banks pursuant to Section 6.03(h) (including their jurisdiction of incorporation) and has no Investment in any Person which is not a Subsidiary of the Company except for such Investments that do not exceed in the aggregate 10% of Consolidated Total Assets. All Investments of the Company and its Subsidiaries (other than Investments in Subsidiaries) with a net book value in excess of $1,000,000 as of the Closing Date are set forth on Schedule 5.17(A) attached hereto. 5.18 Insurance. As of the Closing Date, the properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. 5.19 Merger. The Company has delivered to the Agent and each of the Banks a true, complete and correct copy of the Plan of Merger. The Plan of Merger as originally executed and delivered by the parties thereto is in full force and effect and has not been amended, waived, supplemented or modified in any material respect without the consent of the Agent and the Required Banks. Each of the representations and warranties of -50- the Company (and, to the Company's knowledge, of Comdata Holdings) therein is true and correct in all material respects as of the date hereof. Neither the Company nor, to the Company's knowledge, any other party thereto is in material default in the performance of or compliance with any provision thereof. The Merger has become effective in accordance with the terms of the Plan of Merger and in accordance with applicable laws and regulations. 5.20 Full Disclosure. None of the representations or warranties made by the Company or any of its Subsidiaries in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents as of the date such statements are made or deemed made, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. ARTICLE VI AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.1 Financial Statements. The Company shall deliver to the Agent in form and detail satisfactory to the Agent and the Majority Banks, with sufficient copies for each Bank: (a) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of the audited consolidated financial statements of the Company as of the end of such fiscal year, setting forth in each case in comparative form the figures for the previous year, and accompanied by the opinion of KPMG Peat Marwick LLP or another nationally-recognized independent public accounting firm which report shall state that such consolidated financial statements present fairly in all material respects the financial position of the Company and its Subsidiaries as of the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP; such opinion shall not be qualified or limited for any reason, including, without limitation, because of a restricted or limited examination by such accountant of any material portion of the Company's or any Subsidiary's records; and (b) as soon as available, but not later than 60 days after the end of each calendar quarter, a copy of the Company's quarterly report on Form 10-Q filed with the SEC with respect to such fiscal quarter and an operating report similar to that provided by the Company under the Existing Credit Agreement showing the relevant data by business unit of the Company. 6.2 Certificates; Other Information. The Company shall furnish to the Agent, with sufficient copies for each Bank: -51- (a) concurrently with the delivery of the financial statements referred to in subsections 6.01(a) and (b) above, a Compliance Certificate, signed by a Responsible Officer; (b) copies of each registration statement (or prospectus contained therein) of the Company other than with respect to employee benefit plans, each periodic report regarding the Company required pursuant to Section 13 of the Exchange Act, each annual report, each proxy statement and any amendments to any of the above filed or reported by the Company with or to any securities exchange or the Securities and Exchange Commission, of each communication from the Company or any Subsidiary to the Company's shareholders generally, promptly upon the filing or making thereof and copies of such other filings, reports and communications with the Company's shareholders as the Agent may from time to time request; (c) upon release, copies of all financially material press releases; (d) promptly after the creation or Purchase of any Material Subsidiary, the name of such Subsidiary, a description of its business, the price paid for the stock or assets of such Subsidiary, its net worth and the value of its assets; and (e) promptly, such additional business, financial, corporate affairs and other information as the Agent, at the request of any Bank, may from time to time reasonably request. 6.3 Notices. The Company shall promptly notify the Agent and each Bank upon a Responsible Officer of the Company obtaining knowledge: (a) of the occurrence of any Default or Event of Default; (b) of (i) any breach or non-performance of, or any default under, any Contractual Obligation of the Company or any of its Subsidiaries which would reasonably be expected to result in a Material Adverse Effect; and (ii) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority which would reasonably be expected to result in a Material Adverse Effect (and taking into account the reasonable likelihood of an adverse decision); (c) of the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary (i) which would reasonably be expected to have a Material Adverse Effect (and taking into account the reasonable likelihood of an adverse decision), or (ii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Loan Document; (d) of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted or threatened against the Company or any of its Subsidiaries or any of their respective properties pursuant to any applicable Environmental Laws, (ii) all other Environmental Claims, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the property of the Company or any Subsidiary that could reasonably be anticipated to cause the property of the Company or any of its Subsidiaries or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such property under any -52- Environmental Laws, if, individually or in the aggregate, the events or conditions described or the amount claimed in clauses (i), (ii) and (iii) would reasonably be expected to result in a Material Adverse Effect; (e) of the occurrence of any ERISA Event affecting the Company or any ERISA Affiliate, and deliver to the Agent and each Bank a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any ERISA Affiliate with respect to such event; (f) any Material Adverse Effect subsequent to the date of the most recent audited financial statements of the Company delivered to the Banks pursuant to subsection 6.01(a); (g) of any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving the Company or any of its Subsidiaries; (h) of any Subsidiary (including its jurisdiction of incorporation) which is not a Guarantor being or becoming a Material Subsidiary; and (i) of any change in any rating assigned by any Rating Agency with respect to the Company. Each notice pursuant to this Section 6.03 shall be accompanied by a written statement by a Responsible Officer of the Company setting forth details of the occurrence referred to therein, and stating what action, if any, the Company proposes to take with respect thereto and at what time. Each notice under subsection 6.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated. 6.4 Preservation of Corporate Existence, Etc The Company shall, and shall cause each of its Subsidiaries to: (a) except as permitted in Section 7.02, preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all material rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except in connection with transactions permitted by Section 7.02; (c) use its reasonable efforts, in the Ordinary Course of Business, to preserve its business organization and preserve the goodwill and business of the customers, suppliers and others having material business relations with it; and (d) preserve or renew all of its registered trademarks, trade names and service marks, the non-preservation of which would reasonably be expected to have a Material Adverse Effect, provided, however, that the Company shall not be deemed -61- to be in default under this Section 6.04 if a Subsidiary (other than a Material Subsidiary) fails to comply herewith so long as such failure is not material. 6.5 Maintenance of Property. The Company shall maintain, and shall cause each of its Subsidiaries to maintain, and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted, make all necessary repairs thereto and renewals and replacements thereof, and to keep such property free of any Hazardous Materials, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect, except as permitted by Section 7.02. The Company shall use at least the standard of care typical in the industry in the operation of its facilities. 6.6 Insurance. The Company shall maintain, and shall cause each of its Material Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to its Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; including workers' compensation insurance, public liability and property and casualty insurance. Upon request of the Agent or any Bank, the Company shall furnish the Agent, with sufficient copies for each Bank, at reasonable intervals (but not more than once per calendar year) a certificate of a Responsible Officer of the Company (and, if requested by the Agent, any insurance broker of the Company) setting forth the nature and extent of all insurance maintained by the Company and its Material Subsidiaries in accordance with this Section 6.06 (and which, in the case of a certificate of a broker, were placed through such broker). 6.7 Payment of Obligations. The Company shall, and shall cause its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; provided, however, that the Company and its Subsidiaries shall not be deemed to be in default under this Section 6.07 if failure to comply herewith would not result in a Material Adverse Effect. 6.8 Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all material Requirements of Law applicable to it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. -54- 6.9 Inspection of Property and Books and Records. The Company shall maintain and shall cause each of its Material Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiaries. The Company shall permit, and shall cause each of its Material Subsidiaries to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when a Default exists, (i) the Agent or any Bank may do any of the foregoing with respect to the Company or any Subsidiary at any time during normal business hours and without advance notice and (ii) such inspection, examination and meetings shall be at the Company's expense. 6.10 Environmental Laws. (a) The Company shall, and shall cause each of its Subsidiaries to, conduct its operations and keep and maintain its property in compliance in all material respects with all Environmental Laws. (b) Upon the written request of the Agent or any Bank, the Company shall submit to the Agent with sufficient copies for each Bank, at the Company's sole cost and expense, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to subsection 6.03(d). 6.11 Use of Proceeds. The Company shall use the proceeds of the Loans and the Letters of Credit (a) to provide all or a portion of the funds necessary (i) to repay in full all of the indebtedness owing by Comdata under the Existing Comdata Credit Agreement, (ii) to repay in full all of the indebtedness owing by the Company, and replace any letters of credit outstanding under the Existing Company Credit Agreement, (iii) to repurchase or redeem the Senior Notes, the Junior Subordinated Notes and the Senior Subordinated Debentures, or to provide for such repurchase or redemption, (iv) to pay fees, premiums and expenses in connection with the payment, repurchase or redemption of the Existing Comdata Credit Agreement, the Existing Company Credit Agreement, the Senior Notes, the Junior Subordinated Notes and the Senior Subordinated Debentures, the consummation of the Merger and the transactions contemplated hereby, and (b) for working capital and other general corporate purposes (including permitted Purchases). Letters of Credit shall be used by the Company and its Subsidiaries for Ordinary Course of Business purposes. 6.12 Additional Guarantors. The Company shall cause any domestic Subsidiary which becomes a Material Subsidiary at any time to promptly execute and deliver to the Agent, in sufficient copies for all Banks, a Subsidiary Guaranty. -55- 6.13 Further Assurances. (a) The Company shall ensure that all written information, exhibits and reports furnished to the Agent or the Banks do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Banks and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgment or recordation thereof. (b) Promptly upon request by the Agent or the Majority Banks, the Company shall (and shall cause any of its Subsidiaries to) do, execute, acknowledge and deliver any and all such further acts, certificates, assurances and other instruments as the Agent or such Banks, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, and (ii) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and Banks the rights granted or now or hereafter intended to be granted to the Banks under any Loan Document or under any other document executed in connection therewith. ARTICLE VII NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.1 Limitation on Liens. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) any Lien created under any Loan Document; (b) Liens for taxes, fees, assessments or other governmental charges or statutory obligations which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.07, provided that no notice of Lien has been filed or recorded under the Code; (c) Liens arising in the Ordinary Course of Business in connection with obligations (other than obligations for borrowed money) that are not overdue or which are being contested in good faith and by appropriate proceedings, including, but not limited to Liens under bid, performance and other surety bonds, supersedeas and appeal bonds, Liens on advance or progress payments received from customers under contracts for the sale, lease or license of goods, software or services and upon the products being sold or licensed, in each case securing performance of the underlying contract or the repayment of such advances in the event final acceptance of performance under such -56- contracts does not occur; and Liens upon funds collected temporarily from others pending payment or remittance on their behalf; (d) Liens (other than any Lien imposed by ERISA) required in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other social security legislation; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the Ordinary Course of Business which, 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 interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; (f) purchase money security interests on any property acquired or held by the Company or its Subsidiaries in the Ordinary Course of Business securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property to the extent permitted under Section 7.04; provided, however, that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, and (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property; (g) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, however, that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by the Company or any of its Subsidiaries to provide collateral to the depository institution; (h) rights of the holders of Senior Notes, Senior Subordinated Debentures or Junior Subordinated Notes in deposits placed in trust to legally or "in substance" defease such notes or such debentures; and (i) any Lien (not otherwise permitted by this Section 7.01) securing an obligation of the Company or any Subsidiary if the aggregate amount of all such obligations secured by all such Liens does not exceed 15% of Consolidated Total Assets; provided, however, that the assets of any Material Subsidiary may only be subject to Liens permitted under this subsection 7.01(i) which secure obligations that do not exceed 15% of such Material Subsidiary's total assets, as determined in accordance with GAAP (except that the terms of this proviso shall not apply to Computing Devices Canada Ltd. prior to April 1, 1996). 7.2 Mergers, Consolidations and Dispositions of Assets (a) Except as provided in Section 7.02(b), the Company shall not, and shall not permit any of its Subsidiaries to: (i) sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of related transactions) any property or assets (including accounts and notes receivable, with or without recourse) (collectively, "transfer") to any Person except -57- in the Ordinary Course of Business; (ii) transfer to any Person other than the Company or a Subsidiary any outstanding capital stock that has been issued by any Subsidiary; or (iii) consolidate with or merge into any other Person. (b) Subsection 7.02(a) shall not apply to or restrict: (i) the merger or consolidation of any third Person with or into the Company or any existing Subsidiary of the Company, provided that (A) no Default or Event of Default has occurred and is continuing at the time of, or would result from, the consummation of such merger or consolidation, and (B) either (1) the Company or such existing Subsidiary of the company is the surviving entity in such merger or, if the third Person or a new entity is the surviving or resulting entity in such merger or consolidation, it becomes a Subsidiary of the Company by virtue of such merger or consolidation with an existing Subsidiary, or (2) if the merger or consolidation involves an existing Subsidiary of the Company and clause (B)(1) is not applicable, the transaction would be permitted by subsection 7.02(b)(ix) utilizing the net book value of the Subsidiary; (ii) the merger or consolidation of any Subsidiary into the Company, or with or into any other Subsidiaries, provided that if any such transaction is between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary is the continuing or surviving corporation; (iii) the transfer by any Subsidiary of the Company of any assets (upon voluntary liquidation or otherwise) to the Company or a Wholly-Owned Subsidiary of the Company; (iv) transfers of real estate not used or useful in the business of the Company and its Subsidiaries, any bulk sale of inventory not representing a then current product line of the Company or its Subsidiaries, or any sale of property or assets used in connection with discontinued or abandoned product lines of the Company or its Subsidiaries; (v) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; (vi) (A) the transfer of assets by the Company to any of its Subsidiaries if such transfer is a sale for fair market value and the consideration received by the Company is cash and (B) the transfer of the business and assets of the Company's Computing Devices International division to a Subsidiary of the Company; (vii) the transfer, merger or consolidation of the assets listed on Schedule 7.02 attached hereto; (viii) any transfer of assets by the Company or any of its Subsidiaries to any Person in connection with the extension of Indebtedness or making an investment or acquisition transaction or business combination otherwise permitted under this Agreement; and -58- (ix) transfers of assets not otherwise permitted hereunder (whether by merger, consolidation or otherwise) occurring after the Closing Date which are made for fair market value; provided, however, that (A) at the time of any transfer, no Default or Event of Default exists or would result from such transfer and (B) the aggregate net book value of all assets so transferred by the Company and its Subsidiaries together shall not exceed 10% of Consolidated Total Assets. 7.3 Cash Investments; Minority Investments. The Company shall not, and shall not permit any of its Subsidiaries to, (A) invest any assets classified in accordance with GAAP on the Company's consolidated balance sheet as "cash and equivalents" or "short-term investments" in investments other than Cash Equivalents and investment grade marketable securities or (B) make any Investment in any Person which is not a Subsidiary of the Company except for such Investments that, when aggregated with the Investments set forth on Schedule 5.17(A) hereto, do not exceed in the aggregate 10% of Consolidated Total Assets. 7.4 Indebtedness. The Company shall not, and shall not permit any of its Subsidiaries to, incur, assume or suffer to exist any Indebtedness if a Default or Event of Default has occurred and is continuing or would result from the incurrence or assumption of such Indebtedness. 7.5 Contingent Obligations. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Contingent Obligations except: (a) Contingent Obligations incurred pursuant to this Agreement; (b) endorsements for collection or deposit in the Ordinary Course of Business; (c) any Contingent Obligations relating to letters of credit, bank guarantees or similar instruments incurred by Computing Devices Canada Ltd. in connection with the IRIS system contract dated April 18, 1991 and in connection with a contract dated as of January 3, 1994 with the Diesel Division of General Motors Canada Limited; and (d) Contingent Obligations of the Company and its Subsidiaries in an aggregate amount not in excess of $45,000,000. 7.6 Use of Proceeds. The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 7.7 Hostile Acquisitions. The Company shall not, and shall not permit any of its Subsidiaries to, (a) Purchase, or attempt to Purchase, any Person by means of a public debt or equity tender offer or other unsolicited takeover (or the equivalent thereof in any jurisdiction) or (b) engage in a proxy contest (or the equivalent thereof in any jurisdiction) for control of the board of directors (or the functional equivalent thereof) of any Person, in either case which has not been -59- approved and recommended by the board of directors (or the functional equivalent thereof) of the Person being acquired or proposed to be acquired or which is the subject of such proxy contest. 7.8 Lease Obligations. The Company shall not permit the aggregate minimum non-cancelable payment commitments in respect of Operating Leases for the Company and its Subsidiaries on a consolidated basis determined in accordance with GAAP at the end of any fiscal year to exceed, for any subsequent fiscal year, $60,000,000 (exclusive of $16,000,000, or such lesser amount as may be reserved in the Company's consolidated financial statements to pay such commitments). 7.9 Consolidated Net Worth. The Company shall not permit its Consolidated Net Worth at the end of any fiscal quarter to be less than $115,000,000 plus (a) 75% of Consolidated Net Income, if positive, subsequent to December 31, 1995, plus (b) 100% of the net cash proceeds from the issuance of any capital stock (other than stock issued to or in connection with employee or director benefit plans), plus (c) the amount of any conversion of indebtedness to equity by the Company after December 31, 1995. 7.10 Fixed Charge Coverage Ratio. On and after the Closing Date, the Company shall not permit its ratio of (a) EBITDA, plus interest income, minus Capital Expenditures to (b) Consolidated Fixed Charges, all calculated on a consolidated basis for the immediately preceding four fiscal quarters of the Company, to be less than 2.25 to 1.00. 7.11 Leverage Ratio. On and after the Closing Date, the Company shall not permit its ratio of (a) Consolidated Indebtedness to (b) EBITDA, minus Capital Expenditures and minus dividends paid on preferred stock issued by the Company (including the Preferred Stock), all calculated on a consolidated basis for the immediately preceding four fiscal quarters of the Company, to be more than 3.00 to 1.00. 7.12 Change in Business. The Company shall not, and shall not permit any of its Subsidiaries to, (i) engage in any material line of business substantially different from those lines of business carried on by the Company and its Subsidiaries on the Closing Date; or (ii) extend any material amount of Indebtedness to or make any material equity investment in any Person which engages in one or more lines of business all of which are substantially different from those lines of business carried on by the Company and its Subsidiaries on the Closing Date; or (iii) enter into any joint venture which engages in a material line of business substantially different from those lines of business carried on by the Company and its Subsidiaries on the Closing Date. 7.13 Accounting Changes. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required or permitted by GAAP, or change the fiscal year of the Company or of any of its consolidated Subsidiaries. 7.14 Contracts of Subsidiaries The Company shall not permit any of its Subsidiaries (other than Computing Devices Canada Ltd. and Computing Devices Company Ltd. and its Subsidiaries) to enter into any contract restricting the ability of such Subsidiary to pay dividends or make loans to the Company or Subsidiaries of the Company. -60- ARTICLE VIII EVENTS OF DEFAULT 8.1 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or any reimbursement obligation in respect of a Letter of Credit, or (ii) within 5 days after the same shall become due, any interest, fee or any other amount payable hereunder or pursuant to any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the Company or any of its Subsidiaries made or deemed made herein, in any Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any of its Subsidiaries, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in subsection 6.03(a), (b), (c), (d) or (f), Section 6.09 or in Article VII; or the Company fails to perform or observe any term, covenant or agreement contained in Section 6.01 or 6.02 or in subsection 6.03(e), (g), (h) or (i), and such default continues unremedied for a period of 10 days; or (d) Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or any Loan Document, and such default continues unremedied for a period of 20 days; or (e) Cross-Default. The Company or any of its Subsidiaries (i) fails to make any required payment when due in respect of any Indebtedness or Contingent Obligation having a principal or face amount of $7,500,000 or more when due or any Rate Contract having a notional amount of $7,500,000 or more when due (whether at scheduled maturity or required prepayment or by acceleration, demand, or otherwise); or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (f) Insolvency; Voluntary Proceedings. The Company or any other Subsidiary of the Company (i) ceases or fails to be Solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the -61- ordinary course; (iii) commences an y Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; provided, however, that it shall not be an Event of Default under this subsection (f) if any Subsidiary of the Company (other than a Guarantor) to which this subsection applies does not have annual revenues in excess of 1% of the consolidated revenues of the Company or net worth which constitutes more than 5% of the Consolidated Net Worth of the Company in the fiscal year immediately preceding the date this subsection first becomes applicable to such Subsidiary; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any other Subsidiary of the Company, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any of its Subsidiaries' Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any of its Subsidiaries admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any of its Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; provided, however, that it shall not be an Event of Default under this subsection (g) if any Subsidiary of the Company (other than a Guarantor) to which this subsection applies does not have annual revenues in excess of 1% of the consolidated revenues of the Company or net worth which constitutes more than 5% of the Consolidated Net Worth of the Company in the fiscal year immediately preceding the date this subsection first becomes applicable to such Subsidiary; or (h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or would reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect; or (ii) the Company or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect; or (i) Monetary Judgments. One or more final (non-interlocutory) judgments, orders or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not fully covered by independent third-party insurance) as to any single or related series of transactions, incidents or conditions, of $10,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of 10 days after the entry thereof; or (j) Ownership. Any Person or group of Persons is the beneficial owner of 30% or more of the voting power of the Company for a period of 30 days or more. For purposes of this subsection (j), the terms "group" and "beneficial owner" shall have the meanings given to those terms in Section 13 of the Securities Exchange Act of 1934, as amended; or -62- (k) Subsidiary Guaranty. Any Subsidiary Guaranty shall fail to remain in full force and effect (except, with respect to any Subsidiary, upon the merger of such Subsidiary with and into the Company or any other Subsidiary which is a Guarantor), or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Subsidiary Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of its Subsidiary Guaranty, or any Guarantor denies that it has any further liability under its Subsidiary Guaranty, or gives notice to such effect. 