EXHIBIT 10.1
CONSENT, WAIVER AND FIRST AMENDMENT TO
ACQUISITION LOAN AGREEMENT
THIS CONSENT, WAIVER AND FIRST AMENDMENT TO ACQUISITION LOAN
AGREEMENT, dated as of October 1, 2004 (the "AMENDMENT"), is entered into by and
between CAPITALSOURCE FINANCE LLC, a Delaware limited liability company, in its
capacity as agent (in such capacity, "AGENT") for the Lenders under the Loan
Agreement referenced below, the Lenders party thereto, and INFOCROSSING, INC., a
Delaware corporation ("BORROWER"). Capitalized terms used and not otherwise
defined herein are used as defined in the Loan Agreement (as defined below).
WHEREAS, the Agent, Lenders and the Borrower have entered into
that certain Acquisition Loan Agreement dated as of July 29, 2004 (as the same
may be amended, supplemented, modified and/or restated and in effect from time
to time, the "LOAN AGREEMENT");
WHEREAS, Borrower entered into an agreement to lease certain
software from IBM for a one-year period, pursuant to which Borrower is required
to make 12 equal monthly payments of approximately $50,000 to IBM (collectively,
the "IBM LEASE PAYMENTS");
WHEREAS, Borrower has entered into a Purchase and Sale
Agreement dated as of September 1, 2004 (the "PURCHASE AGREEMENT") with Verizon
Data Services Inc. pursuant to which, among other things, Borrower will acquire
all of the equity of Verizon Information Technologies Inc. ("TARGET") for a
purchase price of $43,500,000 (the "SUBJECT ACQUISITION");
WHEREAS, Borrower intends that the Subject Acquisition qualify
as a Category 3 Permitted Acquisition pursuant to the conditions set forth in
the Loan Agreement ("CATEGORY 3 ACQUISITION CONDITIONS");
WHEREAS, except for the conditions set forth on Exhibit A
attached hereto (the "WAIVED CONDITIONS"), Borrower has met the Category 3
Acquisition Conditions with respect to the Subject Acquisition;
WHEREAS, the Borrower has requested that Agent and Lenders (i)
amend certain provisions of the Loan Agreement, (ii) acknowledge and consent to
the IBM Lease Payments, (iii) waive the Waived Conditions as a requirement for
determining whether or not the Subject Acquisition constitutes a Category 3
Permitted Acquisition under the Loan Agreement and (iv) consent to the
consummation of the Subject Acquisition, all as provided herein; and
WHEREAS, subject to satisfaction of the conditions set forth
herein, Agent and the Lenders are willing to (i) amend the Loan Agreement, (ii)
acknowledge and consent to the IBM Lease Payments, (iii) waive the Waived
Conditions as a requirement for determining whether or not the Subject
Acquisition constitutes a Permitted Acquisition under the Loan Agreement and
(iv) consent to the consummation of the Subject Acquisition.
NOW, THEREFORE, in consideration of the premises and the other
mutual covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. AMENDMENTS TO LOAN AGREEMENT.
(a) Section 1 of the Loan Agreement is hereby amended by adding the
following defined terms thereto in appropriate alphabetical order:
"Fleet": means Fleet National Bank.
"Fleet Payroll Account": means any payroll account maintained
by any Loan Party at Fleet.
"Fleet Zero Balance Account": means any zero balance account
maintained by any Loan Party at Fleet.
"IHS": means Infocrossing Healthcare Services, Inc., a
Delaware corporation (formerly known as Verizon Information
Technologies Inc.).
(b) The definition of "Material Adverse Effect" in Section 1 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"Material Adverse Effect": (i) a material adverse effect on
(a) the condition (financial or otherwise), business, properties,
assets, liabilities, operations or results of operations of the
Borrower and the Subsidiaries, taken as a whole or (b) the validity or
enforceability of this or any of the other Loan Documents or the rights
or remedies of the Agent or the Lenders hereunder or thereunder, or
(ii) any effect resulting from the assertion of any claim in excess of
$4,000,000, individually or in the aggregate, against any Loan Party by
any other Person with respect to any contract which constitutes or
otherwise results in annual revenue to the Loan Parties, in the
aggregate, in excess of $20,000,000.
