Loan Documents and Waiver Agreement [Amendment No. 4] - Intelligroup Inc., Empower Inc. and PNC Bank NA
EXECUTION VERSION
FOURTH AMENDMENT TO LOAN DOCUMENTS
AND WAIVER AGREEMENT
THIS FOURTH AMENDMENT TO LOAN DOCUMENTS AND WAIVER AGREEMENT (this "FOURTH
AMENDMENT") is made as of the 22nd day of October, 2003, among INTELLIGROUP,
INC., a corporation organized under the laws of the State of New Jersey and
EMPOWER, INC., a corporation organized under the laws of the State of Michigan
(each a "BORROWER" and collectively "BORROWERS"), the financial institutions
which are now or which hereafter become a party hereto (collectively, the
"LENDERS" and individually a "LENDER") and PNC BANK, NATIONAL ASSOCIATION
("PNC"), as agent for Lenders (PNC, in such capacity, the "AGENT").
BACKGROUND
A. Borrowers have executed and delivered to PNC, in its capacity as the
Agent and sole Lender with respect to this transaction, one or more promissory
notes, letter agreements, loan agreements, security agreements, mortgages,
pledge agreements, collateral assignments, and other agreements, instruments,
certificates and documents, some or all of which are more fully described on
attached Exhibit A, which is made a part of this Fourth Amendment (collectively,
as amended from time to time, the "LOAN DOCUMENTS"), which Loan Documents
evidence or secure some or all of Borrowers' obligations to Lenders for one or
more loans or other extensions of credit (the "OBLIGATIONS").
B. Borrowers, Agent and Lenders desire to amend the Loan Documents as
provided for in this Fourth Amendment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Certain of the Loan Documents are amended as set forth in Exhibit A. Any
and all references to any Loan Document in any other Loan Document shall be
deemed to refer to such Loan Document as amended by this Fourth Amendment. This
Fourth Amendment is deemed incorporated into each of the Loan Documents. Any
initially capitalized terms used in this Fourth Amendment without definition
shall have the meanings assigned to those terms in the Loan Documents. To the
extent that any term or provision of this Fourth Amendment is or may be
inconsistent with any term or provision in any Loan Document, the terms and
provisions of this Fourth Amendment shall control.
2. Borrowers hereby certify that: (a) all of their representations and
warranties in the Loan Documents, as amended by this Fourth Amendment, are,
except as may otherwise be stated in this Fourth Amendment: (i) true and correct
as of the date of this Fourth Amendment, (ii) ratified and confirmed without
condition as if made anew, and (iii) incorporated into this Fourth Amendment by
reference; (b) no Event of Default or event which, with the passage of time or
the giving of notice or both, would constitute an Event of Default, exists under
any Loan Document which will not be cured by the execution and effectiveness of
this Fourth Amendment; (c) no consent, approval, order or authorization of, or
registration or filing with,
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any third party is required in connection with the execution, delivery and
carrying out of this Fourth Amendment or, if required, has been obtained; and
(d) this Fourth Amendment has been duly authorized, executed and delivered so
that it constitutes the legal, valid and binding obligation of Borrowers,
enforceable in accordance with its terms. Borrowers confirm that the Obligations
remain outstanding without defense, set off, counterclaim, discount or charge of
any kind as of the date of this Fourth Amendment.
3. Borrowers hereby confirm that any collateral for the Obligations,
including liens, security interests, mortgages, and pledges granted by Borrowers
or third parties (if applicable), shall continue unimpaired and in full force
and effect, and shall cover and secure all of Borrowers' existing and future
Obligations, as modified by this Fourth Amendment.
4. As a condition precedent to the effectiveness of this Fourth Amendment,
Borrowers shall comply with the terms and conditions (if any) specified in
Exhibit A.
5. This Fourth Amendment may be signed in any number of counterpart copies
and by the parties to this Fourth Amendment on separate counterparts, but all
such copies shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Fourth Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart.
Any party so executing this Fourth Amendment by facsimile transmission shall
promptly deliver a manually executed counterpart, provided that any failure to
do so shall not affect the validity of the counterpart executed by facsimile
transmission.
