-----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, KrZQxryyOsB49oItBBi3HXZFHNTLZl3fdv7Fv8DUgtQxrl7fx0fowu73v3SsiCl3 QlI++xA8VzF/n5nADJYI0w== 0000893816-04-000011.txt : 20040407 0000893816-04-000011.hdr.sgml : 20040407 20040407121208 ACCESSION NUMBER: 0000893816-04-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040402 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFOCROSSING INC CENTRAL INDEX KEY: 0000893816 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 133252333 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20824 FILM NUMBER: 04721737 BUSINESS ADDRESS: STREET 1: 2 CHRISTIE HEIGHTS STREET CITY: LEONIA STATE: NJ ZIP: 07605 BUSINESS PHONE: 2018404700 MAIL ADDRESS: STREET 1: 2 CHRISTIE HEIGHTS STREET CITY: LEONIA STATE: NJ ZIP: 07605 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER OUTSOURCING SERVICES INC DATE OF NAME CHANGE: 19930328 8-K 1 k8-sms2.txt ANNOUNCING THE SMS ACQUISITION & FINANCING U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 2, 2004 ------------- INFOCROSSING, INC. (Exact name of issuer as specified in its charter) Delaware 0-20824 13-3252333 ------------------------------ ----------- ------------------- (State or other jurisdiction of Commission (IRS Employer incorporation or organization) File Number Identification No.) 2 Christie Heights Street Leonia, New Jersey 07605 (Address of principal executive offices) (201) 840-4700 (Issuer's telephone number) N/A (Former name or former address, if changed since last report.) This report, in addition to the Company's recent historical results and condition, contains statements concerning certain trends and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements, in some cases, can otherwise be identified by terminology such as "may," "will," "should," "expect," "anticipate," "intend," "plan," "believe," "estimate," "potential," or "continue," the negative of these terms or other comparable terminology. These statements involve a number of risks and uncertainties including, but not limited to: incomplete or preliminary information; changes in government regulations and policies; continued acceptance of the Company's products and services in the marketplace; competitive factors; new products; technological changes; the Company's dependence on third party suppliers; intellectual property rights; difficulties with the integration of SMS; and other risks. For any of these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, Public Law 104-67, as amended. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report and are based on information currently and reasonably known. The Company undertakes no obligation to release any revisions to or update these forward-looking statements to reflect events or circumstances that occur after the date of this Report or to reflect the occurrence or effect of anticipated or unanticipated events. ITEM 2. AQUISITION OR DISPOSITION OF ASSETS On April 2, 2004, Infocrossing, Inc. (the "Company") announced that it had acquired all of the outstanding capital stock of ITO Acquisition Corporation, a California corporation doing business as Systems Management Specialists ("SMS"), from ITO Holdings, LLC ("Holdings") for approximately $35 million in cash and 135,892 shares of common stock of the Company (the "Acquisition"). The Acquisition was effected pursuant to a Stock Purchase Agreement, dated as of March 3, 2004 (the "Stock Purchase Agreement"), between Holdings and the Company. The Company issued a press release announcing consummation of the Acquisition. SMS, headquartered in Orange County, California, provides computing operations, business process outsourcing and managed application services to clients primarily located in the western United States. SMS's principal assets consist of rights under contracts, leases and licenses of the equipment, real estate and intellectual property used in performing its business. From and after the Acquisition, the Company anticipates that SMS will continue to operate its business as a wholly owned subsidiary of the Company. On April 2, 2004, the Company amended and restated its term loan agreement, dated as of October 21, 2003 (the "Term Loan Agreement"), among the Company, CapitalSource Finance LLC ("CapitalSource"), as agent and lender, and the other lenders that are party thereto to provide funding for the Acquisition. As amended, the Term Loan Agreement provides for a Tranche A facility and a Tranche B facility. The Company contributed $15 million in proceeds from the Tranche B facility to Holdings to consummate the Acquisition. The Term Loan Agreement is subject to certain restrictive covenants and is guaranteed by all of the Company's subsidiaries, including SMS, which entered into a guarantee and security agreement with CapitalSource (the "Guaranty and Security Agreement") to support the Term Loan Agreement. The Term Loan Agreement is also secured by a pledge of substantially all of the assets of the Company and all of its subsidiaries, including SMS, pursuant an amended and restated stock pledge agreement (the "Stock Pledge Agreement"). As disclosed on Form 8-K filed on April 1, 2004, the Company consummated a $30.6 million private placement of 2,917,000 shares of its common stock, the net proceeds of which were used in part to provide funding for the Acquisition. Immediately following the Acquisition, the Company appointed Patrick A. Dolan as President and Chief Operating Officer of the Company. Mr. Dolan, who previously served as a manager of Holdings and the Chairman and Chief Executive Officer of SMS, was also appointed to serve as the President of SMS. In addition, Robert B. Wallach, the former President of the Company, was promoted to the position of Vice-Chairman of the Board. The Stock Purchase Agreement, the Term Loan Agreement, the Guaranty and Security Agreement, the Stock Pledge Agreement, and Mr. Dolan's Employment Agreement are incorporated by reference herein and are attached hereto as exhibits, and the above descriptions of those documents and the transactions contemplated thereby are qualified in their entirety by reference to those exhibits. Reference is hereby made to the Company's press release dated April 5, 2004 relating to the Acquisition, which press release is attached hereto as Exhibits 99.1 and incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. The financial statements required by this Item are not included herein but will be filed by amendment not later than 60 days after the date that this report must be filed. (b) Pro Forma Financial Information The financial statements required by this Item are not included herein but will be filed by amendment not later than 60 days after the date that this report must be filed. (c) Exhibits: 2.1 Stock Purchase Agreement, dated as of March 3, 2004, between the Company and Holdings. 10.1 Amended and Restated Term Loan Agreement, dated as of April 2, 2004, among the Company, the lenders party thereto and CapitalSource. 10.2 Guaranty and Security Agreement, dated as of April 2, between SMS and CapitalSource. 10.3 Amended and Restated Stock Pledge Agreement, dated as of April 2, 2004, among the Company, Amquest, Inc. and CapitalSource. 10.4 Employment Agreement, dated as of April 2, 2004 by and between the Company and Patrick A. Dolan. 10.5 Employment Agreement, dated as of April 2, 2004 by and between the Company and Jim Cortens. 99.1 Press Release dated April 5, 2004. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. INFOCROSSING, INC. Date: April 7, 2004 /s/ WILLIAM J. McHALE ---------------------------------------- William J. McHale Senior Vice President of Finance EX-2 2 ex2-1sms.txt SMS STOCK PURCHASE AGREEMENT EXHIBIT 2.1 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March 3, 2004 by and between ITO HOLDINGS, LLC, a California limited liability company ("Seller") and INFOCROSSING, INC., a Delaware corporation ("Purchaser"). W I T N E S S E T H: WHEREAS, Seller owns 1,000,000 shares (the "Shares") of common stock of ITO Acquisition Corporation, a California corporation (the "Company"), such Shares being all of the outstanding shares of capital stock of the Company; WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the Shares pursuant to this Agreement; and WHEREAS, it is the intention of the parties hereto that, upon consummation of the purchase and sale of the Shares pursuant to this Agreement, Purchaser shall own all of the outstanding shares of capital stock of the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises hereinafter contained, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto intending to be legally bound hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. (a) Defined Terms. When used in this Agreement, the following terms shall have the respective meanings specified therefor below. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; provided that, for the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise and provided, further, that an Affiliate of any Person shall also include (i) any Person that directly or indirectly owns more than five percent (5%) of any class of capital stock or other equity interest of such Person, (ii) any officer, director, trustee or beneficiary of such Person, (iii) any spouse, parent, sibling or descendant of any Person described in clauses (i) or (ii) above, and (iv) any trust for the benefit of any Person described in clauses (i) through (iii) above or for any spouse, issue or lineal descendant of any Person described in clauses (i) through (iii) above. "Asset Transactions" shall mean each of the transactions consummated pursuant to (i) that certain Asset Purchase Agreement, dated as of October 1, 2002, between the Company and Systems Management Specialists, Inc., a Delaware corporation, as amended, (ii) that certain Asset Purchase Agreement, dated as of June 27, 2003, between the Company and Acxiom Corporation, a Delaware corporation and (iii) each other agreement to which the Company is a party entered into in connection with either of the Asset Purchase Agreements described in clauses (i) and (ii) above. "Books and Records" shall mean any and all of the books, records, contracts, agreements and files of a Person, existing on or after the date of this Agreement, including computer records and electronic copies of such information. "Brea Facility" shall mean the real estate facility located at 3300 Birch Street, Brea, California 92821 as more particularly described in the Brea Facility Lease. "Brea Facility Lease" shall mean that certain Lease Agreement, dated as of December 19, 2002, with respect to the Brea Facility, between Global Brea LLC, as successor-in-interest to Birch Windell, LLC, as lessor, and the Company as lessee, as amended as of January 1, 2004. "Business Day" shall mean any day, other than a Saturday, Sunday or a day on which banks located in New York, New York or Los Angeles, California shall be authorized or required by law to close. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at Closing Date and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Company Intellectual Property" shall mean any Intellectual Property or rights thereto used by the Company in connection with its business and owned by or under license to the Company. "Company Property" shall mean any real property and improvements owned (directly, indirectly, or beneficially), leased, used, held for use, operated or occupied by the Company. "Environmental Law" shall mean any Law, Order or other requirement of Law, including any principle of common Law, relating to pollution or the protection of human health or the environment, or to the identification, manufacture, use, transport, treatment, storage or Release of Hazardous Substances, including (i) CERCLA, (ii) the Toxic Substances Control Act, (iii) the Hazardous Materials Transportation Act, (iv) the Resource Conservation and Recovery Act, (v) the Clean Water Act, (vi) the Safe Drinking Water Act, (vii) the Clean Air Act, (viii) the Occupational Safety and Health Act, (ix) the Federal Insecticide, Fungicide, Rodenticide Act, (x) the Atomic Energy Act, and (xi) the Emergency Planning and Community Right-to-Know Act. "Escrow Agent" shall mean the Escrow Agent named in the Escrow Agreement. 'Escrow Agreement" shall mean the duly executed escrow agreement among Purchaser, Seller and the escrow agent named therein substantially in the form attached hereto as Exhibit D, subject to any modifications required by the Escrow Agent and agreed upon by Purchaser and Seller. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Facilities" shall mean each of the Brea Facility and the Woodland Hills Facility. "Facility Leases" shall mean each of the Brea Facility Lease and the Woodland Hills Facility Lease. "GAAP" shall mean U.S. generally accepted accounting principles. "Governmental or Regulatory Authority" shall mean any instrumentality, subdivision, court, administrative agency, commission, official or other authority of the United States or any other country or any state, province, prefect, municipality, locality or other government or political subdivision thereof, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority. "Hazardous Substance" shall mean (a) any material, substance or waste (whether liquid, gaseous or solid) that: (i) requires removal, remediation or reporting under any Environmental Law, or is listed, classified or regulated as a "hazardous waste" or "hazardous substance" (or other similar term) pursuant to any applicable Environmental Law or (ii) is regulated under applicable Environmental Laws as being, toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and (b) any petroleum product or by-product, petroleum-derived substances wastes or breakdown products, asbestos or polychlorinated biphenyls. "Hosted Materials" shall mean any software applications, databases or other materials that are (i) owned by a customer of the Company, or licensed by such customer from a third party, and (ii) provided to the Company by or on behalf of, and hosted by the Company for, such customer. For the purposes of clarity, any software applications, databases or other materials that the Company owns or licenses from a third party and hosts or uses for its customers shall be deemed to be Company Intellectual Property, and not Hosted Materials. "Indebtedness" of any Person shall mean and include (i) indebtedness for borrowed money, whether or not contingent, or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (ii) amounts owing as deferred purchase price for property or services, including all Seller notes and "earn-out" payments, (iii) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security, (iv) obligations or commitments to repay deposits or other amounts advanced by and owing to third parties, (v) obligations under any interest rate, currency or other hedging agreement, (vi) any obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, which such obligation is required to be treated as a capitalized lease under GAAP, or (vii) guarantees or other contingent liabilities (including so called take-or-pay or keep-well agreements) with respect to any indebtedness, obligation, claim or liability of any other Person of a type described in clauses (i) through (vi) above. Indebtedness shall not, however, include accounts payable to trade creditors and accrued expenses arising in the ordinary course of business consistent with past practice and shall not include the endorsement of negotiable instruments for collection in the ordinary course of business. "Intellectual Property' shall mean all intellectual property or other proprietary rights of every kind, foreign or domestic, including all: (i) inventions (whether or not patentable), patents, patent applications, invention disclosures, and other rights of invention; (ii) trademarks, service marks, trade names, trade dress, logos, domain names, product names and slogans, including any common law rights, registrations, and applications for registration for any of the foregoing, and the goodwill associated with all of the foregoing; (iii) copyrights and other rights of authorship, and any applications, registrations and renewals in connection therewith; (iv) trade secrets, know-how and confidential and proprietary business or technical information, including, without limitation, customer and supplier lists and related information, pricing and cost information, business and marketing plans, any other financial, marketing and business data, technical data, processes, formulations, specifications and schematics; (v) computer applications, operating systems, electronic data and databases, web sites (including all related computer code and content) and any other software (including source code and object code) or documentation for any of the foregoing; (vi) rights to exclude others from appropriating any of such intellectual property including the rights to sue for and remedies against past, present and future infringements of any or all of the foregoing and rights of priority and protection of interests therein under the laws of the United States and abroad; and (vii) any licenses and other proprietary, intellectual property and other rights relating to any or all of the foregoing. "IRS" shall mean the United States Internal Revenue Service. "Key Employees" shall mean the individuals set forth in Schedule 1.1(a). "Law" shall mean any statute, law, ordinance, rule or regulation of or by any Governmental or Regulatory Authority. "Liens" shall mean liens, security interests, options, rights of first refusal, claims, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, licenses to third parties, leases to third parties, security agreements, or any other encumbrances and other restrictions or limitations of any kind, including any Lien under ERISA or the Code. "Material Adverse Effect" shall mean, (i) when used with respect to the Company, any effect, event, occurrence, development, circumstance, change or condition that, individually or in the aggregate with other effects, events, occurrences, developments, circumstances, changes or conditions is, or would reasonably be expected to be, materially adverse to the business, property, assets, liabilities, results of operation, condition (financial or otherwise) of the Company, other than changes or effects relating to general economic conditions, which do not disproportionately affect the Company, or (ii) when used with respect to Purchaser or Seller, as the case may be, any materially adverse change in or effect on (including any material delay) the ability of Purchaser or Seller, as the case may be, to perform their respective obligations hereunder or under the Transaction Documents. "Order" shall mean any judgment, order, consent order, injunction, decree, writ, permit, demand letter or license of any Governmental or Regulatory Authority or any arbitrator. "Organizational Documents" means, with respect to any corporation, its charter, by-laws and any agreements with shareholders; with respect to any partnership, its certificate of partnership and partnership agreement; with respect to any limited liability company, its certificate of formation and limited liability company or operating agreement; with respect to any trust, its declaration or agreement of trust; and with respect to each other Person, its comparable constitutional instruments or documents; together, in each case, with any and all amendments thereto and all material consents and other instruments delegating authority pursuant to such Organizational Documents. "Permit" shall mean any permit (including occupancy permit), certificate, license, consent or authorization of any Governmental or Regulatory Authority. "Permitted Liens" shall mean (i) Liens consisting of zoning or planning restrictions or regulations, easements, Permits, restrictive covenants, encroachments and other restrictions or limitations on the use of real property or irregularities in, or exceptions to, title thereto which, individually or in the aggregate, do not materially detract from the value of, or impair the use of, such property by the Company, (ii) Liens for current Taxes, assessments or governmental charges or levies not yet due and payable or (iii) those Liens set forth on Schedule 1.1(b) hereto. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an incorporated organization and a Governmental or Regulatory Authority. "Purchaser Common Stock" shall mean the common stock of Purchaser, par value $0.01 per share. "Release" shall mean the release, spill, emission, leaking, pumping, pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge, dispersal, leaching or migrating of any Hazardous Substance into the indoor or outdoor environment. "Representatives" of a Person shall mean the directors, officers, employees, agents, advisors and other representatives, including financial advisors, consultants, accountants and counsel of such Person. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Subsidiary" shall mean, with respect to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is owned by such Person directly or indirectly through one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through one or more Subsidiaries of such Person has more than a 50% equity interest. "Taxes" shall mean all federal, state, local, foreign and other income, franchise, profits, gross receipts, capital gains, capital stock, transfer, sales, use, value added, occupation, property, excise, severance, windfall profits, stamp, license, payroll, social security, withholding and other taxes, assessments, charges, duties, fees, levies or other similar governmental charges (whether payable directly or by withholding and whether or not requiring the filing of a Return (as defined below)), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result (i) of transferee liability, (ii) of being a member of a combined, consolidated, unitary or affiliated group or (iii) of a contractual obligation to indemnify any Person or other entity. "Transaction Documents" shall mean the Escrow Agreement and all other instruments, certificates and documents required to be delivered by the parties hereto pursuant to this Agreement. "Woodland Hills Facility" shall mean the real estate facility located at 21051 Warner Center Lane, Suite 200, Woodland Hills, California, 91367, as more particularly described in the Woodland Hills Facility Lease. "Woodland Hills Facility Lease" shall mean that certain Lease, dated as of March 27, 2003, with respect to the Woodland Hills Facility, between CarrAmerica Realty Corporation and Acxiom Corporation. (b) Additional Defined Terms. In addition to the terms defined in Section 1.1(a), the following terms shall have the respective meanings assigned thereto in the sections indicated below. Defined Term Section Acquisition Proposal 5.9(a)(i) Acxiom Business 5.7(l)(ii) Agreed Claims 8.3(c) Agreement Preamble Appraisals 5.7(l) Balance Sheet 3.7(a) Balance Sheet Date 3.7(a) BDO 5.7(l) Bingham Agreement 2.7 Cash Consideration 2.1 Certificate 8.3(a) Claims 5.12(a) Closing 2.3 Closing Cash Consideration 2.2(a)(i) Closing Date 2.3 Common Stock 3.5 Company First Recital Confidential Information 5.2(b) Confidentiality Agreement 5.2(a) Contract 3.3(a)(iii) Controlled Group 3.21(i) Cut-off Time 9.1(d) Draft Financial Statements 3.7(a) Employee Benefit Plans 3.21(a)(iv) ERISA 3.21(a)(i) Escrow Amount 2.2(a)(i) Financial Statements Consents 5.7(l)(v) Financial Statements Deliveries 5.7(l)(v) Historical Financial Statements 5.7(l)(iii) Historical Financial Statements Auditor's Report 5.7(l)(iv) Indemnified Party 8.3(a) Indemnifying Party 8.3(a) Insurance Policies 3.16 Losses 8.2(a) Moore Stephens 5.7(l) Material Customers 3.19 Material Suppliers 3.19 Multiemployer Plan 3.21(c)(i) Proposed Debt Financing 4.7 Proposed Equity Financing 4.7 Proposed Financing Transactions 4.7 Purchase Price 2.1 Purchaser Preamble Purchaser Indemnitee 8.2(a) Purchaser SEC Reports 4.3 Purchaser's Unlimited Warranty 8.1(b) Returns 3.15 Seller Preamble Seller Claims 5.11 Seller Indemnitee 8.2(b) Seller's Expenses 2.7 Seller's Expenses Certificate 2.7 Seller's Unlimited Warranties 8.1(b) Shares First Recital SMS Business 5.7(l)(i) Stock Consideration 2.1 Unaudited Balance Sheet 3.7(a) Unaudited Balance Sheet Date 3.7(a) WARN 3.20(j) Warranty Claim 3.28 1.2 Construction. In this Agreement, unless the context otherwise requires: (a) any reference in this Agreement to "writing" or comparable expressions includes a reference to facsimile transmission or comparable means of communication; (b) words expressed in the singular number shall include the plural and vice versa, words expressed in the masculine shall include the feminine and neuter gender and vice versa; (c) references to Articles, Sections, Exhibits, Schedules and Recitals are references to articles, sections, exhibits, schedules and recitals of this Agreement; (d) reference to "day" or "days' are to calendar days; (e) this "Agreement" or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; and (f) "include," "includes," and "including" are deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of similar import. 1.3 Schedules and Exhibits. The Schedules and Exhibits to this Agreement are incorporated into and form an integral part of this Agreement. If an Exhibit is a form of agreement, such agreement, when executed and delivered by the parties thereto, shall constitute a document independent of this Agreement. 1.4 Knowledge. (a) Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of Seller, it means the actual knowledge of the Key Employees after having made reasonable inquiry of Seller and the Company as to the matters that are the subject of such representations and warranties. (b) Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of Purchaser, it means the actual knowledge of Zach Lonstein and Robert Wallach after having made reasonable inquiry of Purchaser as to the matters that are the subject of such representations and warranties. ARTICLE II SALE OF SHARES 2.1 Sale of Shares. On the terms and subject to the conditions set forth in this Agreement, Seller agrees to sell, assign, transfer and deliver to Purchaser at the Closing, and Purchaser agrees to purchase from Seller at the Closing, the Shares, free and clear of any and all Liens (other than restrictions or limitations on transfer under the Securities Act and other applicable securities Laws). The purchase price (the "Purchase Price") for the Shares is $35,034,265 in cash (the "Cash Consideration"), subject to adjustment as provided in Section 2.2, and the Stock Consideration. 2.2 Determination and Payment of Closing Payment. (a) In consideration for the sale of the Shares by Seller to Purchaser, Purchaser shall deliver to Seller at the Closing (i) an amount in cash (the "Closing Cash Consideration") equal to the Cash Consideration less $3,650,000 (the "Escrow Amount") and the aggregate amount of any Seller's Expenses that have been paid by the Company on or prior to the Closing Date as set forth on the Seller's Expenses Certificate and (ii) 135,892 shares of Purchaser Common Stock (such shares, the "Stock Consideration"). Purchaser shall deliver the Closing Cash Consideration by wire transfer of immediately available funds to the account notified by Seller in writing to Purchaser at least two (2) Business Days prior to the Closing Date. (b) Notwithstanding the foregoing, Purchaser shall be entitled to deduct and withhold from the Closing Cash Consideration such amounts as Purchaser is required to deduct and withhold under the Code with respect to the payment of the Purchase Price; provided, however, that Purchaser shall not deduct and withhold from the Closing Cash Consideration any amount if Purchaser has received the certificate described in Section 2.4(d) at least two (2) Business Days prior the Closing Date. To the extent amounts are so withheld by Purchaser, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller. If Purchaser intends to deduct and withhold from the Closing Cash Consideration any amount as required with respect to the preceding sentence, Purchaser shall, not less than two (2) Business Days prior to the Closing Date, notify Seller of such intent and requirement based on the receipt by Purchaser of a legal opinion from legal counsel. 2.3 Closing. Subject to the terms and conditions of this Agreement, except as otherwise agreed by the parties, the sale of the Shares referred to in Section 2.1 (the "Closing") shall take place within three Business Days following the date on which all of the conditions to the obligations of the parties set forth in Article VI have been satisfied or waived (other than the delivery of the certificates, opinions and documents that are to be delivered at the Closing pursuant hereto); provided, however, that in no event shall the Closing take place prior to April 1, 2004. The Closing shall take place at such place as the parties hereto shall agree. Such date is referred to herein as the "Closing Date". 2.4 Closing Date Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following: (a) the certificates representing the Shares duly endorsed in blank, or accompanied by either stock powers duly executed in blank by Seller or such other instruments of transfer as are reasonably acceptable to Purchaser in each case, with all necessary transfer tax and other revenue stamps, acquired at Seller's expense, affixed and canceled; (b) (i) copies of the Company's articles of incorporation as in effect on the Closing Date, including all amendments thereto, in each case certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation, (ii) a certificate from the Secretary of State or other appropriate official of the jurisdiction of incorporation of the Company to the effect that the Company is in good standing or subsisting in such jurisdiction and listing all charter documents of the Company on file, (iii) a certificate from the Secretary of State or other appropriate official of each state in which the Company is qualified to do business to the effect that the Company is in good standing in such state, and (iv) a copy of the by-laws of the Company, certified by the Secretary of the Company as being true and correct as of the Closing Date; (c) resignation letters, effective on the Closing Date, executed by each of the members of the Board of Directors of the Company, pursuant to which each of them has resigned as a member of the Board of Directors of the Company; (d) an affidavit, stating under penalty of perjury, that the indicated number is Seller's United States taxpayer identification number and that Seller is not a foreign person, pursuant to Section 1445(b)(2) of the Code; (e) the Seller's Expenses Certificate and the Bingham Agreement; (f) a receipt for the Closing Cash Consideration and the Stock Consideration; (g) the certificates, opinions and other documents required to be delivered by Seller pursuant to Section 6.1; and (h) such other instruments, agreements, certificates and documents as shall be reasonably requested by Purchaser to make effective the transactions contemplated hereby. 2.5 Closing Date Deliveries by Purchaser. (a) At the Closing, Purchaser shall deliver or cause to be delivered to Seller the following: (i) the Closing Cash Consideration in accordance with Section 2.2; (ii) a stock certificate duly registered in the name of Seller representing the Stock Consideration; (iii) a receipt for the Shares; (iv) the certificates, opinions and other documents required to be delivered by Purchaser pursuant to Section 6.2; and (v) such other instruments, agreements, certificates and documents as shall be reasonably requested by Seller to make effective the transactions contemplated hereby. (b) At the Closing, Purchaser shall wire transfer in immediately available funds the Escrow Amount to an account designated in writing to Purchaser at least two (2) Business Days prior to the Closing Date by the Escrow Agent. 2.6 Purchaser Stock. The certificate representing the Stock Consideration issued to Seller shall bear the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR SECURITIES REGULATORS OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE, NOR MAY ANY INTEREST THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY, SUBJECT TO CERTAIN EXCEPTIONS, A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, IN FORM AND SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO INFOCROSSING, INC." 2.7 Transaction Costs of the Company. Except as provided in Section 10.1, Seller shall be responsible for, all fees and expenses of counsel and other professional advisors incurred by Seller or the Company in connection with the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby ("Seller's Expenses"). No later than two (2) Business Days prior to the Closing Date, Seller shall deliver to Purchaser a certificate of Seller (the "Seller's Expenses Certificate"), along with such supporting documentation as may reasonably be required by Purchaser, signed by a duly authorized officer of Seller certifying (i) that the only fees and expenses that constitute Seller's Expenses are the fees and expenses of Bingham McCutchen LLP and (ii) as to the aggregate amount of any Seller's Expenses that have been paid or will be paid by the Company at or prior to the Closing Date. Seller will also deliver to Purchaser a letter agreement among Seller, Bingham McCutchen LLP and the Company (the "Bingham Agreement"), pursuant to which Bingham McCutchen LLP (i) agrees that Seller shall be solely responsible for any Seller's Expenses not paid at or prior to the Closing Date and (ii) waives, and releases the Company from, any demand, right, claim or other entitlement Bingham McCutchen LLP may have against the Company for any Seller's Expenses. ARTICLE III REPRESENTATIONS OF SELLER 3. Representations of Seller. Seller represents and warrants on the date hereof and on the Closing Date as follows: 3.1 Ownership of Shares; Existence and Good Standing of Seller. (a) Seller is the sole lawful owner, beneficially and of record, of all of the Shares, free and clear of all Liens or other restrictions or limitations on transfer (other than any restrictions under the Securities Act and other applicable securities Laws). The delivery to Purchaser of the Shares pursuant to this Agreement will transfer to Purchaser good and valid title to all of the outstanding capital stock of the Company, free and clear of all Liens. (b) Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California and has all requisite limited liability company power and authority to own, lease, operate and use the assets and properties currently owned, leased, operated and used by it and to own and operate its business as now conducted. 