(c) Section 5 of the Loan Agreement shall be amended by adding the
following immediately following Section 5.13:
5.14 Separate Entities. (a) The Borrower and its Subsidiaries
(other than IHS) (collectively, the "IFOX Entities"), on the one hand,
and IHS, on the other hand, shall at all times maintain the accounts,
books, resolutions and records of the IFOX Entities separate from the
accounts, books and records of IHS.
(b) The IFOX Entities and IHS (i) have maintained and will
maintain the books, records, resolutions and agreements of the IFOX
Entities as official records and of IHS as official records, (ii) have
not commingled and will not commingle the funds or assets of the IFOX
Entities with those of IHS, (iii) have held and will hold the assets of
the IFOX Entities in the names of the members thereof and the assets of
IHS in the name of IHS, (iv) have conducted and will conduct the
business of the IFOX Entities in the names of the members thereof and
the business of IHS in the name of IHS, (v) have maintained and will
maintain the financial statements, accounting records and other entity
documents of the IFOX Entities separate from those of IHS, (vi) have
paid and will pay the liabilities of the IFOX Entities out of the IFOX
Entities' funds and assets and those of IHS out of IHS's funds and
assets, (vii) have observed and will observe, with respect to the IFOX
Entities and IHS, separately, all partnership, corporate or limited
liability company formalities as applicable, (viii) have maintained and
will maintain an arms-length relationship with their Affiliates, and
have not entered and will not permit any of the IFOX Entities to enter
into or be a party to, any transaction with IHS, or any partners,
members, shareholders or Affiliates thereof, except in the ordinary
course of business and on terms which are intrinsically fair and are
not less favorable to the IFOX Entities than would be obtained in a
comparable arms-length transaction with an unrelated third party, (ix)
have allocated and will allocate fairly and reasonably as between the
IFOX Entities and IHS shared expenses and overhead expenses, including,
without limitation, shared office space, and as between the IFOX
Entities and IHS, shall use separate stationery, invoices and checks,
(x) have held and identified IHS and will hold IHS out and identify IHS
as a separate and distinct entity from, and not as a division of any
of, the IFOX Entities, and will not fail to correct any
misunderstanding as to such separateness or distinction, (xi) have not
paid and will not pay the salaries of the employees of IHS from the
funds of any of the IFOX Entities, and (xii) have maintained and will
maintain for IHS adequate capital for the normal obligations reasonably
foreseeable in a business of IHS's size and character and in light of
IHS's contemplated business operations; and, with respect to each of
clauses (i) through (xii), in each case, unless otherwise agreed to in
advance by Agent in its Permitted Discretion.
(d) Schedule 6.1(b) to the Loan Agreement is hereby amended to delete
therefrom in its entirety the table of Minimum Adjusted EBITDA set
forth therein and to substitute therefor the table of Minimum Adjusted
EBIDTA set forth on Amended Schedule 6.1(b) attached hereto.
(e) Section 6.4 of the Loan Agreement is hereby amended by adding the
following sentence at the end of such Section:
Notwithstanding anything contained in any of the foregoing
clauses (a) through (c), Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, merge, consolidate or
otherwise amalgamate with or into IHS.
(f) Section 6.17 of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:
6.17 Certain Bank Accounts.
(a) Fleet Accounts. To the extent Borrower has not
entered into a Deposit Account Control Agreement with Fleet with regard
to the Fleet Payroll Account and/or the Fleet Zero Balance Account, (i)
permit the aggregate amount on deposit in the Fleet Payroll Account at
any one time to exceed the aggregate amount reasonably necessary to
fund the payroll requirements of Borrower and its Subsidiaries in the
ordinary course of business or (ii) permit the aggregate amount on
deposit in the Fleet Zero Balance Account to exceed zero dollars
($0.00) at any time, as the case may be.