8.2 Remedies. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks, (a) declare the Commitment of each Bank to make Loans and purchase participations in Letters of Credit and of the Issuing Bank to issue Letters of Credit to be terminated, whereupon such Commitments shall forthwith be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in paragraph (f) or (g) of Section 8.01 above (in the case of clause (i) of paragraph (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans and purchase participations in Letters of Credit and of the Issuing Bank to issue Letters of Credit shall automatically terminate without notice to the Company and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank and without notice to the Company. If at the time an Event of Default occurs, Letters of Credit are issued and unexpired, the Company shall deposit with the Agent cash in an amount equal to the Stated Amount of all Letters of Credit to be held as collateral therefor. 8.3 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.1 Appointment and Authorization. Each Bank hereby irrevocably (subject to Section 9.09) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to -63- exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, 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 the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. -64- 9.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent 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 the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank 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 the Company or any of the Company's Subsidiaries or Affiliates. 9.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may -65- be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Sections 4.01, 4.02 and 4.03, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from the Bank prior to the initial Borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or the Bank shall not have made available to the Agent the Bank's ratable portion of such Borrowing. 9.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company 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 Agent receives such a notice, the Agent shall give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Majority Banks in accordance with Article VIII; provided, however, that unless and until the Agent shall have received any such request, the 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 or in the best interest of the Banks. 9.6 Credit Decision. Each Bank expressly acknowledges that none of the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of -66- the Company which may come into the possession of any of the Agent-Related Persons. 9.7 Indemnification. Whether or not the transactions contemplated hereby shall be consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans and the termination or resignation of the related Agent) be imposed on, incurred by or asserted against any such Person any way relating to or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the 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 the Agent is not reimbursed for such expenses by or on behalf of the Company. Without 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 Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Banks in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 9.8 Agent in Individual Capacity. BofA 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, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliates) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include BofA in its individual capacity. 9.9 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent shall resign as Agent under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. ARTICLE X MISCELLANEOUS 10.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any Guarantor therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Agent at the written request of the Majority Banks), the Company and acknowledged by the Agent, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks, the Company and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to subsection 8.02(a)) or subject any Bank to any additional obligations; (b) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or of any fees or other amounts payable hereunder or under any Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for the Banks or any of them to take any action under any Loan Document; (e) release any Guarantor from the Subsidiary Guaranty to which it is a party; or (f) amend this Section 10.01 or Section 2.19; and, provided further, that no amendment, waiver or consent -68- shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document. 10.2 Notices. (a) All notices, requests, consents, approvals, waivers and other communications provided for hereunder or in connection herewith shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on the applicable signature page hereof, and (ii) shall be followed promptly by a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on the applicable signature page hereof; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next day) delivery, or transmitted by facsimile machine, respectively, or if delivered, upon delivery, except that notices pursuant to Article II or IX shall not be effective until actually received by the Agent. (c) The Company acknowledges and agrees that any agreement of the Agent and the Banks in Article II herein to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, 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. 10.4 Costs and Expenses. The Company shall, whether or not the transactions contemplated hereby shall be consummated: (a) pay or reimburse BofA (including in its capacity as Agent) within twenty Business Days after demand (subject to subsection 4.01(f)) for all costs and expenses incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including the reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) with respect thereto; -69- (b) pay or reimburse each Bank and the Agent within twenty Business Days after demand (subject to subsection 4.01(f)) for all costs and expenses incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding) under this Agreement, any other Loan Document, and any such other documents, including Attorney Costs incurred by the Agent and any Bank; and (c) pay or reimburse BofA (including in its capacity as Agent) within twenty Business Days after demand (subject to subsection 4.01(i)) for all audit, environmental inspection and review (including the allocated cost of such internal services), search and filing costs, fees and expenses, incurred or sustained by BofA (including in its capacity as Agent) in connection with the matters referred to under subsections (a) and (b) of this Section 10.04. 10.5 Indemnity. Whether or not the transactions contemplated hereby shall be consummated: (a) General Indemnity. The Company shall pay, defend, indemnify, and hold each Bank, the Agent, the Arranger and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including cleanup costs and engineering consulting costs in respect of Environmental Claims and Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding, Environmental Claim proceedings or appellate proceeding) related to this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, however, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person. (b) Survival; Defense. The obligations in this Section 10.05 shall survive payment and cancellation of all other Obligations. At the election of any Indemnified Person, the Company shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person's sole discretion, at the sole cost and expense of the Company; provided, however, that the Company shall only be obligated to hire one counsel to represent all of the Banks unless any Bank advises the Company that its legal counsel has advised it that its interest is materially different from that of the other Banks and it would not be adequately represented without its own separate counsel, in which case the Company shall hire separate counsel for such Bank, satisfactory to such Bank. All amounts owing under this Section 10.05 shall be paid within 30 days after demand. -69- 10.6 Marshalling; Payments Set Aside. Neither the Agent nor the Banks shall be under any obligation to marshall any assets in favor of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes a payment or payments to the Agent or the Banks, or the Agent or the Banks exercise their rights of set-off, and such payment or payments or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its sole discretion) to be repaid to a trustee, receiver or any other party in connection with any Insolvency Proceeding, or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 10.7 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.8 Assignments, Participations, etc. (a) Any Bank may, with the written consent of the Company (which consent shall not be unreasonably withheld or delayed) at all times other than during the existence of an Event of Default and of the Agent and the Issuing Bank, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company, the Agent or the Issuing Bank shall be required in connection with any assignment and delegation by a Bank to a Bank Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder, and if in part, in a minimum amount of $10,000,000; provided, however, that (i) the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (A) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (B) such Bank and its Assignee shall have delivered to the Company and the Agent an assignment and acceptance agreement in substantially the form of Exhibit B attached hereto, together with any Notes subject to such assignment and (C) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500. The consent of the Company to any such assignment shall not be unreasonably withheld. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed assignment and acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment and acceptance agreement, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such assignment and acceptance agreement, relinquish its rights and be released from its obligations under the Loan Documents. -70- (c) Promptly after its receipt of notice by the Agent that it has received an executed assignment and acceptance agreement and payment of the processing fee, the Company shall execute and deliver to the Agent a new Note evidencing such Assignee's Bid Loans and, if the assignor Bank has not retained any portion of its Loans and its Commitment, the assignor Bank shall return its original Note to the Company for cancellation. Immediately upon each Assignee's making its processing fee payment under the assignment and acceptance agreement, this Agreement, shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto. (d) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in clauses (a), (b) and (c) in the first proviso to Section 10.01. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.01, 3.03 and 10.05 as though it were also a Bank hereunder, and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off 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 Bank under this Agreement. (e) Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" by the Company and provided to it by the Company or any Subsidiary of the Company, or by the Agent on such Company's or Subsidiary's behalf, in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement; except to the extent such information (i) was or becomes generally available to the public other than as a result of a disclosure by the Bank, or (ii) was or becomes available on a non -confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; provided further, however, that any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable requirement of law; and (D) to such Bank's independent auditors and other professional advisors. Notwithstanding the foregoing, the Company authorizes each Bank to disclose to any Participant or Assignee (each, a "Transferee") and to any prospective Transferee, such financial and other information in such Bank's possession concerning the Company or -82- its Subsidiaries which has been delivered to Agent or the Banks pursuant to this Agreement or which has been delivered to the Agent or the Banks by the Company in connection with the Banks' credit evaluation of the Company prior to entering into this Agreement; provided that, unless otherwise agreed by the Company, such Transferee agrees in writing to such Bank to keep such information confidential to the same extent required of the Banks hereunder. (f) Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, any Bank may assign all or any portion of the Loans or Notes held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans or Notes made by the Company to or for the account of the assigning or pledging Bank in accordance with the terms of this Agreement shall satisfy the Company's obligations hereunder in respect to such assigned Loans or Notes to the extent of such payment. No such assignment shall release the assigning Bank from its obligations hereunder. X.9 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all Company deposits (general or special, time or demand, provisional or final) at any time held by, and other -71- indebtedness at any time owing by, such Bank to or for the credit or the account of the Company against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section 10.09 are in addition to the other rights and remedies (including other rights of set-off) which the Bank may have. 10.10 Automatic Debits of Fees. With respect to any fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent or BofA under the Credit Documents, the Company hereby irrevocably authorizes BofA to debit any deposit account of the Company with BofA in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in BofA's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section 10.10 shall be deemed a setoff. 10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of its Offshore Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.12 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be -72- deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 10.13 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.14 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks and the Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. Neither the Agent nor any Bank shall have any obligation to any Person not a party to this Agreement or other Loan Documents. 10.15 Time. Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. 10.16 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW. 10.17 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE -73- TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.18 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for the letter agreement between the Agent, the Arranger and the Company described in subsection 2.15(a). 10.19 Interpretation. This Agreement is the result of negotiations between and has been reviewed by counsel to the Agent, the Company and other parties, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in the preparation of such documents and agreements. 10.20 Term of Agreement. This Agreement shall not terminate until all Obligations (other than inchoate obligations under Article III and Section 10.05 which survive the termination of this Agreement) have been paid to the Agent and the Banks, even though the Termination Date may have occurred. 10.21 Foreign Currency Conversion. If for the purpose of (a) determining the amount owed to an Issuing Bank in respect of payments made under a Letter of Credit or (b) obtaining judgment in any court, it is necessary to convert a sum due hereunder in another currency into U.S. Dollars, the Company agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase such other currency with U.S. Dollars at San Francisco, California on the Business Day preceding that on which the reimbursement amount in respect of the Letter of Credit is due or final judgment is given. -74- 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. CERIDIAN CORPORATION By: /s/John H. Grierson Name:John H. Grierson Title:Vice President & Treasurer Address for notices: 8100 34th Avenue South Minneapolis, Minnesota 55425 Attention: Treasury Department Facsimile: (612) 853-3932 Telephone: (612) 853-5265 S-1 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By:/s/Judith L. Kramer Name: Judith L. Kramer Title: Vice President Address for notices: Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, California 94103 Attn: Agency Management Services #5596 Re: Ceridian Facsimile: (415) 436-2700 Telephone: (415) 436-2766 Address for payment: Bank of America NT&SA ABA No. 121-000-358 Attn: Agency Management Services No. 5596 Credit to Account No. 12339-15086 Ref: Ceridian Corporation S-2 BANK OF AMERICA ILLINOIS By: /s/M. A. Detrick Name:M. A. Detrick Title:Vice President Lending Office: Bank of America-Account Administration 1850 Gateway Boulevard Concord, CA 94520 Attention: Peggy Sanders Facsimile: (510) 675-7531 Telephone: (510) 675-7732 Address for notices: Bank of America-Account Administration 1850 Gateway Boulevard Concord, CA 94520 Attention: Peggy Sanders Facsimile: (510) 675-7531 Telephone: (510) 675-7732 With a copy to: Bank of America Illinois 231 South LaSalle Street (9Q) Chicago, IL 60697 Attention: Margaret Detrick Facsimile: (312) 987-1276 Telephone: (312) 828-5201 S-3 BANK OF MONTREAL By: /s/Erin M. Keyser Name:Erin M. Keyser Title:Director Lending Office: Bank of Montreal 115 S. LaSalle Street, 12th Floor Chicago, IL 60603 Attention: Angela Cobett Facsimile: 2) 750-3798 (31 Telephone: (312) 750-4363 Address for notices: Bank of Montreal 115 S. LaSalle Street, 12th Floor Chicago, IL 60603 Attention: Erin M. Keyser Facsimile: (312) 750-6057 Telephone: (312) 750-5943 S-4 THE BANK OF NEW YORK By: /s/Richard A. Raffetto Name:Richard A. Raffetto Title:Assistant Vice President Lending Office: The Bank of New York 101 Barclay Street New York, NY 10007 Attention: Commercial Lending Office Facsimile: (212) 635-7923 or 7924 Telephone: (212) 635-6991 Address for notices: The Bank of New York One Wall Street, 19th Floor New York, NY 10286 Attention: Richard A. Raffetto Facsimile: (212) 635-1208 or 1209 Telephone: (212) 635-8044 S-5 THE BOATMEN'S NATIONAL BANK OF ST. LOUIS By: /s/John C. Solomon Name:John C. Solomon Title:Vice President Lending Office: The Boatmen's National Bank of St. Louis One Boatmen's Plaza St. Louis, MO 63101 Attention: Sharron Kovsch Facsimile: (314) 466-6499 Telephone: (314) 466-6944 Address for notices: The Boatmen's National Bank of St. Louis One Boatmen's Plaza St. Louis, MO 63101 Attention: John C. Solomon Facsimile: (314) 466-6499 Telephone: (314) 466-6730 S-6 CHEMICAL BANK By: /s/John J. Huber III Name:John J. Huber III Title:Managing Director Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Attention: Donna Montgomery Facsimile: (212) 622-0136 Telephone: (212) 622-1440 Address for notices: Chemical Bank 270 Park Avenue New York, NY 10017 Attention: John Huber Facsimile: (212) 270-4711 Telephone: (212) 270-1402 S-7 FIRST AMERICAN NATIONAL BANK By: /s/Russell S. Rogers Name:Russell S. Rogers Title:Vice President Lending Office: First American National Bank 315 Union Street Nashville, TN 37237-0075 Attention: Frenisa Joy Facsimile: (615) 748-6098 Telephone: (615) 736-6747 Address for notices: First American National Bank 315 Union Street Nashville, TN 37237-0075 Attention: Russell S. Rogers Facsimile: (615) 748-6072 Telephone: (615) 748-2548 S-8 FIRST BANK NATIONAL ASSOCIATION By: /s/Todd W. Nelson Name:Todd W. Nelson Title:Vice President Lending Office: First Bank National Association 601 Second Avenue South Minneapolis, MN 55402-4302 Attention: Karen Johnson Facsimile: (612) 973-0825 Telephone: (612) 973-0546 Address for notices: First Bank National Association 601 Second Avenue South Minneapolis, MN 55402-4302 Attention: Todd W. Nelson Facsimile: (612) 973-0825 Telephone: (612) 973-0550 S-9 PNC BANK, NATIONAL ASSOCIATION By: /s/Jon C. Otterberg Name:Jon C. Otterberg Title:Assistant Vice President Lending Office: PNC Bank, National Association One PNC Plaza Pittsburgh, PA 15265 Attention: Tammy Dunn Facsimile: (312) 906-3420 Telephone: (312) 906-3403 Address for notices: PNC Bank, National Association 500 W. Madison Street, Suite 3140 Chicago, IL 60661 Attention: Jon C. Otterberg Facsimile: (312) 906-3420 Telephone: (312) 906-3425 S-10 WELLS FARGO BANK, N.A. By: /s/Laila S. Partridge Name:Laila S. Partridge Title:Vice President Lending Office: Wells Fargo Bank, N.A. 420 Montgomery Street, 9th Floor San Francisco, CA 94104 Attention: Judi Steele Facsimile: (415) 989-4319 Telephone: (415) 396-3807 Address for notices: Wells Fargo Bank, N.A. 420 Montgomery Street, 9th Floor San Francisco, CA 94104 Attention: Laila Partridge Facsimile: (415) 421-1352 Telephone: (415) 396-2494 S-11 ABN AMRO BANK N.V. By: /s/Bernard J. McGuigan Name:Bernard J. McGuigan Title:Group Vice President By: /s/Christine E. Holmes Name:Christine E. Holmes Title:Vice President Lending Office: ABN AMRO Bank N.V. 135 S. LaSalle Street, Suite 425 Chicago, IL 60674-9135 Attention: Loan Operations Facsimile: (312) 606-8435 Telephone: (312) 904-2961 Address for notices: ABN AMRO Bank N.V. 135 S. LaSalle Street, Suite 425 Chicago, IL 60674-9135 Attention: Jozef A.C. Henriquez Facsimile: (312) 606-8425 Telephone: (312) 904-2611 S-12 TORONTO DOMINION BANK (TEXAS), INC. By: /s/Frederic Hawley Name:Frederic Hawley Title:Vice President Lending Office: Toronto Dominion Bank (Texas), Inc. 909 Fannin Street, Suite 1700 Houston, TX 77010 Attention: Jorge Garcia Facsimile: (713) 951-9921 Telephone: (713) 653-8242 Address for notices: Toronto Dominion Bank (Texas), Inc. 909 Fannin Street, Suite 1700 Houston, TX 77010 Attention: Jorge Garcia Facsimile: (713) 951-9921 Telephone: (713) 653-8242 S-13 THE LONG TERM CREDIT BANK OF JAPAN, LTD. By: /s/Richard E. Stahl Name:Richard E. Stahl Title:Senior Vice President and Joint General Manager Lending Office: The Long Term Credit Bank of Japan, Ltd. Chicago Branch 190 South LaSalle Street, Suite 800 Chicago, IL 60603 Attention: John R. Carley Facsimile: (312) 704-8505 Telephone: (312) 853-9516 Address for notices: The Long Term Credit Bank of Japan, Ltd. Chicago Branch 190 South LaSalle Street, Suite 800 Chicago, IL 60603 Attention: John R. Carley Facsimile: (312) 704-8505 Telephone: (312) 853-9516 S-14 BofA is a party to this Agreement solely as an Issuing Bank with respect to Letters of Credit. BofA shall have no commitment to make Loans, to hold or purchase a participation in any Letter of Credit, or to issue any additional Letters of Credit hereunder. Notwithstanding the foregoing, BofA shall be a "Bank", under the provisions of this Agreement, with a Commitment Percentage of zero percent (0%). BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/Dennis Dubois Name:Dennis Dubois Title:Vice President Address for payment: Bank of America-Account Administration 1850 Gateway Boulevard Concord, CA 94520 Attention: Peggy Sanders Facsimile: (510) 675-7531 Telephone: (510) 675-7732 Address for notices: Bank of America-Account Administration 1850 Gateway Boulevard Concord, CA 94520 Attention: Peggy Sanders Facsimile: (510) 675-7531 Telephone: (510) 675-7732 EX-11 10 EXHIBIT 11 Exhibit 11 CERIDIAN CORPORATION AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (Amounts in thousands, except Year Ended December 31 per sharedata) 1995 1994 1993 Net earnings (loss) $ 58,562 $ 97,689 $(252,109) Dividends on Ceridian preferred stock (12,980) (12,980) (325) Net earnings (loss) for common stock - primary 45,582 84,708 (252,434) Extraordinary loss 38,947 - 8,400 Earnings (loss) before extraordinary item - 84,528 84,708 (244,034) primary Dividends on Ceridian preferred stock 12,980 12,980 325 Earnings (loss) before extraordinary item - fully diluted $ 97,508 $ 97,689 $(243,710) Weighted average common shares outstanding 66,135 65,825 64,452 Common share equivalents - stock options 3,217 1,801 Weighted average common shares and equivalents 69,352 67,626 64,452 outstanding - primary Shares issuable assuming conversion of Ceridian 10,384 10,384 260 preferred stock Weighted average common shares and equivalents 79,736 78,010 64,712 outstanding - full dilution Primary earnings (loss) per share before extraordinary item $ 1.22 $ 1.25 $ (3.79) Extraordinary loss (0.56) 0.00 (0.13) Net earnings (loss) $ 0.66 $ 1.25 $ (3.92) Fully diluted earnings (loss) per share before extraordinary item(1) $ 1.22 $ 1.25 $ (3.77) Net earnings (loss) (1) $ 0.73 $ 1.25 $ (3.90) (1) The calculation of fully diluted earnings (loss) per share appearing above is submitted in accordance with Regulation S-X item 601(b)(11). These amounts are not permitted to be reported under generally accepted accounting principles (APBO No. 15) because they are the same or better than (antidilutive to) the primary earnings (loss) per share amounts.