3.2 Authority and Enforceability. Seller has the limited liability company power and authority to execute and deliver this Agreement and the other instruments and agreements to be executed and delivered by Seller as contemplated hereby. Seller has the limited liability company power and authority to consummate the transactions contemplated hereby and by the other instruments and agreements to be executed and delivered by Seller as contemplated hereby, including the sale, assignment, transfer and conveyance of the Shares pursuant to this Agreement. The execution, delivery and performance of this Agreement, and all other instruments and agreements to be executed and delivered by Seller as contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all requisite limited liability company and member action on the part of Seller and its members and no other limited liability company proceedings or approvals on the part of Seller or its members is necessary to authorize the execution, delivery and performance of this Agreement and such other instruments and agreements by Seller or the consummation of the transactions contemplated hereby and thereby. This Agreement and all other instruments and agreements to be executed and delivered by Seller as contemplated hereby, when delivered in accordance with the terms hereof, assuming the due execution and delivery of this Agreement and each such other document by the other parties hereto and thereto, shall have been duly executed and delivered by Seller and shall be legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights generally and to general equitable principles. 3.3 Consents and Approvals; No Violations. (a) Other than as set forth in Schedule 3.3(a), the execution and delivery of this Agreement by Seller do not, the execution and delivery by Seller of the other instruments and agreements to be executed and delivered by Seller as contemplated hereby will not, and the consummation by Seller of the transactions contemplated hereby and thereby will not (with or without due notice or lapse of time or both), result in the creation of any Lien on any of the properties or assets of Seller or the Company, or result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under: (i) any provision of the Organizational Documents of Seller or the Company; (ii) subject to obtaining and making any of the approvals, consents, notices and filings set forth in Schedule 3.3(b), any Law or Order applicable to Seller or the Company or by which any of their respective properties or assets may be bound; (iii) any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, license, franchise, permit, agreement, understanding, arrangement, contract, commitment, lease, franchise agreement or other instrument or obligation (whether oral or written) (each, including all amendments thereto, a "Contract") to which Seller or the Company is a party, or by which they or any of their respective properties or assets is bound; except in the case of clause (iii) above, for such violations, filings, permits, consents, approvals, notices, breaches or conflicts which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller or the Company. (b) Except for such filings and approvals as are set forth in Schedule 3.3(b), no consent, approval, Permit, registration, report or action of, filing with, notice to or authorization of, any Governmental or Regulatory Authority or any other Person is necessary or required (i) under any of the terms, conditions or provisions of any Law or Order applicable to Seller or the Company or by which any of Seller's or the Company's respective properties or assets may be bound or (ii) under any material Contract to which Seller or the Company is a party or by which any of them or any of their respective assets or properties may be bound, in each case, in connection with the execution and delivery of this Agreement by Seller, the performance by Seller of its obligations hereunder or the consummation by Seller of the transactions contemplated hereby; except in the case of clause (ii) above solely with respect to Seller, for such consents, approvals, Permits, registrations, reports, filings or notices which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller. 3.4 Existence and Good Standing of the Company. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to own, lease, operate and use the assets and properties currently owned, leased, operated and used by it and to own and operate its business as now conducted. (b) The Company is duly qualified to do business in, and is in good standing in, each jurisdiction in which the character or location of the properties owned, leased or operated by the Company, or the nature of the business conducted by the Company, makes such qualification necessary, except for such jurisdictions where the failure to be so qualified or licensed and in good standing could not reasonably be expected to have a Material Adverse Effect with respect to the Company. Seller has delivered to Purchaser true and correct copies of the Organizational Documents of the Company as in effect on the date hereof. 3.5 Capital Stock. The Company has an authorized capitalization consisting of 1,000,000 shares of common stock ("Common Stock"), of which no shares are issued and outstanding other than the Shares and no shares are held in the Company's treasury. The Shares have been duly authorized and validly issued, are fully paid and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights. Except as described above, no shares of capital stock of the Company are authorized, issued, outstanding or reserved for issuance. There are no outstanding or authorized options, warrants, preemptive or other rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments contingent or otherwise, relating to the capital stock of, or other equity or voting interest in, the Company, pursuant to which the Company is or may become obligated to issue, deliver or sell or cause to be issued, delivered or sold, shares of Common Stock, any other shares of the capital stock of, or other equity or voting interest in, the Company or any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire, any shares of the capital stock of, or other equity or voting interest in, the Company. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the capital stock of, or other equity or voting interest in, the Company. The Company has no authorized or outstanding bonds, debentures, notes or other Indebtedness the holders of which have the right to vote (or that are convertible into, exchangeable for, or evidencing the right to subscribe for or acquire securities having the right to vote) with the shareholders of the Company on any matter. There are no Contracts to which the Company is a party or by which the Company is bound to (i) repurchase, redeem, retire, defease or otherwise acquire any shares of capital stock of, or other equity or voting interest in, the Company or any other Person or (ii) vote or dispose of any shares of capital stock of, or other equity or voting interest in, the Company. There are no outstanding proxies and no voting agreements with respect to any shares of capital stock of, or other equity or voting interest in, the Company. 3.6 Subsidiaries. The Company has no Subsidiaries and has never had any Subsidiaries. The Company does not own, directly or indirectly, any capital stock of, or other equity, ownership, proprietary or voting interest in, any Person. 3.7 Financial Statements; Accounts Receivable. (a) Seller has furnished Purchaser with (i) a draft of the audited balance sheet of the Company (the "Balance Sheet") as of December 31, 2003 (the "Balance Sheet Date") and the related audited statements of operations, shareholders' equity and cash flows for the year then ended, together with a draft certification by BDO, (ii) a draft of the audited statements of operations, shareholders' equity and cash flows for the one (1) month ended December 31, 2002, together with a draft certification by BDO ((i) and (ii) collectively, the "Draft Financial Statements"). In addition, Seller has furnished Purchaser with the unaudited balance sheet of the Company as at January 31, 2004 and the related unaudited statements of operations, shareholders' equity and cash flows for the one (1) month then ended. The unaudited balance sheet of the Company as at January 31, 2004 (the "Unaudited Balance Sheet Date") is hereinafter referred to as the "Unaudited Balance Sheet". The financial statements referred to above, including the footnotes thereto, (i) except as described therein or, with respect to the Draft Financial Statement, as set forth in Schedule 3.7(a), have been prepared in accordance with GAAP consistently applied throughout the periods indicated, subject, in the case of the Unaudited Balance Sheet and the unaudited statements of operations, shareholder' equity and cash flows for the one (1) month ended January 31, 2004, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be material) and the absence of notes (that, if presented, would not differ materially from those included in the Balance Sheet) and (ii) are consistent with the Books and Records of the Company. (b) Except as set forth in Schedule 3.7(a), the Draft Financial Statements fairly present, in all material respects, the financial condition of the Company as of the dates thereof and the related statements of operations, shareholders' equity and cash flows fairly present, in all material respects, the results of the operations and cash flows of the Company and the changes in its financial condition for the periods indicated. (c) The Unaudited Balance Sheet fairly presents, in all material respects, the financial condition of the Company as of the date thereof and the related statements of operations, shareholders' equity and cash flows fairly present, in all material respects, the results of operations and cash flows of the Company and the changes in its financial condition for the period indicated. (d) All of the Company's accounts and notes receivable as at the Closing Date have arisen from bona fide sales transactions in the ordinary course of business, are carried at values determined in accordance with GAAP consistently applied, and, to the knowledge of Seller, are legal, valid and binding obligations of the respective debtors. Except as set forth in Schedule 3.7(d), to the knowledge of Seller, no Person has any Lien on, valid set-off or counterclaim against any of the Company's accounts or notes receivable, other than Permitted Liens. Except as otherwise reflected on the Unaudited Balance Sheet, there has been no material adverse change since the Balance Sheet Date in the amount of accounts and notes receivable of the Company or the allowances or reserves with respect thereto, or accounts payable of the Company, from that reflected in the Balance Sheet. 3.8 Liabilities; Indebtedness. (a) Except as set forth in Schedule 3.8(a), the Company has no claims, obligations or liabilities, whether absolute, accrued, due or to become due, inchoate, contingent or otherwise, except for (i) claims, obligations or liabilities set forth in the Balance Sheet or specifically disclosed in the footnotes thereto, (ii) claims, obligations or liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business consistent with past practice and which, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect with respect to the Company, (iii) obligations or liabilities arising in connection with the performance (and not the breach by the Company) of Contracts set forth on Schedule 3.13(a) and Contracts which are not required to be set forth on Schedule 3.13(a), in each case, in accordance with the terms of such Contracts (none of which obligations or liabilities results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement or violation of applicable Law) and (iv) claims, obligations or liabilities which do not exceed $15,000 individually or $30,000 in the aggregate. (b) Except as set forth in Schedule 3.8(b), the Company has no Indebtedness (within the meaning of clauses (i) and (iii) of the definition thereof) or any guarantees or other contingent liabilities with respect thereto. 3.9 Books and Records. Except as set forth or disclosed in Schedule 3.9, the minute book of the Company, as previously made available to Purchaser and its Representatives, contains accurate records of all meetings of, and corporate action taken by (including action taken by written consent) the sole shareholder and Board of Directors of the Company. Except as set forth or disclosed in Schedule 3.9, none of the Company's Books and Records are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Company. 3.10 Title to Personal Properties. Except as set forth in Schedule 3.10, the Company has good and valid title to or, in the case of leased assets, a good and valid leasehold interest in, free and clear of all Liens, except for Permitted Liens, all of the tangible and intangible personal property and assets reflected in the Balance Sheet or thereafter acquired, except for properties and assets disposed of in the ordinary course of business, consistent with past practice, since the date of the Balance Sheet. The Company owns or has the exclusive right to use all of the tangible personal properties and assets necessary for the conduct of its business as currently conducted. All of the tangible personal property used in the business of the Company (including furniture, fixtures, furnishing, machinery, equipment, computer hardware, appliances and vehicles) (a) is in good operating condition and repair, subject to normal wear and tear and (b) is useable in the ordinary course of business consistent with past practice. 3.11 Owned Real Property. The Company does not own any real property. 3.12 Leased Real Property. Except as set forth in Schedule 3.12: (i) the Company has a good and valid leasehold interest in, and enjoys peaceful and undisturbed possession of, the Facilities pursuant to the respective Facility Leases; (ii) each of the Facility Leases is a legal, binding and enforceable obligation against the Company and is in full force and effect, and the Company has not received any notice from the lessor under any Facility Lease that the such Facility Lease is not in full force and effect; (iii) no amount payable under any Facility Lease is past due beyond any applicable cure period; (iv) the Company is in compliance with all covenants, commitments and obligations on its part to be performed or observed under each of the Facility Leases and is not in violation or default thereunder and Seller does not have knowledge of the failure by any other party to any such lease to comply with all of its commitments and obligations or to be in violation or default thereunder; (v) the Company has not received any notice which has not heretofore been cured or resolved of any breach or demand for performance under any of the Facility Leases and is not a party to any other agreement with the lessor of any of the Facilities which gives such lessor, as a remedy for any breach of such other agreement, any right to terminate or alter the terms of the Facility Lease to which such lessor is a party; (vi) all material buildings, structures, fixtures and building systems included in the Facilities are in proper condition and repair to operate such facilities in the manner in which they are currently being operated; (vii) the Company has not received notice from any Governmental or Regulatory Authority that any of such buildings, structures, fixtures and systems are not presently used and operated in compliance with all material covenants, easements, agreements, legal requirements, zoning and restrictions affecting any of the Facilities; and (viii) except for the Facility Leases, there is no real property lease or sublease to which the Company is a party, and the Company does not have any other possessory interest in real property. 3.13 Material Contracts. (a) Schedule 3.13(a) sets forth an accurate and complete list of the following Contracts to which the Company is a party and by which it is currently bound or pursuant to which the Company's business is subject or in respect of which assets, rights or properties are held for use by the Company by any other Person: (i) all Contracts which contain restrictions with respect to payment of dividends or any other distribution in respect of the capital stock or other equity interests of the Company; (ii) all Contracts relating to capital expenditures or other purchases of material, supplies, equipment or other tangible assets or properties (other than purchase orders for inventory or supplies in the ordinary course of business consistent with past practice) in excess of $20,000 individually; (iii) all Contracts involving a loan (other than accounts receivable from trade debtors in the ordinary course of business consistent with past practice) or advance to (other than travel and entertainment allowances to the employees of the Company extended in the ordinary course of business consistent with past practice), or investment in, any Person or any Contract relating to the making of any such loan, advance or investment; (iv) all Contracts involving Indebtedness of the Company; (v) all Contracts (including so called take-or-pay or keep-well agreements) under which any Person (other than the Company) has directly or indirectly guaranteed Indebtedness of the Company; (vi) all Contracts granting or evidencing a Lien on any properties or assets of the Company, other than a Permitted Lien; (vii) all management service, consulting, financial advisory or any other similar type Contract and any Contracts with any investment or commercial bank; (viii) all Contracts limiting the ability of the Company or any of its Affiliates to engage in any line of business or to compete with any Person or to operate its business in any geographic area; (ix) all Contracts (other than this Agreement and any agreement or instrument entered into pursuant to this Agreement) between the Company and (A) Seller, any other Affiliate of the Company or any Affiliate of Seller (other than the Company) or (B) any current or former officer, director or shareholder of the Company, Seller or any Affiliate of Seller; (x) all Contracts (including letters of intent) involving the disposition or acquisition or the future disposition or acquisition of material assets or properties, or any merger, consolidation or similar business combination transaction, whether or not enforceable; (xi) all Contracts involving any joint venture, partnership, strategic alliance, shareholders' agreement, co-marketing, co-promotion, co-packaging, joint development, distribution or similar arrangement; (xii) all Contracts involving any material resolution or settlement of any actual or threatened litigation, arbitration, claim or other dispute; (xiii) all Contracts involving a standstill or similar arrangement; (xiv) all Contracts involving leases or subleases of personal property, including capital leases, to which the Company is a party (as lessee or lessor); (xv) all Contracts which are material to the Company and contain a "change in control" or similar provision; (xvi) all Contracts relating to indemnification, whether the Company is the beneficiary or the obligated party thereunder, including Contracts providing for indemnification of any Person with respect to Liabilities relating to any current or former business; (xvii) all Contracts which include an obligation of the Company to indemnify any Person in connection with third party claims relating to infringement or misappropriation of Intellectual Property (unless capped in liability at or below $25,000); (xviii) all customer Contracts (including but not limited to Contracts with respect to hosting services, support services, outsourcing services and other information technology-related services) that individually account for more than $5,000 in sales of the Company on a monthly basis (other than the Contracts with the Company's CMS customers); (xix) all Contracts (including but not limited to network connection agreements, data center agreements, equipment leases and disaster recovery service agreements) pursuant to which the Company is provided equipment or services that are material to the operation of the Company's business and individually account for more than $25,000 in annual purchases of the Company; (xx) all Contracts not made in the ordinary course of business or under which the consequences of a default or termination could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company; (xxi) all Contracts involving cash (or cash equivalents), property, services or other consideration valued at $10,000 or more which are not cancelable by the Company without penalty on thirty (30) days or less notice; (xxii) all Contracts under which the Company has the right to use any Intellectual Property that is material to its business; (xxiii) all Contracts pursuant to which the Company grants any Person the exclusive right to use any Company Intellectual Property with respect to any line of business or any geographic area; (xxiv) all other Contracts not covered by the above that are material to the business of the Company taken as a whole; and (xxv) any guaranty with respect to the Company's obligations or performance under any of the foregoing Contracts. (b) Except as noted on Schedule 3.13(b), each Contract set forth in Schedule 3.13(a) (or required to be set forth in Schedule 3.13(a)) is a legal valid and binding obligation against the Company and, to the knowledge of Seller, each other party thereto, enforceable in accordance with its terms against the Company, and, to the knowledge of Seller, each other party thereto, and is in full force and effect, and each covenant of the Company and, to the knowledge of Seller, of each other party thereto, required to have been performed has been fully performed in all material respects, and there exists no (i) default or event of default by the Company or, to the knowledge of Seller, any other party to any such Contract with respect to any material term or provision of any such Contract, or (ii) event, occurrence, condition or act (including the consummation of the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default or event of default by the Company or, to the knowledge of Seller, any other party thereto, with respect to any material term or provision of any such Contract. Seller has delivered to Purchaser true and complete copies, including all material amendments, of each Contract set forth in Schedule 3.13(a). 3.14 Litigation. Except as set forth in Schedule 3.14, there is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by (or to the knowledge of Seller any investigation by) any Governmental or Regulatory Authority or any other Person pending, or, to the knowledge of Seller, threatened, (i) against, or that has been brought by Seller or its Affiliates that relates to or affects, the Company or any of its rights or business or (ii) against Seller that could reasonably be expected to have a Material Adverse Effect on Seller. Except as set forth in Schedule 3.14, the Company is not subject to any Order. 3.15 Taxes. (a) Tax Returns. The Company has timely filed or caused to be timely filed with the appropriate taxing authorities all tax returns, statements, forms and reports (including, elections, declarations, disclosures, schedules, estimates and informational tax returns) for Taxes ("Returns") that are required to be filed by, or with respect to, the Company on or prior to the Closing Date. The Returns are true, correct and complete in all material respects. An extension of time within which to file any Return that has not been filed has not been requested or granted. (b) Payment of Taxes. All Taxes of the Company that are due and payable have been timely paid. The unpaid Taxes of the Company as of the Unaudited Balance Sheet Date do not exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth or included in the Unaudited Balance Sheet. (c) Other Tax Matters. (i) Except as set forth in Schedule 3.15(c)(i), the Company has not been the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality (and to Seller's knowledge no such audit is pending or contemplated) nor has the Company received any notices from any taxing authority or other Person relating to any issue which could result in a material Tax liability of the Company. All deficiencies asserted or assessments made as a result of any such audit or examination have been fully paid or are fully reflected as a liability in the Unaudited Balance Sheet or are being contested in good faith and an adequate reserve therefore has been established in the Unaudited Balance Sheet. (ii) Except as set forth in Schedule 3.15(c)(ii), neither Seller nor the Company (A) has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of the Company, (B) is presently contesting the Tax liability of the Company before any court, tribunal or agency, (C) has granted a power-of-attorney relating to Tax matters to any person or (D) has applied for and/or received a ruling or determination from a taxing authority regarding a past or prospective transaction of the Company. (iii) The Company has not been included in the "consolidated" Return of any Person, as provided for under the law of the United States and any applicable non-U.S. jurisdiction or any applicable state or locality. The Company does not have any liability for any other Person under Treasury Regulations Section 1.1502-6 (or any comparable Provision of state, local or foreign law or other law or by contract). (iv) All Taxes which the Company is (or was) required by Law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable. (v) No written claim has ever been received from any taxing authority in a jurisdiction where the Company does not file Returns that the Company is or may by subject to taxation by that jurisdiction. (vi) There are no tax sharing, allocation, indemnification or similar agreements, arrangements or undertakings in effect, written or unwritten, as between the Company or any Affiliate thereof and any other party (including Seller and any predecessors or Affiliates thereof) under which Purchaser or the Company could be liable for any Taxes or other claims of any party. (vii) The Company has not applied for, been granted, or agreed to any accounting method change for which it will be required to take into account any adjustment under Section 481 of the Code or any similar provision of the Code or the corresponding tax laws of any nation, state or locality. (viii) No election under Section 341(f) of the Code has been made to treat the Company as a consenting corporation, as defined in Section 341 of the Code. (ix) The Company is not a party to any agreement that would require it to make any payment that would constitute an "excess parachute payment" for purposes of Sections 280G and 4999 of the Code. (x) No indebtedness of the Company consists of "corporate acquisition indebtedness" within the meaning of Section 279 of the Code. (xi) Seller is not a "foreign person" within the meaning of Section 1445 of the Code. (xii) None of the assets of the Company is property required to be treated as being owned by any other Person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Code. None of the assets of the Company directly or indirectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code. None of the assets of the Company is "tax-exempt use property" within the meaning of Section 168(h) of the Code. (xiii) Within the past three (3) years neither the Company nor any predecessors by merger or consolidation has been a party to a transaction intended to qualify under Section 355 of the Code or under so much of Section 356 of the Code as relates to Section 355 of the Code. (xiv) The Company has not entered into any transaction that is a "reportable transaction," as defined in Treasury Regulations Section 1.6011-4(b) or a "potentially abusive tax shelter," as defined in Treasury Regulations Section 301.6112-1(b). 3.16 Insurance. Set forth in Schedule 3.16(a) is an accurate and complete list of each insurance policy or binder (including self-insurance) owned by the Company or Seller which covers the Company or its business, property, assets or employees (the "Insurance Policies"). The Insurance Policies are in the name of the Company and are in full force and effect; all premiums thereon have been paid; and the Company is otherwise in compliance in all material respects with the terms and provisions of the Insurance Policies. The Company has received no notice of cancellation or non-renewal of any such policy or arrangement and, to the knowledge of Seller, the termination of any Insurance Policies has never been threatened. Since the Company's formation, the Company has not received or become aware of any notice from an insurer under the Insurance Policies refusing, denying, disputing or disclaiming coverage or reserving rights with respect to a particular claim or any Insurance Policy in general. Schedule 3.16(a) also sets forth a list of all pending claims and the claims history for the Company since its formation. Seller has delivered or made available to Purchaser true and complete copies of the Insurance Policies. The Company is not a successor to any Insurance Policy as a result of the Asset Transactions and none of the Company, its business, properties, assets or employees are covered by any Insurance Policy under which the Company is not the beneficiary. 3.17 Intellectual Property. (a) The Company owns and possesses all right, title and interest in and to, or has a valid and enforceable license to use, all Intellectual Property that is necessary for or otherwise material to the conduct of the Company's business, free and clear of all Liens other than Permitted Liens. Schedule 3.17(a) sets forth, a true and complete list of all (i) patents, patent applications, trademark and service mark applications and registrations, material common law trademarks and service marks, domain names and copyright registrations that are owned by the Company (whether solely or jointly with another Person) and included in the Company Intellectual Property; (ii) licenses included in the Company Intellectual Property pursuant to which the Company has licensed any material Intellectual Property from a third party (other than commercially available, off the shelf desktop software for which the Company has all required licenses); and (iii) licenses pursuant to which a license of any Company Intellectual Property is granted to a third party (other than limited, non-exclusive licenses granted to the Company's customers in connection with the provision of outsourcing services to such customers). (b) The Company has not infringed, misappropriated or otherwise conflicted with, and the operation of the Company's business as currently conducted does not infringe, misappropriate or otherwise conflict with, any Intellectual Property owned by any third party except where such infringement, misappropriation or conflict would not be material to the Company. Except as set forth on Schedule 3.17(b), the Company has not received any written notice alleging that the Company or the operation of the Company's business currently or at any time in the past has infringed, misappropriated or otherwise conflicted with any Intellectual Property owned by any third party. (c) To the knowledge of Seller, no material Company Intellectual Property is being infringed, misappropriated or otherwise is the subject of any material conflict. (d) The Company has secured valid written assignments from all of its consultants, contractors and employees who contributed to the creation, conception, reduction to practice or development of any Company Intellectual Property for any rights to such contributions that the Company does not already own by operation of law, except where the failure to secure any such written assignment would not be material to the Company. (e) The Company has taken reasonable steps to protect and preserve the confidentiality of all the Company's trade secrets, customer data and software and other proprietary and confidential information (including know-how, source codes, databases, customer lists, schematics, ideas, algorithms and processes). The Company has not breached any agreements of non-disclosure or confidentiality, nor is it currently alleged or claimed to have done so in any material respect. (f) To the knowledge of Seller, the Company's use of any Hosted Materials as required to provide services to its customers has not, and does not, infringe, misappropriate or otherwise conflict with the Intellectual Property or other rights of any third party in any material respect. (g) Neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any privacy policy or other terms of use relating to any web sites of the Company, or violate any applicable Laws relating to the use or dissemination of information collected in connection with the operation of such web sites or otherwise. The Company's use and dissemination of any and all data and information concerning users of such web sites and other persons is in compliance in all material respects with its privacy policies and terms of use, and all applicable Laws. (h) No former or current employee, director, officer or shareholder of the Company has or will have, directly or indirectly, any interest in any Company Intellectual Property, nor does or will any such Person have any rights to past or future royalty payments or license fees deriving from licenses, technology agreements or other agreements, whether written or oral, between any such Person and the Company. 3.18 Compliance with Laws. Except as disclosed on Schedule 3.18, the Company has complied and is in compliance in all material respects with all applicable Laws and Orders. The Company has received no written notice that any violation of the foregoing is being or may be alleged. 3.19 Suppliers and Customers. Schedule 3.19(a)(1) sets forth each supplier accounting for more than $25,000 of annual purchases of the Company (the "Material Suppliers"). Schedule 3.19(a)(2) sets forth each customer currently accounting for more than $5,000 of monthly sales (other than CMS customers of the Company) (the "Material Customers"). Except as set forth in Schedule 3.19(b), the relationships of the Company with each of the Material Suppliers and each of the Material Customers are good commercial working relationships. Except as set forth in Schedule 3.19(c), no Material Supplier or Material Customer has canceled or otherwise terminated or, to the knowledge of Seller, threatened to cancel or otherwise terminate, its relationship with the Company, and the Company has not received any written notice or, to the knowledge of Seller, any other notice that any such Material Supplier or Material Customer may cancel or otherwise materially and adversely modify its relationship with the Company or limit its services, supplies or materials to the Company, or its usage or purchase of the services and products of the Company either as a result of the transactions contemplated hereby or otherwise. 