Section 2. CONSENTS.
Subject to the terms hereof, Agent and Lenders hereby (i)
acknowledge and consent to the IBM Lease Payments, (ii) irrevocably
waive the Waived Conditions as a requirement for determining whether or
not the Subject Acquisition constitutes a Permitted Acquisition, (iii)
irrevocably consent to the consummation of the Subject Acquisition (iv)
consent to Target establishing deposit accounts with Fleet so long as
such accounts are subject to a Deposit Account Control Agreement, (v)
consent to the execution and delivery by (A) Borrower of that certain
Addendum to Stock Pledge Agreement dated of even date herewith and (B)
IHS of that certain Joinder to Security Agreement of even date
herewith. The foregoing are limited consents and the execution and
delivery of this Amendment does not constitute (a) a waiver by Agent or
any Lender of any Default or Event of Default now or hereafter existing
or any other term or provision of the Loan Agreement or any other Loan
Document or (b) a course of conduct or dealing among the parties. Each
of the Addendum to Stock Pledge Agreement and Joinder to Security
Agreement referred to above shall be deemed to be Loan Documents.
Section 3. CONDITIONS.
This Amendment shall be subject to satisfaction of the
following conditions precedent or concurrent, after giving effect to
this Amendment:
(a) the representations and warranties contained herein and in all other
Loan Documents shall be true and correct in all material respects as of
the date hereof, except for such representations and warranties limited
by their terms to a specific date;
(b) no Default or Event of Default shall be in existence;
(c) the Borrower shall have delivered to the Agent an executed original
copy of this Amendment and each other agreement, document or instrument
reasonably requested by the Agent in connection with this Amendment,
each in form and substance reasonably satisfactory to Agent and
Lenders;
(d) the Borrower shall have paid all fees, costs and expenses owed to
and/or incurred by the Agent and Lenders arising in connection with the
Loan Documents and/or this Amendment; and
(e) all proceedings taken in connection with the transactions contemplated
by this Amendment and all documentation and other legal matters
incident thereto shall be satisfactory to the Agent.
Section 4. DELIVERY OF ADDITIONAL DOCUMENTS.
The Borrower shall deliver, or
caused to be delivered, to the Agent each the following within the
respective time periods:
(a) As soon as possible, but in any event before November 30, 2004, IHS
shall use reasonable best efforts to deliver or cause to be delivered
to Agent (i) a landlord waiver and consent in form and substance
reasonably satisfactory to Agent for each leased real property located
in (x) Jefferson City, Missouri, (y) Phoenix, Arizona and (z) Tampa,
Florida, and (ii) a Collateral Assignment of Leases in the form
previously negotiated with Agent. The parties hereto agree that so
long as IHS fails to obtain such landlord waivers and consents, Agent
shall have the right, in its sole and absolute discretion, to charge
IHS a fully earned collateral agent's fee of $5,000 per month, payable
on the first day of each month hereafter.
(b) As soon as possible, but in any event before October 30, 2004, Borrower
shall deliver or cause to be delivered to Agent a final draft of the
employment and option agreement between IHS and Michael Luebke (the
"LUEBKE AGREEMENT"). The parties hereto agree that so long as IHS fails
to obtain such agreement, Agent shall have the right, in its sole and
absolute discretion, to charge IHS a fully earned collateral agent's
fee of $1,000 per month, payable on the first day of each month
hereafter.