EX-12 11 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS Exhibit 12 Year Ended December 31, 1995 1994 1993 1992 1991 Earnings (Loss) before income taxes and other items (1) $116.2 $115.2 $(239.7) $(344.3) $(11.0) Earnings (Loss) of majority owned affiliates - not consolidated - - - (0.6) - Total earnings (loss) before income taxes and other items 116.2 115.2 (239.7) (343.7) (11.0) Add: Interest 30.6 32.2 46.8 54.8 64.9 Interest portion of rentals (2) 14.0 14.0 14.6 19.0 33.4 Adjusted earnings (loss) before income taxes and other items $160.8 $161.4 $(178.3) $(269.9) $87.3 Dividends on preferred stock: Preferred dividend requirements $23.8 $26.0 $12.9 $1.7 $0.8 Pre-tax to net income ratio (3) 84% 85% 100% 100% 100% Preferred dividend factor on a pre-tax basis 28.3 30.6 12.9 1.7 0.8 Interest 30.6 32.2 46.8 54.8 64.9 Interest portion of rentals 14.0 14.0 14.6 19.0 33.4 Fixed charges and preferred dividends $73.0 $76.8 $74.3 $75.5 $99.1 Ratio of earnings to combined fixed charges and preferred dividends 2.20 2.10 Earnings to combined fixed charges and preferred dividends deficiency $252.6 $345.4 $11.8 (1) Results include discontinued operations and are restated for the poolings of Comdata and Resumix in 1995. (2) Assumed to be one-third of rental expense. (3) Represents the reciprocal of the ratio of the income tax provision to earnings before income taxes. A tax gross-up would not have a material effect prior to 1994
EX-13 12 EXHIBIT 13 SELECTED FIVE-YEAR DATA (Dollars in millions, except per share data) 1995 1994 1993 1992 1991 Revenue $ 1,333.0 $ 1,177.8 $ 1,109.8 $ 1,031.1 $ 953.3 Earnings (Loss) from continuing operations (1) $ 97.5 $ 97.7 $ (243.7) $ (30.3) $ 54.1 Loss from discontinued operations (2) - - - (321.6) (74.7) Extraordinary loss (3) (38.9) - (8.4) (20.5) (1.2) Cumulative effect of accounting change (FAS 106) (4) - - - (41.8) - Net Earnings (Loss) $ 58.6 $ 97.7 $ (252.1) $ (414.2) $ (21.8) Earnings Per Common Share (5) Continuing operations $ 1.22 $ 1.25 $ (3.79) $ (0.48) $ 0.84 Net earnings (loss) $ 0.66 $ 1.25 $ (3.92) $ (6.48) $ (0.35) Shares used in calculations (in thousands) 69,352 67,626 64,452 63,939 63,848 Balance Sheet Data Total assets $ 1,126.1 $ 977.5 $ 850.8 $ 989.9 $ 1,409.7 Debt obligations $ 209.9 $ 238.4 $ 250.7 $ 415.0 $ 458.4 Stockholders' equity (deficit) (6) $ 150.0 $ 86.9 $ (8.9) $ (3.7) $ 483.9 Equity (Deficit) Per Common Share (7) $ (1.28) $ (2.23) $ (3.74) $ (0.06) $ 7.41 Common shares outstanding at end of year (in thousands) 67,277 66,723 65,503 64,125 63,851 Number of Employees at End of Year 10,200 9,500 9,600 10,500 11,300 Prior year amounts have been restated for the 1995 acquisitions of Resumix and Comdata by Ceridian as further described in Note J. (1) Includes pooling expenses of $29.7 in 1995, restructuring loss (gain) of $67.0 in 1993, $76.2 in 1992, and $(16.2) in 1991 and the write-off of $230.3 of Comdata goodwill and other intangibles in 1993. For additional information about the 1993 losses, see Note B to the consolidated financial statements. (2) Relates to the disposition of Ceridian's automated wagering, energy management and computer products businesses. (3) Relates to the early retirement of debt. For additional information about the 1995 and 1993 losses, see Notes B and I to the consolidated financial statements. (4) The Company adopted FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992. (5) Fully diluted amounts do not differ from primary earnings (loss) per share for any year presented. Shares used in the fully diluted calculations in 1995 and 1994 were 79,736,000 and 78,010,000, respectively. (6) The Company has not declared a cash dividend on common stock since 1985. For information regarding the sale in 1993 of preferred stock with a redemption value of $236.0, see Note F to the consolidated financial statements. (7) Computed by reducing stockholders' equity by the redemption value of outstanding preferred stock and dividing by the number of outstanding common shares at the end of the year. Assuming that outstanding preferred stock were converted to common stock, the equity per common share would be $1.93 and $1.13 at December 31, 1995 and 1994, respectively. 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations Results for all periods include the historical results of Comdata Holdings Corporation ("Comdata"), acquired by the Company on December 12, 1995, and Resumix, Inc. ("Resumix"), acquired by the Company on August 31, 1995, and the effect of the issuance of shares of Ceridian common stock in those acquisition transactions, which were accounted for by the pooling-of-interests method. For 1995, the Company reported net earnings of $58.6 million, or $0.66 per fully diluted share of common stock, on revenue of $1,333.0 million, compared to net earnings in 1994 of $97.7 million, or $1.25 per fully diluted share, on revenue of $1,177.8 million. Included in the 1995 results is a $38.9 million extraordinary loss, or $0.56 per fully diluted share, resulting from the refinancing of certain debt of Comdata following its acquisition by the Company, $29.4 million of expenses associated with the acquisition of Comdata, and $9.5 million of balance sheet adjustments discussed below. For 1993, the Company reported a net loss of $252.1 million, or $3.92 per fully diluted share, on revenue of $1,109.8 million. Included in the 1993 results is the write-off by Comdata of $230.3 million of goodwill and other intangibles, a net restructure loss of $67.0 million, and an extraordinary loss of $8.4 million resulting from the redemption of Ceridian's 8 1/2% Convertible Subordinated Debentures Due June 15, 2011 ("8 1/2% Debentures"). Comdata provides funds transfer, regulatory permit and other services to trucking companies at truck stops and other locations. Other trucking company services include debit card issuance and authorization, telephone services and backhaul information, all of which make use of the information processing or telecommunications capabilities of Comdata's proprietary computerized telecommunications network. Comdata also uses its network to provide cash advance services to the gaming industry using credit cards and debit services employing automated teller machines and similar devices. The Company issued 20,472,176 shares of its common stock to effect the acquisition of Comdata and reserved for issuance an additional 1,083,136 such shares in connection with the assumption of outstanding Comdata stock options. Resumix provides skills management software and services to enable an organization to manage large volumes of resume data to identify qualified candidates for hire and match them with available staffing needs, and to place current employees in new jobs or projects. The Company issued 849,010 shares of its common stock to effect the acquisition of Resumix and reserved for issuance an additional 104,642 such shares in connection with the assumption of outstanding Resumix stock options. The following table sets forth revenue for the last three years for the Company, its two industry segments, and the businesses that comprise those segments. Additional financial information regarding the Company's industry segments is contained in Note K, Segment Data, to the consolidated financial statements. 1995 1994 1993 (Dollars in millions) Information Services Segment Arbitron $ 137.2 $ 121.3 $ 172.2 The Human Resources Group(1) 412.2 321.5 244.0 Comdata Holdings Corporation 274.1 243.3 212.3 Other Services(2) -- 5.4 20.0 Total Information Services 823.5 691.5 648.5 Defense Electronics Segment Computing Devices International 509.5 486.3 461.3 Total Revenue $1,333.0 $1,177.8 $1,109.8 __________________ (1) The Human Resources Group consists of the Company's Employer Services business (which includes the Company's Centre-file subsidiary), the Company's Tesseract, Resumix, User Technology and MiniData subsidiaries, and its Employee Advisory Resource business. (2) Consists of revenue from TeleMoney Services and the Company's related network and computer center operations (collectively, "TeleMoney"), which were sold in May 1994. The following table sets forth the percentage of total revenue by industry segment, the gross profit of each industry segment as a percentage of that segment's revenue, and certain items in the consolidated statements of operations as a percentage of total revenue, for the periods indicated. 16 Years Ended December 31, 1995 1994 1993 Revenue: Information Services 61.8% 58.7% 58.4% Defense Electronics 38.2% 41.3% 41.6% Total revenue 100.0% 100.0% 100.0% Gross profit: Information Services 51.4% 51.1% 45.2% Defense Electronics 21.5% 19.5% 18.4% Total gross profit 40.0% 38.0% 34.1% Operating expenses Selling, general & administrative 23.2% 23.3% 22.4% Research and development 4.1% 3.4% 3.3% Other expense (income) 2.5% (0.3%) (0.3%) Write-off of intangibles -- -- 20.8% Restructure loss -- -- 6.0% Total operating expenses 29.9% 26.4% 52.2% Earnings (loss) before interest & taxes 10.1% 11.6% (18.1%) Interest income (expense) (1.4%) (1.8%) (3.5%) Earnings (loss) before income taxes 8.7% 9.8% (21.6%) Income tax provision 1.4% 1.5% 0.4% Net earnings (loss) before extraordinary item 7.3% 8.3% (22.0%) Extraordinary loss (2.9%) -- (0.8%) Net earnings (loss) 4.4% 8.3% (22.7%)
1995 Compared with 1994 The Company's revenue increased 13.2% from 1994 to 1995, reflecting revenue growth in Information Services of 19.1% and in Computing Devices of 4.8%. In Information Services, the Human Resources Group ("HRG") reported a revenue increase of 28.2%, Comdata an increase of 12.7% and Arbitron an increase of 13.1%. About 30% of the revenue growth in HRG was due to three acquisitions: the June 1994 purchase of Tesseract Corporation (Tesseract"), which provides integrated payroll, human resource management and benefits administration software systems; the December 1994 purchase of User Technology Services, Inc., which provides training and other services to effectively utilize information management systems; and the October 1995 purchase of the Centre-file business, which provides payroll processing services and human resource management software in the United Kingdom. Apart from these acquisitions, HRG's revenue increased 20.8% from 1994 to 1995, which included an increase in the average annual yield on the investment of payroll tax filing deposits from 4.24% in 1994 to 5.95% in 1995. Excluding also the additional revenue derived from increased investment yields, HRG's revenue increased 15.3% from 1994 to 1995. The majority of this revenue growth was in Employer Services, reflecting new customer installations for payroll processing services, a 17.8% increase in average invested tax filing balances to $1,021.6 million due to growth in the tax filing customer base, and the 1994 purchase of a tax filing customer base. Revenue also increased in Resumix, particularly from software maintenance products and services. HRG's revenue growth was restrained somewhat from 1994 to 1995, however, due to a 1.5 percentage point decrease in the retention rate during 1994 for existing payroll processing customers. Because of the significance to HRG's revenue of investment income from tax filing deposits, and the interest rate sensitivity of that income, the Company has entered into a series of seven interest rate collar transactions, each with a notional amount of $100 million, during 1995. These collars, which have remaining terms ranging from June 1996 to June 1999, have an average interest rate floor of 5.2%. HRG's revenue and profitability tend to be greater in the first and fourth quarters of each year because the volume of payroll items processed increases in those quarters in connection with employers' year-end reporting requirements, and because the amount of tax filing deposits also tends to be greatest in the first quarter. Comdata's revenue increase from 1994 to 1995 reflected 11.4% revenue growth from transportation services and 24.8% revenue growth from gaming services, increases that were partially offset by the February 1995 sale of Comdata's retail services division from which Comdata had derived $8.4 million more revenue in 1994 than in 1995. Apart from the March 1995 acquisition of Trendar Corporation ("Trendar"), which provides fuel purchase transaction processing systems to the transportation industry, revenue from transportation services increased 4.7%, or $6.7 million, from 1994 to 1995, reflecting increases in funds transfer revenue of 5.7% and in telecommunications revenue of 20.5%, which were partially offset by the discontinuance of certain products and by decreased sales of routing and scheduling software. The growth in funds transfer revenue included a $2.6 million 17 increase in revenue from unsettled transactions. The rate of revenue growth from both funds transfer and telecommunications services was less than the rate of growth in the number of transactions processed. In the case of funds transfer services, this difference was due largely to a decrease in per transaction fees for most funds transfer services and greater transaction growth in lower fee services. These factors primarily reflect competitive pressures and continuing consolidation in the trucking industry, as a result of which larger trucking companies tend to have greater purchasing power and to more often utilize lower fee direct billing transactions. In the case of telecommunications services, the decrease in average fee per transaction was largely due to rate reductions introduced at the end of 1994 to stimulate transaction growth. The $23.2 million increase in revenue from gaming services was primarily attributable to an increase in the number of cash advance transactions at gaming establishments, but also included a $2.9 million increase in revenue from unsettled transactions and $1.9 million in revenue growth from debit services involving automated teller machines. The majority of the gaming transaction growth occurred in gaming locations outside of the traditional casino markets in Nevada and Atlantic City, and was attributable to new accounts that were added during 1994 and 1995. Comdata's revenue from gaming services tends to be greater in the second and third quarters of each year, corresponding to a higher level of vacation travel during those periods of the year. Comdata's services for the trucking and gaming industries require it to process millions of transactions annually over its network. In 1995, approximately 48 million transactions were processed, the vast majority involving the transfer of approximately $9.1 billion of funds. In a very small portion of these transactions, final settlement may not occur or drafts and settlements payable may not clear in the ordinary course of business, resulting in Comdata receiving unapplied funds in excess of funds transmitted on behalf of customers and their affiliates. It is Comdata's policy to take the amount of such unapplied funds into revenue as earned for goods and services rendered if the transactions are not definitively settled within a period of twelve months through the assertion of valid claims. It has been Comdata's experience that an insignificant number of claims for unsettled funds are asserted after such twelve month period. The amount of unsettled transactions included in Comdata's 1993, 1994 and 1995 revenue was $9.2 million, $8.7 million and $14.2 million, respectively. The increase from 1994 to 1995 was primarily due to an increase in the volume of transactions processed and the application of this policy to certain categories of transactions to which it had not previously been applied. As a result of Comdata's inability to settle definitively all funds transfer transactions, it may have contingent liabilities for unapplied fund balances, the magnitude of which cannot be determined. In certain cases, Comdata may have in its possession unclaimed or abandoned funds that may be payable to governmental authorities under state escheatment laws. Based on its past experience, Comdata does not believe that escheatment laws create material liabilities for it, although no assurances can be given that such liabilities will not be asserted in the future. Arbitron's revenue increased 13.1% from 1994 to 1995. Revenue from radio audience measurement services and analytical software, which comprises approximately 85% of Arbitron's revenue, increased 8.8% due to an increased rate of customer renewals, a higher percentage of syndicated ratings customers also subscribing for analytical software applications, and price increases related to increases in the sample size for radio surveys. The revenue increase from radio was complemented by a revenue increase resulting from the Company's year-end 1994 exchange of its interest in the Competitive Media Reporting ("CMR") joint venture for an interest in the Scarborough Research Partnership ("SRP"). As a result of this transaction, Arbitron no longer derives revenue from the sale of commercial monitoring services provided by CMR, but SRP's results are consolidated with Arbitron's. The revenue increase for Computing Devices from 1994 to 1995 was attributable to its international operations, with revenue from its Canadian operations, which accounted for 48.6% of Computing Devices' total 1995 revenue, increasing 8.7% and revenue from its United Kingdom operations, which accounted for 7.6% of Computing Devices' 1995 revenue, increasing 30.4%. Revenue from Computing Devices' U.S. operations decreased 2.6% in total, but 6.5% after excluding the purchase of Paragon 18 Imaging, Inc. in December 1994. The revenue increase in the Canadian operations was primarily due to its ground systems products, particularly a multi-year contract to develop and produce a light armored vehicle reconnaissance system, and the Iris contract to provide a communications system to the Canadian Department of National Defence. Although revenue from the Iris contract increased 6.5% from 1994 to 1995, performance under that contract has progressed to the point that the Company expects revenue from the contract to be essentially unchanged in 1996 and to decline moderately beginning in 1997. The revenue increase in the United Kingdom operations in large measure reflected progress on a multi-year reconnaissance systems contract. Gross Margin. The Company's gross margin improvement from 38.0% in 1994 to 40.0% in 1995 reflected margin improvement in both industry segments, particularly Computing Devices, and also the relatively greater revenue growth in the Information Services segment, which has higher gross margins than Computing Devices. The increase in Information Services' gross margin from 51.1% in 1994 to 51.4% in 1995 reflected not only gross margin improvements in Arbitron and HRG, but also the 1994 sale of TeleMoney, which had a very low gross margin. Partially offsetting these factors was a decrease in Comdata's gross margin. Arbitron's improvement was primarily a function of revenue mix, as low margin revenue from the sale of commercial monitoring services provided by CMR did not continue in 1995 as a result of the CMR/SRP transaction, and higher margin revenue from sales of radio audience measurement services and analytical software increased. The gross margin improvement in HRG was due principally to increased investment yields on tax filing deposits, generally higher gross margin (but not operating margin) levels in businesses acquired during 1994 and 1995, and gross margin increases in the smaller businesses in this group. Offsetting much of this improvement were increased levels of costs in Employer Services' tax filing and payroll processing operations. The increased costs in the tax filing operation were generally associated with increased staffing to deal with the rapid growth in business volume and an increased level of penalties and interest payments to taxing authorities. The increased costs and reduced gross margin in the payroll processing operation primarily relate to a longer than anticipated period of time to transition to a newly established national customer service center, incremental costs associated with Employer Services' internal development effort to upgrade its payroll processing software (referred to as "CII") by adapting the Tesseract payroll processing software to run in Employer Services' multi-customer data center environment and with the corresponding project to consolidate payroll processing utilizing the CII software in centralized facilities, the previously mentioned decrease in customer retention rate during 1994, and increased costs of supplies, particularly paper and forms. The most significant factors in the decrease in Comdata's gross margin were the relatively greater increase in revenue from gaming services, which has a lower gross margin than transportation services revenue, the increase in agent commissions paid to locations offering gaming cash advance services, and $4.0 million in 1995 balance sheet adjustments that included an increase in bad debt expense. Agent commissions increased from $43.4 million, or 46.3% of consumer and gaming revenue, in 1994 to $55.7 million, or 47.7% of such revenue, in 1995, reflecting both the increase in the volume of gaming transactions and competitive pressures. Partially offsetting the impact of the foregoing factors on Comdata's gross margin was the February 1995 sale of the retail services division, which had a very low gross margin. The improvement in Computing Devices' gross margin from 19.5% in 1994 to 21.5% in 1995 was due to improved gross margins in its U.S. operations, reflecting the completion of certain contracts, the movement of other contracts from the development phase into the production phase, and the effects of reduced employment levels on existing fixed price contracts. Although the gross margin on the Iris contract increased from 1994 to 1995, overall gross margins in Computing Devices' international operations were little changed and were generally lower than in the U.S. operations. In large measure, this reflects an increasing amount of revenue from contracts with a large subcontractor content, which tend to have lower gross margins. 