3.20 Employment Relations. Except as set forth in Schedule 3.20: (a) The Company has been and is in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (b) The Company has not been and is not engaged in any unfair labor practice and no unfair labor practice complaint against the Company is pending before the National Labor Relations Board; (c) There is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of Seller, threatened against or involving the Company or the Business and since the Company's formation, the Company has not experienced any labor strike or material concerted labor dispute; (d) No union is currently certified, and there is no union representation question and, to the knowledge of Seller, no union or other organizational activity that would be subject to the National Labor Relations Act (20 U.S.C. 151 et seq.) existing or threatened with respect to the Company; (e) The Company is not subject to or bound by any collective bargaining or labor union agreement applicable to any Person employed by the Company, and no collective bargaining or labor union agreement is currently being negotiated by the Company; (f) The Company has not experienced any material labor difficulty or work stoppage since its formation; (g) The Company has no Equal Employment Opportunity Commission charges or other claims of employment discrimination pending or, to the knowledge of Seller, threatened against the Company; (h) To the knowledge of Seller, no wage and hour department investigation has been made of the Company since its formation; (i) There are no occupational health and safety claims pending or, to the knowledge of Seller, threatened against the Company or that relate to its business or property; (j) Since its formation, the Company has not (i) engaged in layoffs or employment terminations sufficient in timing and number to constitute (A) a "mass layoff" (as defined in the Worker Adjustment and Retraining Notification Act ("WARN")) or (B) an "employment loss" (as defined in WARN) or (ii) effected a "plant closing" (as defined in WARN) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company; the Company has not been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar Law; (k) Prior to the date hereof, an accurate and complete list showing the names of all individuals whose compensation from the Company for services rendered during the fiscal year ended on the Balance Sheet Date exceeded an annualized rate of $50,000, together with a statement of the full amount paid or payable to each such person for services rendered during such fiscal year has been made available to Purchaser; and (l) The Company is not a governmental contractor for purposes of any federal, state or local Law. 3.21 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule 3.21(a) is an accurate and complete list of all (i) "employee benefit plans," within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"), (ii) bonus, savings, profit-sharing, stock option, stock purchase, restricted stock, phantom stock or other equity based compensation, incentive, fringe benefit, "voluntary employees' beneficiary associations", under Section 501(c)(9) of the Code, Code section 125 "cafeteria" or "flexible" benefit, employee loan, educational assistance, pension, or retirement, deferred compensation, medical, life, disability, accident, salary continuation, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement, group insurance, change-in-control, retention and unemployment benefit plans, programs, arrangements, commitments and/or practices (whether or not insured), (iii) employment, consulting, termination, and severance contracts or agreements for active, retired or former employees or directors and (iv) any other similar plans, programs, arrangements, commitments, contracts agreements or practices, in each case (referred to in (i), (ii), (iii) or (iv) above), whether or not any such plans, programs, arrangements, commitments, contracts, agreements and/or practices (referred to in subsections (i), (ii), (iii) or (iv) above) are in writing or are otherwise exempt from the provisions of ERISA, that have been established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) or with respect to which any potential liability (whether direct, indirect, contingent or otherwise) may be borne by the Company (including, for this purpose and for the purpose of all of the representations in this Section 3.21, all employers (whether or not incorporated) that would be treated together with the Company and/or Seller as a single employer (1) within the meaning of Section 414 of the Code or (2) as a result of the Company and/or Seller being or having been a general partner of any such employer), since September 2, 1974("Employee Benefit Plans"). (b) Status of Plans. Each Employee Benefit Plan (including any related trust) complies in form with the requirements of all applicable Laws, including ERISA and the Code, and has at all times been maintained and operated in material compliance with its terms and the requirements of all applicable Laws and Orders, including ERISA and the Code. No complete or partial termination of any Employee Benefit Plan has occurred or is expected to occur. The Company has no commitment, intention or understanding to create, modify or terminate any Employee Benefit Plan. Except as required to maintain the tax-qualified status of any Employee Benefit Plan intended to qualify under Section 401(a) of the Code, no condition or circumstance exists that would prevent the amendment or termination of any Employee Benefit Plan. Each Employee Benefit Plan which is an "employee benefit plan" within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Code is so qualified and has received a favorable determination letter from the IRS or has applied for such favorable letter within the applicable remedial amendment period under Section 401(a) of the Code, and, to the knowledge of Seller, no circumstances exist that could reasonably be expected to result in the revocation of any such favorable determination letter or cause any such Employee Benefit Plan or trust to fail to be so qualified and exempt. To the knowledge of Seller, no event has occurred and no condition or circumstance has existed that would result in a material increase in the benefits under or the expense of maintaining any Employee Benefit Plan from the level of benefits or expense incurred for the most recent fiscal year ended thereof. (c) Liabilities. (i) The Company does not and has never maintained or contributed to, or had any obligation to contribute to, or otherwise have any liability (whether contingent or otherwise) with respect to, (A) any "employee pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Section 302 or Title IV of ERISA, (B) any "multiple employer plan" (within the meaning of the Code or ERISA), or (C) any "multiemployer plan" (as defined in Sections 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan"); and none of the Employee Benefit Plans is a Multiemployer Plan or otherwise subject to Title IV of ERISA. (ii) The Company does not maintain any Employee Benefit Plan which is a "group health plan," (as such term is defined in Section 5000(b)(1) of the Code or Section 607(1) of ERISA) that has not been administered and operated in all material respects in compliance with the applicable requirements of Part 6 of Subtitle I of ERISA and Section 4980B of the Code and the Company is not subject to any liability, including additional contributions, fines, taxes, penalties or loss of tax deduction, as a result of such administration and operation. (iii) No Employee Benefit Plan is a "multiple employer welfare arrangement," within the meaning of Section 3(40) of ERISA. (iv) Each Employee Benefit Plan that is intended to meet the requirements of Section 125 of the Code meets such requirements, and each program of benefits for which employee contributions are provided pursuant to elections under any Employee Benefit Plan meets the requirements of the Code applicable thereto. (v) The Company does not maintain any Employee Benefit Plan which is an "employee welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) that has provided any "disqualified benefit" (as such term is defined in Section 4976(b) of the Code) with respect to which an excise tax could be imposed. (vi) Except as required by Section 4980B of the Code, the Company does not maintain any Employee Benefit Plan providing for post-employment or retiree health, life insurance and/or other welfare benefits, and the Company has no obligation to provide any such benefits to any retired or former employees or active employees following such employees' retirement or termination of service. (vii) The Company has no unfunded liabilities pursuant to any Employee Benefit Plan that is not intended to be qualified under Section 401(a) of the Code. (viii) The Company has incurred no liability for any tax or excise tax arising under Chapter 43 of the Code, and to the knowledge of Seller, no event has occurred and no condition or circumstance has existed that could give rise to any such liability. (ix) There are no actions, suits, claims or disputes pending, or, to the knowledge of Seller, threatened, anticipated or expected to be asserted against or with respect to any Employee Benefit Plan or the assets of any such plan (other than routine claims for benefits and appeals of denied routine claims). No civil or criminal action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or expected to be asserted against the Company or any fiduciary of any Employee Benefit Plan, in any case with respect to any Employee Benefit Plan. No Employee Benefit Plan or any fiduciary thereof has been the direct or indirect subject of an audit, investigation or examination by any governmental or quasi-governmental agency. (x) The Company is in material compliance with all Laws relating to the classification of persons as independent contractors rather than as employees and with respect to any employees leased from another employer. (d) Contributions. Full payment has been timely made of all amounts which the Company is required, under applicable Law or under any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan to which the Company is a party, to have paid as contributions or premiums thereto as of the last day of the most recent fiscal year of such Employee Benefit Plan ended prior to the date hereof. All such contributions and/or premiums have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any governmental entity, and to the knowledge of Seller no event has occurred and no condition or circumstance has existed that would give rise to any such challenge or disallowance. All such contributions and/or premiums have been reflected on the Company's financial statements provided pursuant to Section 3.7 in accordance with GAAP. The Company has made adequate provision for reserves to meet contributions and premiums and any other liabilities that have not been paid or satisfied because they are not yet due under the terms of any Employee Benefit Plan, applicable Law or related agreements. All such liabilities or expenses in respect of any Employee Benefit Plan have been properly accrued on the Company's financial statements provided pursuant to Section 3.7 in accordance with GAAP. Benefits under all Employee Benefit Plans are as represented and have not been increased subsequent to the date as of which documents have been provided. (e) Transactions. Neither the Company nor any of its directors, officers, employees or, to the knowledge of Seller, other Persons who participate in the operation of any Employee Benefit Plan or related trust or funding vehicle, has engaged in any transaction with respect to any Employee Benefit Plan or breached any applicable fiduciary responsibilities or obligations under Title I of ERISA that would subject any of them to a tax, penalty or liability for prohibited transactions or breach of any obligations under ERISA or the Code or would result in any claim being made under, by or on behalf of any such Employee Benefit Plan by any party with standing to make such claim. (f) Triggering Events. The execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment (whether of severance pay or otherwise), "parachute payment" (as such term is defined in Section 280G of the Code), acceleration, vesting or increase in benefits to any employee or former employee or director of the Company. No Employee Benefit Plan provides for the payment of severance, termination, change in control or similar-type payments or benefits. (g) Documents. Seller has made available to Purchaser true and complete copies of all material documents in connection with each Employee Benefit Plan, including (in each case, to the extent applicable): (i) all Employee Benefit Plans as in effect on the date hereof, together with all amendments thereto, including, in the case of any Employee Benefit Plan not set forth in writing, a written description thereof; (ii) all current summary plan descriptions, summaries of material modifications, and material communications; (iii) all current trust agreements, declarations of trust and other documents establishing other funding arrangements (and all amendments thereto and the latest financial statements thereof); (iv) the most recent IRS determination letter, if any, obtained with respect to each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code or exempt under Section 501(a) or 501(c)(9) of the Code; (v) the annual report on IRS Form 5500-series for each of the last three years for each Employee Benefit Plan required to file such form; (vi) the most recently prepared financial statements; and (vii) all contracts and agreements relating to each Employee Benefit Plan, including service provider agreements, insurance contracts, annuity contracts, investment management agreements, subscription agreements, participation agreements, and record keeping agreements and collective bargaining agreements. (h) Loans. Except as set forth in Schedule 3.21(h), as of the Closing Date, the Company will not have any outstanding loans or extensions of credit to any employees (or their family members or dependents). (i) No Controlled Group Liabilities. Seller is the only Person that is now a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with, the Company, as such terms are defined in Section 414(b), (c), (m) or (o) of the Code (collectively, a "Controlled Group"). The Company has incurred no liability and has no obligations with respect to any "employee benefit plan," as defined in Section 3(3) of ERISA, or under any other compensation or employee benefit plan, agreement, program, policy or other arrangement (including any Incentive Unit Plan) maintained by Seller or any other member of a Controlled Group of which the Company has ever been a member. 3.22 Environmental Laws and Regulations. Except as set forth in Schedule 3.22, (i) the Company is, and since its formation has been, in compliance with all applicable Environmental Laws, and has obtained, and is in compliance with, all Permits required of it under applicable Environmental Laws and each such Permit (A) remains in full force and effect and is not subject to appeal and all applicable time periods for filing such an appeal have expired and (B) will not be required, as a result of the transactions contemplated by this Agreement, to be transferred or amended or require any submissions to a Governmental or Regulatory Authority in connection therewith; (ii) there are no pending claims, proceedings, investigations or actions by any Governmental or Regulatory Authority or other Person or entity pending or, to the knowledge of Seller, threatened against the Company or its business or property under any Environmental Law; (iii) to the knowledge of the Company, there are no facts, circumstances or conditions relating to the past or present business or operations of the Company or any of its business or property (including the disposal of any wastes, hazardous substances or other materials), or to any past or present Company Property, that could reasonably be expected to give rise to any claim, proceeding or action, or to any liability, under any Environmental Law; (iv) the Company has not received from any Governmental or Regulatory Authority or any other Person any notice or allegation of violation of, non-compliance with, liability or potential liability pursuant to, any Environmental Law (including a Clean Air Act Section 114 notice, a CERCLA Section 104(e) request, or a potentially responsible party or "PRP" notice) and neither the Company nor the Business is subject to any outstanding administrative or judicial Order, "consent order" or other agreement with regard to any violation, noncompliance or liability under any Environmental Law; (v) no Hazardous Substance has been Released at, on, to or from any of the Company's current or former Company Property or into the air as a result of the Business or other activities of the Company or into, onto or upon the soil or groundwater at any location (A) for which the Company could be obligated to remediate Releases of such Hazardous Substances (or reimburse any other Person for the cost of remediation) pursuant to any Environmental Law or (B) which could reasonably be expected to trigger an investigation of the Company or the Business or result in claims against the Company or with respect to the Business for liability under any Environmental Law; (vi) the Company is not a party to any contract, lease or other agreement with any Person pursuant to which the Company has any continuing obligations with respect to the remediation of any condition resulting from the Release of Hazardous Substances; and (vii) all material environmental site assessment reports (including any Phase I and Phase II reports), remediation studies, audits, assessments or similar documents (if any) that are within the custody or control of Seller or the Company that relate to the investigation or remediation of environmental conditions at any current or former Company Property, or which otherwise relate to the Company's compliance with or liability under Environmental Laws, have been made available to Purchaser. To the knowledge of Seller, there are no such studies, audits, assessments or similar documents that are not within the custody or control of Seller or the Company. 3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions. Except as set forth in Schedule 3.23, (a) there are no Contracts, liabilities or obligations between the Company, on the one hand, and either Seller or any or Affiliate of Seller (other than the Company) on the other hand, and (b) neither Seller, any Affiliate of Seller nor any shareholder, officer or director of the Company possesses, directly or indirectly, any material financial interest in, or is a director, officer or employee of, any Person which is a client, supplier, customer, lessor, lessee, or competitor or potential competitor of the Company. Ownership of securities of a company whose securities are registered under the Exchange Act of 5% or less of any class of such securities shall not be deemed to be a material financial interest for purposes of this Section 3.23. 3.24 Bank Accounts and Powers of Attorney. Set forth in Schedule 3.24 is an accurate and complete list showing (a) the name and address of each bank in which the Company has an account or safe deposit box, the number of any such account or any such safe deposit box and the names of all Persons authorized to draw thereon or to have access thereto and (b) the names of all Persons, if any, holding powers of attorney from the Company and a summary statement of the terms thereof. Copies of all agreements or other writings evidencing such powers of attorney have been made available to Purchaser. 3.25 Permits. Seller has delivered or made available to Purchaser for inspection a true and correct copy of each material Permit obtained or possessed by the Company. The Company has obtained and possesses all Permits necessary for the lawful conduct of its business as presently conducted, or otherwise necessary for the lawful ownership of its properties and assets or the operation of its business as presently operated, other than those the failure of which to obtain, possess or make could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company. All such Permits are in full force and effect. The Company is in compliance with all such Permits except for such non-compliance that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company. Any applications for the renewal of any such Permit which are due prior to the Closing Date have been timely made or filed by the Company prior to the Closing Date. No proceeding to renew, suspend, modify, suspend, revoke, withdraw, terminate or otherwise limit any such Permit is pending or, to the knowledge of Seller, threatened. 3.26 No Changes Since Balance Sheet Date. Except as set forth in Schedule 3.26, since the Balance Sheet Date, the Company has conducted its business in the ordinary course consistent with past practice and, since such date, there has not been (i) any development, action, event, occurrence or transaction that would have been prohibited by Section 5.1 if this Agreement had been in effect at the time thereof or any agreement, arrangement, understanding, Contract or commitment in respect of any development, action, event, occurrence or transaction that would have been prohibited by Section 5.1 if this Agreement had been in effect at the time thereof, (ii) any Material Adverse Effect with respect to the Company or an event or development that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company or Seller, or (iii) any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the assets, property or business of the Company. 3.27 Government Contracts. Except as set forth in Schedule 3.27, the Company: (a) has no contracts with any Governmental Authority involving any information, technology or data which is classified under Executive Order 12356 of April 2, 1982; (b) has no products or services (including research and development) with respect to which it is a supplier, direct or, to the knowledge of Seller, indirect, to any of the military services of the United States or the Department of Defense; (c) does not export (a) products or technical data under validated licenses or technical data under General License GTDR pursuant to the U.S. Export Administration Regulations (15 CFR Parts 768 through 799) or (b) defense articles and defense services under the International Traffic in Arms Regulations (22 CFR Subchapter M); or (d) does not have a facility security clearance under the Department of Defense Industrial Security Program. 3.28 Warranty Claims. There are no pending or, to the knowledge of Seller, threatened Warranty Claims against the Company or that relate to its business in connection with the sales of products or the provision of services, except Warranty Claims that do not exceed $5,000 individually or $10,000 in the aggregate. Except as set forth in Schedule 3.28, the Company does not make any representation or warranty to its customers with respect to products sold or services delivered by it. Schedule 3.28 contains a complete list of the pending, and, to the knowledge of Seller, threatened Warranty Claims against the Company or that relate to its business. As used herein, the phrase "Warranty Claim" means any claim presented to the Company by any Person alleging one or more defects in a product sold or a service provided by the Company in violation of the terms of the product's warranty. 3.29 Brokers' or Finders' Fees. No agent, broker, finder, investment banker, or other Person acting on behalf of Seller, the Company or any of their respective Affiliates is, or will be, entitled to any commission or brokers' or finders' fees or expenses from the Company or Purchaser, or from any of their respective Affiliates, in connection with any of the transactions contemplated by this Agreement. 3.30 Investment Intent. Seller understands that the shares of Purchaser Common Stock representing the Stock Consideration are "restricted securities" (as defined under Rule 144 under the Securities Act) and have not been registered under the Securities Act or any applicable state securities Law. Seller is acquiring the shares of Purchaser Common Stock representing the Stock Consideration for its own account and not with a view to or for sale (as defined in the Securities Act) in connection with any distribution thereof within the meaning of the Securities Act, except pursuant to an exemption therefrom or pursuant to an effective registration statement (it being understood that the Stock Consideration shall be distributed by Seller to certain of its members following the Closing in accordance with Section 5.12). ARTICLE IV REPRESENTATIONS OF PURCHASER 4. Representations of Purchaser. Purchaser represents and warrants on the date hereof and on the Closing Date as follows: 4.1 Existence and Good Standing of Purchaser; Power and Authority. Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and the other instruments and agreements to be executed and delivered by Purchaser as contemplated hereby. Purchaser has all requisite corporate power and authority to consummate the transactions contemplated hereby and thereby, including the issuance of the Stock Consideration. The execution, delivery and performance of this Agreement, and all other instruments and agreements to be executed and delivered by Purchaser as contemplated hereby, the issuance of the Stock Consideration and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate and stockholder action on the part of Purchaser and no other corporate proceedings or approvals on the part of Purchaser or its stockholders is necessary to authorize the execution, delivery and performance of this Agreement and such other instruments and agreements by Purchaser, the issuance of the Stock Consideration or the consummation of the transactions contemplated hereby and thereby. This Agreement and all other instruments and agreements to be executed and delivered by Purchaser as contemplated hereby, when delivered in accordance with the terms hereof, assuming the due execution and delivery of this Agreement and each such other document by the other parties hereto and thereto, shall have been duly executed and delivered by Purchaser and shall be legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, except to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights generally and to general equitable principles. The Stock Consideration, when issued as contemplated hereby, will constitute duly and validly issued shares of Purchaser Common Stock and will be fully paid and non-assessable. 4.2 Consents and Approvals; No Violations. (a) Other than as set forth in Schedule 4.2(a), the execution and delivery of this Agreement by Purchaser do not, the execution and delivery by Purchaser of the other instruments and agreements to be executed and delivered by Purchaser as contemplated hereby and the issuance of the Stock Consideration will not and the consummation by Purchaser of the transactions contemplated hereby and thereby will not (with or without due notice or lapse of time or both) result in the creation of any Lien upon any of the properties or assets of Purchaser, or result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under: (i) any provision of the Organizational Documents of Purchaser; (ii) subject to obtaining and making any of the approvals, consents, notices and filings set forth in Schedule 4.2(b), any Law or Order applicable to Purchaser or by which any of its properties or assets may be bound; or (iii) any Contract to which Purchaser is a party, or by which any of its properties or assets is bound except in the case of clauses (ii) and (iii) above, for such violations, filings, permits, consents, approvals, notices, breaches or conflicts which could not reasonably be expected to have a Material Adverse Effect with respect to Purchaser. (b) Except for such filings and approvals as may be set forth in Schedule 4.2(b), no consent, approval, Permit, registration, report or action of, filing with, notice to or authorization of any Governmental or Regulatory Authority or any other Person is necessary or required (i) under any of the terms, conditions or provisions of any Law or Order or any Contract to which Purchaser is a party or by which any of its properties or assets is bound or (ii) for the execution and delivery of this Agreement by Purchaser, the performance by Purchaser of its obligations hereunder, the issuance of the Stock Consideration or the consummation by Purchaser of the transactions contemplated hereby other than those, the failure of which to obtain, could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Purchaser. 4.3 Purchaser SEC Reports. Since January 1, 2002, Purchaser has properly filed all forms, schedules, reports, prospectuses, proxy statements and other documents required to be filed by Purchaser with the Securities and Exchange Commission (the "Purchaser SEC Reports"). The Purchaser SEC Reports (i) at the time they were filed, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by the filing prior to the date of this Agreement or the Closing Date, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Purchaser makes no representation or warranty whatsoever concerning the Purchaser SEC Reports as of any time other than the time they were filed. 4.4 Purchase for Investment. Purchaser understands that the Shares are "restricted securities" (as defined in Rule 144 under the Securities Act) and have not been registered under the Securities Act or any applicable state securities Law. Purchaser is acquiring the Shares for its own account and not with a view to or for sale (as defined in the Securities Act) in connection with any distribution thereof within the meaning of the Securities Act, except pursuant to an exemption therefrom or pursuant to an effective registration statement. 4.5 No Action or Proceedings. No action or proceedings have been instituted or, to Purchaser's knowledge, threatened before a court or other Governmental or Regulatory Authority to restrain or prohibit any of the transactions contemplated hereby. 4.6 Brokers' or Finders' Fees. Except for Roth Capital Partners, LLC, whose commission, fees and expenses are obligations solely of Purchaser, no agent, broker, finder, investment banker, or other Person acting on behalf of Purchaser or any of its Affiliates is, or will be, entitled to any commission or brokers' or finders' fees or expenses in connection with any of the transactions contemplated by this Agreement and no such agent, broker, finder, investment banker or other Person is, or will be, entitled to any commission or brokers' or finders' fees or expenses from Seller, or from any of its Affiliates, in connection with any of the transactions contemplated by this Agreement. 