(c) As soon as possible, but in any event before October 8, 2004, (i) fully
executed Deposit Account Control Agreements, in the forms previously
negotiated with Agent and Fleet, with respect to all deposit accounts
maintained at Fleet, including the Fleet Payroll Account and the Fleet
Zero Balance Account, by the Loan Parties, and (ii) an opinion from
Borrower's legal counsel with respect to such Deposit Account Control
Agreements, in form and substance substantially similar to the terms
previously negotiated between the parties hereto. Any failure to comply
with either of the foregoing clauses (i) or (ii) within such time
period shall constitute and be deemed an Event of Default under the
Loan Agreement.
(d) As soon as possible, but in any event before October 8, 2004, Borrower
shall deliver or cause to be delivered to Agent a good standing
certificate from the New Jersey Secretary of State for ETG, Inc. The
parties hereto agree that so long as Borrower fails to obtain such
certificate, Agent shall have the right, in its sole and absolute
discretion, to charge Borrower a fully earned collateral agent's fee of
$1,000 per month, payable on the first day of each month hereafter.
Section 5. LOAN AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED.
Except as specifically amended hereby, the Loan Agreement and other
Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed as so amended. Except as expressly set forth
herein, this Amendment shall not be deemed to be a waiver, amendment
or modification of any provisions of the Loan Agreement or any other
Loan Document or any right, power or remedy of Agent or Lenders, or
constitute a waiver of any provision of the Loan Agreement or any
other Loan Document, or any other document, instrument and/or
agreement executed or delivered in connection therewith or of any
Default or Event of Default under any of the foregoing, in each case
whether arising before or after the date hereof or as a result of
performance hereunder or thereunder. Except as set forth herein, Agent
and Lenders reserve all rights, remedies, powers, or privileges
available under the Loan Agreement, the other Loan Documents, at law
or otherwise. All references to the Loan Agreement shall be deemed to
mean the Loan Agreement as modified hereby. This Amendment shall not
constitute a novation or satisfaction and accord of the Loan Agreement
and/or other Loan Documents, but shall constitute an amendment
thereof. The parties hereto agree to be bound by the terms and
conditions of the Loan Agreement and Loan Documents as amended by this
Amendment, as though such terms and conditions were set forth herein.
Each reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of similar import shall mean and be a
reference to the Loan Agreement as amended by this Amendment, and each
reference herein or in any other Loan Documents to the "Loan
Agreement" or "Credit Agreement" shall mean and be a reference to the
Loan Agreement as amended and modified by this Amendment.
Section 6. REPRESENTATIONS.
Borrower hereby represents and warrants to Agent and Lenders as
follows:
(a) it is duly incorporated or organized, validly existing and
in good standing under the laws of its jurisdiction of organization;
(b) the execution, delivery and performance by it of this
Amendment and all other Loan Documents executed and/or delivered in connection
herewith are within its powers, have been duly authorized, and do not contravene
(i) its articles of organization, operating agreement, or other organizational
documents, or (ii) any applicable law;
(c) no consent, license, permit, approval or authorization of,
or registration, filing or declaration with any Governmental Authority or other
Person, is required in connection with the execution, delivery, performance,
validity or enforceability of this Amendment or any other Loan Documents
executed and/or delivered in connection herewith by or against it;
(d) this Amendment and all other Loan Documents executed
and/or delivered in connection herewith has been duly executed and delivered by
it;
(e) this Amendment and all other Loan Documents executed
and/or delivered in connection herewith constitute its legal, valid and binding
obligation enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity;
(f) except for the Waived Conditions, Borrower has met the
Category 3 Acquisition Conditions;
(g) after giving effect to this Amendment and the consummation
of the Subject Acquisition, it is not in default under the Loan Documents and no
Default or Event of Default exists, has occurred and is continuing or would
result by the execution, delivery or performance of this Amendment or the
consummation of the Subject Acquisition; and
(h) the representations and warranties contained in the Loan
Documents are true and correct in all material respects as of the date hereof as
if made on the date hereof, except for such representations and warranties
limited by their terms to a specific date.
Section 7. MISCELLANEOUS.