19 Operating Expenses. The most significant factor in the increase in the Company's operating expenses as a percentage of revenue from 1994 to 1995 was the $29.4 million of expenses associated with the acquisition of Comdata. Apart from this factor, operating expenses for the Company increased from 26.4% of revenue in 1994 to 27.7% of 1995 revenue. This increase reflected increases in both Computing Devices and Information Services (the latter including $5.5 million in 1995 Comdata balance sheet adjustments), and the relatively greater revenue growth in Information Services, which has higher operating expenses as a percentage of revenue than Computing Devices. The slight decrease in the Company's selling, general and administrative ("SG&A") expenses as a percentage of revenue reflected a decrease in Information Services from 30.6% to 29.6% of revenue and a $3.2 million decrease in such expenses not attributable to either industry segment, factors that were substantially offset by the revenue mix issue noted earlier and an increase in Computing Devices' SG&A expenses from 10.7% to 11.4% of revenue. Information Services' selling expense as a percentage of revenue decreased 1.2 percentage points, primarily reflecting increased concentration of Employer Services' sales and marketing efforts on medium and large employers and increased revenue with which there is associated a lesser percentage of selling expense, such as revenue attributable to increased interest rates on tax filing deposits. General expense was essentially unchanged as a percentage of revenue for Information Services despite an increase of $6.0 million in amortization of goodwill and other intangible assets due to acquisitions made during 1994 and 1995, and Comdata's 1995 write-off of $1.9 million of goodwill related to the 1994 acquisition of RoTec, a developer of routing and scheduling software. The comparative general and administrative expenses for the Company as a whole were also affected by an increase in compensation expense of $5.4 million during 1995 associated with the Company's performance restricted stock plan, primarily as a result of the Company's favorable stock price performance during 1995. Also contributing to the increase in Computing Devices' SG&A expenses were increased amortization expense attributable to the December 1994 acquisition of Paragon Imaging and expenditures related to quality improvement programs. R&D expense increased from 2.5% to 3.2% of revenue in Computing Devices from 1994 to 1995, and from 1.7% to 2.0% of revenue in Information Services over the same period. The increase in Computing Devices primarily involved expenditures to upgrade and enhance existing technologies, while the increase in Information Services was largely due to the June 1994 acquisition of Tesseract and 1995 charges related to development costs in connection with Comdata's Windows-based management information software for trucking companies. Apart from the previously mentioned $29.4 million in expenses related to the Comdata acquisition, other expense in 1995 primarily consisted of Arbitron's partner's share of SRP's income, Computing Devices' share of the losses of a commercial satellite joint venture, and Comdata's loss on the sale of its retail services division. Earnings Before Interest and Taxes. The Company's earnings before interest and taxes ("EBIT") decreased $2.0 million, or 1.5%, from 1994 to 1995. Information Services' EBIT decreased $8.1 million, from 16.9% percent of revenue to 13.2% of revenue. Partially offsetting this decrease was a $3.1 million increase in Computing Devices' EBIT, from 6.3% to 6.6% of revenue, and a $3.0 million decrease in expenses not allocated to either industry segment, in large measure due to the compensation expense associated with the Company's restricted stock plan mentioned earlier. Apart from the $29.4 million of Comdata acquisition expenses and accruals, the Company's EBIT would have increased $27.4 million, or 20.0%. Computed on that basis, the Company's EBIT as a percentage of revenue increased from 11.6% in 1994 to 12.3% in 1995, and Information Services' EBIT as a percentage of revenue decreased slightly from 16.9% to 16.8%, reflecting operating margin improvement in HRG that was offset by operating margin decreases in Comdata, due in large measure to the 1995 balance sheet adjustments, and to a much lesser degree in Arbitron. 20 Interest Income and Expense. The $1.4 million increase in interest income from 1994 to 1995 primarily resulted from higher interest rates during 1995. The $1.6 million decrease in interest expense from 1994 to 1995 generally reflected slightly lower debt levels during the year. Taxes and Net Operating Loss Carryforwards. The Company's income tax provision increased from $4.0 million in 1993 to $17.5 million in 1994, and to $18.7 million in 1995. Amounts in the latter two years primarily represent tax charges related to Comdata prior to its acquisition by Ceridian, and amounts in all three years include tax charges related to Ceridian's international operations. Comdata's pre-acquisition effective tax rate increased during 1994 as a result of the utilization of most of Comdata's net operating loss carryforwards for U.S. federal income tax purposes ("NOLs"). Ceridian estimates that it currently has NOLs of $1,019 million, which may be used, to the extent available, to offset regular taxable income of the Company during the carryforward period (through 2008). If unused, the Company's NOLs would begin to expire in a modest amount in 1997. Although the Company expects that it will utilize its NOLs prior to their expiration, the losses which the Company has reported in three of the last five years have caused the Company to maintain a valuation allowance equal to the net deferred tax asset attributable to the existence of the Company's NOLs. The Company also has accrued $243 million of expenses for financial statement reporting purposes which are expected to be deductible for federal income tax purposes in future taxable years. Section 382 of the Internal Revenue Code of 1986, as amended, contains complex rules that place an annual limit on the amount of NOLs that a company may utilize after an "ownership change." Generally, an ownership change occurs on a given date if the aggregate of the increases in the percentage of stock owned by certain stockholders (generally those owning during the preceding three years 5% or more of the stock of the Company and those receiving stock in a new issuance during that three-year period) over the lowest percentage owned by such stockholders over the past three years exceeds 50 percentage points. Because the amount of the annual limit is computed by multiplying the equity value of the Company (generally the Company's market capitalization reduced by capital contributions made to the Company during the previous two years) immediately prior to an ownership change by the then applicable federal long-term tax exempt rate, the higher the Company's equity value at the time of an ownership change, the higher the resulting annual NOL limitation applicable to the Company. Although the Company does not believe that such an annual limitation on NOLs is currently applicable, events could occur, either within or outside the control of the Company, that would cause an ownership change and trigger the limitations of Section 382. Extraordinary Loss. The Company's 1995 extraordinary loss of $38.9 million ($40.5 million on a pre-tax basis) represents $33.6 million in costs associated with the repurchase pursuant to a tender offer of substantially all of the $130 million in principal amount of Comdata's 12.5% Senior Notes due 1999 ("Senior Notes") and the $75 million in principal amount of Comdata's 13.25% Convertible Subordinated Debentures due 2002 ("13.25% Debentures") during December 1995, the redemption of the $6.2 million remaining principal amount of Comdata's 11% Junior Subordinated Extendible Notes due 1997 ("Junior Notes"), and the in-substance defeasance of such debt that remained outstanding at December 31, 1995, as well as the write-off of $6.9 million of deferred financing costs associated with such debt and Comdata's revolving credit agreement that was cancelled in December 1995. 1994 Compared with 1993 Revenue. The 6.6% increase in Information Services' revenue from 1993 to 1994 was a function of 31.8% revenue growth in HRG and 14.6% revenue growth in Comdata being offset in large measure by decreased revenue from Arbitron and the sale of the TeleMoney business in April 1994. Slightly more than half of HRG's revenue growth was attributable to acquisitions, most significantly the October 1993 acquisition of the Systems Tax Service ("STS") tax filing business and the June 1994 acquisition of Tesseract. Apart from acquisitions, HRG's revenue increased 15.8% from 1993 to 1994, primarily reflecting new payroll processing customer installations and an increased retention rate during 1993 for existing customers, and increased payroll 21 tax filing revenue, due largely to a higher percentage of Employer Services' payroll processing customers also utilizing its tax filing service. The investment income component of the revenue increase reflects average balances of payroll tax filing deposits in 1994 that were approximately 25% greater than Employer Services' and STS' combined balances in 1993, and an average yield on investments that was 4.23% compared to 4.00% in 1993. Also contributing to HRG's revenue growth was an a 60% increase in Resumix' revenue. Comdata's $31.0 million revenue increase from 1993 to 1994 reflected 12.5% revenue growth, or $15.5 million, from transportation services and 23.4% revenue growth, or $17.8 million, from consumer and gaming services. Revenue from Comdata's retail services division, which was sold in February 1995, decreased $2.3 million from 1993 to 1994. About 70% of the revenue growth in transportation services was due to the December 1993 acquisition of Saunders, Inc., which provides funds transfer, fuel tax, licensing and permit services, and the February 1994 acquisition of the assets of RoTec. Apart from acquisitions, transportation services revenue increased 3.6%, due primarily to revenue growth of 7.1% in funds transfer services. Restraining transportation services' revenue growth in 1994 was a revenue decrease of $2.6 million from the discontinuance of Comdata's in-cab communication service. The increase in revenue from gaming services was primarily due to an increase in the number of cash advance transactions at gaming establishments, including gaming locations outside of the traditional casino markets in Nevada and Atlantic City. These increases were partially offset by a $2.9 million reduction in revenue from nongaming locations resulting from credit card association regulations limiting Comdata's ability to do business in nongaming locations. The Arbitron revenue decrease of $50.8 million from 1993 to 1994 was primarily attributable to the discontinuance of its television ratings service, which had provided $44.9 million of revenue during 1993. Also contributing to the decrease was the year-end 1993 transfer from Arbitron to the CMR joint venture of certain contracts for commercial monitoring services, which decreased Arbitron's revenue in 1994 by $13.8 million. Partially offsetting this decrease was a revenue increase of approximately 7% in 1994 in the other aspects of Arbitron's business. Computing Devices' revenue increased $25.0 million, or 5.4%, from 1993 to 1994. Constraining the revenue increase were the near completion at year-end 1993 of a contract to manufacture equipment for Control Data Systems, Inc., which was spun-off from the Company in mid-1992, and the July 1993 sale of the Company's Barrios Technology subsidiary, activities which together provided $29.6 million more revenue in 1993 than in 1994. Apart from these items, Computing Devices' revenue increased 12.7% from 1993 to 1994. About 90% of this revenue increase was attributable to a $49.9 million increase in revenue from the Iris contract. Computing Devices' ongoing U.S. operations also reported an increase in revenue of 6.6% from 1993 to 1994. Gross Margin. The Company's gross margin improvement from 34.1% in 1993 to 38.0% in 1994 was primarily due to an increase in Information Services from 45.2% to 51.1%. The most significant factor in this improvement in Information Services was the discontinuance of Arbitron's unprofitable syndicated television ratings service at the end of 1993. The Company estimates that this discontinuance contributed 2.8 percentage points of the segment's gross margin improvement. Two other significant factors in the gross margin improvement in Information Services were the previously mentioned decrease in Arbitron's commercial monitoring revenue (the cost of such revenue having been a 90% royalty payable to the CMR joint venture) and the sale of TeleMoney in May 1994. These two factors contributed an estimated 1.8 percentage points of the segment's gross margin increase. The balance of the Information Services improvement was attributable to gross margin improvements in HRG and Comdata. In HRG, margin improvements in its tax filing operations and in Resumix and as a result of the acquisition of Tesseract were substantially offset by decreased gross margins in payroll processing operations and an increase in lower margin revenue associated with a human resources information software consulting service. The margin improvement in tax filing operations was primarily due to the consolidation of Ceridian's tax filing activity on STS' more highly 22 automated system and increased investment income from tax filing balances. The margin decrease in payroll processing was due largely to costs to establish and equip a national customer service center and costs of related actions to upgrade communications systems. The increase in Computing Devices' gross margin from 1993 to 1994 was attributable to a four percentage point improvement in its U.S. operations, primarily reflecting actions taken in 1993 to reduce employment levels and a reduction in low margin revenue from the manufacture of equipment for Control Data Systems, Inc. Lessening Computing Devices' overall gross margin improvement was a decrease in gross margin in its U.K. operations, primarily reflecting provisions established in 1994 for costs to complete certain contracts, including a development contract for an avionics system for the Eurofighter 2000 aircraft, and the increase in the relative revenue contribution from the Iris contract. Although the gross margin on the Iris contract improved from 1993 to 1994, it has lower gross margins than most other aspects of Computing Devices' business. Operating Expenses. The Company's operating expenses decreased from 52.2% of revenue in 1993 to 26.4% of revenue in 1994. The Company's 1993 operating expenses included a $230.3 million fourth quarter write-off by Comdata of goodwill and certain other long-lived intangible assets, primarily related to its transportation business, based on Comdata's assessment of future operations of the businesses involved. The effect of this write-off was to reduce annual amortization expense for Comdata beginning in 1994 by about $8 million. Also included in 1993 operating expenses was a net restructuring loss of $67.0 million, which included $75.9 million in restructuring charges for Information Services, $5.5 million in charges for Computing Devices, and a net restructure gain of $14.4 million not attributable to either industry segment. Information Services' charges included $57.0 million resulting from the October 1993 decision to discontinue Arbitron's syndicated television ratings service. The principal components of this charge involved the write-off of metering and other assets, severance and other costs related to the termination of approximately 700 employees, and lease and other obligations related to facilities and equipment. The discontinuance of this unprofitable service is estimated to have benefited the Company's 1994 results by about $6 million. Information Services' 1993 restructuring charges also included $18.9 million of charges recorded by HRG, primarily related to actions to discontinue payroll data processing in Employer Services' district offices in conjunction with a program to consolidate such processing in centralized processing facilities and actions to discontinue most telephonic customer support in district offices in conjunction with a program that consolidated such support activities into a single national center. The principal components of the Employer Services charges included severance and other costs related to the termination of about 330 employees, incremental costs related to the reduction of payroll processing and telephonic customer support capabilities in district offices, and lease and other obligations related to facilities and equipment. The restructuring charges recorded by Computing Devices in the fourth quarter 1993 involved actions taken to reduce employment levels by 205 employees in its U.S. and U.K. operations. Although these actions resulted in the elimination of approximately $8 million of annual employment expense, they were not expected to improve profitablity by a comparable amount, but rather were undertaken to enable Computing Devices to maintain competitive cost and expense levels. Because pricing of government contracts is typically predicated on a concept of "allowable" costs, actions to reduce costs tend to improve profitability only on fixed price contracts currently in place. The 1993 net restructuring gain not attributable to either industry segment primarily consisted of a gain resulting from the Company's October 1993 receipt of a $35.5 million refund of taxes and related interest from the Internal Revenue Service. The refund relates to restructure losses recorded by the Company during the 1980s. Apart from the impact of the 1993 intangibles write-off and restructuring, the Company's operating expenses increased from 25.4% of revenue in 1993 to 26.4% of revenue in 1994. As a percentage of revenue, SG&A expenses for the Company increased from 22.4% to 23.3%, due to an increase in Information Services from 29.5% to 30.6% of revenue, and a $2.4 million increase in such expenses 23 not attributable to either industry segment, due largely to compensation expense associated with the Company's restricted stock plan that was not allocated to the industry segments in the first half of 1994. Information Services' SG&A expense increase as a percentage of revenue was attributable to Arbitron, reflecting the sizeable decrease in Arbitron's revenue and the proportionately smaller decrease in its SG&A expenses. In part this reflects the past dependence of Arbitron's radio and television services on a common support structure. Also contributing to the increase were provisions established in 1994 for certain claims and litigation involving Arbitron. SG&A expenses as a percentage of revenue did, however, decrease in HRG and Comdata from 1993 to 1994. Computing Devices' SG&A expenses were unchanged from 1993 to 1994 as a percentage of revenue. The Company's R&D expense increased from 3.3% to 3.4% of revenue from 1993 to 1994. In the Information Services segment, R&D expense increased modestly in dollars and as a percentage of revenue (from 1.4% to 1.7%), as increased R&D spending in HRG, primarily due to the acquisition of Tesseract, was substantially offset by the discontinuance of Arbitron's television ratings service and the sale of TeleMoney. R&D expense also increased in Computing Devices, both in dollars and as a percentage of revenue (from 2.0% to 2.5%), primarily due to concept development efforts intended to attract additional government funding for product development efforts. Earnings (Loss) Before Interest and Taxes. The Company's earnings before interest and taxes ("EBIT") in 1994 totaled $136.7 million as compared to a loss before interest and taxes of $201.4 million in 1993. Excluding the $230.3 million write-off of intangibles and the $67.0 million net restructure loss from 1993 results, the Company's EBIT increased $40.8 million, or 42.5%, from 1993 to 1994, from 8.6% of revenue in 1993 to 11.6% of revenue in 1994. Information Services was the primary contributor to this improvement, with EBIT (computed without regard to the intangibles write-off or restructuring) increasing $40.8 million, or 53.8%, from 1993 to 1994, from 11.7% of revenue in 1993 to 16.9% of revenue in 1994. Computing Devices' EBIT (without regard to 1993 restructuring) increased $3.6 million, or 13.5%, from 1993 to 1994, and as a percentage of revenue from 5.9% to 6.3%. Interest Income and Expense. The $14.6 million decrease in interest expense from 1993 to 1994 principally reflected the redemption at the end of 1993 of $163.5 million in principal amount of Ceridian's 8 1/2% Debentures with the majority of the proceeds of the sale of Ceridian's 5 1/2% Cumulative Convertible Exchangeable Preferred Stock ("5 1/2% Preferred Stock"). The annual dividend obligation in connection with the 5 1/2% Preferred Stock is $13.0 million. The $2.2 million increase in interest income over the same period reflected higher balances of cash and short-term investments during 1994, primarily as a result of the 5 1/2% Preferred Stock offering, and generally increasing interest rates during 1994. Financial Condition The Company's cash and short-term investments decreased from $192.4 million at December 31, 1994 to $151.7 million at December 31, 1995. Approximately $81.1 million of the Company's cash and short-term investments at December 31, 1995 were the U.S. dollar equivalent of unhedged Canadian dollar cash and short-term investments held by the Company's Canadian subsidiary. The Company expects that this balance in Canada will not change materially during 1996. During 1995, operating cash flows provided $192.2 million of cash, compared to $62.5 million in 1994 and $56.3 million in 1993. Net earnings adjusted to a cash basis provided cash of $163.5 million in 1995, $146.3 million in 1994 and $75.2 million in 1993. Reflected in the $46.4 million of cash provided in 1995 in connection with working capital items was a $52.7 million increase in customer advances and deferred income, primarily reflecting Computing Devices' receipt of customer advances as a result of achieving significant milestones under the Iris contract, a $34.2 million increase in Comdata's drafts and settlements payable, and a $42.0 increase in other current liabilities, primarily due to accruals related to the Comdata acquisition. Comdata's drafts and settlements payable is significantly affected by the day of the week on which the accounting period ends, with higher balances on weekends because of the large volume 24 of weekend transactions in its gaming services. Reducing the 1995 cash provided by working capital items was a $73.1 million increase in trade and other receivables, primarily reflecting increases in Comdata's receivables related to 1995 ending on a Sunday, increases in Computing Devices' unbilled receivables, principally related to the Iris contract, and increases in Employer Services' receivables reflecting end of year billings. The following table summarizes the cash payments made during the three year period ended December 31, 1995 with respect to restructuring reserves, as well as the Company's estimate of remaining restructuring reserves expected to require cash outlays during 1996. Restructure Cash Payments Actual Expected Category 1993 1994 1995 1996 Severance and Related Costs $17.0 $14.7 $2.0 $7.3 Equipment Lease Termination 4.0 4.9 0.8 0.6 Vacant Space 23.4 16.8 9.0 7.6 Costs to Dispose of Businesses 5.1 6.6 1.0 0.2 Legal Costs 4.3 4.3 1.5 1.7 Environmental Costs 1.1 1.2 1.4 1.0 Duplicate Processing/Support -- 3.2 1.5 0.6 Other 4.8 2.0 1.0 0.2 Total $59.7 $53.7 $18.2 $19.2 Of the $51.2 million of restructuring reserves expected to require cash outlays after 1996, the largest portions relate to obligations with respect to vacant space (generally payable during 1997-1999), the obligation to indemnify the purchaser of the Company's former disk drive manufacturing subsidiary against certain environmental remediation costs related thereto (expected to be payable over ten years or more), and defense or settlement costs related to age discrimination litigation involving the Company (see Note N, Legal Matters, to the consolidated financial statements). The following table summarizes the major components of restructuring and discontinued operations reserves established and utilized during the three year period ended December 31, 1995, as well as the balance of such reserves at that date. The December 31, 1992 reserve balance of $140.7 million shown in the table principally involved obligations relating to the disposition of a computer chip manufacturing operation, the sale of a disk drive manufacturing subsidiary (including under an indemnification provided to the purchaser for certain environmental liabilities), the Company's investments in wind energy ventures and Business and Technology Centers, and excess facilities. Restructure and Discontinued Operations Reserves (1) Employer Computing (Dollars in millions) Arbitron Arbitron Services Devices TV ScanAm Consolidation Severance Other Total Reserve Balance 12/31/92 $ - $ 0.6 $ 6.0 $ 1.1 $ 133.0 $ 140.7 1993 Restructure Loss (1) 57.0 18.9 5.5 0.3 81.7 Cash Payments (4.1) (0.6) (4.0) (6.1) (44.9) (59.7) Asset Write-Off (26.8) (15.0) (41.8) Adoption of FAS 112 (2) (12.0) (12.0) Other Non-cash Items (0.9) (0.9) Reserve Balance 12/31/93 26.1 - 20.9 0.5 60.5 108.0 1994 Restructure Loss (1) 15.0 15.0 Sale of TeleMoney (3) 14.1 14.1 Cash Payments (17.4) (8.5) (0.5) (27.3) (53.7) Other Non-cash Items 2.4 2.5 4.9 Reserve Balance 12/31/94 11.1 - 12.4 - 64.8 88.3 Cash Payments (3.9) (0.7) (13.6) (18.2) Other Non-cash Items 0.3 0.3 Reserve Balance 12/31/95 $ 7.5 $ - $ 11.7 $ - $ 51.2 $ 70.4 (1) Does not include restructure gains of $7.6 in 1992, $14.7 in 1993 and $15.0 in 1994. (2) Represents the reclassification to other liabilities of FAS 106 and FAS 112 obligations. (3) Represents obligations undertaken in connection with the sale of TeleMoney.