4.7 Financing. Purchaser intends to obtain the funds required to satisfy its obligations to pay the Cash Consideration pursuant to this Agreement through a proposed debt financing (the "Proposed Debt Financing") and a proposed equity financing (the "Proposed Equity Financing" and, together with the Proposed Debt Financing, the "Proposed Financing Transactions") as described in Schedule 4.7(a). Other than as set forth in Schedule 4.7(b), the Proposed Financing Transactions will not result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under: (i) any provision of the Organizational Documents of Purchaser; (ii) subject to obtaining and making any of the approvals, consents, notices and filings set forth in Schedule 4.7(b), any Law or Order applicable to Purchaser or by which any of its properties or assets may be bound; or (iii) any Contract to which Purchaser is a party, or by which any of its properties or assets is bound, except with respect to clause (iii) as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Purchaser. Except for such filings and approvals as may be set forth in Schedule 4.7(b), it is not anticipated that any consent, approval, Permit, registration, report or action of, filing with, notice to or authorization of any Governmental or Regulatory Authority or any other Person will be necessary or required under any of the terms, conditions or provisions of any Law or Order, any Contract to which Purchaser is a party or by which any of its properties or assets is bound, for the completion of the Proposed Financing Transactions. ARTICLE V COVENANTS OF SELLER AND PURCHASER 5.1 Conduct of Business. (a) Prior to the Closing Date, except as set forth in Schedule 5.1, Seller shall, and shall cause the Company to: (i) maintain its limited liability company or corporate existence, as applicable; (ii) use commercially reasonable efforts to keep available the services of the current employees of the Company; (iii) conduct its operations in the ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve the Company's business intact and retain the Company's Permits and preserve the existing Contracts and goodwill of its customers, distributors, suppliers, lenders, licensors, licensees and others having business relations with the Company; (iv) have in effect and maintain at all times all insurance of the kinds, in the amounts and with the insurers as is in presently in effect for the benefit of the Company and its business; (v) keep in working condition and good order and repair all of the Company's assets and other properties; (vi) maintain the Company's Books and Records and accounts in its usual, regular and ordinary manner and post all entries therein promptly in compliance with accepted practice and all applicable Laws; (vii) pay and discharge when due all Taxes, imposed upon it or any of its properties, or upon the income or profit therefrom; and (viii) meet in all material respects the Company's obligations under all material Contracts, instruments and arrangements. (b) Without limiting the generality of the foregoing, except as set forth in Schedule 5.1 or otherwise consented to by Purchaser (which consent shall not be unreasonably withheld), prior to the Closing Date, Seller shall cause the Company not to (and with respect to subsections (ii), (xxi), (xxii) and (xxiii) below, Seller shall not): (i) amend, modify, supplement, rescind, restate or otherwise change its Organizational Documents; (ii) authorize for issuance, issue, sell, deliver, transfer, pledge or otherwise encumber, grant, create or incur a Lien on, or agree or commit to do any of the foregoing with respect to, (A) any capital stock of, or other equity or voting interest in, the Company or (B) any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire either (1) any shares of capital stock of, or other equity or voting interest in, the Company, or (2) any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire, any shares of the capital stock of, or other equity or voting interest in, the Company; (iii) declare, pay or set aside any dividend or make any distribution (whether in property, assets or cash and in any form) with respect to, or split, combine, redeem, reclassify, purchase or otherwise acquire, in each case, directly or indirectly, any shares of capital stock of, or other equity or voting interest in, the Company, or make any other change in the capital structure of the Company; (iv) increase the compensation payable (in whatever form, including, but not limited to, wages, salaries, bonuses or any other remuneration) or to become payable to any officer, director, employee or agent or other Person (including any leased employee or contract employee) providing services to the Company, except for (A) such increases that were required in accordance with the terms of any Employee Benefit Plan set forth in Schedule 3.21(a) and (B) salary increases made in the ordinary course of business consistent with past practice not exceeding three percent (3%) of the annual base salary for any Person and disclosed to Purchaser; (v) enter into, establish, adopt or amend or otherwise become obligated under any Employment Benefit Plan (other than as set forth in Schedule 3.21(a)) or any other employment retention, change in control, collective bargaining, deferred compensation, severance, retirement, bonus, profit-sharing, stock option or other equity-based pension or welfare plan, or any other plan, agreement, trust, fund, policy or arrangement for the benefit of maintained for the benefit of any officer, director, employee, agent or other Person (including any leased employee or contract employee) providing services to the Company or make, grant or pay any severance, termination, compensation, benefits, bonus, profit sharing, pension, retirement or insurance payment, distribution or arrangement to or with any officer, director, employee, agent or other Person (including any leased employee or contract employee) providing services to the Company, except to the extent required by the terms of any Employee Benefit Plan set forth in Schedule 3.21(a); (vi) except as contemplated by Section 5.11, cancel, terminate, modify, assign or amend in any material respect any Contract (A) set forth in Schedule 3.13(a), (B) which, if in effect on the date hereof, would be required to be set forth in Schedule 3.13(a) or (C) outside the ordinary course of business; (vii) incur, assume, guarantee or modify any Indebtedness, except for (A) Indebtedness incurred, assumed, guaranteed or modified pursuant to the terms of any Contract set forth in Schedule 3.13(a) pursuant to Section 3.13(a)(iv) or (B) negative cash balances and unpaid checks or drafts incurred in the ordinary course of business consistent with past practice; (viii) permit, grant, create or incur any Lien on any of its properties or assets (other than Permitted Liens); (ix) sell, transfer, lease, license, assign or otherwise dispose of any assets or properties having a value in excess of $5,000 in any individual case or $10,000 in the aggregate; (x) merge or consolidate with or into, or acquire all or substantially all or a substantial portion of the business or assets of, any other Person, in a single transaction or a series of transactions or by any other manner, or form or cause to be formed any Subsidiary of the Company; (xi) make any capital expenditure or execute any lease involving payments in excess of $5,000 individually or $10,000 in the aggregate or otherwise acquire any assets or properties that are material to the Company, individually or taken as a whole; (xii) enter into, materially amend or become subject to any joint venture, partnership, strategic alliance, shareholders' agreement, co-marketing, co-promotion, co-packaging, joint development or similar arrangement; (xiii) write-off as uncollectible any notes or accounts receivable, except write-offs in the ordinary course of business consistent with past practice and GAAP charged to, and not in excess of, applicable reserves; (xiv) cancel, waive or release any claims or rights of material value or settle or compromise any action, claim, suit or other proceeding at law or in equity; (xv) except as required by GAAP, make any change in its accounting principles or any method of accounting or auditing practice by which such principles are applied for financial accounting purposes; (xvi) make any new, or changed any existing, tax election or settle and/or compromise any tax liability, prepare any Returns in a manner which is inconsistent with the past practices of the Company with respect to the treatment of items on such Returns, incur any material liability for Taxes other than in the ordinary course of business or file an amended Return or a claim for refund of Taxes with respect to the income, operations or property of the Company; (xvii) pay, discharge, settle or satisfy any material claims, other than in the ordinary course of business consistent with past practice; (xviii) plan, announce, implement or effect any reduction in force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company; (xix) conduct its cash management customs and practices (including collection policies and payment terms applicable to any suppliers, distributors and customers) other than in the ordinary course of business consistent with past practice; (xx) take any action with respect to or in contemplation of, or adopt resolutions providing for, any complete or partial liquidation, dissolution, recapitalization, reorganization or other winding up of its business or operations; (xxi) enter into any Contract of the type described in Section 3.13(a)(ix), other than as set forth in Schedule 3.13(a), or any other transaction with any Affiliate, director, officer or shareholder of the Company or Seller; (xxii) sell, transfer, lease, license, assign or otherwise disposed of any material Company Intellectual Property, except for nonexclusive licenses granted to customers in the ordinary course of business consistent with past practice or permit to lapse any registrations or applications or other rights with respect to any material Company Intellectual Property, or otherwise abandon or fail to maintain or enforce the Company's rights to any material Company Intellectual Property; (xxiii) take any action that if taken on or prior to the date of this Agreement would cause any of the representations and warranties of Seller set forth in Article III to be false or incorrect in any material respect; or (xxiv) take any action in contemplation of or enter into any contract or letter of intent with respect to, or otherwise commit or agree to do, in each case, whether or not binding or enforceable and whether or not in writing, any of the foregoing. 5.2 Confidential Information. (a) Effective upon the Closing, Purchaser' obligations under that certain confidentiality and nondisclosure Agreement entered into on the 19th day of September 2003 between the Company and Purchaser (the "Confidentiality Agreement") shall terminate with respect to information relating to the Company. The terms of the Confidentiality Agreement shall otherwise be incorporated herein by reference. (b) Seller acknowledges that it is in possession of Confidential Information (as defined in the Confidentiality Agreement) concerning Purchaser and/or the Company and its business and operations. Seller agrees that it will, and will cause its Affiliates (other than the Company following the Closing) and its and their respective Representatives who have had access to Confidential Information to, treat confidentially and not disclose all or any portion of such Confidential Information; provided that the Company may use any such Confidential Information for the purpose of operating its business in the ordinary course. Seller acknowledges and agrees that such Confidential Information is proprietary and confidential in nature. If Seller or any of its Representatives are legally required to disclose (after Seller has used its commercially reasonable efforts to avoid such disclosure and after promptly advising and consulting with Purchaser about its intention to make, and the proposed contents of such, disclosure) any of such Confidential Information (whether by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process), Seller agrees that Seller shall, or shall cause such Representative, to provide Purchaser with prompt written notice of such request so that Purchaser may seek an appropriate protective order or other appropriate remedy. If such protective order or remedy is not obtained, Seller or such Representative, may disclose only that portion of such Confidential Information which such Person is legally required to disclose, and Seller shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded to such Confidential Information so disclosed. Seller further agrees that from and after the Closing Date, Seller and its Representatives, upon the request of Purchaser or the Company, promptly will deliver to Purchaser or the Company or destroy all such Confidential Information without retaining any copy thereof; provided, however, that any such Person may retain a sealed archival copy of any records in order to comply with applicable Law or to the extent maintenance of such records is otherwise required by the internal policies and procedures of such Person. 5.3 Public Announcements. Neither Seller nor Purchaser shall, nor shall any of their respective Affiliates, without the approval of the other party, issue any press releases or otherwise make any public statements with respect to the transactions contemplated by this Agreement, except as may be required by applicable Law or regulation or by obligations pursuant to any listing agreement with any national securities exchange or interdealer quotation system; provided that, prior to any such press release or making any such public statement, such party has used commercially reasonable efforts to obtain the approval of the other party prior to issuing such press release or making such public disclosure. The foregoing notwithstanding, after the Closing, Seller and its members shall have the right to issue press releases, make public statements and publish and disseminate "tombstone" and similar announcements concerning the consummation of the sale of Shares provided that such press releases, statements and announcements do not contain any information concerning the Company or the terms of the transactions contemplated hereby not previously made public by Purchaser. 5.4 Non-Solicitation of Employees and Customers. (a) In consideration of the purchase of the Shares by Purchaser, Seller shall not, and shall cause its Affiliates not to, for the period from the Closing Date until the second (2nd) anniversary of the Closing Date: (i) solicit the employment, or the engagement as a consultant or contractor, for itself or any third Person, of, or any Key Employee. Nothing herein is intended to preclude (i) Seller's or its Affiliates' general solicitations in public media regarding employment opportunities or (ii) Seller's or its Affiliates' solicitation of any Key Employee (as an employee, consultant or otherwise) (A) whose employment by the Company (or any of its Affiliates) shall have been terminated at the instigation of the Company (or such Affiliate, as the case may be), or (B) if such Key Employee has resigned from the Company more than one hundred and eighty (180) days prior to such solicitation; and (ii) solicit for the benefit of or fulfillment by Seller or any Person other than the Company the business of the type and character engaged in or competitive with that conducted by the Company on the Closing Date, of any Person which is a customer or client of the Company, or was its customer or client, at any time within the two (2) years prior to the Closing Date, or attempt to hurt, hinder, diminish or interfere with the relationship between the Company and any such customer or client (including making any negative or disparaging statements or communications about Purchaser or the Company); provided, however, that this clause (ii) shall not limit in any way the lawful competitive business activities of any Person in which any Affiliate of Seller is at any time an investor or to which any Affiliate of Seller is at any time a lender so long as such activities are conducted in the ordinary course of business and do not use confidential information concerning the Company or its business provided to such Person by such Affiliate. (b) It is the desire and intent of the parties to this Agreement that the provisions of this Section 5.4 shall be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought. If any particular provision or portion of this Section 5.4 shall be adjudicated to be invalid or unenforceable, this Section 5.4 shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, such amendment to apply only with respect to the operation of such provision or portion in the particular jurisdiction in which such adjudication is made. (c) The parties recognize that the performance of the obligations under this Section 5.4 by Seller is special, unique and extraordinary in character, and that in the event of the breach by Seller of the terms and conditions of this Section 5.4 to be performed by Seller, Purchaser and the Company shall be entitled, if it so elects, to obtain damages for any breach of this Section 5.4, or to enforce the specific performance thereof by Seller. 5.5 Access and Information. (a) Prior to the Closing, Seller shall permit and shall cause the Company to permit, Purchaser, its Affiliates and their respective Representatives to (i) have reasonable access, during regular business hours, to the assets, Representatives, properties, Books and Records, businesses and operations relating to the Company as Purchaser, its Affiliates and their respective Representatives may reasonably request, (ii) to inspect each Contract set forth in Schedule 3.13(a) (or required to be set forth in Schedule 3.13(a)), Books and Records and all other documents and information, from time to time, reasonably requested by Purchaser and its Representatives, including financial, tax and operating documents and information and (iii) without limiting the foregoing, to meet with designated employees and Representatives of the Company. Seller shall cause the Company to furnish to Purchaser promptly upon request such additional documents and information with respect to the affairs of the Company, as Purchaser, its Affiliates or their respective Representatives may from time to time reasonably request. No information or knowledge obtained by Purchaser pursuant to this Section 5.5(a) shall affect or be deemed to modify any representation made by Seller under this Agreement or any other Transaction Document. (b) All information provided or obtained under Section 5.5(a) shall be held by Purchaser in accordance with and subject to the terms of the Confidentiality Agreement, and Purchaser hereby agrees that the provisions of the Confidentiality Agreement will apply to any properties, Books and Records, data, documents and other information that is provided to Purchaser or its Affiliates or any of their respective Representatives pursuant to this Agreement. 5.6 Supplemental Disclosure and Notices. (a) Between the date hereof and the Closing Date, Seller shall promptly notify Purchaser in writing if Seller has knowledge of: (i) the occurrence or non-occurrence of any fact or event that could reasonably be likely to cause (A) any representation of Seller in this Agreement or any other Transaction Document to be untrue or inaccurate in any material respect or (B) any covenant or condition of Seller contained in this Agreement or any other Transaction Document not to be complied with or satisfied in any material respect; (ii) any failure of Seller to comply with or satisfy any covenant or condition to be complied with or satisfied by Seller under this Agreement or any other Transaction Document in any material respect; (iii) any notice or other communication from any Person alleging that the consent or approval of such Person is or may be required in connection with the transactions contemplated by this Agreement or any other Transaction Document or that such transactions otherwise may violate the rights of or confer remedies upon such Person; (iv) any notice or other communication from any Governmental or Regulatory Authority in connection with the transactions contemplated by this Agreement or any other Transaction Document; and (v) any judicial, administrative, arbitration, action, suit, proceeding (public or private), condemnation, audit, claim, inquiry, investigation, whether domestic or foreign, in law or in equity, or before any arbitrator or Governmental or Regulatory Authority, that, if pending on the date of this Agreement, would have been required to have been disclosed by Seller to Purchaser pursuant to this Agreement. Notwithstanding the foregoing, such notices shall not be deemed to cure, or to relieve Seller from, any liability or obligation with respect to, any breach of or failure to satisfy any representation, warranty, covenant, condition or agreement under this Agreement or any other Transaction Document, it being understood that the updating of Schedule 3.13(a) solely to reflect the execution, termination or expiration after the date hereof of Contracts in the ordinary course of business of the Company consistent with past practice, to the extent such execution, termination or expiration is otherwise permitted by this Agreement, shall not constitute a breach of the representations and warranties of Seller set forth in Section 3.13(a). (b) Between the date hereof and the Closing Date, Purchaser shall promptly notify Seller in writing if Purchase has knowledge of: (i) the occurrence or non-occurrence of any fact or event that could reasonably be likely to cause (A) any representation or warranty of Purchaser contained in this Agreement or any other Transaction Document to be untrue or inaccurate in any material respect or (B) any covenant or condition of Purchaser contained in this Agreement or any Transaction Document not to be complied with or satisfied in any material respect; (ii) any failure of Purchaser to comply with or satisfy any covenant or condition to be complied with or satisfied by Purchaser under this Agreement or any other Transaction Document in any material respect; (iii) any notice or other communication from any Person alleging that the consent or approval of such Person is or may be required in connection with the transactions contemplated by this Agreement or any other Transaction Document or that such transactions otherwise may violate the rights of or confer remedies upon such Person; and (iv) any notice or other communication from any Governmental or Regulatory Authority in connection with the transactions contemplated by this Agreement or any other Transaction Document. Notwithstanding the foregoing, such notices shall not be deemed to cure, or to relieve Purchaser from any liability or obligation with respect to, any breach of or failure to satisfy any representation, warranty, covenant, condition or agreement under this Agreement or any other Transaction Document. 5.7 Efforts to Consummate Transaction. (a) Each of Purchaser and Seller shall use commercially reasonable efforts in good faith to take or cause to be taken all actions, and to do, or cause to be done as promptly as practicable, all actions necessary, proper or advisable under applicable Law to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement and any other Transaction Document, including the execution of documents, instruments or conveyances of any kind that may be reasonably necessary or advisable to carry out any of the transactions contemplated by this Agreement and any other Transaction Document. (b) Each of Purchaser and Seller shall file or supply, or cause to be filed or supplied as soon as practicable following the execution of this Agreement, all material applications, notifications and information required to be filed or supplied by them pursuant to applicable Law in connection with the transactions contemplated by this Agreement and any other Transaction Document, including such applications, notifications and information required to be filed pursuant to Section 5.7(c). (c) In furtherance of Section 5.7(b) but subject to Section 5.7(h), each party hereto covenants to contest and resist any action, claim or suit, whether judicial or administrative and whether brought derivatively or on behalf of third parties, seeking to have imposed any Order (whether temporary, preliminary, or permanent) that would prevent or materially delay the consummation of the transactions contemplated by this Agreement or any other Transaction Document. (d) Purchaser shall use commercially reasonable efforts to obtain all consents, Permits, exemptions and waivers from Governmental or Regulatory Authorities and third Persons required to be obtained by Purchaser and necessary or advisable to authorize, approve or permit the performance by Purchaser of its obligations hereunder and under any other Transaction Document, including all such consents, Permits, exemptions and waivers set forth in Schedule 4.2(b). (e) Seller shall use commercially reasonable efforts to obtain all consents, Permits, exemptions and waivers from Governmental or Regulatory Authorities and third Persons required to be obtained by Seller and the Company and necessary or advisable to authorize, approve or permit the performance by Seller of its obligations hereunder and under any other Transaction Document, including all such consents, Permits, exemptions and waivers set forth in Schedule 3.3(b); provided, however, that Seller shall have no obligation to, and may provide for the Company to, as may be permitted under this Agreement, make any payments or bear any other economic consequences of obtaining any such consent, Permits, exemptions and waivers. (f) Each party shall cooperate in good faith with the other party in obtaining all consents, Permits, exemptions and waivers from Governmental or Regulatory Authorities and third Persons required to be obtained and necessary or advisable to authorize, approve or permit the performance by the parties of their obligations hereunder and under any other Transaction Document. (g) Without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, no amendment or modification shall be made to any Contract set forth in Schedule 3.13(a) (or required to be set forth in Schedule 3.13(a)) to obtain any required consent, Permit, exemption or waiver, and no consideration, whether such consideration shall consist of the payment of money or shall take any other form, for any such consent, Permit, exemption or waiver required, necessary or advisable for the consummation of the transactions contemplated hereby or by any other Transaction Document shall be given or promised by Seller or the Company and no expenses shall be incurred with respect to such consents, Permits, exemptions or waivers without the prior written approval of Purchaser, unless such consideration or expenses shall be paid or given solely by Seller without any obligations of Purchaser or the Company to reimburse Seller therefor. (h) Notwithstanding the foregoing, nothing contained herein shall require Purchaser or its Affiliates to (i) defend any lawsuit should it determine, in its sole discretion, that it is not in its business interest to do so, (ii) sell, transfer, divest or otherwise dispose of any of its business assets or properties or any of the business or assets of the Company in connection with this Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby or (iii) give or promise any consideration, whether such consideration shall consist of the payment of money or shall take any other form, or incur any expenses for any consent, Permit, exemption or waiver required, necessary or advisable for the consummation of the transactions contemplated hereby or by any other Transaction Document. (i) Each party shall provide to the other party copies of all filings made by such party with any Governmental or Regulatory Authority and, upon reasonable request, any other information supplied by such party to any Governmental or Regulatory Authority in connection with this Agreement or any other Transaction Document. (j) As promptly as practicable following the date of this Agreement, Purchaser shall use its commercially reasonable efforts to (i) complete the Proposed Financing Transactions and (ii) have the funds provided by the Proposed Equity Financing held in escrow pursuant to a customary escrow arrangement with the longest term as is then commercially and reasonable available up to thirty (30) days. Purchaser shall provide Seller with a copy of any final and executed commitment letter it receives or credit agreement it enters into in connection with the Proposed Debt Financing and shall promptly inform Seller if at any time Purchaser becomes aware of any fact or circumstance that indicates that Purchaser will not be able to complete the Proposed Financing Transactions within forty five (45) days from the date of this Agreement. At such time as Purchaser has obtained the funds sufficient to pay the Cash Consideration (or has the right to obtain such funds through customary commitments of the type used in financings similar to the Proposed Financing Transactions or otherwise, subject to the satisfaction of the other conditions precedent to the consummation of the transactions contemplated hereby), Purchaser shall deliver a written notice to Seller to such effect. (k) Seller shall, and shall cause the Company and the Representatives of each of Seller and the Company to, cooperate with Purchaser upon its reasonable request in connection with the Proposed Financing Transactions; provided, however, that under no circumstances shall Seller, the Company (prior to the Closing) or any Representative of Seller or the Company (other than the Key Employees and such Representatives and other employees of the Company as may be approved by the Key Employees, excluding non-Key Employee directors of the Company and members of Seller and their respective Representatives) be required to make any oral or written representation to any potential purchaser of equity securities in the Proposed Equity Financing or to any potential lender in the Proposed Debt Financing. (l) Seller shall use its commercially reasonable efforts, and shall cause the Company to use its commercially reasonable efforts, to cause Moore Stephens Wurth Frazer and Torbet, LLP ("Moore Stephens"), with respect to (i) and (ii) below, and BDO Seidman LLP ("BDO"), with respect to (iii) below, to deliver to Purchaser, as promptly as practicable following the date of this Agreement, (i) the audited statements of assets, liabilities and division capital, statements of operations and statements of cash flows of the business purchased by the Company from Systems Management Specialists, Inc. pursuant to the Asset Transactions (the "SMS Business") for the eleven-month period ended November 30, 2002 and the year ended December 31, 2001 and the audited balance sheets of the SMS Business as of November 30, 2002 and December 31, 2001, (ii) the audited statements of assets, liabilities and division capital, statements of operations and statements of cash flows of the business purchased by the Company from Acxiom Corporation pursuant to the Asset Transactions (the "Acxiom Business") for the six-month period ended June 30, 2003, and the years ended December 31, 2002 and December 31, 2001 and the audited balance sheets of the Acxiom Business as of June 30, 2003, December 31, 2002 and December 31, 2001, (iii) (A) the audited balance sheet of the Company as of December 31, 2003 and the related audited statements of operations, shareholders' equity and cash flows for the year then ended certified by BDO and (B) the audited balance sheet of the Company as of December 31, 2002 and the related audited statements of operations, shareholders' equity and cash flows for the one (1) month ended December 31, 2002 certified by BDO ((i), (ii) and (iii) collectively, the "Historical Financial Statements"), (iv) the auditor,s reports of Moore Stephens relating to the Historical Financial Statements described in (i) and (ii) above and BDO relating to the Historical Financial Statements described in (iii) above (collectively, the "Historical Financial Statements Auditor's Reports") and (v) the consent of each of Moore Stephens and BDO, as applicable, with respect to the inclusion of the Historical Financial Statements, in each case, in customary form and meeting the filing requirements of the Securities and Exchange Commission, in any filings to be made by Purchaser under the Securities Act or the Exchange Act (the "Financial Statements Consents" and together with the Historical Financial Statements and the Historical Financial Statements Auditor's Reports, the "Financial Statements Deliveries"). Notwithstanding the foregoing, BDO will not have an obligation to deliver the Historical Financial Statements described in clause (iii) of the immediately preceding sentence until such time as it receives the appraisals (the "Appraisals") from an independent appraiser (to be provided at the cost and expense of Purchaser) of the tangible and intangible assets purchased by the Company in the Asset Transactions necessary to complete the final allocation of the purchase prices paid by the Company in connection with the Asset Transactions. 5.8 Further Assurances. Seller and Purchaser each agree that from time to time before and after the Closing Date, they will execute and deliver or cause their respective Affiliates (including the Company) to execute and deliver such further instruments, and take (or cause their respective Affiliates, including the Company, to take) such other action, as may be reasonably necessary to carry out the purposes and intents of this Agreement and the other Transaction Documents. 5.9 Non-Solicitation. (a) Seller shall not, and shall not cause or permit the Company or any of their respective Affiliates to, nor any Representative of Seller, the Company or any of their respective Affiliates (including any investment banker, attorney or accountant retained by Seller, the Company or any of their respective Affiliates) to: (i) initiate, facilitate, conduct, continue, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal or offer (including any proposal or offer to Seller) with respect to a merger, consolidation, acquisition, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or its business or any purchase of any capital stock or other equity securities of the Company, or of any business of the Company, or all or any portion of the assets of the Company, (any such proposal or offer (other than as specifically permitted by this Agreement), an "Acquisition Proposal"); (ii) engage in or encourage or respond (except as specifically permitted below) to any negotiations concerning, or provide any information or data to, or have any discussions with, or otherwise cooperate in any other way with any Person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; or (iii) release any Person or other third party from, or amend or waive any provision of, any confidentiality or standstill agreement to which they (or any of them) are a party. (b) Seller shall, and shall cause each of the respective Affiliates and Representatives of Seller and the Company (including any investment banker, attorney or accountant retained by Seller, the Company or any of their respective Affiliates) to, immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted prior to the date of this Agreement with respect to any Acquisition Proposal. (c) Before responding to any Acquisition Proposal or responding to any request for information or to commence discussions that may be reasonably believed to be directed at making an Acquisition Proposal, which response shall consist solely of informing such Person of the restrictions contained in this Section 5.9, Seller shall, and shall cause its Affiliates, the Company and their respective Representatives to (as applicable), promptly notify Purchaser (in writing) that it has received such Acquisition Proposal or request. 5.10 Intercompany Balances. At or prior to the Closing, Seller shall cause, and shall cause the Company to cause, all intercompany Indebtedness, and amounts owed, and all intercompany balances outstanding, between Seller or any Affiliate of Seller (other than the Company), on the one hand, and the Company, on the other hand, to have been satisfied in full in a manner that does not create any Tax or other liability for or obligation of Purchaser, the Company or any of their respective Affiliates (including any increase in the Purchase Price). 5.11 Termination of Existing Registration Rights Agreement. Prior to the Closing, Seller shall cause, and shall cause the Company and each other party thereto to cause, the termination (including the termination of any rights or obligations with respect to the Common Stock of the Company) of that certain Amended and Restated Registration Rights Agreement, dated as of June 27, 2003, by and among Seller, the Company, and the other parties named therein, and the Company shall have been released from all obligations thereunder. 5.12 Release. (a) For and in consideration of the amounts payable to Seller under this Agreement, effective as of the Closing Date, Seller, acting solely in its capacity as the sole shareholder of the Company, hereby releases, acquits and forever discharges the Company of and from any and all manner of action or actions, cause or causes of action, demands, rights, damages, debts, dues, sums of money, accounts, reckonings, costs, expenses, responsibilities, covenants, contracts, controversies, agreements and claims whatsoever, whether known or unknown, of every name and nature, both in law and in equity (collectively, "Claims"), other than Claims arising under this Agreement, which Seller ever had, now has, or hereafter may have against the Company arising out of Seller's status as a shareholder of the Company (it being understood and agreed that nothing in this clause (a) shall in any way limit or otherwise restrict any claims Seller may have against Purchaser arising out of, relating to or in connection with this Agreement and the transactions contemplated hereby). (b) For and in consideration of the Shares to be transferred to Purchaser pursuant to this Agreement, effective as of the Closing Date, Purchaser on behalf of the Company, hereby releases, acquits and forever discharges Seller, solely in its capacity as a shareholder of the Company, of and from any and all Claims, other than Claims arising under this Agreement, which the Company ever had, now has, or hereafter may have against Seller, arising out of Seller's status as the sole shareholder of the Company (it being understood and agreed that nothing in this clause (b) shall in any way limit or otherwise restrict any claims Purchaser may have against Seller arising out of, relating to or in connection with this Agreement and the transactions contemplated hereby). 