(a) This Amendment may be executed in any number of counterparts
(including by facsimile), and by the different parties hereto on the
same or separate counterparts, each of which shall be deemed to be an
original instrument but all of which together shall constitute one and
the same agreement. Each party agrees that it will be bound by its own
facsimile signature and that it accepts the facsimile signature of
each other party. The descriptive headings of the various sections of
this Amendment are inserted for convenience of reference only and
shall not be deemed to affect the meaning or construction of any of
the provisions hereof or thereof. Whenever the context and
construction so require, all words herein in the singular number
herein shall be deemed to have been used in the plural, and vice
versa, and the masculine gender shall include the feminine and neuter
and the neuter shall include the masculine and feminine.
(b) This Amendment may not be changed, amended, restated, waived,
supplemented, discharged, canceled, terminated or otherwise modified
orally or by any course of dealing or in any manner other than as
provided in the Loan Agreement. This Amendment shall be considered part
of the Loan Agreement and shall be a Loan Document for all purposes
under the Loan Agreement and other Loan Documents.
(c) This Amendment, the Loan Agreement and the Loan Documents constitute
the final, entire agreement and understanding between the parties with
respect to the subject matter hereof and thereof and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements between the parties, and shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto and
thereto. There are no unwritten oral agreements between the parties
with respect to the subject matter hereof and thereof.
(d) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE LOAN
AGREEMENT AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE
PROVISIONS OF THE LOAN AGREEMENT.
(e) Borrower may not assign, delegate or transfer this Amendment or any of
its rights or obligations hereunder. No rights are intended to be
created under this Amendment for the benefit of any third party donee,
creditor or incidental beneficiary of Borrower or any Guarantor.
Nothing contained in this Amendment shall be construed as a delegation
to Agent or Lenders of Borrower's or any Guarantor's duty of
performance, including, without limitation, any duties under any
account or contract in which Agent has or Lenders have a security
interest or Lien. This Amendment shall be binding upon the Borrower and
its successors and assigns.
(f) Borrower shall pay all costs and expenses incurred by Agent and
Lenders or any of their affiliates, including, without limitation,
documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and
all other out-of-pocket charges and expenses (including, without
limitation, UCC and judgment and tax lien searches and UCC filings and
fees for post-Closing UCC and judgment and tax lien searches) and
reasonable attorneys' fees and expenses, in connection with entering
into, negotiating, preparing, reviewing and executing this Amendment
and the documents, agreements and instruments contemplated hereby and
all related agreements, documents and instruments, and all of the same
shall be part of the Obligations. If Agent, any Lender or any of their
affiliates uses in-house counsel for any of the purposes set forth
above the Borrower expressly agrees that the Obligations include
reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by such Person
in its sole discretion for the work performed.
(g) Borrower hereby (i) agrees that this Amendment shall not limit or
diminish the obligations of Borrower under the Loan Documents, (ii)
reaffirms its obligations under each of the Loan Documents to which it
is a party, and (iii) agrees that each of such Loan Documents remains
in full force and effect and is hereby ratified and confirmed.
(h) All representations and warranties made in this Amendment shall survive
the execution and delivery of this Amendment and no investigation by
Agent or Lenders shall affect such representations or warranties or the
right of Agent or Lenders to rely upon them.
(i) BORROWER ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN DOCUMENTS AND
THE PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF IT HAS ANY
SUCH CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN
DOCUMENTS AND/OR ANY TRANSACTION RELATED TO THE LOAN DOCUMENTS AND/OR
THE OBLIGATIONS, THE SAME ARE HEREBY WAIVED, RELINQUISHED AND RELEASED
IN CONSIDERATION OF AGENT'S AND LENDERS' EXECUTION AND DELIVERY OF THIS
AMENDMENT.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, each of the parties has duly executed this
Amendment as of the day and year first written above.