6. This Fourth Amendment will be binding upon and inure to the benefit of
Borrowers, Agent and Lenders and their respective successors and assigns.
7. This Fourth Amendment will be interpreted and the rights and liabilities
of the parties hereto determined in accordance with the laws of the State of New
Jersey, excluding its conflict of laws rules.
8. Except as amended hereby, the terms and provisions of the Loan Documents
remain unchanged, are and shall remain in full force and effect unless and until
modified or amended in writing in accordance with their terms, and are hereby
ratified and confirmed. Except as expressly provided herein, this Fourth
Amendment shall not constitute an amendment, waiver, consent or release with
respect to any provision of any Loan Document, a waiver of any default or Event
of Default under any Loan Document, or a waiver or release of any of Agent's or
Lenders' rights and remedies (all of which are hereby reserved). BORROWERS
EXPRESSLY RATIFY AND CONFIRM THE WAIVER OF JURY TRIAL PROVISIONS CONTAINED IN
THE LOAN DOCUMENTS.
[SIGNATURE PAGE FOLLOWS]
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WITNESS the due execution of this Fourth Amendment as a document under seal
as of the date first written above.
INTELLIGROUP, INC.
By: /s/ Nicholas Visco
---------------------------------------
Name: Nicholas Visco
Title: Chief Financial Officer
499 Thornall Street
Edison, New Jersey 08837
EMPOWER, INC.
By: /s/ Nicholas Visco
---------------------------------------
Name: Nicholas Visco
Title: Secretary
c/o Intelligroup, Inc.
499 Thornall Street
Edison, New Jersey 08837
PNC BANK, NATIONAL ASSOCIATION, as Lender
and as Agent
By: /s/ Alan Tischbein
---------------------------------------
Name: Alan Tischbein
Title: Vice President
PNC Business Credit
70 East 55th Street, 14th Floor
New York, New York 10022
Commitment Percentage: 100%
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EXECUTION VERSION
EXHIBIT A TO
FOURTH AMENDMENT TO LOAN DOCUMENTS
DATED AS OF OCTOBER 22, 2003
A. The "Loan Documents" that are the subject of this Fourth Amendment include
the following (as any of the foregoing have previously been amended, modified or
otherwise supplemented):
1. The Amended and Restated Revolving Credit Loan and Security Agreement
dated May 31, 2000, as amended by the First Amendment to Loan Documents
and Waiver Agreement dated March 27, 2002, as amended by the Second
Amendment to Loan Documents and Waiver Agreement dated January 6, 2003,
and as amended by the Third Amendment to Loan Documents dated July 21,
2003 (as amended, the "Loan Agreement"); and
2. All other documents, instruments, agreements, and certificates executed
and delivered in connection with the Loan Documents.
B. The Loan Documents are amended as follows:
1. The definitions of "Total Stockholders Equity" and "Unconsolidated
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Stockholders Equity" set forth in Article I of the Loan Agreement,
--------------------
"Definitions", are hereby amended and restated as follows:
"Total Stockholders Equity" shall mean, at a particular date, (a)
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the aggregate amount of all assets of Borrowers on a consolidated
basis as may be properly classified as such in accordance with GAAP
consistently applied (but exclusive of Borrowers' investment in
SeraNova), less (b) the aggregate amount of all liabilities of the
Borrowers on a consolidated basis. Notwithstanding anything
contained herein to the contrary, the computation of Total
Stockholders Equity shall exclude any changes thereto (positive or
negative) other than from the result of operations; and, more
specifically, excluded from this computation are: (i) any
non-operational factors, events or circumstances, such as, but not
limited to, the issuance of stock, options, warrants or similar
instruments, the repurchases or redemption of stock or unrealized
currency transactions, the sale (on terms acceptable to Lenders and
with the prior written consent of Lenders) of all or substantially
all of the stock or assets of any foreign Subsidiary of Borrowers,
provided that sales of other assets not in the ordinary course of
business shall be included in said computation; and (ii) the items
specified for this definition in the table set forth on the Covenant
Exclusion Schedule attached hereto and made a part hereof.