25 Investing activities utilized $109.4 million of cash during 1995, including expenditures of $76.8 million for business acquisitions, principally Centre-file ($52.1 million) and Trendar ($12.7 million). Investing activities in 1995 also included $53.0 million expended for capital assets, principally in Employer Services, and $51.2 million expended for deferred assets, principally the development of the CII software in Employer Services. Partially offsetting these 1995 expenditures were $54.6 million in cash received from the liquidation of short-term investments, $10.6 million received in final payment of a note received in connection with the 1989 sale of the Company's disk drive subsidiary, and $6.4 million from the sale of Comdata's retail services division and a Computing Devices facility in the United Kingdom. The net use of $45.6 million of cash for investing activities during 1994 reflected expenditures of $69.0 million for business acquisitions, principally Tesseract, $45.9 million for capital assets and $13.5 million for deferred assets, principally internally developed software, as well as proceeds of $48.8 million from the liquidation of short-term investments and $33.5 million from the sale of TeleMoney and the final settlement of obligations under a tax sharing agreement with Commercial Credit Company. The increase in expenditures for deferred assets from 1994 to 1995 was primarily due to the costs, which are incremental to normal operations, of the CII software development effort. As of December 31, 1995, the net amount of these capitalized costs for CII was $44.2 million, an increase of $38.9 million during 1995. The Company's capital expenditures presently planned for 1996 total approximately $62 million, with the majority of the expected increase over the 1995 level of spending to be in Computing Devices. Planned capital expenditures for 1996 generally involve equipment and leasehold improvements to expand and improve Employer Services' communications and service delivery capabilities, equipment to support Computing Devices' R&D efforts, and routine replacements and upgrades for existing equipment and systems. The Company also expects to capitalize in 1996 approximately $38 million of software development and related costs, primarily to complete the CII project and to develop human resource information software for client/server environments. Financing activities utilized $69.1 million of cash during 1995, due principally to the payment of $244.4 million to retire Comdata's Senior Notes and 13.25% Debentures and to redeem its Junior Notes, and to the receipt of $195.0 million of cash from net borrowings under the credit facility established by the Company in December 1995. Financing activities utilized $8.6 million of cash in 1994, primarily reflecting the receipt in January of an additional $15.5 million in net cash proceeds from the sale by the Company of additional shares of 5 1/2% Preferred Stock as a result of the underwriters' exercise of their over-allotment option, the payment of $13.0 million in dividends on that stock, and the net repayments under revolving credit and overdraft lines of $13.5 million. Financing activities produced $47.9 million of cash during 1993, primarily from the receipt of $213.0 million of net cash proceeds from the public offering of the 5 1/2% Preferred Stock, $168.1 million of which was used to redeem the Company's remaining 8 1/2% Debentures. The portion of the Company's revenue derived from operations outside of the U.S. (Computing Devices' operations in Canada and the U.K. and Centre-file) has increased from 19.4% in 1993 to 21.9% in 1994 to 22.2% in 1995. Despite this trend, the Company believes that its foreign currency exposure is relatively small and largely limited to a risk that profits of its overseas operations denominated in Canadian dollars or pounds will be worth less in U.S. dollars if those currencies weaken against the U.S. dollar. About 86% of the Company's non-U.S. revenue is from the Canadian operations, and about 84% of the revenue of the Canadian operations is provided by contracts, principally the Iris contract, which are denominated in Canadian dollars but contain provisions which protect the Company from any currency exposure on non-Canadian dollar costs. In the case of the Company's U.K. operations, which provide the remainder of non-U.S. revenue, approximately 92% of their revenue and costs are based in pounds. Approximately 13% of the Company's non-U.S. revenue is U.S. dollar based. During 1994, the Company's Board of Directors authorized the Company to repurchase up to 2,000,000 shares of its common stock in open market 26 or privately negotiated transactions, principally to provide shares to be issued under the Company's employee stock plans. Purchases may be made from time to time at the discretion of Company management, depending on share price and market conditions. As of December 31, 1995, the Company had repurchased 262,000 shares in the open market, including 192,000 shares during 1995, at an average purchase price of $32.66. On December 12, 1995, Ceridian concluded a $325 million revolving credit facility with a commercial bank syndicate, with Bank of America as agent. The credit facility is unsecured but is guaranteed by Comdata and its Comdata Network subsidiary, and has a final maturity of November 30, 1998. The full amount of the credit facility may be utilized for revolving loans and up to $75 million of the credit facility may be used to obtain standby letters of credit. The credit facility was utilized to finance Comdata's tender offers for its Senior Notes and 13.25% Debentures, and the redemption of its Junior Notes. The pricing of the credit facility for both loans and letters of credit is determined based on the Company's senior unsecured debt ratings. Current ratings enable the Company to obtain revolving loans either at prime rate or at 65 basis points above 1, 2, 3 or 6-month IBOR, which means that the $195 million in loans outstanding under the facility at December 31, 1995 bore an annual interest rate of approximately 6.3%. At that same date, there were also $1.5 million in letters of credit outstanding under the facility. Under the terms of the credit facility, Ceridian must satisfy various financial tests on a consolidated basis. The Company must maintain a minimum consolidated net worth which is subject to increase based on the Company's consolidated net earnings after December 31, 1995 and certain equity contributions to the Company after the same date. The Company is also required to maintain a fixed charge coverage ratio of 2.25 to 1 on a rolling four quarters basis, and to limit consolidated debt to three times earnings before interest, taxes, depreciation and amortization ("EBITDA") minus capital expenditures and dividends on the Company's 5 1/2% Preferred Stock on a rolling four quarters basis. As of December 31, 1995, the Company was in compliance with the net worth test by $42.6 million, its fixed charge coverage ratio was 2.30 to 1, and its permitted debt ratio was 2.59 to 1. So long as the Company's margin of compliance with the latter two financial tests is relatively small, the Company's ability to fully utilize the credit facility will be correspondingly limited. At December 31, 1995, for example, the permitted debt ratio would have accommodated an additional $32.8 million of borrowing under the credit facility, while the fixed charge coverage ratio would have accommodated additional borrowings under the credit facility whose debt service was no greater than about $1 million annually. Because these are rolling four quarter tests, the Company expects that a combination of factors, principally increased earnings and reduced interest expense in 1996 as compared to 1995 (see "1996 Financial Outlook" below), will progressively permit more extensive utilization of the credit facility if the need arises. The credit facility also limits liens, contingent obligations, operating leases, minority equity investments and divestitures, and the Company was in compliance with all such limitations at December 31, 1995. The Company's liquidity needs are expected to be met from existing cash balances, cash flow from operations and borrowings under the credit facility. Cash flow from operations of the combined entity is expected to benefit from reduced debt service costs, as described above, and utilization of the Company's NOLs. Given the expected negative arbitrage between the interest rates applicable to the Company's cash balances and interest rates under the credit facility, the Company expects that it will commonly utilize excess cash to reduce amounts outstanding under the credit facility. The Company may also utilize cash from these sources to make acquisitions. The Company expects to remain active in this regard and to concentrate its acquisitions in areas related to or which complement the Information Services segment. In structuring any such acquisitions, the Company would seek to emphasize the use of its common stock as acquisition consideration in order to make pooling-of-interests accounting treatment available. 27 1996 Financial Outlook The statements regarding the outlook for the Company's businesses contained in this section, elsewhere in this Annual Report to Stockholders and in the Company's Annual Report on Form 10-K for 1995 into which this Management's Discussion and Analysis is incorporated are forward-looking statements based on current expectations, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. This section also identifies important factors known to the Company that could cause such material differences. Without regard to any acquisitions that may be made by the Company during 1996, the Company expects 1996 revenue to increase approximately 12% over 1995, to about $1,490 million. This increase reflects expected revenue growth in Information Services of about 16%, and in Computing Devices of about 4%. The Company's 1996 net earnings are expected to be approximately $2.20 per share on a fully diluted basis. Contributing to the projected increase in earnings is an expected $20 million reduction in interest expense from 1995 to 1996 (assuming no borrowings to finance acquisitions during 1996 and relatively constant interest rates during the year) as a result of the refinancing of Comdata's debt and an expected reduction in overall debt levels with cash flow from operations. In addition, and assuming no ownership change during 1996 that would impose a restrictive limitation on the Company's ability to utilize its NOLs, the Company estimates that its effective tax rate during 1996 will be approximately 8%, primarily reflecting state and foreign taxes, as compared to an effective rate of approximately 16% during 1995. Information Services' expected revenue growth reflects, among other things, a full year's revenue from Centre-file, which was acquired in early October 1995 and contributed $8.4 million of 1995 revenue to the Company, a sizeable increase from 1994 to 1995 in the annualized revenue value of orders received by HRG, and an assumed continuing high rate of growth in the gaming industry. Revenue and earnings growth in Information Services in 1996 could, however, be adversely affected by a variety of factors. Interest rates in the U.S. are expected to decline in 1996, although at an uncertain rate, with a corresponding negative impact on the Company's revenue from the investment of tax filing deposits. Also negatively affecting this source of revenue in 1996 and 1997 is the continuing phased introduction of IRS regulatory changes that reduce by one day the period of time the Company may earn investment income on certain tax filing deposits. A portion of the expected revenue growth in Information Services, particularly in Arbitron and in Comdata's transportation services business, is attributable to new or enhanced product and service offerings which may not achieve the desired level of market acceptance or may be the subject of difficulties or delays in introduction. Difficulties or delays may also be experienced in other software development projects that could adversely impact future costs and revenue. The Company's ability to effectively manage internal growth and assimilate recent and future acquisitions will also have an impact on Information Services' profitability. Difficulties or delays in the introduction of Employer Services' CII software or in the transition of existing payroll customers to centralized processing on the CII software, or unanticipated technological problems with that software when placed in service, could also have an adverse effect on Employer Services' revenue, costs, orders and customer retention. The introduction of the CII software, the transition of customers and the phased reduction of processing capabilities in Employer Services' district offices is expected to occur over a 30 to 36 month period, largely because of the system conversion and customer training efforts required of Employer Services to assure a satisfactory transition process for customers electing the software upgrade. Ceridian expects that the transition process will entail incremental costs that principally reflect the costs of systems and data conversion, maintaining duplicate processing systems during the transition period, and providing necessary training. Although a portion of these incremental costs (relating to the reduction of processing capabilities in the district offices) will be charged to existing restructure reserves, the majority of the incremental costs, estimated to be an additional $50 million to $60 million over about a three year period, will be accounted for outside of restructuring and will be 28 incurred relatively evenly over the customer transition period. The impact of these incremental costs is, however, expected to be substantially offset over the course of the transition period by upgrade fees to be paid by customers electing to take advantage of the added features of the enhanced system and by various efficiencies, such as reduced installation, operating and maintenance costs, resulting from increasing utilization of the enhanced system. Because the benefits of these additional fees and efficiencies should be greater in the latter portion of the transition period when a sizeable percentage of customers will have completed the transition, the burden of the incremental costs is expected to be relatively greater early in the transition period, particularly during 1996, putting pressure on Employer Services' margins. The time when the consolidation of payroll processing can begin is principally a function of the timing of Ceridian's introduction of the CII software and the availability of resources required to transition the existing customer base. Customers who were part of the beta test of the first version of this software began to process their payrolls utilizing this version of the CII software during the first quarter 1996. Testing of the "production" version of the CII software began in the first quarter of 1996 and is expected to be completed during the first half of 1996. During the third quarter of 1996, Ceridian expects that existing customers who participated in the testing of the production version will be utilizing this software exclusively, and that the installation of certain large new payroll processing customers on the enhanced system utilizing the upgraded software will be in process. The installation of all new customers on the enhanced system and the general transition of existing customers to that system are expected to begin during 1997. Employer Services will continue, for the foreseeable future, to make payroll processing utilizing its existing software available to customers who do not wish to upgrade. Amortization of the substantial capitalized software costs associated with this development effort is expected to begin in 1996 and occur over a seven year period. A somewhat smaller percentage of Computing Devices' expected 1996 revenue is covered by backlog at the beginning of the year than was the case at the beginning of 1995, increasing the risk of achieving the planned revenue level. Government budgetary constraints and increasing competition for the remaining new defense procurement programs have affected order levels, particularly in the United States. The adaptation by Computing Devices of certain commercial technologies to defense markets may occur more slowly or at greater cost than anticipated, and the resulting product offerings may not achieve the desired level of market acceptance or may be the subject of difficulties or delays in introduction. Because Computing Devices' Canadian and United Kingdom operations have accounted for an increasing portion of its revenue during recent years, and for 56% of its 1995 order value, currency fluctuations can have an increasing impact on Computing Devices' revenue. The Company's expectations for 1996 could also be significantly affected by other, more general factors. Comdata's gaming services are subject to policies and regulations adopted from time to time by the major credit card associations which affect the scope of its permitted services and the amount of merchant discounts to which Comdata is subject. For example, VISA USA, Inc. announced in late 1995 a merchant discount increase that would be applicable to Comdata beginning in 1996. Trade, monetary and fiscal policies, and general economic conditions may substantially change, with corresponding impact on the industries which the Company serves, particularly more economically sensitive industries such as trucking. Competition may become more intense than anticipated, including as a result of industry consolidation, such as in the defense contracting industry, or by the entry of new competitors, such as in the trucking services industry. The Company may also be affected by unanticipated costs or other effects of legal and administrative cases now pending or that may be instituted in the future. 29 Report of Management The consolidated financial statements and other related financial information of Ceridian published in this Annual Report were prepared by Company management, which acknowledges its responsibility therefor. Such statements and information were prepared in accordance with generally accepted accounting principles and were necessarily based in part on reasonable estimates, giving due consideration to materiality. Ceridian maintains a system of internal controls which, in the opinion of management, provides reasonable assurance that assets are adequately safeguarded, that financial records accurately reflect all transactions and can be relied upon in all material respects in the prep-aration of financial statements, and that the Company's business is conducted in compliance with its policy on business ethics. The control system is supported by written policies and procedures, and its effectiveness is monitored by a regular program of internal auditing. Our independent auditors, KPMG Peat Marwick LLP, in their audit of Ceridian's consolidated financial statements, considered the internal control structure of the Company to gain a basic understanding of the accounting system in order to design an effective and efficient audit approach, not for the purpose of providing assurance on the system of internal control. The Audit Committee, consisting of outside directors, is responsible to the Board of Directors for reviewing the financial controls and reporting practices and for recommending appointment of the independent auditors. The committee meets periodically with representatives of the internal audit department and the independent auditors, both with and without Ceridian management being present. /s/Lawrence Perlman Lawrence Perlman Chairman, President and Chief Executive Officer /s/John R. Eickhoff John R. Eickhoff Executive Vice President and Chief Financial Officer 30 Independent Auditors' Report The Board of Directors and Stockholders of Ceridian Corporation: We have audited the accompanying consolidated balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Comdata Holdings Corporation, a wholly-owned subsidiary, which statements reflect total assets constituting 29 percent and 28 percent at December 31, 1995 and 1994, respectively, and total revenues constituting 21 percent, 21 percent and 19 percent in 1995, 1994 and 1993, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Comdata Holdings Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ceridian Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick KPMG Peat Marwick Minneapolis, Minnesota January 23, 1996 31 CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data) Years Ended December 31, 1995 1994 1993 Revenue Product sales $ 562.8 $ 528.0 $ 450.2 Services 770.2 649.8 659.6 Total 1,333.0 1,177.8 1,109.8 Cost of revenue Product sales 411.0 406.1 358.8 Services 389.3 323.6 372.7 Total 800.3 729.7 731.5 Gross profit 532.7 448.1 378.3 Operating expenses Selling, general and administrative 309.9 274.1 248.8 Research and development 54.5 40.5 37.1 Other expense (income) 33.6 (3.2) (3.5) Write-off of goodwill and other intangibles - - 230.3 Restructure loss - - 67.0 Earnings (Loss) before interest and taxes 134.7 136.7 (201.4) Interest income 12.1 10.7 8.5 Interest expense (30.6) (32.2) (46.8) Earnings (Loss) before income taxes 116.2 115.2 (239.7) Income tax provision 18.7 17.5 4.0 Earnings (Loss) before extraordinary item 97.5 97.7 (243.7) Extraordinary loss 38.9 - 8.4 Net earnings (loss) $ 58.6 $ 97.7 $ (252.1) Primary earnings (loss) per share Before extraordinary item $ 1.22 $ 1.25 $ (3.79) Net earnings (loss) $ 0.66 $ 1.25 $ (3.92) Fully diluted earnings (loss) per share Before extraordinary item $ 1.22 $ 1.25 $ (3.79) Net earnings (loss) $ 0.66 $ 1.25 $ (3.92) Shares used in calculations (in thousands) Primary 69,352 67,626 64,452 Fully diluted 79,736 78,010 64,452 See notes to consolidated financial statements.
32 CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share data) December 31, 1995 1994 ASSETS Current assets Cash and equivalents $ 151.7 $ 137.8 Short-term investments - 54.6 Trade and other receivables Trade, less allowance of $12.4 and $12.2 278.9 226.3 Unbilled 86.5 57.3 Other 7.4 11.7 Total 372.8 295.3 Inventories 30.4 26.5 Other current assets 15.9 9.4 Total current assets 570.8 523.6 Investments and advances 6.9 14.5 Property, plant and equipment, net 120.9 111.8 Goodwill and other intangibles, net 262.6 211.4 Software and development costs, net 72.6 28.5 Prepaid pension cost 88.6 78.0 Other noncurrent assets 3.7 9.7 Total assets $ 1,126.1 $ 977.5 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt and current portion of long-term obligations $ 4.6 $ 8.2 Accounts payable 54.4 46.0 Drafts and settlements payable 146.3 112.1 Customer advances 73.7 23.4 Deferred income 90.1 84.5 Accrued taxes 68.7 64.2 Employee compensation and benefits 63.6 59.9 Restructure reserves, current portion 19.2 18.8 Other accrued expenses 85.0 63.5 Total current liabilities 605.6 480.6 Long-term obligations, less current portion 205.3 230.2 Deferred income taxes 7.1 7.7 Restructure reserves, less current portion 51.2 69.5 Employee benefit plans 78.7 80.5 Deferred income and other noncurrent liabilities 28.2 22.1 Stockholders' equity 5-1/2% Cumulative Convertible Exchangeable Preferred Stock, $100 par value (liquidation preference of $236.0 million), authorized 50,600 shares, issued and outstanding 47,200 4.7 4.7 Common Stock, $.50 par, authorized 100,000,000 shares, issued 67,325,372 and 66,836,309 33.7 33.4 Additional paid-in capital 1,106.6 1,073.9 Accumulated deficit (963.9) (998.7) Other stockholders' equity items (31.1) (26.4) Total stockholders' equity 150.0 86.9 Total liabilities and stockholders' equity $ 1,126.1 $ 977.5 See notes to consolidated financial statements.