INFOCROSSING, INC.,
a Delaware corporation, as Borrower
By: /s/ ZACH LONSTEIN
----------------------------------
Name: Zach Lonstein
Title: Chief Executive Officer
CAPITALSOURCE FINANCE LLC,
as Agent and a Lender
By: /s/ STEVE A. MUSELES
----------------------------------
Name: Steve A. Museles
Title: Senior Vice President
EXHIBIT A
WAIVED CONDITIONS
1. The Borrower has entered into an agreement to lease certain software
from IBM for a one-year period (the "IBM Lease Agreement"), pursuant to which
IBM Lease Agreement the Borrower is required to make 12 equal monthly payments
of approximately $50,000 to IBM. Such monthly payments are considered by the
Agent to be Indebtedness under the Acquisition Loan Agreement and, as a result
of the incurrence of such Indebtedness by the Borrower, as of the date of
execution of the IBM Lease Agreement, the Borrower had unsecured Indebtedness of
approximately $1,260,000, which amount exceeds the $1,000,000 amount of
unsecured Indebtedness permitted to be incurred by Borrower pursuant to Section
6.2(j) of the Acquisition Loan Agreement.
2. The Borrower has not furnished to Agent and Lenders an executed term
sheet and/or commitment letter with respect to the Acquisition, as no such
document exists. The Borrower has not furnished a final draft of the employment
and option agreement with Michael Luebke. Such agreement will be promptly
delivered to the Agent, and in no event later than thirty (30) days from the
date hereof.
3. The Agent has informed the Borrower that the Agent and the Required
Lenders will deliver consent to the Acquisition at the closing of the
Acquisition Advance.
4. As an accommodation to the Borrower, the Agent performed the
searches referred to in paragraph (n) of Exhibit A to the Officer's Certificate
of the Borrower dated the date hereof (the "Officer's Certificate") based on
information provided to the Agent by the Borrower. To the best of the Borrower's
knowledge, the Target is not subject to any Liens in favor of any Persons (other
than Liens otherwise permitted under the Acquisition Loan Agreement).
5. The certification contained in paragraph (u) of Exhibit A to the
Officer's Certificate is qualified by the following: (a) to Borrower's
knowledge, the September 30, 2004 financial statement and balance sheet of the
Target, which has not been reviewed by the Borrower prior to the date of this
certification, will not disclose any liabilities or obligations with respect to
Target which individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect and (b) to Borrower's knowledge, the matters
described in Schedule 3.1.7(b)(1) to the Purchase and Sale Agreement dated as of
September 1, 2004 between the Borrower and Verizon Data Services Inc. could
reasonably be expected to have a Material Adverse Effect.
6. The certification contained in paragraph (w) of Exhibit A to the
Officer's Certificate is qualified by the following: to Borrower's knowledge, no
Material Adverse Effect has occurred or exists.
7. The Agent has not received an opinion of counsel to Seller in
respect of the Acquisition.
AMENDED SCHEDULE 6.1(B)
The Minimum Adjusted EBITDA table in Schedule 6.1(b) shall be deleted and
replaced with the following Minimum Adjusted EBITDA table:
Fiscal quarter ended Amount*
--------------------- ------
June 30, 2004 $12,300,000
September 30, 2004 $15,000,000
December 31, 2004 $25,300,000
March 31, 2005 $27,300,000
June 30, 2005 $29,800,000
September 30, 2005 $31,300,000
December 31, 2005 $32,300,000
March 31, 2006 $33,300,000
June 30, 2006 $33,300,000
September 30, 2006 $33,300,000
December 31, 2006 $33,300,000
March 31, 2007 $36,300,000
June 30, 2007 $36,300,000
September 30, 2007 $36,300,000
December 31, 2007 $36,300,000
March 31, 2008 $36,300,000
June 30, 2008 $36,300,000
September 30, 2008 $36,300,000
December 31, 2008 $36,300,000
The last day of each Fiscal Quarter $36,300,000
thereafter