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"Unconsolidated Stockholders Equity" shall mean, at a particular
------------------------------------
date, (a) the aggregate amount of all assets of Borrowers and their
respective subsidiaries which are organized under the laws of one of
the states of the United States (but exclusive of Borrower's
investment in Sera Nova) on a consolidated basis as may be properly
classified as such in accordance with GAAP consistently applied,
less (b) the aggregate amount of all liabilities of the Borrowers
and such subsidiaries on a consolidated basis. Notwithstanding
anything contained hereto to the contrary, the definition of
Unconsolidated Stockholders Equity shall exclude any changes thereto
(positive or negative) other than from the results of operations;
and, more specifically, excluded from this computation are: (i) any
non-operational factors, events or circumstances, such as, but not
limited to, the issuance of stock, options, warrants or similar
instruments, the repurchases or redemption of stock or unrealized
currency transactions, the sale (on terms acceptable to Lenders and
with the prior written consent of Lenders) of all or substantially
all of the stock or assets of any foreign Subsidiary of Borrowers,
provided that sales of other assets not in the ordinary course of
business shall be included in said computation; and (ii) the items
specified for this definition in the table set forth on the Covenant
Exclusion Schedule attached hereto and made a part hereof.
2. Section 7.20 of Article VII of the Loan Agreement, "Negative Covenants",
are hereby amended and restated as follows:
7.20 Minimum EBITDA. Cause suffer or permit EBITDA, calculated
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on a quarter-by-quarter basis for each of the four fiscal quarters
and, at year-end only, on a year-to-date basis, to be or become less
than: (a) during the 2003 fiscal year (i) One Million Two Hundred
Thirty Nine Thousand Dollars ($1,239,000) as of the March 31, 2003
quarter-end; (ii) One Million Two Hundred Ninety Thousand Dollars
($1,290,000) as of the June 30, 2003 quarter-end, (iii) One Million
Seven Hundred Seventy Eight Thousand Dollars ($1,778,000) as of the
September 30, 2003 quarter-end, (iv) One Million Eight Hundred
Eighty Thousand Dollars ($1,880,000) as of the December 31, 2003
quarter-end, and (v) Six Million One Hundred Eighty Seven Thousand
Dollars ($6,187,000) for the fiscal year ending December 31, 2003,
and (b) thereafter, (i) as of the end of each fiscal year not less
than ninety-five percent (95%) of actual EBITDA as of the prior
fiscal year end and (ii) during each fiscal year, as of the end of
the first, second, third and fourth fiscal quarters, to be or become
less than twenty percent (20%), twenty-five percent (25%), thirty
percent (30%), and twenty-five percent (25%), respectively, of the
required total EBITDA for such fiscal year. Anything contained in
this Agreement to the contrary notwithstanding, for the purpose of
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calculating EBITDA the items specified for this subsection 7.20 in
the table set forth on the Covenant Exclusion Schedule attached
hereto and made a part hereof. shall be excluded from this
calculation, however, in all other respects EBITDA, shall be
determined in accordance with GAAP.
C. Waiver Agreement:
1. Borrowers hereby acknowledge that:
(a) Borrowers failed to comply with Section 7.20, "Minimum EBITDA"
--------------
of the Loan Agreement in that Section 7.20 requires that Borrowers maintain
EBITDA of not less than One Million Two Hundred Ninety Thousand Dollars
($1,290,000) as of June 30, 2003, however actual EBITDA was approximately Eight
Hundred Seventy Thousand Dollars ($870,000.00); and
(b) This failure to comply constitutes an Event of Default under the
terms and conditions of the Loan Agreement.
2. Borrowers have requested that Lenders waive:
(a) the requirement that Borrowers comply with Section 7.20 as of
the fiscal quarter ended June 30, 2003; and
(b) the rights and remedies available as a result of the existence
of the Event of Default enumerated in subsection 1 above.