33 CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions, except per share data) Years Ended December 31, 1995 1994 1993 Cash Flows from Operating Activities Net earnings (loss) $ 58.6 $ 97.7 $ (252.1) Adjustments to reconcile net earnings (loss) to net cash provided by (used for) operating activities: Extraordinary loss 38.9 - 8.4 Restructure reserves established - - 67.0 Restructure reserves utilized (18.2) (53.7) (59.7) Depreciation and amortization of capital and deferred assets 63.4 42.3 274.6 Other 3.1 6.3 (22.7) Decrease (Increase) in trade and other receivables (73.1) (61.7) (8.6) Decrease (Increase) in other current assets (9.4) 7.9 10.8 Increase (Decrease) in customer advances and deferred income 52.7 2.6 20.7 Increase (Decrease) in drafts and settlements payable 34.2 38.0 (4.6) Increase (Decrease) in other current liabilities 42.0 (16.9) 22.5 Net cash provided by (used for) operating activities 192.2 62.5 56.3 Cash Flows from Investing Activities Expended for capital assets (53.0) (45.9) (35.0) Expended for deferred assets (51.2) (13.5) (8.5) Short-term investments 54.6 48.8 (39.0) Proceeds from sales of businesses and assets 6.4 33.5 11.5 Expended for business acquisitions, less cash acquired (76.8) (69.0) (7.5) Collection of notes from asset sales 10.6 0.5 0.2 Net cash provided by (used for) investing activities (109.4) (45.6) (78.3) Cash Flows from Financing Activities Revolving credit and overdrafts, net 193.9 (13.5) 7.3 Retirement of public debt (244.4) - (168.1) Borrowings of other debt 2.6 - - Repayment of other debt (15.1) (2.2) (9.4) Sale of 5-1/2% Preferred Stock - 15.5 213.0 Preferred dividends (13.0) (13.0) (0.3) Proceeds from exercise of stock options and other 6.9 4.6 5.4 Net cash provided by (used for) financing activities (69.1) (8.6) 47.9 Effect of exchange rate changes on cash 0.2 (0.3) (0.9) Net Cash Flows Provided (Used) 13.9 8.0 25.0 Cash and equivalents at beginning of year 137.8 129.8 104.8 Cash and equivalents at end of year $ 151.7 $ 137.8 $ 129.8 See notes to consolidated financial statements. Years Ended December 31, Interest and Income Taxes Paid (Refunded) 1995 1994 1993 Interest paid $ 28.4 $ 29.2 $ 43.5 Income taxes paid $ 15.3 $ 12.5 $ 8.7 Income taxes refunded $ (2.7) $ (2.2) $ (36.2)
34 INDEX TO NOTES 35 A. Accounting Policies 38 B. Extraordinary and Unusual Losses 38 C. Supplementary Data to Statements of Operations 39 D. Income Taxes 40 E. Capital and Deferred Assets 40 F. Stockholders' Equity 42 G. Retirement Plans 44 H. Stock Plans 45 I. Financing Arrangements 46 J. Investing Activity 47 K. Segment Data 48 L. Leasing Arrangements as Lessee 49 M. Commitments and Contingencies 50 N. Legal Matters A. ACCOUNTING POLICIES Basis of Consolidation The consolidated financial statements of Ceridian Corporation ("Ceridian" or the "Company") include the accounts of Resumix, Inc. ("Resumix") and Comdata Holdings Corporation ("Comdata"), which were acquired during 1995 in transactions accounted for by the pooling-of-interests method, and of all majority owned subsidiaries. Investments in other affiliated companies where Ceridian has significant influence are accounted for by the equity method. Other investments are accounted for by the cost method. All material intercompany transactions have been eliminated from the consolidated financial statements. Future Changes in Accounting Principles The Company believes that neither FAS 121, dealing with accounting for impairment of the value of long-lived assets, nor FAS 123, dealing with accounting for stock-based compensation, will have a material effect on its financial statements when they become effective for Ceridian in 1996. The Company believes its present policy for recognizing asset impairment meets the requirements of FAS 121. With regard to FAS 123, the Company has elected to adopt only the disclosure requirements and will not recognize compensation expense with regard to its fixed stock option plans. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Changes in Presentation In certain cases, prior year amounts have been reclassified to conform to the current year's presentation, notably the reclassification to selling expense of other technical expenses. Cash and Short-term Investments Investments which are readily convertible to cash within three months of purchase are classified in the balance sheet as cash equivalents. Investments with longer maturities are considered available-for-sale under FAS 115 and reported in the balance sheet as short-term investments. The fair value of short-term investments is not materially different from their amortized cost, and the amount of investments expected to be held more than one year beyond the balance sheet date is not considered material. Net changes in short-term investments, which are shown as investing cash flows in the Statements of Cash Flows, may relate to investment decisions by an independent investment manager as well as to changes in the financing needs of the Company. Property, Plant and Equipment Property, plant and equipment are carried at cost and depreciated for financial statement purposes using straight-line and accelerated methods at rates based on the estimated lives of the assets, which are generally as follows: Buildings 40-50 years Building improvements 5-20 years Machinery and equipment 3-8 years Computer equipment 3-6 years 35 Repairs and maintenance are expensed as incurred. Gains or losses on dispositions are included in results of operations. Goodwill and Other Intangibles Goodwill, which represents the excess purchase price over the fair value of net assets of businesses acquired, is assigned to operating units based on the benefits derived from the acquisition and amortized on a straight line basis over the expected periods to be benefited, ranging up to 40 years. Other intangible assets represent amounts assigned to intangible assets at the time of a purchase acquisition and includes such items as customer lists and bases, technology, covenants not to compete, trademarks and other rights. Such costs are generally amortized on a straight line basis over periods ranging up to 20 years. Recorded amounts are regularly reviewed and recoverability assessed. The review considers factors such as whether the amortization of the goodwill and other intangibles balance for each business segment over its remaining life can be recovered through forecasted results of future operations. Software and Development Costs The Company capitalizes purchased software which is ready for service and software development costs incurred from the time technological feasibility of the software is established until the software is ready for use to provide processing services to customers. Research and development costs and other computer software maintenance costs related to software development are expensed as incurred. Software development costs, which includes costs related to the software which will become an integral part of the Company's revenue producing payroll processing system ("CII"), are amortized using the straight-line method over periods ranging from three to seven years. The remaining software development costs and costs of purchased software are amortized using the straight-line method over a maximum of three to five years or the expected life of the product, whichever is less. The carrying value of software and development costs is reviewed by the Company and impairments are recognized when the expected undiscounted future cash flows derived from such assets are less than their carrying value. Earnings (Loss) Per Share Primary earnings per share is calculated by dividing the net earnings after reduction for preferred dividends by the weighted average of outstanding common stock and common stock equivalents. When the result would be a loss per share, equivalents are ignored. Common stock equivalents includes the impact of outstanding dilutive stock options and restricted stock. Fully diluted earnings per share assumes that the Company's 5-1/2% Preferred Stock was converted to common shares at the beginning of the reporting period. Therefore, the calculation uses net earnings without reduction for preferred stock dividends divided by weighted average common shares and common share equivalents plus the additional common shares which would have resulted from the assumed conversion. When the fully diluted amount is more favorable than the primary amount, only the primary amount may be reported. Income Taxes The provision for income taxes is based on income recognized for financial statement purposes and includes the effects of temporary differences between such income and that recognized for tax return purposes. The Company and its eligible subsidiaries file a consolidated U.S. federal income tax return. Certain subsidiaries which are consolidated for financial reporting are not eligible to be included in the consolidated U.S. federal income tax return and separate provisions for income taxes have been determined for these entities. The tax benefit of losses from U.S. operations in prior years has been provided as the losses are utilized. Except for selective dividends, Ceridian intends to reinvest the unremitted earnings of its non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes was required on such earnings during the three years ended December 31, 1995. Revenue Recognition Revenue from product sales is related primarily to fixed price, long-term contracts with government customers and is recognized on a percentage of completion basis. Percentage of completion is determined by reference to the extent of contract performance, future performance risk and cost incurrence. Costs and estimated earnings in excess of billings on uncompleted contracts are reported as unbilled receivables, a portion of which represents a holdback reserve which is billable as allowed under the contract terms. Contracts in progress are reviewed quarterly, and sales and earnings are adjusted in current accounting periods based on revisions in contract value and estimated costs at completion. Provisions for estimated losses on contracts are recorded when identified. Revenue from sales of services is recognized when the services are performed and billable, except for services provided by Comdata and the portion of Employer Services tax filing revenue which is recognized as earned from the investment of customer deposits. 36 Revenue from Comdata funds transfer and regulatory permit services consists of the transaction fees charged to customers. Such revenue does not include the costs of goods and services for which funds are advanced by Comdata (e.g., fuel purchased, permit provided or face amount of the COMCHEK, purchased and cashed). However, Comdata must pay the issuing agent (e.g., truck stop, casino or state agency) for the full cost of the goods and services provided and accordingly, bills the customer for such cost as well as the transaction fee. As a result, the Company's accounts receivable include both the cost of the goods and services purchased and the transaction fees. The Company's drafts and settlements payable includes the amount due to the issuing agent for the cost of the goods and services. Revenue is recognized for the amount of the transaction fee at the time the goods and services are purchased. In a very small portion of Comdata funds transfer transactions, customer transactions may not be settled or drafts and settlements payable cleared in the ordinary course of business, resulting in unapplied cash balances that are carried as credits to accounts receivable or as unsettled drafts payable. Comdata's policy is to take the amount of such unsettled transactions into revenue as earned for goods and services rendered if the transactions are not definitively settled within a period of twelve months through the assertion of valid customer claims. Some portion of the amounts so taken into revenue may remain subject to claims by Comdata's customers or, under certain circumstances, by states under specific escheat laws. It has been Comdata's experience that an insignificant number of claims for unsettled funds are asserted after such twelve month period. Inventories Inventories consist primarily of electronic components which are purchased in anticipation of funding for specific contracts and programs and are stated at the lower of first in, first out or average cost or net realizable value. Although inventories include costs related to long-term contracts, most of the inventoried costs are expected to be charged to cost of sales within one year. Payments received in advance of billings on long-term contracts are recorded as a liability for customer advances until contract milestones are accomplished. Payroll Tax Filing Services In connection with Ceridian's payroll tax filing services, the Company collects funds for payment of taxes due, holds such funds in trust until payment is due, remits the funds to the appropriate taxing authority, files federal, state and local tax returns, handles related regulatory correspondence and amendments, and selectively absorbs regulatory charges for certain penalties and interest. For such services, the Company derives its payroll tax filing revenue from fees charged and from investment income it receives on tax filing deposits temporarily held pending remittance on behalf of customers to taxing authorities. These funds are held in a tax filing trust established by Ceridian to more clearly evidence the fiduciary capacity in which such funds are held. The trust invests primarily in high quality collateralized short-term investments or top tier commercial paper. The trust also invests in U.S. Treasury and Agency securities, AAA rated asset-backed securities and corporate securities rated A3/A- or better. The amount of collected but unremitted funds varies significantly during the year and averaged $1,021.6 in 1995, $867.5 in 1994 and $460.0 in 1993. The increase in such balances during 1994 was due primarily to the acquisition of Systems Tax Service, Inc. in October 1993. The amount of such funds at December 31, 1995 and 1994, was $1,456.1 and $918.2. Translation of Foreign Currencies Local currencies have been determined to be functional currencies for the Company's international operations. Foreign currency balance sheets are translated at the end-of-period exchange rates and earnings statements at the average exchange rates for each period. The resulting translation gains or losses are recorded as "foreign currency translation adjustment" in the stockholders' equity section of the balance sheet. Gains and losses from translation of assets and liabilities denominated in other than the functional currency of the operation are recorded in results of operations as "other expense (income)." Canadian operations include a significant number of contracts which either provide for exchange rate adjustments or are denominated in the U.S. dollar, which benefits the management of exchange rate risk. 37 B. EXTRAORDINARY AND UNUSUAL LOSSES Extraordinary Loss The Company recorded an extraordinary loss of $38.9 in December 1995 due to early retirement of debt acquired in the Comdata acquisition. As further described in Note I, the retirement was accomplished by tender offers for the $130.0 principal amount of 12.5% Senior Notes due 1999 and the $75.0 principal amount of 13.25% Senior Subordinated Debentures due 2002 and the in-substance defeasance of the $6.2 principal amount of 11% Junior Subordinated Extendible Notes due 1997, as well as the minor amounts of untendered Senior Notes and Debentures. The loss, which is net of an income tax benefit of $1.6, includes $6.9 to write-off unamortized debt issue costs and $33.6 for the direct costs of the tender offers and defeasance arrangements, premiums paid, and interest expense related to the defeased amount. Restructure Loss During second quarter 1994, the Company recorded restructure gains of $7.8 from the sale of its TeleMoney Services and related data services operations and $7.2 from the final settlement of a tax-sharing arrangement with a former subsidiary. These gains were offset by a $15.0 provision for costs related to age discrimination litigation arising out of downsizing actions taken by the Company in past years. In 1993, the net restructure loss of $67.0 included charges of $75.9 for Information Services and $5.5 for Defense Electronics. These charges were offset in part by a gain of $14.4, not attributable to either industry segment, which includes a gain of $14.7 resulting from the receipt of a refund of taxes and related interest and a $0.3 net adjustment of prior years' restructuring provisions. The $75.9 Information Services charges included a charge of $57.0 related to the discontinuance of Arbitron's syndicated television ratings service. Also included is a charge of $18.9 for Employer Services, primarily to consolidate its payroll processing activities into centralized processing facilities and its customer service operations into a single national center. Write-off of Comdata Goodwill and Other Intangibles In fourth quarter 1993, Comdata management evaluated the realizability of goodwill related to its retail and transportation businesses and determined that this goodwill was impaired in that the projected net income of these businesses would not recover its carrying value. Furthermore, there was no evidence of any external or other factors which would improve this outcome. Since this method of measurement was considered preferable to Comdata's former policy, which evaluated the realizability of goodwill using income before interest, taxes, depreciation and amortization, the preferable method was adopted and substantially all of the remaining balance of goodwill and other long-lived intangible assets of these businesses, amounting to $230.3, was written off to operations. C. SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS Years Ended December 31, Other Expense (Income) 1995 1994 1993 Foreign currency translation expense (income) $ - $ - $ (0.5) Loss (Gain) on sale of assets 1.0 0.6 (0.9) Other expense (income) (1.2) (2.9) (0.9) Minority interest and equity in operations of affiliates 4.1 (0.9) (1.2) Pooling expense 29.7 - - Total $ 33.6 $ (3.2) $ (3.5) 38 D. INCOME TAXES The cumulative amount of undistributed earnings of international subsidiaries for which U.S. income taxes have not been provided was approximately $42.0 at December 31, 1995. It is not practical to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings. Under tax sharing agreements existing at the time of the disposition of certain former operations of the Company, Ceridian remains subject to income tax audits in various jurisdictions for the years 1985-1992. Ceridian considers its tax accruals adequate to cover any U.S. and international tax deficiencies not recoverable through deductions in future years. The Company has U.S. net operating loss carryforwards, future tax deductions and general business tax credits of $1,019.0, $242.7 and $26.8, respectively, which will be available to offset substantially all of its U.S. earnings during the carryforward period. The increase to the net operating loss carryforward during 1995 is due to the offset of some of the future tax deductions and separate net operating losses of recently acquired companies. The tax benefits of these items are reflected in the accompanying table of deferred tax assets and liabilities. If not used, these carryforwards begin to expire with a nominal amount in 1997. U.S. tax rules impose limitations on the use of net operating loss carryforwards following certain changes in ownership. If such a change were to occur with respect to the Company, the limitation could reduce the amount of these benefits that would be available to offset future taxable income each year, starting with the year of ownership change. Components of Earnings and Taxes 1995 1994 1993 Earnings (Loss) Before Income Taxes U.S. $ 98.1 $ 100.0 $(248.6) International 18.1 15.2 8.9 Total $ 116.2 $ 115.2 $(239.7) Income Tax Provision Current U.S. $ 11.7 $ 10.2 $ 0.1 International 7.9 3.1 2.6 State and other 0.4 2.0 0.7 20.0 15.3 3.4 Deferred International (1.3) 2.2 0.6 Total $ 18.7 $ 17.5 $ 4.0 Effective Rate Reconciliation 1995 1994 1993 U.S. statutory rate 35% 35% 35% Income tax provision (benefit) at U.S. statutory rate $ 40.7 $ 40.3 $ (83.9) International rate differences (0.9) (0.7) (0.8) State income taxes, net 0.4 2.0 0.7 Losses for which no tax benefit was provided 1.6 1.2 87.9 Utilization of loss carryforwards (24.7) (26.2) - Other 1.6 0.9 0.1 Income tax provision $ 18.7 $ 17.5 $ 4.0 Tax Effect of Items That Comprise a Significant Portion of Deferred Tax Assets and Liabilities at December 31, 1995 Item Description Deferred Tax Deferred Tax Asset Liability Net operating loss carryforwards $ 401.6 $ - Restructuring and other accruals 81.7 International (6.4) Other 14.6 (0.7) Total 497.9 (7.1) Less valuation allowance (497.9) Deferred income taxes $ - $ (7.1) The net deferred tax asset at December 31, 1995, is fully offset by a valuation allowance. During 1995, both the deferred tax asset and the valuation allowance decreased by $4.7. The amount of the valuation allowance is reviewed annually. 39 E. CAPITAL AND DEFERRED ASSETS December 31, 1995 1994 Plant, Property and Equipment Land $ 3.0 $ 3.0 Machinery and equipment 236.0 207.2 Buildings and improvements 79.4 73.0 Construction in progress 4.9 10.3 323.3 293.5 Accumulated depreciation (202.4) (181.7) Property, plant and equipment, net $ 120.9 $ 111.8 Goodwill and Other Intangibles Goodwill $ 220.3 $ 190.6 Accumulated amortization (27.6) (17.7) Goodwill, net 192.7 172.9 Other intangible assets 78.8 44.0 Accumulated amortization (8.9) (5.5) Other intangibles, net 69.9 38.5 Goodwill and other intangibles, net $ 262.6 $ 211.4 Software and Development Costs Purchased software $ 34.0 $ 27.3 CII development cost 44.2 5.3 Other software development cost 18.5 9.1 96.7 41.7 Accumulated amortization (24.1) (13.2) Software and development costs, net $ 72.6 $ 28.5 Depreciation and Amortization of Capital and Deferred Assets 1995 1994 1993 Depreciation and amortization of capital assets $ 39.1 $ 31.9 $ 29.6 Amortization of goodwill 9.9 5.7 10.5 Amortization of other intangibles 3.4 1.6 2.1 Amortization of software and development costs 10.6 3.1 1.4 Other amortization 0.4 - 0.7 Write-off of goodwill and other intangibles - - 230.3 Total $ 63.4 $ 42.3 $ 274.6
F. STOCKHOLDERS' EQUITY Preferred Stock From a class of preferred stock with 750,000 authorized shares (the "Preferred Stock"), a series consisting of 50,600 such shares has been designated as 5-1/2% Cumulative Convertible Exchangeable Preferred Stock, par value $100 per share (the "5-1/2% Preferred Stock"). In December 1993, the Company completed the sale in an underwritten public offering of 4,400,000 Depositary Shares, each representing a one one-hundredth interest in a share of 5-1/2% Preferred Stock, for $50 per share, or net cash proceeds of $213.0, and received a commitment from the underwriters to purchase an additional 320,000 Depositary Shares, at $50 per share, which purchase occurred in early January 1994. Dividends on the 5-1/2% Preferred Stock and depositary shares are cumulative and payable on a quarterly basis. The depositary shares are convertible at the option of the holder into common stock of the Company at a conversion price of $22.72 per common share, subject to adjustment under certain conditions. The Depositary Shares are redeemable, in whole or in part, at the option of the Company, at any time on or after December 31, 1996, initially at a redemption price per share of $51.10 and thereafter at prices declining to $50.00, in all cases plus accrued and unpaid dividends to the redemption date. The Depositary Shares are exchangeable, in whole but not in part, at the option of the Company, on any quarterly dividend payment date on or after December 31, 1995, for the Company's 5-1/2% Convertible Subordinated Debentures due 2008 at a rate of $50.00 principal amount of such Debentures for each depositary share. Depositary Shares are non-voting except that holders will be entitled to vote as a separate class under certain conditions resulting from nonpayment of dividends or other actions adverse to their interest. All of Comdata's outstanding Series B and Series C Preferred Stock was converted into approximately 19 million shares of Comdata common stock on October 25, 1995 as Comdata exercised its right to force such a conversion when the common stock reached and maintained for a stated time period certain specified trading price and volume levels. Dividends declared on Comdata preferred stock and the results of Comdata stock option activity are included in the following table. 40 Common Stock, Shares Additional Additional Paid-In Capital Treasury Common Paid-In Accumulated and Accumulated Deficit Outstanding Stock Issued Stock Capital Deficit Balance December 31, 1992 as reported 42,803,872 200,738 43,004,610 $21.5 $ 585.0 $ (699.1) Resumix pooling adjustment 849,010 849,010 0.4 9.3 (5.9) Comdata pooling adjustment 20,472,176 20,472,176 10.2 193.6 (100.4) Balance December 31, 1992 as adjusted 64,125,058 200,738 64,325,796 32.1 787.9 (805.4) Exercises of stock options 252,851 252,851 0.1 2.3 Restricted stock awards 119,000 (119,000) (0.2) Net loss (252.1) Sale of 5-1/2% Preferred Stock depositary shares 223.8 Preferred stock dividends (0.3) Issued for purchase of Systems Tax Service 1,005,908 1,005,908 0.5 13.3 Comdata stock transactions 2.6 Dividends on Comdata stock (12.6) Balance December 31, 1993 65,502,817 81,738 65,584,555 32.7 1,029.7 (1,070.4) Repurchase of common shares (70,000) 70,000 Exercises of stock options 462,462 (33,708) 428,754 0.2 4.4 Restricted stock awards 827,500 (4,500) 823,000 0.5 21.4 Net earnings 97.7 Sale of 5-1/2% Preferred Stock depositary shares (0.4) Preferred stock dividends (13.0) Comdata stock transactions 18.8 Dividends on Comdata stock (13.0) Balance December 31, 1994 66,722,779 113,530 66,836,309 33.4 1,073.9 (998.7) Repurchase of common shares (192,000) 192,000 Exercises of stock options 613,376 (168,267) 445,109 0.3 3.2 Restricted stock awards 94,327 (89,327) 5,000 13.8 Employee Stock Purchase Plan 38,954 38,954 1.4 Net earnings 58.6 Preferred stock dividends (13.0) Comdata stock transactions 14.3 Dividends on Comdata stock (10.8) Balance December 31, 1995 67,277,436 47,936 67,325,372 $33.7 $1,106.6 $ (963.9) Authorized but unissued or treasury common shares reserved for future issuance as of December 31, 1995, included 8,231,865 shares for exercise of stock options and awards of restricted stock, as discussed in Note I, 461,046 shares for the Employee Stock Purchase Plan and 10,384,000 shares for conversion of 5-1/2% Preferred Stock depositary shares.