5.13 Distributions of Stock Consideration. Seller shall take all action required to ensure that the Stock Consideration is distributed to its members as a distribution with respect to their membership interests. Purchaser shall upon request of Seller promptly re-register the shares of Purchaser Common Stock issued as the Stock Consideration in the names of the members who have received such shares (allocated among the members in such amounts as Seller may instruct) without any requirement for the delivery of any legal opinion in connection therewith. ARTICLE VI CONDITIONS PRECEDENT TO CLOSING 6.1 Conditions to the Obligation of Purchaser. The obligation of Purchaser to consummate the purchase of the Shares and the other transactions contemplated hereby shall be subject to the satisfaction by Seller or waiver (to the extent permitted by Law) by Purchaser on or prior to the Closing Date of each of the following conditions: (a) Representations, Warranties and Covenants. (i) The representations and warranties of Seller contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 shall be true and correct in all respects and the representations and warranties contained in Section 3.7 (to the extent not qualified by "materiality," "in all material respects," or similar terms and phrases) shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date with the same effect as though made on and as of the date of this Agreement and on the Closing Date (except to the extent that any such representation or warranty relates to a specified date, in which case such representation or warranty shall be true and correct as of such date) and (ii) all other representations and warranties of Seller contained in Article III hereof, disregarding and without giving effect to all qualifications and exceptions contained in such representations and warranties relating to knowledge, materiality or Material Adverse Effect (and, accordingly, all references in such representations and warranties to "material," "Material Adverse Effect," "in all material respects" and similar terms and phrases shall be deemed to be deleted therefrom), shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as though made on and as of the date of this Agreement and the Closing Date (except to the extent that any such representation or warranty relates to a specified date, in which case such representation or warranty shall be true and correct as of such date), except where the untruth or incorrectness of such representations and warranties has not had and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company; each of the covenants and agreements of Seller to be performed on or prior to the Closing Date shall have been duly performed in all material respects in accordance with this Agreement; and Purchaser shall have received at the Closing certificates certifying as to the fulfillment of the foregoing dated as of the Closing Date and duly executed on behalf of Seller. (b) Material Adverse Effect. No event, change, development, condition or circumstance shall have occurred since the Balance Sheet Date that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company or Seller. (c) No Action or Order. On the Closing Date, no action, suit or proceeding by, or before, any Governmental or Regulatory Authority of competent jurisdiction shall be pending or threatened seeking to (i) enjoin, prohibit or restrain the consummation of the sale of the Shares or the other transactions contemplated by this Agreement or recover damages from Purchaser, any Affiliate of Purchaser or the Company with respect thereto or (ii) require Purchaser to dispose of or hold separately any Shares or assets of the Company or Purchaser. No preliminary or permanent injunction, temporary restraining Order or other decree of any Governmental or Regulatory Authority and no applicable Law shall exist that enjoins, prohibits or restrains the consummation of the transactions contemplated by this Agreement. (d) Opinion of Counsel. Purchaser shall have received the opinion of Bingham McCutchen LLP containing substantially the matters set forth in Exhibit A. (e) Governmental Consents. All consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations or filings with, or expirations of waiting periods imposed by, any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have been obtained, made or filed or shall have occurred, including the approvals set forth in Schedule 6.1(e), without the imposition of conditions, the requirement of divestiture of assets or property or the requirement of expenditure of money by Purchaser or the Company (other than as permitted hereunder) to a third party (other than filing and similar fees required to be paid to a Governmental Authority) in exchange for any such consent, approval, license, permit, order, authorization, registration, declaration, filing or expiration of waiting periods, except for such consents, approvals, licenses, permits, orders and authorizations registrations, declarations, filings or expirations of waiting periods the failure of which to obtain (i) could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company, Seller or Purchaser or (ii) could not reasonably be expected to result in a violation of applicable Law. (f) Third Party Consents. The Company shall have obtained all consents from third parties set forth in Schedule 6.1(f). (g) Estoppels. Purchaser shall have received estoppels, in form and substance reasonably satisfactory to Purchaser, from each ground lessor under a Facility Lease whose consent is required pursuant to Section 6.1(f); provided that such ground lessor is required to deliver an estoppel by the terms of the relevant Facility Lease (it being understood that Seller shall not permit the Company to pay any consideration or offer or grant any financial accommodation to such ground lessor without the prior consent of Purchaser). (h) Financial Statements Deliveries. Purchaser shall have received the Financial Statements Deliveries, and the Historical Financial Statements described in clause (iii) of Section 5.7(l) shall not differ in any material respect from the Draft Financial Statements, except to the extent any such differences are reflected solely as a result of the information contained in the Appraisals and the final allocation of the purchase prices paid by the Company in connection with the Asset Transactions as determined pursuant to the Appraisals. (i) Financing. Purchaser shall have obtained funds pursuant to the Proposed Financing Transactions sufficient to enable it to pay the Cash Consideration. (j) Escrow Agreement. Each of the escrow agent named in the Escrow Agreement and Seller shall have executed and delivered to Purchaser the Escrow Agreement. (k) Employment Agreements. The Key Employees shall have entered into employment agreements with Purchaser on the terms set forth in Schedule 6.1(k). (l) Other Documents. Purchaser shall have received all other documents and certificates required to be delivered to Purchaser pursuant to Section 2.4 of this Agreement. 6.2 Conditions to the Obligation of Seller. The obligation of Seller to consummate the sale of the Shares and the other transactions contemplated by this Agreement shall be subject to the satisfaction by Purchaser or waiver (to the extent permitted by Law) by Seller on or prior to the Closing Date of each of the following conditions: (a) Representations, Warranties and Covenants. (i) The representations and warranties of Purchaser contained in Sections 4.1 and 4.2 shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date with the same effect as though made on and as of the date of this Agreement and the Closing Date (except to the extent that any such representation or warranty relates to a specified date, in which case such representation or warranty shall be true and correct as of such date) and (ii) all other representations and warranties of Purchaser contained in Article IV hereof disregarding and without giving effect to all qualifications and exceptions contained in such representations and warranties relating to knowledge, materiality or Material Adverse Effect (and, accordingly, all references in such representations and warranties to "material," "Material Adverse Effect," "in all material respects" and similar terms and phrases shall be deemed to be deleted therefrom), shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as though made on and as of the date of this Agreement and on the Closing Date (except to the extent that any such representation or warranty relates to a specified date, in which case such representation or warranty shall be true and correct as of such date), except where the untruth or incorrectness of such representations and warranties has not had and could not reasonably be expected to have a Material Adverse Effect; each of the covenants and agreements of Purchaser to be performed on or prior to the Closing Date shall have been duly performed in all material respects in accordance with this Agreement; and the Company shall have received at the Closing certificates certifying as to the fulfillment of the foregoing dated as of the Closing Date and duly executed on behalf of each of Purchaser. (b) No Action or Order. On the Closing Date, no action, suit or proceeding by, or before, any Governmental or Regulatory Authority of competent jurisdiction shall be pending or threatened seeking to enjoin, prohibit or restrain the consummation of the transactions contemplated by this Agreement or recover damages from Seller or any Affiliate of Seller with respect thereto. No preliminary or permanent injunction, temporary restraining Order or other decree of any Governmental or Regulatory Authority and no applicable Law shall exist that enjoins, prohibits or restrains the consummation of the transactions contemplated by this Agreement. (c) Opinion of Counsel. Seller shall have received the opinion of Latham & Watkins LLP containing substantially the matters set forth in Exhibit B. (d) Governmental Consents. All consents, approvals, licenses, permits, orders and authorizations of, or registrations, declarations or filings with, or expirations of waiting periods imposed by, any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have been obtained, made or filed or shall have occurred, including such approvals as are set forth in Schedule 6.1(e), without the imposition of conditions, the requirement of divestiture of assets or property or the requirement of expenditure of money by Purchaser or the Company to a third party (other than filing and similar fees required to be paid to a Governmental Authority) in exchange for any such consent, approval, license, permit, order, authorization, registration, declaration, filing or expiration of waiting periods, other than those consents, approvals, licenses, permits, orders and authorizations registrations, declarations, filings or expirations of waiting periods, the failure of which to obtain, (i) could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller or (ii) could not reasonably be expected to result in a violation of applicable Law. (e) Escrow Agreement. Each of the escrow agent named in the Escrow Agreement and Purchaser shall have executed and delivered to Seller the Escrow Agreement. (f) Other Documents. Seller shall have received all other documents and certificates required to be delivered to Seller pursuant to Section 2.5 of this Agreement. ARTICLE VII TAX MATTERS 7.1 Tax Returns. (a) Seller shall prepare and execute on behalf of the Company and timely file, or cause to be prepared and timely filed, all Returns of the Company that are due on or prior to the Closing Date. Such Returns shall be prepared by treating items on such Returns in a manner consistent with the past practices of the Company with respect to such items. Seller shall provide a copy of such Returns due after the date of this Agreement to Purchaser for its review or comment at least fifteen (15) days before such Returns are due. Such Returns shall not be filed without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed. (b) Purchaser shall have the exclusive authority and obligation to prepare and timely file, or cause to be prepared and timely filed, all Returns of the Company that are due after the Closing Date. Such authority shall include, but not be limited to, the determination of the manner in which any items of income, gain, deduction, loss or credit arising out of the income, properties and operations of the Company shall be reported or disclosed on such Returns. (c) After the Closing Date, Purchaser shall have the sole right to control any audit or examination by any taxing authority, initiate any claim for refund or amend any Return, and contest, resolve and defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to, the income, assets or operations of the Company for all taxable periods. 7.2 Transfer Taxes. Purchaser and Seller shall share equally in the payment of all transfer, sales and use, registration, stamp and similar Taxes imposed in connection with the sale of the Shares or any other transaction that occurs pursuant to this Agreement. ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 8.1 Survival of Representations. (a) Except as set forth in paragraph (b) below, the respective representations and warranties of Seller and Purchaser contained in this Agreement or in any Schedule, Exhibit or certificate delivered pursuant to this Agreement shall survive the purchase and sale of the Shares pursuant to this Agreement for a period of twelve (12) months after the Closing Date. (b) The representations and warranties contained in Sections 3.1(a) (Ownership of Shares), 3.4(a) (Existence and Good Standing) and 3.5 (Capital Stock) shall survive indefinitely. The representations and warranties contained in Sections 3.29 and 4.6 (Brokers' or Finders' Fees) shall survive until sixty (60) days after the expiration of the applicable statute of limitations period with respect to the matters covered thereby (after giving effect to any waivers and extensions thereof). All of the representations and warranties of Seller referred to in this Section 8.1(b) are collectively referred to herein as "Seller's Unlimited Warranties" and the representation and warranty of Purchaser referred to in this Section 8.1(b) is referred to herein as "Purchaser's Unlimited Warranty". 8.2 Indemnification. (a) Subject to Section 8.2(e), Seller agrees to indemnify, defend (as provided in Section 8.4) and hold Purchaser and its Affiliates (including the Company) and their respective stockholders, officers, directors, employees, agents and other Representatives, successors and assigns (each a "Purchaser Indemnitee"), harmless from and against any damages, losses, liabilities, penalties, obligations, claims of any kind, interest or expenses (including reasonable attorneys' fees and expenses) (collectively, "Losses"), suffered, incurred or paid, directly or indirectly, through application of the Company's or Purchaser's assets or otherwise, as a result of, in connection with or arising out of (i) the failure of any representation or warranty made by Seller in this Agreement (whether or not contained in Article III) or in the certificate delivered pursuant to Section 6.1(a) to be true and correct in all respects, (ii) any breach by Seller of any of its covenants contained herein, (iii) Seller's Expenses to the extent the actual amount thereof paid by the Company exceeds the aggregate amount of Seller's Expenses set forth on the Seller's Expenses Certificate delivered in accordance with Section 2.7, (iv) any liability arising out of the Company's failure to comply with the provisions of any foreign, federal, state or local "bulk sales," "bulk transfer" or similar Laws with respect to the Asset Transactions, (v) any Claims asserted by any Person against the Company, Purchaser or any of their respective Affiliates relating to (A) any equity incentive plan of Seller or the Company in effect prior to the Closing or (B) the distribution of the Purchase Price by Seller to its members. (b) Subject to Section 8.2(f), Purchaser agrees to indemnify, defend (as provided in Section 8.4) and hold Seller and its Affiliates and their respective shareholders, officers, directors, employees, agents and other Representatives, successors and assigns (other than the Company and its Subsidiaries) (each a "Seller Indemnitee") harmless from and against any Losses suffered, incurred or paid, directly or indirectly, as a result of, in connection with or arising out of (i) the failure of any representation or warranty made by Purchaser in this Agreement (whether or not contained in Article IV) or in any certificate delivered pursuant to Section 6.2(a) to be true and correct in all respects, (ii) any breach by Purchaser of any of its covenants contained herein, (iii) any liability under WARN or any similar Law resulting from actions taken by Purchaser following the Closing and (iv) any liability under any securities Law resulting from claims brought by a third party against Seller in connection with the Proposed Equity Financing. (c) The obligations to indemnify, defend and hold harmless pursuant to Sections 8.2(a)(i) and 8.2(b)(i) shall survive the consummation of the transactions contemplated by this Agreement for the time periods set forth in Section 8.1, except for claims for indemnification asserted prior to the end of such periods, which claims shall survive until final resolution thereof. The obligations to indemnify, defend and hold harmless pursuant to the other provisions of Sections 8.2(a) and 8.2(b) shall survive the consummation of the transactions contemplated by this Agreement until the expiration of all applicable statutes of limitation, except for claims for indemnification asserted prior to the end of such periods, which claims shall survive until final resolution thereof. (d) Except for claims grounded in fraud, deceit or willful misconduct, the rights of Purchaser Indemnitees, on the one hand, and the Seller Indemnitees, on the other hand, under this Article VIII comprise the sole rights and remedies of Purchaser Indemnitees and the Seller Indemnitees, respectively, at Law or in equity or otherwise for any misrepresentation, breach of warranty, or the failure to fulfill any agreement or covenant hereunder on the part of Seller or Purchaser, respectively, including the right of rescission or restitution but excluding the right to seek specific performance or equitable enforcement of any agreement or covenant of Seller or Purchaser, respectively, hereunder. (e) Seller shall have no liability with respect to the matters described in Sections 8.2(a)(i) (other than with respect to breaches or inaccuracies of any of Seller's Unlimited Warranties and any of the representations and warranties in Sections 3.8(b) (Indebtedness), 3.15 (Taxes) and 3.17 (Intellectual Property)) until the total of all Losses with respect thereto exceeds two hundred thousand dollars ($200,000), and then only for the amount by which such Losses exceed two hundred thousand dollars ($200,000). In no event shall the aggregate liability of Seller under Section 8.2(a)(i) exceed an amount equal to the Escrow Amount plus interest accrued thereon pursuant to the Escrow Agreement (and any such liability shall be satisfied solely out of the Escrow Amount and such interest accrued thereon as provided in the Escrow Agreement), except with respect to indemnification for breaches or inaccuracies of Seller's Unlimited Warranties. (f) Purchaser shall have no liability with respect to the matters described in Section 8.2(b)(i) (other than with respect to breaches or inaccuracies of Purchaser's Unlimited Warranty) until the total of all Losses with respect thereto exceeds two hundred thousand dollars ($200,000), and then only for the amount by which such Losses exceed two hundred thousand dollars ($200,000). In no event shall the aggregate liability of Purchaser under Section 8.2(b)(i) exceed an amount equal to the Escrow Amount plus interest accrued thereon pursuant to the Escrow Agreement, except with respect to indemnification for breaches or inaccuracies of Purchaser's Unlimited Warranty. (g) The right to indemnification based upon breaches or inaccuracies of representations, warranties and covenants will not be affected by any investigation conducted with respect to, or knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, whether as a result of disclosure by a party pursuant to this Agreement or otherwise, with respect to the accuracy or inaccuracy of or compliance with any such representation, warranty or covenant. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant, will not affect a party's right to indemnification, payment of Losses or other remedies based on such representations, warranties and covenants. (h) Subject to Section 8.4, upon payment in full by Seller of any claim for indemnification, or the payment by Seller of any judgment or settlement with respect to a claim by a third party, Seller shall be subrogated to the extent of such payment to the rights of Purchaser Indemnitee (at no cost or expense to any Purchaser Indemnitee) against any person or entity (other than any Purchaser Indemnitee, including, without limitation, the Company) with respect to the subject matter of such claim for indemnification or claim by such third party, provided, however, that: (i) Purchaser shall have the right to assume the conduct and control, through counsel reasonably acceptable to Seller, of the prosecution of any action, lawsuit, proceeding or other claim made or brought against such Person or entity if Purchaser or the Company has any remaining unsatisfied claim for Losses against such entity or party connected with, or arising from, the subject matter of such claim for indemnification or claim by such third party; (ii) any amount recovered as a result of any such action, lawsuit, proceeding or other claim shall be paid to Purchaser and set-off against the amount of Purchaser's unsatisfied claim for Losses and any balance remaining (up to the amount of the payment made by Seller for such claim for indemnification or judgment or settlement with respect to such claim by a third party) shall be paid to Seller; and (iii) no action shall be taken by Seller pursuant to this Section 8.2(h) unless and until any such remaining unsatisfied claim of Purchaser or the Company for Losses has been satisfied in full. (i) Purchaser and Seller acknowledge and agree that, after the Closing, the Company shall not have any liability to Seller or any of its Affiliates or Seller Indemnitees on the account of any claim made by Purchaser or any other party under this Agreement or any other Transaction Document, and none of Seller or any of its Affiliates or Seller Indemnitees shall have any right of contribution against the Company with respect to any such claim made by Purchaser or any other party. 8.3 Indemnification Procedure. (a) Within a reasonable period of time after the incurrence of any Losses by any Person entitled to indemnification pursuant to Section 8.2 hereof (an "Indemnified Party"), including, any claim by a third party described in Section 8.4, which might give rise to indemnification hereunder, the Indemnified Party shall deliver to the party from which indemnification is sought (the "Indemnifying Party") a certificate in the form of Exhibit C (the "Certificate"), which Certificate shall: (i) state that the Indemnified Party has paid or properly accrued Losses or anticipates that it will incur liability for Losses for which such Indemnified Party is entitled to indemnification pursuant to this Agreement; and (ii) specify in reasonable detail each individual item of Loss included in the amount so stated, the date such item was paid or properly accrued, the basis for any anticipated liability and the nature of the misrepresentation, breach of warranty, breach of covenant or claim to which each such item is related and the computation of the amount to which such Indemnified Party claims to be entitled hereunder. (b) In the event that the Indemnifying Party shall object to the indemnification of an Indemnified Party in respect of any claim or claims specified in any Certificate, the Indemnifying Party shall, within ten (10) Business Days after receipt by the Indemnifying Party of such Certificate, deliver to the Indemnified Party a notice to such effect and the Indemnifying Party and the Indemnified Party shall, within the thirty (30) day period beginning on the date of receipt by the Indemnified Party of such objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims to which the Indemnifying Party shall have so objected. If the Indemnified Party and the Indemnifying Party shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnified Party and the Indemnifying Party shall promptly prepare and sign a memorandum setting forth such agreement. Should the Indemnified Party and the Indemnifying Party be unable to agree as to any particular item or items or amount or amounts, then the Indemnified Party and the Indemnifying Party shall submit such dispute to a court of competent jurisdiction. The party which receives a final judgment in such dispute shall be indemnified and held harmless for all reasonable attorney and consultant's fees or expenses by the other party. (c) Claims for Losses specified in any Certificate to which an Indemnifying Party shall not object in writing within ten (10) Business Days of receipt of such Certificate, claims for Losses covered by a memorandum of agreement of the nature described in Section 8.3(b), claims for Losses the validity and amount of which have been the subject of judicial determination as described in Section 8.3(b) and claims for Losses the validity and amount of which shall have been the subject of a final judicial determination, or shall have been settled with the consent of the Indemnifying Party, as described in Section 8.4, are hereinafter referred to, collectively, as "Agreed Claims". Within ten (10) Business Days of the determination of the amount of any Agreed Claims, subject to the limitation set forth in Section 8.2, the Indemnifying Party shall pay to the Indemnified Party an amount equal to the Agreed Claim by wire transfer in immediately available funds to the bank account designated by the Indemnified Party in a notice to the Indemnifying Party not less than two (2) Business Days prior to such payment. 8.4 Third Party Claims. If a claim by a third party is made against any Indemnified Party and if such party intends to seek indemnity with respect thereto under this Article VIII, such Indemnified Party shall promptly notify the Indemnifying Party of such claims; provided that the failure to so notify shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent that the Indemnifying Party is actually and materially prejudiced thereby. The Indemnifying Party shall have thirty (30) days after receipt of such notice to assume the conduct and control, through counsel reasonably acceptable to the Indemnified Party at the expense of the Indemnifying Party, of the settlement or defense thereof and the Indemnified Party shall cooperate with it in connection therewith; provided that it is reasonably anticipated by the Indemnified Party that the Indemnifying Party shall permit the Indemnified Party to participate in such settlement or defense through counsel chosen by such Indemnified Party, provided that the fees and expenses of such counsel shall be borne by such Indemnified Party; provided, further, that the Indemnifying Party shall not be entitled to assume control of such defense and shall pay the fees and expenses of counsel retained by the Indemnified Party if (i) the claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation; (ii) the Indemnified Party has been advised in writing by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party; or (iii) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such claim. Any Indemnified Party shall have the right to employ separate counsel in any such action or claim and to participate in (but not control) the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (i) the Indemnifying Party shall have failed, within a reasonable time after having been notified by the Indemnified Party of the existence of such claim as provided in the preceding sentence, to assume the defense of such claim, (ii) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party, which authorization shall not be unreasonably withheld, or (iii) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised in writing by such counsel that there may be one or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party. So long as the Indemnifying Party is reasonably contesting any such claim in good faith, the Indemnified Party shall not pay or settle any such claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such claim, provided that in such event it shall waive any right to indemnity therefor by the Indemnifying Party for such claim unless the Indemnifying Party shall have consented to such payment or settlement. If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days after the receipt of the Indemnified Party's notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the Indemnified Party shall have the right to contest, settle or compromise the claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement. The Indemnifying Party shall not, except with the written consent of the Indemnified Party, enter into any settlement that (i) is not entirely indemnifiable by the Indemnifying Party pursuant to this Article VIII and does not include as an unconditional term thereof the giving by the Person or Persons asserting such claim to all Indemnified Parties of an unconditional release from all liability with respect to such claim or consent to entry of any judgment, (ii) provides for injunctive relief or other nonmonetary relief affecting the Indemnified Party or (iii) in the reasonable opinion of the Indemnified Party, could materially adversely affect the Indemnified Party. The Indemnifying Party and the Indemnified Party shall cooperate with each other in all reasonable respects in connection with the defense of any claim, including making available records relating to such claim and furnishing, without expense to the Indemnifying Party and/or its counsel, such employees of the Indemnified Party as may be reasonably necessary for the preparation of the defense of any such claim or for testimony as witnesses in any proceeding relating to such claim. The obligations of an Indemnifying Party pursuant to this Section 8.4 are subject to the limitation set forth in Section 8.2. ARTICLE IX TERMINATION 9.1 Termination. This Agreement may be terminated at any time prior to the Closing Date: (a) By the mutual written agreement of Purchaser and Seller; (b) By Purchaser, on the one hand, or Seller, on the other hand, by written notice to the other party after 5:00 p.m. New York City time on the date that is sixty (60) days after the date of this Agreement, if the transactions contemplated by this Agreement have not been consummated, unless such date is extended by the mutual written consent of Purchaser and Seller; provided that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any party whose failure to fulfill in any material respect any obligations under this Agreement has caused or resulted in the failure of the Closing to occur on or before such date; (c) By either Purchaser, on the one hand, or Seller, on the other hand, by written notice to the other party if: (i) the other party has (and the terminating party shall not have) failed to perform and comply with, in any material respect, any material agreement, covenant or condition hereby required to have been performed or complied with by such party prior to the time of such termination, and such failure shall not have been cured within 30 days following notice of such failure; or (ii) any event occurs or any condition exists after the date of this Agreement that makes it impossible to satisfy a condition precedent to the terminating party's obligations to consummate the transactions contemplated by this Agreement, unless the occurrence of such event is due to the failure of the terminating party to perform or comply with any of the agreements, covenants or conditions of this Agreement to be performed or complied with by such party prior to the Closing; (d) By Seller by written notice to Purchaser after 5:00 p.m. New York City time on the date that is forty five (45) days from the date of this Agreement (the "Cut-off Time"), if (i) Purchaser has not delivered to Seller the written notice referred to in the last sentence of Section 5.7(j) on or prior to the Cut-off Time or (ii) Purchaser has delivered such notice prior to the Cut-off Time but as of the Cut-off Time does not have funds sufficient to pay the Cash Consideration and does not have the right to obtain such funds through customary commitments of the type used in financings similar to the Proposed Financing Transactions or otherwise (subject to the satisfaction of the other conditions precedent to the transactions contemplated hereby); provided, however, that Seller may not terminate this Agreement pursuant to this Section 9.1(d) if, as of the Cut-off Time, any event has occurred or any condition exists at the Cut-off Time that would make it impossible for Seller to satisfy the conditions precedent set forth in Sections 6.1(a), 6.1(b) and 6.1(c) and it is reasonable to conclude that Seller will not be able to satisfy such conditions precedent within fifteen (15) days following the Cut-off Time. 9.2 Effect of Termination(a) . (a) In the event of the termination of this Agreement in accordance with Section 9.1, written notice thereof shall promptly be given by the terminating party to the other party and this Agreement shall become void and have no effect, without any liability to any person in respect of this Agreement or of the transactions contemplated by this Agreement on the part of any party, or any of its Representatives, shareholders or Affiliates, except as provided in Sections 5.2, 5.3, Article X and this Section 9.2, and except that nothing in this Agreement shall relieve any party of liability for fraud or deceit or willful misconduct, or for any breach of or failure to perform any of its agreements and covenants contained in this Agreement; provided, however, that, notwithstanding anything to the contrary contained herein, Seller's right (whether or not exercised) pursuant to Section 9.1(d) to terminate this Agreement and receive a termination fee pursuant to Section 9.2(b) shall be Seller's sole and exclusive remedy for any breach of Purchaser's representations, warranties or covenants relating the Proposed Financing Transactions or any obligation, covenant or agreement of Purchaser to obtain funds to pay the Cash Consideration. (b) In the event this Agreement shall be terminated by Seller pursuant to Section 9.1(d), Purchaser shall, within two Business Days thereof, pay to Seller by wire transfer of immediately available funds a termination fee in the amount of three hundred seventy five thousand dollars ($375,000). (c) In the event this Agreement shall be terminated and at such time any party is in material breach of or in default under any term or provision hereof, such termination shall be without prejudice to, and shall not effect, any and all rights to damages that any other party may have hereunder or otherwise under applicable Law; provided, however, that, notwithstanding anything to the contrary contained herein, Seller's right (whether or not exercised) pursuant to Section 9.1(d) to terminate this Agreement and receive a termination fee pursuant to Section 9.2(b) shall be Seller's sole and exclusive remedy for any breach of Purchaser's representations, warranties or covenants relating the Proposed Financing Transactions or any obligation, covenant or agreement of Purchaser to obtain funds to pay the Cash Consideration. The damages recoverable by the non-defaulting party shall include all attorneys' fees reasonably incurred by such party in connection with recovering any such damages. ARTICLE X MISCELLANEOUS 10.1 Expenses. Except as provided in this Agreement, the parties hereto shall pay all of their own expenses relating to the transactions contemplated by this Agreement, including the fees and expenses of their respective legal counsel and financial advisers. Without limiting the generality of the foregoing, Seller shall be responsible for Seller's Expenses as provided in Section 2.7. The foregoing notwithstanding, all out-of-pocket expenses incurred by the Company relating to the preparation of the Historical Financial Statements as described in clauses (i) and (ii) of Section 5.7(l) shall be borne by Purchaser, whether or not the transactions contemplated by this Agreement are consummated. Except as provided in the immediately preceding sentence, the Company shall pay and shall be entitled to pay without any adjustment to the Purchase Price or reimbursement obligation on the part of Seller, the fees and expenses of the Company's accountants incurred in connection with the preparation of the Historical Financial Statements as described in clause (iii) of Section 5.7(l), the related drafts thereof and the unaudited financial statements of the Company, including the preparation of the related financial statements of Seller, or in providing other services to the Company in the ordinary course of business consistent with past practice or in connection with the transactions contemplated by this Agreement. 