3. Lenders hereby waive:
(a) the requirement that Borrowers comply with Section 7.20 as of
the fiscal quarter ended June 30, 2003; and
(b) the right to exercise the rights and remedies which are
available to Agent and Lenders pursuant to the Loan Agreement, at law and in
equity as a result of the existence of the Event of Default enumerated in
subsection 1 above.
This waiver is specific to the Event of Default and fiscal period
enumerated in subsection 1 above. This waiver is not intended and shall not be
deemed to extend to any other Event of Default whether known or unknown which
may presently exist under the Loan Agreement or which may occur hereafter.
D. In consideration of the facilities being granted by Agent and Lenders to
Borrowers under the terms and conditions of this Fourth Amendment and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the effectiveness of this Fourth Amendment is conditioned upon
satisfaction by the Borrowers of the following:
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1. Borrowers' payment to PNC of a Five Thousand Dollar
($5,000.00) amendment fee which, shall be due and payable
in full, and deemed non-refundable upon the execution and
delivery of this Fourth Amendment. Such fee may be paid by
Agent's charging an Advance against the Borrowers'
Revolving Loan and paying the proceeds of such Advance to
PNC. Borrowers hereby consent to Agent's making such
charge.
2. Agent's receipt of a fully executed counterpart of (a) this
Fourth Amendment, (b) a corporate resolution, in form and
substance acceptable to Agent, authorizing this Fourth
Amendment, and (d) all other documents and instruments in
conjunction with this Fourth Amendment as may be required by
Agent, in form and substance satisfactory to Agent.
3. Borrowers' payment to Agent's counsel, immediately upon
presentation of an invoice, of all reasonable fees and
expenses of such counsel incurred in conjunction with the
preparation and execution of this Fourth Amendment. Such
fees and expenses may be paid by Agent's charging an
Advance against the Borrowers' Revolving Loan and retaining
the proceeds of such Advance. Borrowers hereby consent to
Agent's making such charge.
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COVENANT EXCLUSION SCHEDULE
(TO BE UTILIZED IN CALCULATING COVENANT COMPLIANCE
DURING THE 2003 FISCAL YEAR ONLY)
<TABLE>
<CAPTION>
Q1 2003 Q2 2003 Q3 2003 Q4 2003 FY 2003
SECTION 7.18 - TOTAL STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Excluded items:
Proxy Contest Charges $297,000 - - - $297,000
Ashok Pandey Settlement - - $750,000 - $750,000
SeraNova Note Write-Off and Other Related Charges $5,060,000 - - - $5,060,000
Zions Bank - SeraNova Debt Guarantee Liability - $581,000 - - $581,000
Loss on Sale of Asia-Pacific Subsidiaries* $2,134,000 - - - $2,134,000
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Total $7,491,000 $581,000 $750,000 - $8,822,000
==================================================================
SECTION 7.19 - UNCONSOLIDATED STOCKHOLDERS' EQUITY
Excluded items:
Proxy Contest Charges $297,000 - - - $297,000
Ashok Pandey Settlement - - $750,000 - $750,000
SeraNova Note Write-Off and Other Related Charges $5,060,000 - - - $5,060,000
Zions Bank - SeraNova Debt Guarantee Liability - $581,000 - - $581,000
Loss on Sale of Asia-Pacific Subsidiaries* $4,450,000 - - - $4,450,000
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Total $9,807,000 $581,000 $750,000 - $11,138,000
===================================================================
SECTION 7.20 - MINIMUM EBITDA
Excluded items:
Proxy Contest $297,000 - - - $297,000
Ashok Pandey Settlement - - $750,000 - $750,000
SeraNova Note Write-Off and Other Related Charges $5,060,000 - - - $5,060,000
Zions Bank - SeraNova Debt Guarantee Liability - $581,000 - - $581,000
-------------------------------------------------------------------
Total $5,357,000 $581,000 $750,000 - $6,688,000
===================================================================
</TABLE>
* The reference to "Asia-Pacific Subsidiaries" shall be a reference to the stock
of Singapore Private, Ltd., Intelligroup Australia Pty. Ltd, Intelligroup Hong
Kong Ltd. and Intelligroup New Zealand Limited which was sold during the 2003
fiscal year.
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