December 31, Other Stockholders' Equity Items 1995 1994 1993 Foreign currency translation adjustment $ (2.4) $ (2.2) $ (1.9) Restricted stock awards (21.9) (17.6) (2.3) Pension liability adjustment (5.2) (4.2) (4.1) Treasury stock, at cost (1.6) (2.4) (1.6) Total $ (31.1) $ (26.4) $ (9.9)
41 G. RETIREMENT PLANS Pension Benefits Ceridian maintains two defined benefit pension plans for U.S. employees which were closed to new participants effective January 1, 1995. Ceridian's Canadian and UK subsidiaries also have defined benefit pension plans which constitute a minor portion of the amounts in accompanying tables. The plans' assets consist principally of equity securities, U.S. government securities, and other fixed income obligations and do not include securities of the Company. Benefits under these plans are calculated on maximum or career average earnings and years of participation in the plans. U.S. employees participate in these plans by means of salary reduction contributions. Certain former employees are inactive participants in the plans. Employer cash contributions to the U.S. plans amounted to $9.9 in 1995, $13.8 in 1994 and $24.9 in 1993. Retirement plan funding amounts are based on independent consulting actuaries' determination of the Employee Retirement Income Security Act of 1974 ("ERISA") funding requirements in the U.S. and local statutory requirements in other countries. The Company also sponsors a nonqualified supplemental retirement plan. The projected benefit obligation at September 30, 1995 and 1994 for this plan was $20.0 and $19.2, respectively, and the net periodic pension cost was $2.3 for 1995, $2.1 for 1994, and $2.2 for 1993. The cost recognized by the Company with respect to its defined contribution (401k) plans was $4.9 in 1995, $3.5 in 1994, and $2.2 in 1993. Funded Status of Defined Benefit September 30, Retirement Plans at Measurement Date 1995 1994 Actuarial present value of obligation: Vested benefit obligation $ 662.9 $ 585.5 Accumulated benefit obligation 663.5 589.4 Projected benefit obligation $ 712.5 $ 648.7 Plan assets at fair value 730.0 654.5 Plan assets in excess of projected benefit obligation 17.5 5.8 Unrecognized net loss 39.9 44.8 Prior service cost 34.3 35.4 Unrecognized net asset (10.3) (12.7) Net pension asset recognized in the consolidated balance sheet $ 81.4 $ 73.3
The assumptions used in determining the funded status information are as follows: Rate of Long-term Rate Discount Rate Salary Progression of Return on Assets U.S. International U.S. International U.S. International 1995 7.50% 8.0% 4.5% 6.0 - 6.5% 9.0% 8.0 - 9.0% 1994 8.25% 7.5 - 8.0% 4.5% 6.0 - 7.0% 9.0% 8.0 - 9.0% 1993 7.25% 7.5 - 8.0% 4.0% 6.0 - 7.0% 9.0% 8.0 - 9.0%
Net Periodic Pension Cost (Credit) 1995 1994 1993 Service cost $ 6.2 $ 6.1 $ 6.0 Interest cost on projected benefit obligation 53.5 51.5 52.2 Actual return on plan assets (103.2) (14.7) (103.0) Net amortization and deferral 46.0 (41.8) 47.5 Total $ 2.5 $ 1.1 $ 2.7
42 Postretirement Benefits Ceridian provides health care and life insurance benefits for eligible retired employees, including individuals who retired from operations of the Company that were subsequently sold or discontinued. The Company sponsors several health care plans in the U.S. for both pre- and post-age 65 retirees. Company contributions to these plans differ for various groups of retirees and future retirees. Employees hired on or after January 1, 1992, will be allowed to enroll in company-sponsored plans at retirement, but receive no company subsidy. For employees hired before January 1, 1992, and retiring in 1992 or later, the Company subsidizes pre-age 65 coverage only. The Company's subsidy is a fixed dollar contribution determined at retirement equal to 2.5% of the catastrophic plan cost for each year of service. Employees who retired prior to 1992 are subject to various cost-sharing policies depending on when retirement began and eligibility for Medicare. This is a closed group of retirees. Most retirees outside the United States are covered by governmental health care programs, and the Company's cost is not significant. The following tables present the funded status and the components of the net periodic postretirement benefit cost for the plans. The Company does not prefund these costs. Funded Status of Postretirement Health Care and Life Plans December 31, 1995 1994 Accumulated postretirement benefit obligation: Retirees $45.4 $42.9 Fully eligible active participants 4.1 3.2 Other active participants 8.2 6.8 57.7 52.9 Unrecognized net gain (loss) (1.6) 3.7 Accrued benefits cost $56.1 $56.6 Current portion $ 6.0 $ 6.0 Noncurrent portion 50.1 50.6 Total $56.1 $56.6
Net Periodic Postretirement Benefit Cost 1995 1994 1993 Service cost $ 0.2 $ 0.3 $ 0.4 Interest cost 4.2 4.0 4.4 Other (1.1) - - Net periodic benefit cost $ 3.3 $ 4.3 $ 4.8
The assumed health care cost trend rate used in measuring the benefit obligation is 13.0% pre-age 65 and 9% post-65 in 1995, declining at a rate of 1% per year to an ultimate rate of 5.75% in 2003 pre-age 65 and 1999 post-age 65. A one percent increase in this rate in each year would increase the benefit obligation at December 31, 1995 by $3.8 and the aggregate service and interest cost for 1995 by $0.3. The weighted average discount rates used in determining the benefit obligation at December 31, 1995 and 1994 are 7.00% and 8.25%, respectively. 43 H. STOCK PLANS The 1993 Long-Term Incentive Plan as amended ("1993 LTIP") authorizes the issuance until February 1999 of up to 6,000,000 common shares in connection with awards of stock options, restricted stock, stock appreciation rights and performance units to key executive and managerial employees. The 1994 Stock Options Plan, adopted in connection with the acquisition of Tesseract, authorizes the issuance of up to 500,000 common shares in connection with awards of stock options to key employees of businesses acquired by Ceridian. The exercise price of stock options awarded under this plan and the 1993 LTIP may not be less than the fair market value of the underlying stock at the date of grant. These plans also provide for the accelerated exercisability of options and the accelerated lapse of transfer restrictions on restricted stock if a participant's employment terminates for specified reasons within two years of a change of control of the Company. During 1995 and 1994, respectively, 91,000 and 828,000 common shares, net of forfeitures, were awarded pursuant to the 1993 LTIP to senior executives under a performance restricted stock program. Under the terms of these awards, shares awarded are generally eligible to vest in three installments in 1996, 1997 and 1998, provided the executive is still employed by the Company on the vesting dates, but vesting will occur only to the extent that the total return to holders of Ceridian common stock over two, three and four year performance periods ending in those years meets certain prescribed levels as compared to other companies in the S&P 500. Of the shares eligible to vest on any given date, generally 25% of the shares would vest if the Company's total return to stockholders over the applicable performance period is at least at the 60th percentile of companies in the S&P 500, 50% would vest at the 75th percentile, and 100% would vest at the 90th percentile. If the 60th percentile is not achieved, no shares would vest on that date. Shares which have not yet vested as of the end of the final performance period will be forfeited. The amount of compensation expense charged to operations under this performance-based program was $11.3 in 1995 and $5.9 in 1994. The 1993 Non-Employee Director Stock Plan provided for the issuance of up to 50,000 common shares in connection with awards of stock options and restricted stock to non-employee directors of the Company. Options to purchase 23,000 shares and 9,000 shares of restricted stock were awarded under this plan as of December 31, 1995. The acquisitions of Comdata and Resumix resulted in the assumption by Ceridian of the stock option plans of those companies and the conversion of stock options under those plans into Ceridian stock options as indicated in the accompanying table. In connection with the acquisition of Systems Tax Service, the Company adopted a plan pursuant to which 107,000 common shares were awarded as stock options or restricted stock to senior executives of the acquired company. In July 1994, the Company's Board of Directors authorized the repurchase by the Company of up to 2,000,000 of its outstanding common shares for the purpose of providing shares to be issued under the Company's stock-based compensation plans, thereby reducing dilution of common stockholders' equity. The Company repurchased 192,000 and 70,000 shares in 1995 and 1994, respectively, for this purpose. Stock Plans Option Price Outstanding Exercisable Available Per Share for Grant At December 31, 1992 $ 7.09-$40.24 2,777,459 945,052 3,402 Authorized 3,157,000 Granted 14.25- 19.13 1,069,965 (1,069,965) Became exercisable 7.09- 15.96 401,174 Exercised 7.30- 16.27 (252,851) (252,851) Canceled 7.52- 14.75 (40,557) (93) 40,557 Expired 7.30- 32.29 467 467 Awards of restricted stock (119,000) At December 31, 1993 $ 7.09-$40.24 3,554,483 1,093,749 2,011,994 Authorized 500,000 Granted 19.13- 26.38 1,388,855 (1,388,855) Became exercisable 7.52- 23.63 731,702 Exercised 7.52- 24.45 (462,462) (462,462) Canceled 7.52- 24.13 (261,394) (4,278) 265,821 Expired 24.44- 40.24 (5,928) (5,928) (1,895) Awards of restricted stock (830,000) At December 31, 1994 $ 7.09-$31.74 4,213,554 1,352,783 557,065 Authorized 3,000,000 Resumix conversion 1.77- 35.40 104,642 32,448 Comdata conversion 10.52- 30.04 1,083,136 584,248 Granted 24.13- 45.50 1,049,282 (1,049,282) Became exercisable 2.65- 34.88 1,012,481 Exercised 1.77- 26.38 (613,376) (613,376) Canceled 2.65- 41.25 (141,906) (1,481) 129,824 Expired 16.27 (3,574) (3,574) Awards of restricted stock (97,500) At December 31, 1995 $ 1.77- $45.50 5,691,758 2,363,529 2,540,107 Average option price $21.29
44 I. FINANCING ARRANGEMENTS On December 12, 1995, Ceridian concluded a three-year, $325 million revolving credit facility with a commercial bank syndicate, with Bank of America as agent, replacing its then-existing $35 million domestic revolving credit facility, which had been extended for one year in May 1995. Borrowings under the new credit facility were used to retire the public debt of Comdata, comprised of principal amounts of $130.0 and $75.0 of its 12.5% Senior Notes due 1999 and 13.25% Senior Subordinated Debentures due 2002, respectively, and $6.2 principal amount of its 11% Junior Subordinated Extendible Notes due 1997. The retirement was accomplished by means of the purchase, as a result of tender offers (the "Debt Tender Offers"), of $128.7 of the Senior Notes and $74.9 of the Senior Subordinated Debentures. The remainder of those issues and all of the Junior Notes, which were called for redemption on December 29, 1995, were retired through an in-substance defeasance which involved the deposit of $8.2 in defeasance trusts. The revolving credit facility is unsecured but is guaranteed by Comdata, and has a final maturity of November 30, 1998. Under the facility, Ceridian is able to obtain up to $325.0 including loan advances and up to $75.0 in standby letters of credit. At December 31, 1995, the amount of advances and letters of credit outstanding was $195.0 and $1.5, respectively, and the interest rate for advances, determined by a number of factors, was approximately 6.3%. Under the terms of the facility, the Company must maintain a minimum consolidated net worth, which is subject to increase based on the Company's net earnings after December 31, 1995 and certain equity contributions to the Company after the same date. Ceridian must also maintain a fixed charge coverage ratio of 2.25 to 1 and limit consolidated debt to 3 times earnings before interest, taxes, depreciation and amortization minus capital expenditures and preferred dividends on a rolling four quarter basis. The Company is subject to additional covenants which limit liens, contingent obligations, operating leases, minority equity investments and divestitures. The Company is in compliance with all covenants associated with this credit facility. Comdata financing activity in 1995 included an amendment in March to its revolving credit facility to increase the commitment from $37.5 to $75.0, extend the maturity and lower the interest rate. The facility was terminated when Comdata was acquired by Ceridian. In connection with the Debt Tender Offers, the indentures governing Comdata's Senior Notes and Junior Subordinated Debentures were amended to eliminate, modify or waive most restrictive covenants in such indentures. December 31, Debt Obligations 1995 1994 Revolving credit agreements and overdrafts $ 195.0 $ 1.1 Mortgages payable 6.0 9.7 Public debt of Comdata - 210.8 Other long-term debt obligations 8.9 16.8 Total debt obligations 209.9 238.4 Less short-term debt and current portions of long-term debt 4.6 8.2 Long-term obligations, less current portions $ 205.3 $ 230.2
Aggregate Amounts of Maturities at December 31, 1995 1996 1997 1998 1999 2000 Thereafter Total Mortgages payable $0.1 $0.1 $ 0.1 $0.1 $0.1 $5.5 $ 6.0 Revolving credit - - 195.0 - - - 195.0 Other 4.5 2.7 1.1 0.3 0.2 0.1 8.9 Total $4.6 $2.8 $196.2 $0.4 $0.3 $5.6 $209.9
45 J. INVESTING ACTIVITY On December 12, 1995, Ceridian acquired Comdata, a leading provider of transaction processing services to the trucking and gaming industries, in a reverse subsidiary merger transaction that resulted in the exchange of 0.57 of a share of Ceridian common stock for each outstanding share of Comdata common stock, for a total issuance of 20,472,176 Ceridian shares. On August 31, 1995, Ceridian acquired Resumix, a privately held California-based company that provides skills management software and services, in a reverse subsidiary merger transaction in which the outstanding shares of Resumix capital stock were exchanged for 849,010 newly issued shares of Ceridian common stock. The mergers qualify as a tax-free reorganizations and were accounted for by the pooling-of-interests method. Accordingly, the Company's financial statements have been restated to include the results of Comdata and Resumix as if the mergers had taken place on the first day of the earliest reported period. The accompanying table presents the combined and separate results of the merged companies during the periods preceding the mergers. In connection with the mergers, Ceridian incurred $29.7 in pooling expenses, including fees for investment bankers and legal firms in addition to other acquisition costs. On October 2, 1995, Ceridian acquired the assets of the Centre-file personnel and payroll services business in a purchase transaction for $52.1 in cash. Centre-file provides payroll processing services and human resource management software to customers in the UK. In addition to $8.0 of assets and $6.3 of liabilities, the Company recorded goodwill of $15.2 and other intangibles of $35.2 to be amortized over periods of 5 to 20 years. Comdata 1995 investing activity included the March purchase of the stock of Trendar Corporation, which provides transaction processing services to the transportation industry, for $12.7 in cash and a $1.5 note payable in March 1996. Comdata also sold in February the net assets of its retail services division, which provided check authorization and collection services, for $3.5 in cash, subject to certain contingencies, at a loss of $1.0. In May 1994, Ceridian sold TeleMoney Services and related network and computer center operations, received $24.3 of net cash proceeds and recognized a $7.8 restructuring gain. In June 1994, Ceridian purchased all of the outstanding stock of Tesseract Corporation. The acquisition used $54.3 in cash, net of cash acquired of $7.2. The Company received other assets valued at $9.9 and liabilities, primarily deferred income, of $28.2, and recorded intangible assets valued at $37.0 with amortization periods ranging from 10 to 20 years and goodwill of $35.6 with a life of 20 years. In October 1993, the Company purchased Systems Tax Service, Inc. for 1,005,908 shares of Ceridian common stock. The transaction was valued at $18.8 and resulted in the recording of goodwill and other intangible assets of $21.1 to be amortized over a 15-year period. In December 1994, the Company sold its interest in the CMR joint venture to VNU Business Information Services, Inc. ("VNU") in exchange for a 50.5% interest in a partnership into which the business and assets of VNU's Scarborough Research Corporation subsidiary had been placed, resulting in no gain or loss. 1995 1994 1993 Restated Results of Mergers (9 Mos.) (12 Mos.) (12 Mos.) Revenue Ceridian $767.2 $ 916.3 $ 886.1 Resumix (a) 18.2 11.4 Comdata 204.3 243.3 212.3 Combined $971.5 $ 1,177.8 $ 1,109.8 Net earnings (loss) Ceridian (b) $ 75.9 $ 78.6 $ (30.4) Resumix (a) (1.5) (4.6) Comdata (c) 22.4 20.6 (217.1) Combined $ 98.3 $ 97.7 $ (252.1) (a) Resumix included in Ceridian amount in 1995. Resumix revenue and net earnings (loss) have been restated to conform to Ceridian's revenue recognition policy. (b) Includes extraordinary loss of $8.4 in 1993. (c) Income tax provision restated to eliminate the benefit from deferred tax asset recorded in 1994 and 1995.