10.2 Governing Law. The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of New York applicable to agreements executed and to be performed solely within such State. 10.3 Jurisdiction. Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the courts of (i) the State of New York or the United States District Court for the Southern District of New York or (ii) the State of California or the United States District Court for the Central District of California, in connection with any suit, action or judicial proceeding brought against any of the parties to this Agreement or any dispute arising out of this Agreement or any Transaction Document or any matter related hereto or thereto and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement or any Transaction Document. Each of the parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of this Agreement or any Transaction Document or any matter related hereto or thereto in any New York State or Federal Court sitting in New York or in any California State or Federal Court sitting in California and each of the parties hereto irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action, suit or proceeding in any such court. The foregoing consents to non-exclusive jurisdiction shall not be deemed to confer rights on any Person other than the respective parties to this Agreement. The prevailing party or parties in any such litigation shall be entitled to receive from the losing party or parties all costs and expenses, including reasonable counsel fees, incurred by the prevailing party or parties. Each of the parties to this Agreement agrees that service of any process, summons, notice or document by any method approved pursuant to Section 10.4 below, to such party's address set forth below shall be effective service of process for any action, suit or proceeding with respect to any matters for which it has submitted to jurisdiction pursuant to this Section 10.3. 10.4 Notices. Any notice or other communication required or permitted under this Agreement shall be deemed to have been duly given (a) when sent, if sent by facsimile transmission, if receipt thereof is confirmed by telephone, (b) when delivered, if delivered personally to the intended recipient and (c) two Business Days following deposit with a nationally recognized overnight courier service, in each case addressed as follows (or to such other address or number as shall be furnished in writing by any such party): if to Seller, to ITO Holdings, LLC c/o Global Innovation Partners, LLC 2730 Sand Hill Road Menlo Park, CA 94025 Telephone: (650) 233-3609 Facsimile: (650) 233-3601 Attn: Eric Harrison and to ITO Holdings, LLC c/o RLH Investors, L.P. 300 South Grand Avenue, 29th Floor Los Angeles, CA 90071 Telephone: (213) 229-8500 Facsimile: (213) 229-8597 Attn: Patrick C. Haden with a copy to Bingham McCutchen LLP 600 Anton Boulevard, 18th Floor Costa Mesa, CA 92626 Telephone: 714-830-0626 Facsimile: 714-830-0726 Attn: James W. Loss, Esq. Thomas F. Morrison, Esq. and if to Purchaser, to Infocrossing, Inc. Two Christie Heights Street Leonia, NJ 07605 Telephone: 201-840-4700 Facsimile: 201-840-7126 Attn: Chief Executive Officer with a copy to Latham & Watkins LLP 885 Third Avenue New York, NY 10022--4802 Telephone: 212-906-1215 Facsimile: 212-751-4864 Attn: David M. Schwartzbaum, Esq. David S. Allinson, Esq. 10.5 Assignment; Parties in Interest. This Agreement may not be transferred, assigned, pledged or hypothecated by any party hereto without the express written consent of the other party hereto, other than by operation of Law; provided that Purchaser may assign its rights, interests and obligations (other than its obligation to issue the Stock Consideration) hereunder without the express written consent of the other party hereto (a) to any direct or indirect wholly owned Subsidiary of Purchaser, (b) in connection with the transfer by Purchaser of all or substantially all of the capital stock and/or assets of the Company or (c) to one or more lenders as a collateral assignment; provided, further, that if Purchaser makes any assignment referred to in (a) above, Purchaser shall remain liable under this Agreement as if such assignment had not occurred. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. Any purported assignment in violation of the above shall be void and of no effect to transfer any right hereunder. 10.6 Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. 10.7 Entire Agreement. This Agreement, including the other documents referred to herein which form a part hereof and the Confidentiality Agreement, contain the entire understanding of the parties hereto and thereto with respect to the subject matter contained herein and therein. This Agreement, including the other documents referred to herein which form a part hereof and the Confidentiality Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter. 10.8 Amendments. This Agreement may not be changed, and any of the terms, covenants, representations, warranties and conditions cannot be waived, except pursuant to an instrument in writing signed by Purchaser and Seller or, in the case of a waiver, by the party waiving compliance. 10.9 Severability. If any term, provision, agreement, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, agreements, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a reasonably acceptable manner in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible. 10.10 Third Party Beneficiaries. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto and the Purchaser Indemnitees and Seller Indemnitees, all of whom are express third party beneficiaries of this Agreement. 10.11 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by all parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. 10.12 Schedules and Exhibits(a) . (a) Items disclosed on one particular Schedule relating to one section of this Agreement shall be deemed to be constructively disclosed or set forth in other Schedules relating to other sections of this Agreement regardless of whether a cross-reference is made to such other Schedules so long as the matter and extent of such disclosure is sufficient to identify the facts and circumstances required to be disclosed in such other Schedule. The fact that any item of information is contained in a Schedule shall not be construed as an admission of liability under any applicable Law, or to mean that such information is required to be disclosed in or by this Agreement, or to mean that such information is material. Such information shall not be used as a basis for interpreting the term "material", "materially", "materiality" or "Material Adverse Effect", or any similar qualification in this Agreement. (b) Each Exhibit and Schedule to this Agreement is a part of this Agreement, but, in the event of any conflict or inconsistency between the main body of this Agreement and any Exhibit or Schedule, the provisions of the main body of this Agreement shall prevail. 10.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN ANY OF THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH OF THE PARTIES TO THIS AGREEMENT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY OR PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.13. [The remainder of this page has been intentionally left blank. Signature page follows.] IN WITNESS WHEREOF, each of Seller and Purchaser has caused its company name to be hereunto subscribed by its officer thereunto duly authorized all as of the day and year first above written. ITO HOLDINGS, LLC By: /s/ Patrick A. Dolan ------------------------------ Name: Patrick A. Dolan Title: Manager INFOCROSSING, INC. By: /s/ Zach Lonstein ----------------------------- Name: Zach Lonstein Title: Chairman & Chief Executive Officer EXHIBIT A Topics to be Covered by Seller's Counsel Legal Opinion Opinions covering the following topics will be addressed in one or more opinions to be delivered by counsel to Seller subject to standard exceptions and qualifications1: 1. Seller is a limited liability company of the State of California, with limited liability company power and authority to enter into the Purchase Agreement and the other Transaction Documents to which it is a party and perform its obligations thereunder. Based on certificates from public officials, we confirm that Seller is validly existing and in good standing under the laws of the State of California. 2. The Company is a corporation of the State of California. Based on certificates from public officials, we confirm that the Company is validly existing and in good standing under the laws of the State of California. 3. The execution, delivery and performance of the Purchase Agreement and the other Transaction Documents to which it is a party have been duly authorized by all necessary limited liability company action of Seller, and the Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by Seller. 4. Each of the Purchase Agreement and the Escrow Agreement constitutes a legally valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. 5. The execution and delivery of the Purchase Agreement and the Escrow Agreement, and the sale, assignment, transfer and delivery by Seller to Purchaser of the Shares pursuant to the Purchase Agreement and the Escrow Agreement, on the date hereof do not: (i) violate the provisions of the Organizational Documents of Seller or the Company, (ii) violate any federal or California statute, rule or regulation applicable to Seller or the Company, or (iii) require any consents, approvals, or authorizations to be obtained by Seller or the Company, or any registrations, declarations of filings to be made by Seller or the Company, under any federal or California statute, rule or regulation applicable to Seller or the Company that have not been obtained or made. 6. The authorized capitalization of the Company consists of 1,000,000 shares of common stock, of which no shares are issued and outstanding other than the Shares and no shares are held in the Company's treasury. The Shares are owned of record by Seller. Except as described above, no shares of capital stock of the Company are authorized, issued, outstanding or reserved for issuance. 7. The Shares have been duly authorized by all necessary corporate action of the Company and are validly issued, fully paid and non-assessable and free of preemptive rights arising from the Organizational Documents of the Company or Seller. Seller's counsel shall permit the lenders of Purchaser to rely on the foregoing opinions delivered at the Closing as may be reasonably requested by such lenders in connection with the Proposed Debt Financing. EXHIBIT B Topics to be Covered by Purchaser's Counsel Legal Opinion Opinions covering the following topics will be addressed in one or more opinions to be delivered by counsel to Purchaser subject to standard exceptions and qualifications1: 1. Purchaser is a corporation of the State of Delaware, with corporate power and authority to enter into the Purchase Agreement and the other Transaction Documents to which it is a party and perform its obligations thereunder. Based on certificates from public officials, we confirm that Purchaser is validly existing and in good standing under the laws of the State of Delaware. 2. The execution, delivery and performance of the Purchase Agreement and the other Transaction Documents to which it is a party have been duly authorized by all necessary corporate action of Purchaser, and the Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by Purchaser. 3. Each of the Purchase Agreement and the Escrow Agreement constitutes a legally valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. 4. The execution and delivery of the Purchase Agreement and the Escrow Agreement, and the purchase by Purchaser of the Shares from Seller pursuant to the Purchase Agreement and the Escrow Agreement, on the date hereof do not: (i) violate the provisions of the Organizational Documents of Purchaser, (ii) violate any federal or New York statute, rule or regulation applicable to Purchaser, or (iii) require any consents, approvals, or authorizations to be obtained by Purchaser, or any registrations, declarations of filings to be made by Purchaser, under any federal or New York statute, rule or regulation applicable to Purchaser that have not been obtained or made. 5. The Stock Consideration to be issued to Seller pursuant to the Purchase Agreement has been duly authorized by all necessary corporate action of Purchaser and, when issued to Seller in accordance with the terms of the Purchase Agreement, will be validly issued, fully paid and non-assessable and free of preemptive rights arising from the Organizational Documents of Purchaser. Purchaser's counsel shall permit the lenders of Purchaser to rely on the foregoing opinions delivered at the Closing as may be reasonably requested by such lenders in connection with the Proposed Debt Financing. 1. EXHIBIT C Form of Certificate: Indemnification Procedure [Letterhead of Indemnified Party] CERTIFICATE OF ENTITLEMENT TO INDEMNITY [______________]1 [Notice address of Indemnifying Party] I, _____________________, [a duly authorized officer of [Indemnified Party] (the "Company"), a [________]2,]3 pursuant to Section 8.3 of the Stock Purchase Agreement (the "SPA"), dated as of February __, 2004, by and between ITO Holdings, LLC and Infocrossing, Inc., hereby certify[ on behalf of [Name of Party], and not in my personal capacity,]4 that: (1) [Name of Party][I] [[has][have] paid or properly accrued Losses][anticipate[s] that [it][I] will incur liability for Losses] for which [the [Name of Party] is entitled][I am entitled] to indemnification pursuant to Section 8.2 of the SPA, in an aggregate amount of $[__________]. (2) Schedule I attached hereto specifies in reasonable detail each individual item of Loss included in the amount stated above, the date such item was paid or properly accrued, the basis for any anticipated liability and the nature of the misrepresentation, breach of warranty, breach of covenant or claim to which each item is related and the computation of the amount to which [the [Name of Party] claims][I claim] to be entitled under Section 8.2 of the SPA. Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the SPA, unless the context requires otherwise. IN WITNESS WHEREOF, I have hereunto signed my name as of the date first written above. [Indemnified Party] By: Name: Title: Schedule I Item Amount Date Paid or Accrued Description and Computation EXHIBIT D Form of Escrow Agreement ESCROW AGREEMENT This ESCROW AGREEMENT (this "Agreement"), dated as of ______ __, 2004, is made and entered into by and among ITO HOLDINGS, LLC, a California limited liability company ("Seller"), INFOCROSSING, INC., a Delaware corporation ("Purchaser"), and _______________ (the "Escrow Agent"). W I T N E S S E T H : WHEREAS, Seller and Purchaser have entered into a Stock Purchase Agreement, dated as of March 3, 2004 (the "Purchase Agreement"), providing for the purchase by Purchaser from Seller of all of the issued and outstanding shares of common stock (the "Shares") of ITO Acquisition Corporation, a California corporation (the "Company"); WHEREAS, the Purchase Agreement provides that certain portions of the cash consideration to be paid by Purchaser to Seller for the Shares shall be held in escrow pursuant to this Agreement; and WHEREAS, Seller and Purchaser desire that the Escrow Agent hold and dispose of such escrowed monies, and the Escrow Agent is willing to do so, on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows (capitalized terms used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement): 1. Appointment of Escrow Agent. The Escrow Agent is hereby constituted and appointed the escrow agent hereunder. 2. Escrow Funds. Simultaneously with the execution of this Agreement, Purchaser shall deliver to and deposit with the Escrow Agent in accordance with the Purchase Agreement, in immediately available funds, an amount equal to three million six hundred and fifty thousand dollars ($3,650,000) to be held by the Escrow Agent in accordance with the terms of this Agreement (the funds so held by the Escrow Agent, from time to time, with the benefit of any earnings thereon, being hereinafter referred to as the "Escrow Funds"). The Escrow Agent hereby agrees to act with respect to the Escrow Funds as hereinafter set forth. The Escrow Funds will be retained by the Escrow Agent for safekeeping in an account (the "Escrow Account") pursuant to the terms hereof as security for the indemnity obligations of Seller set forth in Article VIII of the Purchase Agreement. 3. Investment of Escrow Funds. (a) The Escrow Agent shall invest and reinvest the Escrow Funds in any of the following investments: (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof; (ii) money market investments consisting solely of the investments identified in subsection (i) above; or (iii) certificates of deposit with maturities of six months or less from the date of acquisition thereof and overnight bank deposits with any domestic commercial bank having capital and surplus in excess of $5 billion (including the Escrow Agent, if applicable). Any earnings received from the investment of the Escrow Funds shall be credited to, and shall become a part of, the Escrow Funds (and any losses on such investments shall be deducted from the Escrow Funds) and shall be invested as provided in this Section 3 and remain on deposit with the Escrow Agent in the Escrow Account until disbursed in accordance with the terms hereof. The Escrow Agent shall have the right to sell any investments held hereunder in order to comply with the terms of this Agreement and shall not be liable for any loss due to fluctuation of interest rates or the market value of the investment being sold. (b) The Escrow Agent shall not be responsible or liable for any loss suffered in connection with any investment of the Escrow Funds made by it in accordance with this Section 3 or realized as a result of the sale of any such investment. All earnings on investments of Escrow Funds shall be net of income taxes, if any, payable by the Escrow Agent. 4. Claims Relating to the Escrow Account. (a) If at any time (and from time to time) Purchaser determines that it is entitled to indemnification for Losses from Seller pursuant to Article VIII of the Purchase Agreement, Purchaser shall deliver to each of the Escrow Agent and Seller a copy of the relevant Certificate delivered to Seller pursuant to Section 8.3(a) of the Purchase Agreement, together with wire instructions for disbursement to Purchaser of the amount specified in the Certificate for which indemnification is sought (the "Certificate Amount"). The Escrow Agent will have no responsibility to verify the existence of any circumstances set forth in such Certificate. (b) Seller may, within ten (10) Business Days after the delivery the Certificate described in Section 4(a) (the "Notice Period"), send a notice of objection with respect to the Certificate Amount to the Escrow Agent and Purchaser in accordance with Section 8.3(b) of the Purchase Agreement and Section 10 hereof (any such notice, a "Dispute Notice"). (c) If the Escrow Agent does not receive a Dispute Notice with respect to a Certificate Amount within the Notice Period, Seller shall be deemed to have accepted such Certificate Amount in full and Seller shall have no further right to contest such amount. In the event of an acceptance or deemed acceptance of a Certificate Amount in its entirety, the Escrow Agent shall pay such amount to Purchaser within three (3) Business Days of such acceptance or deemed acceptance, to the extent Escrow Funds are available. If the Escrow Agent receives a Dispute Notice that relates to a Certificate within the Notice Period, the Escrow Agent (i) will pay to Purchaser the portion, if any, of the Certificate Amount that is not objected to in such Dispute Notice within three (3) Business Days after receipt of such Dispute Notice and (ii) will not disburse such portion of the Certificate Amount which is objected to in such Dispute Notice unless it has received either (x) a notice of release signed by Seller directing the Escrow Agent to deliver all or a portion of such funds and setting forth instructions as to payment, or (y) a final order by a court of competent jurisdiction, which order is not subject to ongoing appeal, directing the Escrow Agent to disburse an amount set forth in such order (provided that the Escrow Agent shall be entitled to receive from the claiming party, with a copy to the non-claiming party, a letter, on which the Escrow Agent may conclusively rely, to the effect that the order of the court is final and binding). (d) Notwithstanding the receipt of one or more Dispute Notices, the Escrow Agent shall disburse the amount specified in one or more Certificates for which no Dispute Notices have been timely received by it regardless of whether such disbursement would reduce the Escrow Account to an amount less than the amount subject to Dispute Notices which have been timely received by the Escrow Agent; provided, however, that at such time as the amount of the Escrow Funds have been reduced to zero, all then unresolved Dispute Notices shall be deemed resolved and of no further force or effect, solely for purposes of this Agreement and not with respect to any unresolved claims under the Purchase Agreement, and this Agreement shall terminate in accordance with Section 22 hereof. 5. Release of Escrow Account. Within three (3) Business Days after [Date which is one year from the closing of the Purchase Agreement to be inserted] [_______] (the "Distribution Date"), the Escrow Agent shall pay out of the Escrow Account to Seller an amount equal to the remaining amount, if any, of the Escrow Funds (subject to the succeeding proviso); provided, however, that (i) if any Certificate that has been delivered to Seller and the Escrow Agent on or prior to the Distribution Date remains outstanding and unresolved, an amount equal to the aggregate Certificate Amounts set forth in such outstanding and unresolved Certificates shall not be distributed to Seller on the Distribution Date, but instead will remain on deposit in the Escrow Account, and will be paid out only in accordance with the terms of Section 4(d) of this Agreement, to the extent funds are available, and (ii) the only amount that shall be distributed to Seller upon resolution in favor of Seller of any such Certificate shall be an amount, if available, equal to the difference between (x) the amount of Escrow Funds deducted from the distribution to Seller on the Distribution Date, minus (y) the aggregate Certificate Amounts subject to any remaining outstanding and unresolved Dispute Notices. 6. Tax Matters. (a) The parties to this Agreement agree that, for federal and applicable state income tax purposes, all interest or other income earned from the investment of the Escrow Funds or any portion thereof shall be treated as assets and income of Seller. The Escrow Agent shall timely report to Seller and Purchaser the aggregate amount of such interest or other income and shall allocate such amounts in accordance with the preceding sentence. (b) Seller agrees to provide the Escrow Agent with a certified tax identification number by signing and returning a form W-9 to the Escrow Agent prior to the date on which any income earned on the investment of the Escrow Funds is credited to such Escrow Funds. The parties hereto understand that, in the event their tax identification numbers are not certified to the Escrow Agent, the Internal Revenue Code, as amended from time to time, may require withholding of a portion of any interest or other income earned on the investment of the Escrow Funds. 7. Payments by the Escrow Agent. All payments by the Escrow Agent will be by wire transfer or intrabank transfer of immediately available funds to the account of Purchaser or to the account of Seller, as the case may be, specified in written notice from the applicable party to the Escrow Agent. 8. No Creditor Rights. The Escrow Funds shall be held as a trust fund, subject to the sole dominion and control of the Escrow Agent, who shall have sole legal title thereto, and shall not be subject to lien or attachment of any creditor of any party hereto and shall be used solely for the purposes and subject to the conditions set forth herein. No creditor of Purchaser or Seller shall have any rights in or to the Escrow Funds so long as they remain subject to the terms of this Agreement. In addition, in order to effectuate the parties' intentions under this Agreement, Purchaser hereby grants to Seller and Seller hereby grants to Purchaser, a security interest in all of the grantor's rights, title and interest in and to the Escrow Funds and any proceeds thereof (as such term is defined in Section 9-306 of the Uniform Commercial Code) so long as the Escrow Funds and/or any such proceeds remain subject to the terms of this Agreement. In addition, Purchaser and Seller hereby appoint the Escrow Agent as Purchaser's and Seller's agent for possession of the Escrow Funds in order to perfect Purchaser's and Seller's respective security interests therein. The Escrow Agent agrees to this appointment and acknowledges that, in connection with the security interest granted in this Section 9, it is acting as bailee with respect to such Escrow Funds and/or such proceeds on behalf of Purchaser and Seller. Purchaser and Seller further agree to take any and all necessary additional steps to perfect and continue perfection of the security interests granted hereunder. The Escrow Agent hereby waives any and all rights to offset that it may have against the Escrow Funds, including, without limitation, claims arising as a result of any claims, amounts, liabilities, costs, expenses, indemnified costs or other losses (collectively "Escrow Agent Claims") that the Escrow Agent may be otherwise be entitled to collect from any party to this Agreement, other than Escrow Agent Claims arising under this Agreement. 9. Matters Relating to the Escrow Agent 10.14 . (a) The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. (b) The Escrow Agent may rely and shall be protected in acting or refraining from acting upon any written instructions or notices furnished to it hereunder and believed by it to be genuine and to have been signed and presented by the proper party or parties. (c) The Escrow Agent will not be liable for any action taken by it in good faith and believed by it to be authorized or within the rights and powers conferred upon it by this Agreement (other than its negligence, gross negligence or willful misconduct), and may consult with counsel of its own choice and will be fully protected for any action taken by it hereunder in good faith and in accordance with the written opinion of such counsel. (d) In the event that the Escrow Agent shall be uncertain as to its duties or rights or shall receive instructions with respect to any property held by it in escrow pursuant to this Agreement which, in the opinion of the Escrow Agent, are in conflict with any of the provisions of this Agreement, the Escrow Agent shall be entitled to refrain from taking any action until it shall be directed otherwise in writing by Purchaser and Seller or by a final order of a court of competent jurisdiction, which order is not subject to ongoing appeal. In the event that any of the terms and provisions of any other agreement (excluding any amendment to this Agreement and, with respect to Seller and Purchaser, the Purchase Agreement) between any of the parties hereto conflict or are inconsistent with any of the terms and provisions of this Agreement, the terms and provisions of this Agreement shall govern and control in all respects. (e) The Escrow Agent may resign by giving written notice of such resignation to Purchaser and Seller specifying a date (not less than thirty (30) days after the giving of such notice) when such resignation shall take effect; provided, however, that such resignation shall not become effective until a successor escrow agent shall have been appointed and shall have accepted such appointment in writing and all Escrow Funds have been transferred to such successor escrow agent. Promptly after such notice, Purchaser and Seller will, by mutual agreement and notice to the Escrow Agent, appoint a successor escrow agent or otherwise provide for the disposition of Escrow Funds, and the Escrow Agent shall pay over the Escrow Funds, less its unpaid fees and expenses, as provided in such notice. If, within thirty (30) days after written notice of resignation by the Escrow Agent is received by Purchaser and Seller, a successor escrow agent is not appointed and no notice is delivered with regard to the disposition of Escrow Funds, the Escrow Agent shall have the right to petition any court of competent jurisdiction for the appointment of a successor escrow agent. (f) Seller and Purchaser may by mutual agreement at any time substitute a new escrow agent by giving fifteen (15) days' joint written notice thereof to the Escrow Agent then acting. The Escrow Agent shall continue to serve until its successor accepts the escrow and receives delivery of the Escrow Funds. (g) For the Escrow Agent's services hereunder, Purchaser, on the one hand, and Seller, on the other hand, severally and not jointly, each agree to (i) pay to the Escrow Agent one-half of the fees in accordance with the schedule of fees set forth in Exhibit A attached hereto (payable for the first year promptly following execution and delivery of this Agreement) and (ii) reimburse the Escrow Agent upon request for one-half of all reasonable expenses, disbursements and advances, including reasonable attorneys' fees, incurred or made by it in connection with carrying out its duties hereunder. (h) Seller, on the one hand, and Purchaser, on the other hand, jointly and not severally agree to indemnify the Escrow Agent for, and to hold it harmless against, any loss, liability or expense incurred by it arising out of or in connection with its carrying out its duties hereunder, other than as incurred by reason of its negligence, gross negligence or willful misconduct. As between Seller, on the one hand, and Purchaser, on the other hand, Seller, on the one hand, and Purchaser, on the other hand, agree that each shall be responsible for one-half of all indemnified amounts pursuant to this Section 10(g), other than as incurred solely by reason of either Seller's, on the one hand, or Purchaser's, on the other hand, negligence, gross negligence or willful misconduct, in which case the non-offending party shall not be liable to the offending party for the payment of any indemnified amounts. (i) The Escrow Agent shall not be responsible for delays or failures in performance resulting from acts beyond its control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes, terrorist attacks or other disasters. 10. Notices. All notices, requests, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given to Seller and/or Purchaser in accordance with Section 10.4 of the Purchase Agreement and to Escrow Agent in the same manner at [____________] (or at such other address for a party as shall be specified by like notice). 11. Consent to Jurisdiction. Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of (i) the State of New York or the United States District Court for the Southern District of New York or (ii) the State of California or the United States District Court for the Central District of California, in connection with any suit, action or judicial proceeding brought against any of the parties to this Agreement or any dispute arising out of this Agreement or any matter related hereto and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Each of the parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of this Agreement or any matter related hereto in any New York State or Federal Court sitting in New York or in any California State or Federal Court sitting in California. Each of the parties hereto irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action, suit or proceeding in any such court. The foregoing consents to non-exclusive jurisdiction shall not be deemed to confer rights on any Person other than the respective parties to this Agreement. The prevailing party or parties in any such litigation shall be entitled to receive from the losing party or parties all costs and expenses, including reasonable counsel fees, incurred by the prevailing party or parties. Each of the parties to this Agreement agrees that service of any process, summons, notice or document by any method approved pursuant to Section 11 above, to such party's address set forth in Section 10.4 of the Purchase Agreement shall be effective service of process for any action, suit or proceeding with respect to any matters for which it has submitted to jurisdiction pursuant to this Section 12. 12. Entire Agreement. This Agreement, the Purchase Agreement and the other Transaction Documents constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to their subject matters. 14. Governing Law. The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of New York applicable to agreements executed and to be performed solely within such State. 16. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN ANY OF THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH OF THE PARTIES TO THIS AGREEMENT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY OR PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15. 17. Amendments. No amendment, modification or discharge of this Agreement, and no waiver under this Agreement, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. The waiver by any of the parties of a breach of or a default under any of the provisions of this Agreement or to exercise any right or privilege under this Agreement, shall not be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges under this Agreement. 18. Assignments. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties; provided, however, that Purchaser and may, upon written notice to Seller assign any of its rights and obligations hereunder in accordance with the Purchase Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by and against the successors and permitted assigns of the parties, whether or not so expressed. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any person other than the parties hereto and the successors and assigns permitted by this Section 17, any right, remedy or claim under or by reason of this Agreement, and no person, other than the parties, their successors and permitted assigns, is entitled to rely on any representation, warranty, covenant or agreement contained herein. 20. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not to be performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other right and remedy to which they are entitled under this Agreement or, subject to this Agreement, at law or in equity. 21. Warranties. Each party executing this Agreement hereby represents and warrants as of the date hereof that it has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby 23. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. 25. Interpretation. In this Agreement, unless otherwise specified, the following rules of interpretation apply: (a) references to Sections, Schedules, Exhibits and parties are references to sections or subsections, schedules, and exhibits of, and parties to, this Agreement; (b) the section and other headings contained in this Agreement are for reference purposes only and do not affect the meaning or interpretation of this Agreement; (c) references to any law, regulation or statutory provision include references to such law or regulation or provision as modified, codified, re-enacted or replaced; (d) references to any party include references to such party's successors and permitted assigns; (e) words importing the singular include the plural and vice versa; (f) words importing one gender include the other gender; (g) references to the word "including" do not imply any limitation; (h) references to months are to calendar months; (i) the words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; (j) references to "$" or "dollars" refer to U.S. dollars; and (k) a defined term has its defined meaning throughout this Agreement and in each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined. 27. Severability. If any provision, including any phrase, sentence, clause, section or subsection, of this Agreement is invalid, inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering such provisions in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision in this Agreement contained invalid, inoperative, or unenforceable to any extent whatsoever, and such other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to a party. Upon such determination that any provision is invalid, inoperative or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 29. Termination. This Agreement and all rights and obligations of the parties hereunder shall terminate upon payment, in accordance with the provisions hereof, of all samounts held by the Escrow Agent in the Escrow Account, except that nothing in this Agreement shall relieve any party of liability for fraud or deceit or intentional misrepresentations or for any breach of or failure to perform any of its agreements and covenants contained in this Agreement. The obligations of Seller and Purchaser to pay accrued fees to the Escrow Agent pursuant to Section 10(f) hereof and to indemnify the Escrow Agent pursuant to Section 10(g) hereof shall survive any termination of this Agreement or replacement of the Escrow Agent hereunder. 31. Public Announcements. Neither the Escrow Agent nor Seller shall issue any press release or other public statement with respect to the transactions contemplated by this Agreement, except as may be required by applicable law or court process. Seller shall not issue any press release or other public statement with respect to the transactions contemplated by this Agreement, except in accordance with the Purchase Agreement. [The remainder of this page is intentionally left blank] IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. ITO HOLDINGS, LLC By: Name: Title: INFOCROSSING, INC. By: Name: Title: [ESCROW AGENT] By: Name: Title: Exhibit A Fee Schedule EX-99 3 ex99_sms.txt PRESS RELEASE EXHIBIT 99.1 IFOX Logo Media Contacts: Investor Relations: Michael L. Wilczak William McHale Infocrossing, Inc. Infocrossing, Inc. 201-840-4941 201-840-4732 mwilczak@infocrossing.com wmchale@infocrossing.com INFOCROSSING ACQUIRES SMS LEONIA, NEW JERSEY, APRIL 5, 2004 - INFOCROSSING, INC. (NASDAQ: IFOX), a provider of strategic IT and business process outsourcing solutions to large and mid-sized companies, announced today that the Company has completed its acquisition of ITO Acquisition Corp, a data center outsourcing company doing business as Systems Management Specialists (SMS), for $35 million in cash and 135,892 shares of Infocrossing stock. SMS, headquartered in Orange County, California, provides computing operations, business process outsourcing and managed application services to nearly forty clients primarily in the western United States. The company's business model is based on signing long-term, recurring revenue commitments for services delivered from a data center infrastructure. The deal combines two strong regional service providers with complementary services to create a single outsourcing company with national scale, an impressive client base, multi-platform expertise and a full complement of outsourcing solutions. "The acquisition of SMS positions Infocrossing as a national provider in the strategic outsourcing market," stated Zach Lonstein, Chairman and Chief Executive Officer of Infocrossing. "The deal moves Infocrossing from a strong regional service provider to a company with national scale and coast-to-coast operations. The greater capabilities and market presence will enable Infocrossing to offer greater value to our clients, target additional opportunities for growth, and continue toward our vision of becoming a recognized leader among providers of strategic outsourcing services in the United States," Mr. Lonstein concluded. SMS is expected to add approximately $33 million to Infocrossing's gross revenue during the next twelve months. Synergistic benefits are expected to be realized throughout 2004 and the acquisition is expected to be accretive on an earnings per share basis in 2004. In connection with the acquisition, Patrick A. Dolan, the former Chairman & Chief Executive Officer of SMS, has become President & Chief Operating Officer of Infocrossing. Robert B. Wallach, previously President & Chief Operating Officer of Infocrossing, has been promoted to the position of Vice Chairman of the Company. Infocrossing financed the acquisition of SMS with a portion of the net proceeds received from its recently completed private placement of common stock and from debt financing provided by CapitalSource Finance LLC pursuant to a $15 million term loan under Infocrossing's amended and restated term loan agreement. ABOUT INFOCROSSING Infocrossing, Inc. (IFOX) is a provider of strategic outsourcing services, delivering the computing platforms and proprietary systems that enable companies to process data and share information within their business, and between their customers, suppliers and distribution channels. Leading companies leverage Infocrossing's robust computing infrastructure, skilled technical team, and process-driven operations to reduce costs and improve service delivery by outsourcing the management of mainframes, mid-range, open system servers, networks and business processes to Infocrossing. This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. As such, final results could differ from estimates or expectations due to risks and uncertainties, including but not limited to: incomplete or preliminary information; changes in government regulations and policies; continued acceptance of the Company's products and services in the marketplace; competitive factors; technological changes; the Company's dependence upon third-party suppliers; intellectual property rights; difficulties with the integration of SMS; and other risks. For any of these factors, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. EX-10 4 ex104sms.txt EMPLOYMENT AGREEMENT - DOLAN EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April 2, 2004, by and between Patrick A. Dolan ("Executive") and Infocrossing, Inc., a Delaware corporation (the "Company"). RECITALS WHEREAS, the Company and ITO Holdings, LLC, a California limited liability company ("Holdings"), have entered into a Stock Purchase Agreement dated as of March 3, 2004 (as such agreement may hereafter be amended, the "Stock Purchase Agreement") pursuant to which the parties thereto have agreed that the Company will acquire all of the outstanding common stock of ITO Acquisition Corporation, a California corporation (the "Corporation"), and pursuant to which the Corporation will become a wholly-owned subsidiary of the Company; WHEREAS, Executive is the Chief Executive Officer of the Corporation and holds limited liability company member interests in Holdings, with respect to which interests Holdings will make distributions to Executive of its proceeds from the sale of the Corporation to the Company; WHEREAS, the covenants provided herein, including Executive's non-competition and non-solicitation covenants set forth in Section 8, and in that certain Employee Confidentiality and Invention Assignment Agreement dated as of the date hereof by and between the Company and Executive (the "Confidentiality Agreement"), are necessary in order for the Company to fully acquire the Corporation's business and goodwill and are material, significant and essential to effecting the acquisition of the Corporation and the other transactions contemplated by the Stock Purchase Agreement; and WHEREAS, the Company desires to employ Executive and to enter into this Agreement embodying the terms of such employment, effective as of the closing the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement (the "Closing"); and WHEREAS, Executive desires to enter into this Agreement and to accept employment with the Company, effective as of the Closing, subject to the terms and conditions of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein and for other good and valuable consideration, the adequacy and receipt of which are, hereby acknowledged, the parties hereto agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company commencing immediately after, and on the date of, the Closing (the "Effective Date'), on the terms and conditions set forth in this Agreement. 2. Position and Duties. (a) Position. During the term of his employment by the Company, Executive shall serve as the President and Chief Operating Officer of the Company and shall report directly to the Chairman of the Board of Directors and Chief Executive Officer of the Company. (b) Duties. Executive will generally be responsible for the operations, sales and marketing of the Company. Executive will also be responsible for the pre-sales, account management and human resource functions of the Company. Executive shall have such other duties and authority consistent with the foregoing and consistent with the position of President and Chief Operating Officer as shall be assigned to him from time to time by the Board of Directors. Executive's duties and authority shall not be reduced or changed except by the prior written consent of Executive and any reduction or change by the Company of Executive's duties and authority without Executive's prior written consent shall constitute a material breach of this Agreement by the Company. Executive shall devote his full business time, attention, skill and best efforts to the performance of his duties under this Agreement and shall not engage in any other business or occupation while employed by the Company. Notwithstanding the foregoing, nothing herein shall preclude Executive from: (i) engaging in charitable activities and community affairs, and (ii) managing his personal investments and affairs; provided, however, that the activities set out in clauses (i) and (ii) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder. The Company agrees that Executive shall perform a majority of his duties at the Company's corporate offices in Brea, California. (c) Stock Options. On the Effective Date, Executive shall be granted an option for 200,000 shares of the Company's common stock (the "Inducement Option") pursuant to the Company's 2002 Stock Option and Stock Appreciation Rights Plan, as amended (the "Plan"), which option (i) shall have an exercise price equal to the per share "Fair Market Value" (as defined in the Plan) of the stock on the Effective Date, (ii) shall have a term of ten (10) years from the Effective Date, without regard to any termination of Executive's employment with the Company, and (iii) shall be fully vested and exercisable as of the Effective Date. The Company has obtained the approval by the Compensation Committee of its Board of Directors for the Inducement Option. The Inducement Option shall be governed by the terms and conditions of a Stock Option Agreement in form and substance acceptable to Executive. Thereafter, on each anniversary of the Effective Date on which Executive is employed by the Company, beginning with the first anniversary of the Effective Date, Executive shall be granted an option for 75,000 shares of the Company's common stock pursuant to the Plan, subject to such terms and conditions as may be determined by the Committee that administers the Plan. (d) Board of Directors. The Company shall take the necessary steps to ensure that Executive will, during the term of his employment, be a member of the Board of Directors of the Company. (e) Promotion. On the second anniversary of the Effective Date, Executive shall become the Chief Executive Officer of the Company if Executive is then employed by the Company and if (i) the Company's gross revenues on a consolidated basis for month twenty four (24) when multiplied by twelve (12) equal or exceed on an annual basis Two Hundred Fifty Million Dollars ($250,000,000), (ii) the Company's stock trades on a public stock exchange at an average price of at least Thirty Three Dollars ($33) per share (adjusted for any stock splits or dividends that occur after the Effective Date) during the twenty (20) trading day period ending on or immediately prior to the second anniversary of the Effective Date, and (iii) the Company's consolidated "Organic Revenue" for the calendar month preceding the second anniversary of the Effective Date equals or exceeds 150% of the sum of (a) the Company's consolidated Organic Revenue plus (b) the Corporation's Organic Revenue, for the calendar month immediately preceding the Effective Date. As used herein "Organic Revenue" means the recurring gross revenue, determined on a consolidated basis, of the Company or the Corporation, as the case may be, from all sources other than revenue derived from other entities or businesses that are acquired (whether by stock, other equity or asset acquisition) by the Company after the Effective Date. 3. Compensation. (a) Base Salary. During the term of Executive's employment, the Company shall pay Executive an annual base salary of Two Hundred Eighty Thousand Dollars ($280,000) (the "Annual Base Salary") payable in accordance with the Company's regular payroll practices, but not less frequently than twice per month. The Annual Base Salary shall be reviewed at least annually by the Board of Directors and may be adjusted upwards (but not downwards) in the sole discretion of the Board of Directors. (b) Additional Compensation. In addition to the Annual Base Salary Executive shall receive such additional compensation and annual bonus payments as the Board of Directors may award Executive from time to time in its sole and absolute discretion. (c) Withholding. The Company shall deduct and withhold from any compensation payments payable to Executive all social security and other federal, state and local taxes and charges in the minimum amounts (or such greater amounts as Executive may from time to time request) which currently are or which hereafter may be required by law to be so deducted and withheld, including withholding pursuant to bonus withholding rates, as applicable. 4. Benefits: Vacation and Expense Reimbursement. (a) Benefits. During the term of Executive's employment, Executive shall be entitled to participate in all fringe benefits (including without limitation, group medical and dental insurance) and other benefit plans which are available from time to time to executive employees of the Company, subject in each case to the generally applicable terms and conditions of the applicable plan or program. In addition, Executive shall be covered by the Company's disability insurance plans and policies for senior executives as they may be maintained by the Company from time to time. (b) Vacation: Holidays and Sick Leave. During the term of Executive's employment, Executive shall be entitled to four (4) weeks of paid time off ("PTO") per year under the same terms and conditions as other employees of the Company. In addition, Executive shall be entitled to all paid Company holidays and other benefits as are generally provided to other executives of the Company in accordance with Company policies in effect from time to time. (c) Automobile. The Company shall provide Executive with the use of a current model automobile owned or leased by the Company and the Company shall pay for and/or reimburse Executive for all maintenance and repairs thereon as well as for gasoline, tolls and parking expenses for business use of such automobile for the Company, upon submission of such documentation as may be reasonably required by the Company. (d) Expense Reimbursement. Executive shall be authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement and the Company shall reimburse him for all business expenses incurred in connection with carrying out the business of the Company upon presentation of expense statements or such other supporting information as the Company may customarily require of its executives. Because it is anticipated that Executive will perform some or a substantial amount of his duties in the Company's corporate office located in New Jersey, the Company will: (i) advance and pay to Executive all of Executive's reasonable travel expenses, in accordance with the Company's expense reimbursement policies, to and from New Jersey and California; (ii) provide Executive a mutually acceptable housing allowance to permit Executive to maintain a reasonable apartment in New Jersey; (iii) advance and pay Executive for relocation expenses to and from New Jersey and California to the extent that Executive relocates any of his personal belongings to New Jersey; and (iv) advance and pay Executive the reasonable expenses for a driver service for use by Executive for business related transportation, including without limitation, to and from Executive's apartment, the Company's corporate office in New Jersey and the airport. 5. Confidentiality Agreement. Concurrently with the execution of this Agreement, Executive shall execute the Company's standard Employee Confidentiality and Invention Assignment Agreement (the "Confidentiality Agreement"). 6. Termination of Executive's Employment. (a) Termination of Employment. Executive's employment may be terminated (i) by the Company, at any time, for any reason or for no reason (including, without limitation, due to the Disability (as defined below) of Executive) and (ii) by Executive at any time with or without Good Reason (as defined below). In addition, Executive's employment shall terminate upon the death of Executive. (b) Definitions. (i) Disability. For purposes of this Agreement, a "Disability" shall occur in the event that there is a determination by the Company, upon the advice of an independent qualified physician, reasonably acceptable to Executive, that Executive has become physically or mentally incapable of performing his duties under this Agreement and such disability has disabled Executive, or can reasonably be anticipated to disable Executive, for a cumulative period of one hundred eighty (180) days within a twelve (12) month period. (ii) Good Reason. For purposes this Agreement, "Good Reason" shall mean, without Executive's prior written consent: (A) the occurrence of any material breach of this Agreement by the Company which remains uncured for a period of more than thirty (30) days after written notice of such breach and of Executive's intention to terminate his employment for "Good Reason" if such breach is not remedied; (B) a failure to pay any amount due hereunder within ten (10) business days following written demand for payment, which demand shall state that Executive intends to resign for Good Reason if such payment is not made within such ten (10) business day period; (C) the assignment to Executive of duties or responsibilities materially inconsistent with Executive's current position, duties or responsibilities, as contemplated by this Agreement, sufficient to constitute a substantial diminution of status within the Company which duties or responsibilities are not reassigned within thirty (30) days after written demand from Executive, which demand shall state that Executive intends to resign for Good Reason if such duties and responsibilities are not reassigned; or (D) a relocation of the office of the Company to which Executive is required to report to a location outside of a fifty (50) mile radius of the then existing location of such office or a requirement that Executive relocate his residence from Orange County, California. 7. Compensation Upon Termination of Employment. (a) Generally. Except as otherwise provided in Section 7(b) and Section 7(c), if the Company terminates Executive's employment for any reason (including, without limitation, as a result of Executive's death or Disability) or Executive terminates his employment for Good Reason, the Company shall: (i) immediately upon such termination, pay to Executive (A) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (B) an amount equal to the value of Executive's accumulated PTO, (C) an amount equal to any unpaid bonus or additional compensation to which Executive is entitled, and (D) an amount equal to the pro rata value of any bonus or additional compensation accrued through and including the date of termination; (ii) pay to Executive as severance one-twelfth of the Annual Base Salary in effect as of the date of the termination of Executive's employment each month after such termination (such monthly payments, the "Monthly Severance Payments"), in accordance with the Company's regular payroll practices and payroll schedule for a period of nine (9) months (the "Severance Period"); provided, however, that, if Executive enters into an employment relationship with any other party during the Severance Period, the Monthly Severance Payments shall immediately be reduced by fifty percent (50%) for the remainder of the Severance Period; provided further, that, if Executive's employment is terminated as a result of Executive's Disability, the Monthly Severance Payments shall be reduced by the amount, if any, paid to Executive during the Severance Period under any disability insurance policy purchased by the Company on behalf and for the benefit of Executive; and (iii) make all payments necessary to provide Executive with continuation coverage under the Company's group health plan until the earlier to occur of (A) the expiration of the Severance Period, or (B) in the event Executive enters into an employment or consulting relationship with any other party during the Severance Period, the date on which Executive becomes eligible to participate in the group health plan of such other party. Executive's right to receive the severance benefits described in Section 7(a)(ii) and Section 7(a)(iii) shall be subject to (x) Executive's execution of a full and complete release in favor of the Company and its officers, directors, shareholders and affiliates (and the respective officers, directors and shareholders of such affiliates), in form and substance reasonably acceptable to the Company, releasing the Company and such other parties from any and all claims of Executive in connection with his employment by the Company, and (y) to the extent applicable, Executive's compliance with the provisions of Section 8 of this Agreement. Except for the salary, PTO and severance payments described in this Section 7(a), the Company shall not be obligated to make any further payments to Executive hereunder. (b) Compensation Upon Termination by Company in Event of Misconduct. In the event that the Company terminates Executive's employment as a result of Misconduct (as defined below), the Company shall, immediately upon such termination, pay to Executive (i) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (ii) an amount equal to the value of Executive's accumulated PTO, and (iii) an amount equal to any unpaid bonus or additional compensation to which Executive is then entitled. Upon the payment of the amounts described in the previous sentence, the Company shall not be obligated to make any further payments to Executive hereunder. For purposes of this Section 7(b), "Misconduct" shall mean (1) any act of theft, fraud, embezzlement, falsification of Company or customer documents, misappropriation of funds or other assets of the Company or other acts of dishonesty or misconduct involving the property or affairs of the Company or the carrying, out of Executive's duties; (2) a conviction (by trial, upon a plea or otherwise) or the admission of guilt of any felony or misdemeanor involving moral turpitude or other act of dishonesty, fraud or deceit; or (3) the repeated material violation of any written policy or procedure of the Company. (c) Compensation Upon Termination by Executive Without Good Reason. If Executive terminates his employment without Good Reason, the Company shall, immediately upon such termination, pay to Executive (i) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (ii) an amount equal to the value of Executive's accumulated PTO, and (iii) an amount equal to any unpaid bonus or additional compensation to which Executive is then entitled. Upon the payment of the amounts described in the previous sentence, the Company shall not be obligated to make any further payments to Executive hereunder. 8. Non-Competition and Non-Solicitation. (a) Non-Competition. Except as provided below, upon the termination of Executive's employment with the Company Executive shall not directly or indirectly, for a period of twelve (12) months after such termination of Executive's employment, engage in (whether as an employee, consultant, agent, proprietor, principal, partner, major stockholder, corporate officer, director or otherwise), manage or control, any person, firm, corporation or business that competes with the Company's business at the time of termination. Notwithstanding the foregoing, Executive shall not be prohibited from owning shares of a business that competes with the Company's business if the shares are listed on a national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended, and the investment in such shares does not exceed two percent (2%) of the outstanding shares of such class of shares. The foregoing covenant shall not apply (i) if the Company terminates Executive's employment other than for Misconduct or Executive's Disability or (ii) if Executive terminates his employment with the Company for Good Reason. Executive further acknowledges that his agreement pursuant to this Section 8(a) is given, in part, in connection with and in consideration of the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement. (b) Non-Solicitation. Executive agrees and acknowledges that for a period of twelve (12) months after the termination of Executive's employment with the Company for any reason, Executive shall not, either directly or indirectly, personally, or on behalf of or in conjunction with any person or firm, divert or take away any client or customer of the Company or solicit, induce, facilitate, recruit, encourage or cause any employee, consultant, contractor, agent or representative of the Company, to leave their employment or engagement with the Company for any reason. Executive further acknowledges that his agreement pursuant to this Section 8(b) is given, in part, in connection with and in consideration of the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement. (c) Understanding of Covenants. Executive hereby represents that he (i) is familiar with the foregoing covenants not to compete and not to solicit; (ii) is fully aware of and agrees specifically to his obligations thereunder, including, without limitation, the reasonableness of the length of time and scope of these covenants: (iii) acknowledges that the remedies set forth herein for violation of such covenants are in addition to any remedies that the Company may have in law or in equity; and (iv) understands that he will also be executing simultaneously with this Agreement, the Confidentiality Agreement and that the obligations set forth in that agreement are in addition to those set forth in this Section 8. 9. Remedies. The parties hereto agree that the Company would suffer irreparable harm from a breach by Executive of any of the covenants or agreements contained in Section 8 of this Agreement. Therefore, in the event of the actual or threatened breach by Executive of any of the provisions of Section 8 of this Agreement, the Company may, in addition and supplementary to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violation of the provisions thereof. 10. Representation of Executive. Executive hereby warrants and represents that he is not bound by any other agreement or subject to any other restriction which would either prevent him from entering into this Agreement or from performing his duties as contemplated hereunder. 11. Indemnification. The Company shall, to the maximum extent permitted by the General Corporation Law of the State of Delaware, indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive's performance as an officer or employee of the Company or in any other capacity, including serving as a fiduciary, in which Executive serves at the request of the Company, except for acts or omissions not in good faith or which involve gross negligence, intentional misconduct or a knowing violation of law, for any breach of Executive's duty of loyalty or any other fiduciary duty to the Company; or for any transaction from which Executive derived an improper personal benefit. If any claim is asserted against Executive for which Executive reasonably believes in good faith he is entitled to be indemnified hereunder, the Company shall, at its option, (i) assume the defense thereof; or (ii) pay Executive's reasonable legal expenses (or cause such expenses to be paid), if the Company does not so assume the defense; provided, however that Executive shall reimburse the Company for such amounts if Executive shall be found by a final, non-appealable order of a court of competent jurisdiction or any arbitrator or mediator (whose judgment Executive has agreed to be bound by) not to be entitled to indemnification. 12. Arbitration and Equitable Relief. (a) Executive and the Company each agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof shall be settled by arbitration to be held in Orange County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator shall apply California law to the merits of any dispute or claim, without reference to rules of conflict of law. The arbitration proceedings shall be governed by California arbitration law and by the Rules. (c) The Company shall pay the costs and expenses of such arbitration, and each party shall separately pay his or its attorneys' fees and expenses. (d) Executive has read and understands this Section 12. Executive understands that by signing this Agreement, Executive agrees to submit any future claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof to binding arbitration, and that this arbitration clause constitutes a waiver of Executive's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/executive relationship, including but not limited to, the following claims: (i) employment; breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation; (ii) any and all claims for violation of any federal state or municipal law, regulation, statute or ordinance, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the California Fair Employment and Housing Act, and the California Labor Code Section 201, et seq.; and (iii) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination. (e) By signing this Agreement, the Company agrees to submit any future claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof to binding arbitration, and further agrees that this arbitration clause constitutes a waiver of the Company's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the relationship between the Company and Executive. (f) Adherence to this Section 12 regarding Arbitration shall not limit the right of the parties hereto to obtain any provisional remedy including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their respective rights and interests pending arbitration, particularly if necessary to avoid irreparable harm. 13. Successors and Assigns. This Agreement may not be assigned by Executive; provided, however, that Executive's rights to payments hereunder shall, upon his death, inure to the benefit of Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall inure to the benefit of and be binding on the successors and assigns of the Company. 14. Modification or Waiver. No provision of this Agreement may be modified, waived, or discharged unless agreed to in writing by both parties hereto. The failure of a party to insist upon strict adherence to any term, condition or other provision of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term, condition or other provision of this Agreement. 15. Notices. All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or delivered by a recognized delivery service or mailed, postage, prepaid, by express, certified or registered mail, return receipt requested, and addressed to the Company or Executive, as applicable, at the address set forth below (or to such other address as shall have been previously provided in accordance with this Paragraph 14): If to the Company: Infocrossing, Inc. 2 Christie Heights Leonia, NJ 07605 Attention: Chairman of the Board If to Executive: Patrick A. Dolan 32052 Via Buho Coto De Caza, California 92679 16. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of California without regard to its conflict of laws provisions. 17. Severability. Whenever possible, each provision and term of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or term of this Agreement shall be held to be prohibited by or invalid under such applicable law, then such provision or term shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provisions or term or the remaining provisions or terms of this Agreement. 