46 K. SEGMENT DATA Industry Segments The two industry segments of Ceridian are Information Services and Defense Electronics. The Information Services segment consists of Arbitron, Comdata, and the Human Resources Group, along with a small services business sold in May 1994. The Information Services businesses collect, manage and analyze data and process transactions on behalf of customers in the human resources, transportation, gaming, and electronic media markets and report information resulting from such activities to customers. The products and services provided by the Information Services businesses address specific information management and transaction processing needs of other businesses to enable them to operate more efficiently. These products and services are typically provided through long-term customer relationships that result in a high level of recurring revenue. Information Services 1995 earnings before interest and taxes was reduced by pooling expenses of $29.7 related to the acquisitions of Comdata and Resumix. The Defense Electronics segment, consisting of Computing Devices International, develops, manufactures and markets electronic systems, subsystems and components, and provides systems integration and other services, primarily to government defense agencies. The "other" category represents corporate center operations and unallocated assets, primarily cash and short-term investments. Intersegment sales are not material. Major Customers Revenue in 1995, 1994 and 1993, respectively, included sales under prime contracts or subcontracts to the U.S. government of $214.9, $225.8 and $232.3 and the Canadian government of $190.7, $172.5 and $137.4, substantially all of which are reported in the Defense Electronics segment. Of the sales to the Canadian government, $163.9 in 1995, $153.8 in 1994 and $105.1 in 1993 were from the Iris contract. Information Defense Industry Segment Data Services Electronics Other Consolidated 1995 Revenue $ 823.5 $ 509.5 $ - $ 1,333.0 Earnings (Loss) before interest and taxes $ 108.6 $ 33.7 $ (7.6) $ 134.7 Identifiable assets $ 707.5 $ 294.9 $ 123.7 $ 1,126.1 Capital expenditures $ 39.1 $ 12.0 $ 1.9 $ 53.0 Depreciation $ 26.6 $ 11.6 $ 0.9 $ 39.1 1994 Revenue $ 691.5 $ 486.3 $ - $ 1,177.8 Earnings (Loss) before interest and taxes $ 116.7 $ 30.6 $ (10.6) $ 136.7 Identifiable assets $ 534.3 $ 210.0 $ 233.2 $ 977.5 Capital expenditures $ 31.9 $ 13.4 $ 0.6 $ 45.9 Depreciation $ 23.8 $ 10.1 $ 1.6 $ 35.5 1993 Revenue $ 648.5 $ 461.3 $ - $ 1,109.8 Earnings (Loss) before write-off of intangibles, restructure, interest and taxes $ 75.9 $ 27.0 $ (7.0) $ 95.9 Restructure gain (loss) (75.9) (5.5) 14.4 (67.0) Write-off of intangibles (230.3) - - (230.3) Earnings (Loss) before interest and taxes $(230.3) $ 21.5 $ 7.4 $ (201.4) Identifiable assets $ 368.8 $ 209.7 $ 272.3 $ 850.8 Capital expenditures $ 23.5 $ 10.6 $ 0.9 $ 35.0 Depreciation $ 31.1 $ 8.7 $ 1.1 $ 40.9
47 Geographic Segments The Company's international operations consist of defense electronics operations in Canada and the UK and a payroll processing business in the UK acquired in October 1995. The amounts of the parent company's equity in net assets of and advances to international subsidiaries and branches were $107.7 and $47.9 at December 31, 1995 and 1994, respectively. Geographic Segment Data United States International Consolidated 1995 Revenue $ 1,037.2 $ 295.8 $ 1,333.0 Earnings before interest and taxes $ 118.0 $ 16.7 $ 134.7 Identifiable assets $ 862.7 $ 263.4 $ 1,126.1 1994 Revenue $ 919.7 $ 258.1 $ 1,177.8 Earnings before interest and taxes $ 120.6 $ 16.1 $ 136.7 Identifiable assets $ 841.6 $ 135.9 $ 977.5 1993 Revenue $ 893.9 $ 215.9 $ 1,109.8 Earnings before restructure, write-off of intangibles, interest and taxes $ 83.8 $ 12.1 $ 95.9 Restructure loss (65.5) (1.5) (67.0) Write-off of intangibles (230.3) - (230.3) Earnings (Loss) before interest and taxes $ (212.0) $ 10.6 $ (201.4) Identifiable assets $ 717.7 $ 133.1 $ 850.8
L. LEASING ARRANGEMENTS AS LESSEE Ceridian conducts a substantial portion of its operations in leased facilities. Most such leases contain renewal options and require payments for taxes, insurance, and maintenance. Downsizing activities in prior years have resulted in assignment of leases under which Ceridian remains secondarily liable for future rental obligations totaling $31.2 at December 31, 1995. The Company does not anticipate any material nonperformance by the assignees of these leases, which principally involve Control Data Systems, Inc. and Seagate Technology, Inc. Virtually all leasing arrangements for equipment and facilities are operating leases and the rental payments under these leases are charged to operations as incurred. The amounts in the accompanying tables do not include assigned leases or obligations recorded as liabilities as the result of restructuring actions in prior years. The amounts of rental expense and sublease income for each of the three years ended December 31, 1995 appear in the following table. Rental Expense 1995 1994 1993 Rental expense $45.0 $44.8 $46.2 Sublease rental income (2.9) (2.7) (2.5) Net rental expense $42.1 $42.1 $43.7 48 Future minimum noncancelable lease payments and related sublease income, on operating leases existing at December 31, 1995 which have an initial term of more than one year, are described in the following table. Future Minimum Lease Payments Sublease Lease Rental Payments Income Net 1996 35.3 (2.5) 32.8 1997 31.1 (2.5) 28.6 1998 26.9 (2.3) 24.6 1999 23.7 (2.3) 21.4 2000 21.0 (2.3) 18.7 Thereafter 37.9 (7.7) 30.2 M. COMMITMENTS AND CONTINGENCIES COMMITMENTS In January 1995, Ceridian entered into a technology services agreement with Integrated Systems Solutions Corporation ("ISSC"), a wholly-owned subsidiary of IBM Corporation. Under the technology services agreement, whose term extends through December 31, 2004, ISSC will provide centralized computer processing services required by the Company's Employer Services business for payroll processing customers nationwide. While the Company expects to spend approximately $110.0 over the term of the agreement, the future minimum noncancelable annual service charges payable by the Company are $6.1 in 1996, $3.9 in 1997 and $2.6 in 1998. Comdata contracted with ISSC in 1991 for substantially all data processing functions for a term of ten years. In connection with the agreement, ISSC paid $15.0 in cash to Comdata for certain property and rights and to reimburse certain transition expenses of Comdata. This amount, net of $0.7 for assets sold to ISSC, was recorded as a deferred credit and is being amortized over the term of the agreement. In 1995, the agreement was amended to increase the minimum monthly payment from $1.0 to $1.7 in 1996 and $1.5 thereafter. The amount of expense incurred, net of amortization of the deferred credit, was $13.9 in 1995, $11.2 in 1994 and $10.0 in 1993. Cancellation of the agreement for convenience in 1996 would require payment of a termination fee of $23.7. Under a Telecommunications Services Agreement with LDDS/WorldCom ("LDDS" formerly "ATC"), renewed in 1995, Comdata agreed to purchase a minimum of $10.0 of long distance services each year until 2003. Under this agreement, expenses of $18.5 in 1995, $13.7 in 1994 and $11.2 in 1993 were incurred on behalf of LDDS, which was a Comdata stockholder prior to its merger with Ceridian and remained a Ceridian stockholder at December 31, 1995. The amount payable to LDDS at December 31, 1995 was $3.3. Cancellation of the agreement for convenience requires the payment of $16.2. INTEREST RATE COLLARS AND SWAPS During 1995, Ceridian executed a series of seven interest rate collar transactions of $100.0 each for the purpose of hedging interest rate risk on invested customer deposits held in its tax filing trust. The counterparties to these arrangements are domestic commercial banks with debt ratings of A or better. Under current accounting standards, neither the collar arrangements nor the related trust investments and offsetting liability to customers are reflected in the Company's balance sheet. These arrangements, which do not require collateral, provide for the bank to pay Ceridian the amount by which a certain index of short-term interest rates falls below a floor strike level (5% or 5.5%). Alternatively, when that index exceeds a cap strike level (ranging from 6.15% to 8.47% and averaging 7.41%), Ceridian pays out the excess above the cap strike level. The remaining terms of the collars range from 5 to 42 months. In addition to the collar arrangements, the Company continued to hold at December 31, 1995, three interest rate swap agreements, maturing in the first half of 1996, with an A-rated financial institution for an aggregate notional amount of $75.0 with no collateral required. The risk of accounting loss through non-performance by the counterparties under any of these arrangements is considered negligible. OTHER MATTERS In connection with the spin-off of Control Data Systems, Ceridian agreed to indemnify the U.S. Pension Benefit Guaranty Corporation ("PBGC") if the Control Data Systems defined benefit pension plan is terminated in a distress termination and the PBGC is unable to recover the full amount of any unfunded benefit liabilities. The maximum amount of this contingent liability is $16.0, which will decrease by $4.0 each July 31 beginning in 1996. The Company monitors all such contingent liabilities and has established restructure or other reserves for those which it believes are probable of payment. With respect to these contingent obligations, the Company believes that there is not a material exposure to an accounting loss as of December 31, 1995. 49 N. LEGAL MATTERS Age Discrimination Litigation. Certain former employees, purporting to act on behalf of a class of all former employees of the Company who were terminated after the age of 40, filed suit against the Company in U.S. District Court in Minnesota in 1990 alleging violations of the Age Discrimination in Employment Act. An earlier administrative proceeding before the Equal Employment Opportunity Commission involving some of the named plaintiffs was dismissed in October 1988. With the Court's permission, plaintiffs invited all individuals in the alleged class to join as additional plaintiffs. About 1,100 former employees indicated a desire to do so. In addition, certain of the plaintiffs in this action, along with other individuals, filed two parallel age discrimination class action lawsuits in state court in Minnesota, which have been stayed pending resolution of the federal court action. In December 1992, the Court denied plaintiffs' motion for certification of the requested class of former employees, but ordered that putative class members would be allowed to file individual age discrimination claims against the Company. In response, eight complaints covering 419 of the putative class members were filed against the Company in early 1993. Later that year the Company made individual settlement offers to these plaintiffs, 92 of whom accepted offers in an aggregate amount of $0.6. In late 1993, the parties agreed to commence by September 1994 a series of three six-week test trials, each involving twelve randomly selected plaintiffs, that were to be determinative as to issues of liability, but not damage amounts (if any), with respect to the plaintiffs involved. The Company agreed to the test case process and has explored settlement opportunities principally because of the costs of defending these actions. In light of settlement discussions that occurred in the second quarter 1994 and the Company's estimates of costs to defend these actions, the Company established reserves totaling $15 million with respect to these cases in June 1994. The Company indicated at that time that it was prepared to either absorb that amount in settlement costs if settlement were to occur within a reasonable period of time or commit that amount to a multi-year defense of these actions, as a result of which the Company firmly believes it would prevail. The first test trial did not begin by the specified time, and counsel for the plaintiffs took the position that he does not wish to re-institute the test trial process. In February 1995, these cases were reassigned to a second district judge. In late 1995, the federal magistrate assigned to these cases entered an order that contemplates a consolidated trial on the limited question of whether the Company engaged in a "pattern or practice" of age discrimination. The Company has appealed the magistrate's ruling regarding the consolidated trial because a pattern or practice trial is inappropriate in the absence of a class. In January 1996, these cases were reassigned to a third district judge. Plaintiffs have also requested that the EEOC intervene in this case, presumably seeking to avail themselves of the EEOC's enhanced powers to obtain consolidated trials of multi-party litigation. The local office of the EEOC has recommended intervention to the EEOC national office in Washington D.C., which, if it concurs, must obtain the court's permission to intervene. The local EEOC office has also sought to reinstitute settlement conferences between the parties. Although the Company would be amenable to a global settlement of these cases in light of the high costs of defending them, it is not optimistic that a settlement can be achieved in the near term on acceptable terms, given the lack of merit of the plaintiffs' cases. Comdata Antitrust Cases. In October 1995, a lawsuit was filed by Imperial Bank of Los Angeles against Comdata and its Comdata Network, Inc. subsidiary ("Network") in U.S. District Court for the Central District of California alleging that certain business practices of Network in providing cash advance services at legalized gaming establishments, truck stops and check cashing establishments violated the federal antitrust laws. Specifically, the lawsuit alleges that certain provisions of Network's long-term contracts with its customers unlawfully excluded others from providing competing services. The lawsuit seeks injunctive relief, money damages "in excess of $20 million," treble damages under the antitrust laws and attorneys fees and costs. A similar lawsuit was also filed in October 1995 in U.S. District Court for the Northern District of California by Preferred Card Services, Inc., which is understood to be an independent marketing organization for Imperial Bank. Preferred Card Services seeks relief similar to that sought by Imperial Bank, including money damages "in excess of $8 million." A third similar lawsuit was filed in December 1995 in U.S. District Court for the District of Nevada by Service Data Corporation, dba Premier Cashlink, which is a competitor of Comdata's in the gaming industry. Service Data also seeks relief similar to that sought by Imperial Bank, including money damages "in excess of $10 million." The Company believes that Comdata and Network have not engaged in any illegal conduct and intends to vigorously contest the lawsuits. 50 Retirement Plan Litigation. In August 1995, the Company and its primary defined benefit pension plan maintained for certain U.S. employees (the "Plan") were named as co-defendants in a lawsuit filed in U.S. District Court for the District of Minnesota. The two plaintiffs, who left the employ of the Company in 1989 and elected at that time to receive their vested benefit under the Plan in the form of a single enhanced lump sum payment, purport to act on behalf of a class of all persons who elected to receive a lump sum benefit under the Plan. The plaintiffs allege that the Company and the Plan utilized an incorrect methodology in calculating the amount of enhanced lump sum benefits payable to the plaintiffs and the other class members. Specifically, the plaintiffs allege that an improperly high interest (discount) rate was utilized to calculate the lump sum benefit amounts, thereby lowering the benefit amounts, in contravention of the Employee Retirement Income Security Act of 1974, the Plan and the defendants' fiduciary duties. The Company believes that the proper methodology was consistently utilized in calculating lump sum benefit payments at all times since that feature was introduced into the Plan in 1989, and denies the plaintiffs allegations. Moreover, any finding in favor of the plaintiffs would not likely have a direct financial effect on the Company, but rather would result in an increase in Plan liabilities that is not currently estimable. Such an increase in Plan liabilities would, in turn, become one of many factors affecting the funded status of the Plan. The funded status of the Plan, in turn, is one of many factors affecting the determination of the Company's obligation (if any) to make an annual contribution to the Plan and the determination of its annual pension expense (if any) attributable to the Plan. Seagate Securities Litigation. The Company and Lawrence Perlman, its chairman, president and CEO, have been named as co-defendants in a lawsuit filed in U.S. District Court for the Northern District of California against Seagate Technology, Inc., certain of its present or former officers, and three investment banking firms. The plaintiffs purport to act on behalf of a class consisting of all purchasers of Seagate common stock during the period October 11, 1990 through June 26, 1991 (the "Class Period"). During the Class Period, the Company sold 10.7 million shares of Seagate common stock in a registered public offering. The plaintiffs allege that during the Class Period, the defendants acted in concert with each other to issue false and misleading public statements regarding Seagate's earnings, products and future prospects which artificially inflated the price of Seagate common stock during the Class Period and permitted the Company and the individual defendants to profit from stock sales during the Class Period. The plaintiffs allege that such conduct violated federal securities laws and also allege "controlling person" liability under those laws against, among others, the Company and Mr. Perlman. The Company believes that the claims against it and Mr. Perlman are without merit, and has notified Seagate that this matter and any expenses the Company incurs in connection therewith are subject to an indemnification obligation undertaken by Seagate at the time it issued the 10.7 million shares to the Company as partial payment for Seagate's purchase of the Company's Imprimis subsidiary. Other Matters. The Company is also involved in a number of other judicial and administrative proceedings considered normal in the nature of its current and past operations, including employment-related disputes, contract disputes and tort claims. It is anticipated that final disposition of some of these proceedings may not occur for several years. In the opinion of management, the final disposition of all current judicial and administrative proceedings will not, considering the merits of the claims and available reserves, have a material adverse effect on the Company's financial position or results of operations. 51 SUPPLEMENTARY QUARTERLY DATA (Unaudited) (Dollars in millions, except per share data) 1995 1994 4th 3rd 2nd 1st 4th 3rd 2nd 1st Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Revenue $ 361.5 $ 317.9 $ 327.4 $ 326.2 $ 301.3 $ 310.7 $ 284.3 $ 281.5 Cost of revenue 216.9 189.4 198.4 195.6 181.6 196.4 178.8 172.9 Gross profit 144.6 128.5 129.0 130.6 119.7 114.3 105.5 108.6 Selling, general and administrative 91.5 71.5 74.7 72.2 74.2 69.2 65.2 65.5 Research and development 13.4 13.1 13.8 14.2 11.6 11.1 9.3 8.5 Other expense (income) (1) 32.8 0.6 0.7 (0.5) (2.5) (1.2) 0.1 0.4 Earnings (Loss) before interest and taxes 6.9 43.3 39.8 44.7 36.4 35.2 30.9 34.2 Interest income 2.6 3.9 2.9 2.7 2.8 2.8 3.2 1.9 Interest expense (7.3) (7.7) (7.9) (7.7) (8.0) (8.0) (8.1) (8.1) Earnings (Loss) before income taxes 2.2 39.5 34.8 39.7 31.2 30.0 26.0 28.0 Income tax provision 3.0 5.9 5.5 4.3 8.0 2.8 3.1 3.6 Earnings (Loss) before extraordinary item (0.8) 33.6 29.3 35.4 23.2 27.2 22.9 24.4 Extraordinary loss (2) 38.9 - - - - - - - Net earnings (loss) $ (39.7) $ 33.6 $ 29.3 $ 35.4 $ 23.2 $ 27.2 $ 22.9 $ 24.4 Earnings (loss) per share (3) Primary $ (0.06) $ 0.44 $ 0.38 $ 0.47 $ 0.29 $ 0.35 $ 0.29 $ 0.31 Fully diluted $ (0.06) $ 0.42 $ 0.37 $ 0.45 $ 0.29 $ 0.35 $ 0.29 $ 0.31 Shares used in calculations (in thousands) (4) Primary 66,258 69,592 69,042 68,631 67,819 68,001 67,584 67,257 Fully diluted 66,258 79,976 79,426 79,015 78,203 78,385 77,968 77,641 Common Stock-per share Market price ranges (5) High 47-1/2 46-7/8 37-5/8 34-1/2 27-1/8 27-1/2 25-5/8 24-3/4 Low 36-5/8 36-3/4 31-5/8 26-1/8 23-1/2 24 21-1/2 18-1/2 No cash dividends have been declared on common stock during the periods presented. (1) Includes pooling expenses of $29.7 related to Resumix and Comdata mergers. (2) For details on the early retirement of debt, see notes B and I. (3) Net earnings (loss) for calculation of primary earnings (loss) per share has been reduced by preferred dividends. Fully diluted results per share may not be more favorable than primary. (4) For calculation of a loss per share, common stock equivalents and the assumed conversion of preferred stock are ignored. (5) Source: New York Stock Exchange-Composite Transactions.
52 EX-21 13 SUBSIDIARIES OF THE COMPANY Exhibit 21 CERIDIAN CORPORATION SUBSIDIARIES DECEMBER 31, 1995 State or Other Jurisdiction of Incorporation CD Plus S.A. France Ceridian Holdings U.K. Limited United Kingdom Centre-file Limited (f/k/a Datacarrer Limited) United Kingdom Comdata Holdings Corporation Delaware Comdata Network, Inc. Maryland Cashcall Systems, Inc. Canada Comdata Telecommunications Services, Inc. Delaware Permicom Permits Services, Inc. Canada Transceiver United, Inc. Nevada Trendar Corporation Tennessee Computing Devices Canada Ltd. Canada Computing Devices Company Limited (Hastings) United Kingdom Computing Devices International Satellite Services, Inc. Delaware Minidata Services, Inc. New Jersey Paragon Imaging, Inc. Florida Resumix, Inc. California Scarborough Research (General Partnership) Delaware Tesseract Corporation California User Technology Services Inc. New York Certain subsidiaries, which in the aggregate would not constitute a significant subsidiary, are omitted from this listing. EX-23.01 14 CONSENT OF INDEPENDENT AUDITORS - KPMG Exhibit 23.01 CONSENT OF INDEPENDENT AUDITORS The Board of Directors of Ceridian Corporation: We consent to incorporation by reference in Registration Statements Nos. 33-49601, 33-61551, 33-34035, 2-97570, 2-67753, 33-56833, 33-15920, 2- 81865, 2-93345, 33-26839, 33-54379, 33-56325, 33-61001, 33-62319, 33-64913, 333-01793, 333-01887 on Forms S-8 of Ceridian Corporation and in Registration Statement No. 33-56351 on Form S-4 of our reports dated January 23, 1996. Such reports relate to the consolidated financial statements and related financial statement schedules of Ceridian Corporation and subsidiaries as of December 31, 1995 and 1994 and for each of the years in the three-year period ended December 31, 1995 and are included or incorporated by reference in the 1995 Annual Report on Form 10- K of Ceridian Corporation. /s/ KPMG Peat Marwick KPMG Peat Marwick LLP Minneapolis, Minnesota March 25, 1996 EX-23.02 15 CONSENT OF PUBLIC ACCOUNTANTS - ARTHUR ANDERSEN Exhibit 23.02 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated January 20, 1996 on the consolidated financial statements of Comdata Holdings Corporation incorporated by reference into Ceridian Corporation's Form 10-K for the year ended December 31, 1995, into Ceridian Corporation's previously filed Registration Statement File Nos. 33-49601, 33-61551, 33-34035, 2-97570, 2-67753, 33-56833, 33-15920, 2-81865, 2-93345, 33-26839, 33-54379, 33-56325, 33-61001, 33-62319, 33-64913, 333-01793, 333-01887 and 33-56351. It should be noted that we have not audited any financial statements of Comdata Holdings Corporation subsequent to December 31, 1995 or performed any audit procedures subsequent to the date of our report. /s/ ARTHUR ANDERSEN ARTHUR ANDERSEN LLP Nashville, Tennessee March 21, 1996 EX-24 16 POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of Ceridian Corporation (the "Company"), a Delaware corporation, do hereby make, nominate and appoint JOHN R. EICKHOFF, STEVEN J. OLSON and JOHN A. HAVEMAN, and each of them, to be my attorney in fact for three months from the date hereof, with full power and authority to sign his name on the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended; provided that such Form 10-K is first reviewed by the Audit Committee of the Board of Directors of the Company and by my attorney in fact; and his name, when thus signed, shall have the same force and effect as though I had manually signed such Form 10-K. IN WITNESS WHEREOF, I have signed this Power of Attorney as of February 2, 1996. /s/Lawrence Perlman /s/George R. Lewis Lawrence Perlman George R. Lewis /s/Ruth M. Davis /s/Charles Marshall Ruth M. Davis Charles Marshall /s/Allen W. Dawson /s/Carole J. Uhrich Allen W. Dawson Carole J. Uhrich /s/Richard G. Lareau /s/Richard W. Vieser Richard G. Lareau Richard W. Vieser /s/Paul S. Walsh Paul S. Walsh EX-27 17 ART. 5 FDS FOR 1995
5 1000 Dec-31-1995 Dec-31-1995 YEAR 151,700 0 385,200 12,400 30,400 570,800 323,300 202,400 1,126,100 605,600 209,900 33,700 0 4,700 111,600 1,126,100 562,800 1,333,000 411,000 800,300 33,600 0 30,600 116,200 18,700 97,500 0 38,900 0 58,600 0.66 0.66
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