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 19. Entire Agreement. This Agreement and the Confidentiality Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof. 20. Acknowledgement of Executive. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO CONSULT TAX AND LEGAL COUNSEL IN REGARD TO THIS AGREEMENT, THAT HE HAS READ AND UNDERSTANDS THIS AGREEMENT, THAT HE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT HE HAS ENTERED INTO IT FREELY AND VOLUNTARILY AND BASED ON HIS OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS, UNDERSTANDINGS, OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. [Remainder of Page Intentionally Left Blank] [Signature Page to Employment Agreement] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. EXECUTIVE THE COMPANY /s/PATRICK A DOLAN - -------------------------------- Patrick A. Dolan By: /s/ZACH LONSTEIN ---------------------------------- Name: Zach Lonstein Title: Chief Executive Officer EX-10 5 ex101sms.txt NEW TERM LOAN AGREEMENT EXHIBIT 10.1 AMENDED AND RESTATED TERM LOAN AGREEMENT (this "Agreement"), dated as of April 2, 2004, among INFOCROSSING, INC., a Delaware corporation (the "Borrower"), the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders") and CapitalSource Finance LLC, a Delaware limited liability company, as agent for the Lenders hereunder. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Borrower, Agent and Lenders are parties to that certain Term Loan Agreement dated as of October 21, 2003 (as amended, supplemented or otherwise modified prior to the date hereof, the "Original Loan Agreement"); WHEREAS, on the Original Closing Date, pursuant to the Exchange Agreement, the Borrower exchanged all of the outstanding Existing Preferred Stock and the outstanding Existing Warrants of the Borrower owned by the Investors for (i) $55,000,000 in cash and (ii) proceeds of Loans outstanding under the Original Loan Agreement in the aggregate original principal amount of $25,000,000 represented by Notes issued by the Borrower in favor of the Investors; WHEREAS, pursuant to that certain (i) Agreement Regarding Transitional Matters dated as of February 13, 2004 between Infocrossing Agent, Inc. (the "Retired Agent") and Agent, and (ii) Master Assignment and Assumption Agreement dated as of February 13, 2004 among the Retired Agent, the Agent, the Investors, the Lenders, the Borrower and the Subsidiaries party thereto, among other things, the Agent was appointed as "Agent" under the Original Loan Agreement, and all outstanding Loans under the Original Loan Agreement were assigned to the Lenders and the Lenders became parties to the Original Loan Agreement and the other Loan Documents, respectively; and WHEREAS, Borrower, Agent and Lenders desire to amend and restate the Original Loan Agreement in its entirety without constituting a novation thereof. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree to amend and restate the Original Loan Agreement in its entirety as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Affiliate": with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent": CapitalSource Finance LLC, as agent for the Lenders under this Agreement and the other Loan Documents, together with its successors and assigns in such capacity. "Agreement": this Amended and Restated Term Loan Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Applicable Interest Rate": means (a) with respect to Term Loan A, 9% per annum and (b) with respect to Term Loan B, the greater from time to time of (i) 9% per annum and (ii) an interest rate per annum equal to 3% plus the Prime Rate in effect from time to time. "Applicable Law": as to any Person (a) any United States federal, state, local or foreign law, statute, rule, regulation, order, writ, injunction, judgment, decree or permit of any Governmental Authority and (b) any rule or listing requirement of any applicable national stock exchange or listing requirement of any national stock exchange or SEC recognized trading market, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Assignee": as defined in subsection 9.6(c). "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Assignee (with the consent of any party whose consent is required by Section 9.6), and accepted by the Agent, in the form of Exhibit B. "Borrower Deposit Account Control Agreements": the Deposit Account Control Agreements executed and delivered by the Borrower, Agent and the relevant financial institutions substantially in the form of Exhibit C or otherwise in a form acceptable to the Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Borrower Property": as defined in subsection 3.16. "Borrower Security Documents": the collective reference to the Borrower Deposit Account Control Agreements, the Security Agreements to which Borrower is a party and the Stock Pledge Agreements to which the Borrower is a party. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Chevy Chase, Maryland are authorized or required by law to close. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are or should be capitalized under GAAP on a balance sheet of such Person; provided that, Capital Expenditures shall not include the cash purchase price of either the SMS Acquisition or investments that constitute Permitted Acquisitions pursuant to subsection 6.9(h). "Capital Stock": (i) with respect to any Person that is a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock and (ii) with respect to any other Person, any and all partnership or other equity interests of such Person and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": means the occurrence of any of the following events, whether in a single transaction or a series of related transactions, and any other similar events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Capital Stock of the Borrower; or (b) the Borrower consolidates with, or merges with or into, another Person or Persons or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person or Persons, or any Person or Persons consolidate with, or merge with or into the Borrower, in any such event pursuant to a transaction in which (i) the holders of the outstanding Voting Capital Stock of the Borrower immediately prior to such transaction hold less than 50% of the outstanding Voting Capital Stock of the surviving or transferee company or its direct or indirect parent company immediately after the transaction or (ii) immediately after such transaction any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Capital Stock of the surviving or transferee company or its direct or indirect parent company immediately after the transaction; or (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any new directors whose election by the Board of Directors of the Borrower or whose nomination for election by the stockholders of the Borrower was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower then in office provided, however, that the change in individuals constituting the Board of Directors in connection with the closing of the transactions contemplated by the Exchange Agreement shall be deemed not to result in a Change of Control pursuant to this clause (c); or (d) any transaction subject to Rule 13e-3 under the Exchange Act if following such Rule 13e-3 transaction such Person owns more than 50% of the total Voting Capital Stock of the Borrower. "Claim": for purposes of the definition of "Environmental Claims" contained in subsection 3.16, as defined herein. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Assignment of Acquisition Agreement": the Collateral Assignment of Acquisition Agreement to be executed and delivered by the Borrower in form and substance satisfactory to Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Commitments": collectively, the Term Loan A Commitment, the Term Loan B Commitment, the Term Loan A Interest Reserve Commitment and the Term Loan B Interest Reserve Commitment. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b) or (c) of the Code. "Common Stock": the common stock, par value $.01 per share, of the Borrower. "Consolidated Current Assets": of any Person at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date. "Consolidated Current Liabilities": of any Person at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of such Person and its Subsidiaries at such date, but excluding, with respect to the Borrower, (a) the current portion of any Funded Debt of the Borrower and its Subsidiaries and (b), without duplication, all Indebtedness consisting of revolving credit loans to the extent otherwise included therein. "Consolidated EBITDA": for any period, Consolidated Net Income of the Borrower and its Subsidiaries for such period plus, without duplication and to the extent deducted in determining such Consolidated Net Income for such period, the sum of (a) consolidated income tax expense, (b) consolidated interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness, (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary non-cash charges agreed to by Agent in its reasonable discretion and (f) any other non-cash charges agreed to by Agent in its reasonable discretion, and minus, to the extent included in determining such Consolidated Net Income for such period, the sum of (a) any extraordinary non-cash gains and (b) any other non-cash items, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Fixed Charges": with respect to the Borrower and its Subsidiaries on a consolidated basis for any period, the aggregate of (i) regularly scheduled principal payments of all Funded Debt made or to be made by the Borrower and its Subsidiaries on a consolidated basis during such period and discount or premium relating to such Funded Debt for such period, whether expensed or capitalized, (ii) without duplication, all payments made by Borrower and its Subsidiaries with respect to the Strategix Earnout during such period, (iii) Consolidated Interest Expense during such period, both expensed and capitalized, (iv) dividends and/or distributions paid in cash, and (v) cash paid for stock repurchases and/or redemptions in each case determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense": of any Person for any period, total cash interest expense (including that attributable to Financing Leases) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed by such Person with respect to letters of credit and bankers' acceptance financing and net costs of such Person under hedge agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP). "Consolidated Net Income": for any period, the net income or loss of the Borrower and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person (other than a Loan Party) in which any other Person (other than the Borrower or any Subsidiary or any director holding qualifying shares in compliance with applicable law) owns an equity interest, except to the extent of the amount of dividends or other cash distributions actually paid to the Borrower or any of the Subsidiaries during such period, and (b) the income or loss of any Person accrued prior to the date it becomes Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such Person's assets are acquired by the Borrower or any Subsidiary. "Consolidated Total Debt": as of any date, the sum of (a) the aggregate principal amount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP, plus (b) the aggregate principal amount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance with GAAP, determined on a consolidated basis, provided, that for purposes of clause (b) above, the term "Indebtedness" shall not include contingent obligations of the Borrower or any Subsidiary as an account party in respect of any letter of credit or letter or guaranty unless such letter of credit or letter of guaranty supports an obligation that constitutes Indebtedness. "Consolidated Working Capital": at any date, the difference of (a) Consolidated Current Assets of the Borrower and its Subsidiaries on such date less (b) Consolidated Current Liabilities of the Borrower and its Subsidiaries on such date. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Deposit Account Control Agreements": the collective reference to the Borrower Deposit Account Control Agreements and the Subsidiaries Deposit Account Control Agreements. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States. "Environmental Claims": as defined in subsection 3.16. "Environmental Laws": as defined in subsection 3.16. "ERISA": the Employee Retirement Income Security Act of 1974, as amended, and all regulations promulgated thereunder, as in effect from time to time. "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the difference, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) the amount of the decrease, if any, in Consolidated Working Capital for such fiscal year (without giving effect to any reduction in the realization reserve of deferred income tax benefits), (iv) the aggregate net amount of non-cash loss on the disposition of property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income and (v) the net increase during such fiscal year (if any) in long-term deferred tax accounts of the Borrower minus (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such fiscal year on account of Capital Expenditures (except to the extent attributable to the incurrence of capital lease obligations or other Indebtedness in connection with such expenditures and except to the extent such expenditures are financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all optional prepayments of the Funded Debt during such fiscal year (to the extent otherwise permitted hereunder) and mandatory prepayments made pursuant to subsection 2.3(b) with the proceeds of Prepayment Events described in clause (C) of the definition thereof during such year to the extent such proceeds are included in the calculation of Consolidated Net Income for such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt of the Borrower and its Subsidiaries made during such fiscal year, (v) the amount of the increase, if any, in Consolidated Working Capital for such fiscal year (without giving effect to any increase in the realization reserve of deferred income tax benefits), (vi) the aggregate net amount of non-cash gain on the disposition of property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, and (vii) the net decrease during such fiscal year (if any) in long-term deferred tax accounts of the Borrower. "Exchange Act": Securities Exchange Act of 1934, as amended. "Exchange Agreement": the Exchange Agreement entered into between the Borrower and the Investors relating to the Recapitalization. "Existing Preferred Stock": the Series A Cumulative Convertible Participating Preferred Stock, par value $.01 per share, previously issued by Borrower to the Investors and none of which is outstanding as of the Restatement Effective Date. "Existing Warrants": the warrants to purchase the Borrower's Common Stock at a purchase price of $.01 per share previously issued to the Investors and none of which is outstanding as of the Restatement Effective Date. "Federal Funds Rate": for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the United Stated Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent in a commercially reasonable manner. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "First Amendment Closing Date": February 13, 2004. "Fixed Early Prepayment Amount": an amount equal to 101% of the outstanding aggregate principal amount of the Loans to be prepaid. "Foreign Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction outside the United States of America. "Funded Debt": means, with respect to the Borrower and its Subsidiaries as of the date of determination thereof, all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis outstanding at such time (including the current portion thereof and amounts outstanding in the final year of any Funded Debt) which matures more than one year after the date of calculation, and any such Indebtedness maturing within one year from such date of calculation which is renewable or extendable at the option of the obligor to a date more than one year from such date and including in any event the Loans. "GAAP": generally accepted accounting principles in the United States of America, consistently applied, which are in effect on the date of this Agreement; provided, that, if any changes in GAAP are hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) and are adopted by the Borrower with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the covenants, standards or terms found in this Agreement, the Borrower may request that the parties hereto enter into negotiations in order to amend such provisions so as to equitably reflect such changes; provided, however, that no change in GAAP that would affect the method of calculation of any of the covenants, standards or terms shall be given effect in such calculations until such provisions are amended, in a manner satisfactory to the Required Lenders and the Borrower, to so reflect such change in GAAP. "Governmental Authority": (i) any foreign, Federal, state or local court or governmental or regulatory agency or authority, (ii) any arbitration board, tribunal or mediator and (iii) any national stock exchange or SEC recognized trading market on which securities issued by the Borrower or any of the Subsidiaries are listed or quoted. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefore, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantor": any Person party to a Security Agreement other than the Borrower and the Agent. "Hazardous Materials": as defined in subsection 3.16. "Indebtedness": with respect to the Borrower or any specified Person, all obligations, contingent or otherwise, which in accordance with GAAP are required to be classified upon the balance sheet of the Borrower (or other specified Person) as liabilities, but in any event including (without duplication): (a) all indebtedness of such Person for borrowed money, (b) for the deferred purchase price of assets, securities, property or services, including related non-competition, consulting and stock repurchase obligations (other than current trade liabilities incurred in the ordinary course of business), (c) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (d) all obligations of such Person upon which interest charges are customarily paid, (e) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (f) all obligations of such Person under Financing Leases or synthetic leases or other similar off-balance sheet leases, (g) all obligations of such Person in respect of bankers' acceptances, letters of credit, hedging arrangements or similar facilities, (h) all liabilities secured by any Lien on any property owned or acquired by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (i) obligations that are immediately and directly due and payable out of the proceeds of or production from property, (j) mandatory redemption or cash dividend rights on Capital Stock (or other equity securities), or (k) all Guarantee Obligations in respect of the Indebtedness of others. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": domestic and foreign patents, patent applications, patent licenses, software licenses, know-how licenses, trade names, trademarks, copyrights, unpatented inventions, service marks, trademark registrations and applications, service mark registrations and applications, copyright registrations and applications, uniform resource locators, Internet domain names, trade secrets and other confidential and proprietary information. "Interest Advances": collectively, the Term Loan A Interest Advances and the Term Loan B Interest Advances. "Interest Payment Date": the last day of each March, June, September and December of each year. "Investors": collectively, Sandler Capital Partners V, L.P., Sandler Capital Partners V FTE, L.P., Sandler Technology Partners Subsidiary, LLC, Sandler Co-Investment Partners, L.P., Sandler Capital Partners V Germany, L.P., Price Family Limited Partners and MidOcean Capital Investors, L.P. "ITO Holdings": ITO Holdings, LLC, a California limited liability company. "Leverage Ratio": on any date, with respect to the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Total Debt as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": collectively, any Term Loan A or Term Loan B held by any Lender pursuant to this Agreement, and such loans being referred to collectively as the "Loans." "Loan Documents": this Agreement, the Notes, the Security Documents and all other agreements, instruments and certificates contemplated hereby and thereby in each case, as amended, restated, supplemented or otherwise modified from time to time in accordance with Section 9.1. "Loan Interest Reserve": as of any date, a reserve equal to the amount, if any, by which (a) the product of (x) 2.5% (two and one-half percent), multiplied by (y) $39,875,156.25 less the amount of repayments of the Loans pursuant to Section 2.2(a)(i) as and when made, exceeds (b) all additional loans made by the Lenders under the Loan Interest Reserve pursuant to subsection 2.1(b) after the First Amendment Closing Date. "Loan Obligations": (a) the due and punctual payment by the Borrower of (i) the principal of, and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Agent and the Lenders under the Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Loan Documents, and (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of the Guarantors under or pursuant to the Loan Documents. "Loan Parties": the Borrower and each Subsidiary of the Borrower which is a party to a Loan Document. "Master Reaffirmation Agreement": the Master Reaffirmation Agreement to be executed and delivered by the Borrower and each Subsidiary, in form and substance satisfactory to Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Material Adverse Effect": 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. "Maturity Date": October 21, 2008. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": means, with respect to (a) any sale, transfer or other disposition of any property or asset of the Borrower or any Subsidiary, (b) any casualty or condemnation event or (c) any other event set forth in the definition of Prepayment Event, (i) the cash proceeds received in respect of such event, including (x) in the case of a casualty, insurance proceeds, and (y) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (ii) the sum of (x) all reasonable fees and out-of-pocket expenses paid by the Borrower and the Subsidiaries to third parties (other than Affiliates) in connection with such event and (y) the amount of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements). "Non-Excluded Taxes": as defined in subsection 2.8(a). "Note": any of the promissory notes executed pursuant to subsection 2.2(e). "Obligations": means the principal, interest, premium, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. "Original Closing Date": October 21, 2003. "Original Closing Date Term Loan A": as defined in Section 2.1(a). "Original Loan Agreement": as defined in the Recitals. "Participant": as defined in subsection 9.6(b). "Past Due Interest" " as defined in subsection 2.1(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition": the acquisition by the Borrower or any Domestic Subsidiary of the Borrower of all or any portion of the assets or stock or other equity interests of any Person engaged in a business that would be permitted under subsection 6.15, including pursuant to a merger or consolidation; provided that all such acquisitions are approved by the Board of Directors and stockholders, if required, of the Borrower or such Domestic Subsidiary and the acquiree and are not otherwise hostile and, in the case of a merger (x) involving the Borrower, the surviving entity is the Borrower or (y) involving any such Domestic Subsidiary, the surviving entity is such Domestic Subsidiary or otherwise becomes a Loan Party upon consummation thereof; and provided, further, that: (i) if such acquisition is an asset acquisition, the subject assets are located in the continental United States or, if such acquisition is a stock or other equity acquisition or a merger, the acquiree or target is an entity incorporated or otherwise organized under the laws of a State of the United States; (ii) on the closing date of such acquisition, both before and immediately after giving effect to such proposed acquisition, no Default or Event of Default has occurred or will occur or be continuing; (iii) after giving effect to any such acquisition there shall be no negative effect on Consolidated EBITDA on a pro forma basis, and the Borrower would remain in compliance with the covenants set forth in subsection 6.1 on a pro forma basis (determined on a pro forma basis (A) as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements are available (computed on the basis of (x) balance sheet amounts as of the most recently completed fiscal quarter, and (y) income statement amounts for the most recently completed period of four consecutive fiscal quarters) and (B) on the basis of twelve month projections updated to give effect to such acquisition) and the Borrower delivers a certificate of a Responsible Officer certifying compliance with this clause (iii); (iv) any Person or business acquired becomes a wholly-owned Subsidiary of the Borrower or of a Guarantor following such acquisition and such Person becomes a Guarantor, and the Borrower shall, and shall cause any applicable Subsidiary to, execute any documents and take all actions that may be required under applicable law or that the Agent reasonably may request, in order to comply with subsection 5.10 herein, and the Borrower shall have used commercially reasonable efforts to either (A) obtain and deliver to Agent a collateral assignment of representations, warranties and indemnities in respect of the documentation evidencing such acquisition, acknowledged in writing by the related sellers thereunder, or (B) include in such documentation a provision expressly permitting such a collateral assignment, in each case in form and substance satisfactory to the Agent; and (v) Borrower shall give written notice to Agent no less than five (5) Business Days prior to the consummation of any such contemplated acquisition. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prepayment Event": means (A) any sale, transfer or other disposition of any property or asset of the Borrower or any Subsidiary (including pursuant to a sale and leaseback transaction) (other than sales, transfers or other dispositions permitted under subsections 6.5(c), 6.5(d) and 6.5(e) hereof) or (B) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Subsidiary after the Original Closing Date or (C) the receipt by the Borrower or any Subsidiary of any unscheduled payment in excess of $1,000,000 during any fiscal year of the Borrower under any contract with any third Person including, without limitation, an amount on account of early termination of such contract; provided that such events shall not constitute "Prepayment Events" to the extent that (1) the aggregate Net Proceeds from all such casualty events are less than $250,000 during any fiscal year of the Borrower or (2) the aggregate Net Proceeds from the sale, transfer or other disposition of assets of the Borrower or any Subsidiary are less than $250,000 during any fiscal year of the Borrower. "Prepayment Premium Amount": with respect to any prepayment of the Loans to which a Prepayment Premium Amount is to be calculated, the greater of (x) two percent (2.0%) of the amount so prepaid and (y) the Related Yield Maintenance Fee in respect of such amount so prepaid. "Prime Rate": a fluctuating interest rate per annum equal at all times to the greater of (i) the rate of interest announced publicly from time to time by Bloomberg, L.P. as the prime rate; provided, that such rate is not necessarily the best rate offered to its customers, and, should Agent be unable to determine such rate, such other indication of the prevailing prime rate of interest as may reasonably be chosen by Agent, and (ii) the sum of the Federal Funds Rate in effect from time to time, plus one half of one percent (0.5%). Any change in the Prime Rate due to a change in such prime rate or the Federal Funds Rate shall be effective immediately on the effective date of such change in such prime rate or the Federal Funds Rate. "Pro Rata Share: as to any Lender, at any time, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the total Loans then outstanding at such time. "Recapitalization": the recapitalization transaction in which the Investors exchanged all of their outstanding Existing Preferred Stock and Existing Warrants of the Borrower for (i) $55,000,000 in cash and (ii) loans outstanding under this Agreement in the aggregate original principal amount of $25,000,000 represented by promissory notes of the Borrower issued under the Original Loan Agreement. "Register": as defined in subsection 9.6(d). "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reinvestment Amount": with respect to any Reinvestment Event, the amount expended prior to the relevant Reinvestment Prepayment Date to acquire real property, equipment or other tangible assets used in or useful in the Borrower's business. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Proceeds received by the Borrower or any of its Subsidiaries in connection therewith that are not applied to prepay the Loans pursuant to subsection 2.3(b) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any Prepayment Event in respect of which the Borrower has delivered a Reinvestment Notice. "Reinvestment Notice": with respect to Net Proceeds from a Prepayment Event specified in paragraphs (A) or (B) of the definition of Prepayment Event, a written notice executed by a Responsible Officer stating (i) that no Default or Event of Default has occurred and is continuing, (ii) with respect to Net Proceeds from a Prepayment Event specified in paragraph (A) of the definition of Prepayment Event, the aggregate amount of Reinvestment Amounts expended by the Borrower with respect to Prepayment Events specified in paragraph (A) of the definition of Prepayment Event (directly or indirectly through a Subsidiary) during the term of this Agreement does not and will not exceed $5,000,000 (including the specified portion of the Net Proceeds the subject of such Reinvestment Notice) and specifying such aggregate amount of such Reinvestment Amounts to date and (iii) that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Proceeds of any Prepayment Event to acquire real property, equipment or other tangible assets used in or useful in its business. "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less the Reinvestment Amount relating thereto. "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring 180 days after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire real property, equipment or other tangible assets used in or useful in the Borrower's business with all or any portion of the relevant Reinvestment Deferred Amount. "Related Yield Maintenance Fee": with respect to any prepayment of the Loans, the present value (discounted at the one year Treasury rate in effect on the day that is two (2) Business Days prior to the date on which such prepayment is made, determined by the Agent in its reasonable discretion) of the total interest and fees which could be earned on the amount so prepaid from the effective date of such prepayment through the date that is the first anniversary of the Restatement Effective Date. "Release": as defined in subsection 3.16. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections 13, 14, 16, 18, 19 or 20 of PBGC Reg.ss. 2615. "Required Lenders": at any time, Lenders whose Pro Rata Shares aggregate at least 51%. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer and the president of the Borrower or, with respect to financial matters, the chief financial officer of the Borrower. "Restatement Effective Date": the date on which the conditions precedent set forth in Section 4 shall be satisfied. The execution and delivery of this Agreement by the Borrower shall be deemed a representation and warranty by such Person that such conditions precedent have been satisfied in all respects as of the date hereof. "Restatement Effective Date Term Loan B": as defined in Section 2.1(a). "Restricted Payment": means any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Capital Stock or any option, warrant or other right to acquire any such Capital Stock. "SEC": United States Securities and Exchange Commission. "SEC Filings": all reports, registration statements and other filings filed by the Borrower with the SEC (and all notes, exhibits and schedules thereto and all documents incorporated by reference therein). "SEC Reports" as defined in subsection 3.1. "Securities Act": the Securities Act of 1933, as amended. "Security Agreements": collectively, any and all Guarantee and Security Agreements executed and delivered by the Borrower and/or the Subsidiaries, substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time. "Security Documents": the collective reference to the Deposit Account Control Agreements, the Security Agreements, the Stock Pledge Agreements, the Collateral Assignment of Acquisition Agreement, the Master Reaffirmation Agreement and all other security documents hereafter delivered to the Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "SMS": as defined in subsection 3.15. --- "SMS Acquisition": the acquisition by Borrower of all of the issued and outstanding capital stock of SMS pursuant to the SMS Stock Purchase Agreement. "SMS Acquisition Documents": collectively the SMS Stock Purchase Agreement, that certain Escrow Agreement dated as of the Restatement Effective Date among Borrower, Wells Fargo and ITO Holdings, and the other "Transaction Documents" as such term is defined in the SMS Stock Purchase Agreement. "SMS Stock Purchase Agreement": that certain Stock Purchase Agreement dated as of March 3, 2004 between Borrower and ITO Holdings. "Stock Pledge Agreements": collectively, any and all Stock Pledge Agreements executed and delivered by the Borrower and each relevant Subsidiary, substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified from time to time. "Strategix Purchase Agreement": that certain Asset Purchase Agreement dated as of February 29, 2004 among Strategix, Ltd., ePassage, Inc., and SMS. "Strategix Earnout": collectively, Indebtedness consisting of deferred purchase price obligations payable by SMS to ePassage, Inc. pursuant to (i) the Strategix Purchase Agreement and (ii) that certain Consulting Services Agreement dated as of March 1, 2004 between SMS and ePassage, Inc. "Subject Period": see Section 2.3(a). "Subsidiaries Deposit Account Control Agreements": the Deposit Account Control Agreements executed and delivered, or to be executed and delivered, as applicable, by each relevant Subsidiary, substantially in the form of Exhibit E or otherwise in a form acceptable to the Agent, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiaries Security Documents": the collective reference to the Subsidiaries Deposit Account Control Agreements, the Security Agreements to which any Subsidiary is a party and the Stock Pledge Agreements to which any Subsidiary is a party. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Term Loan A": collectively, the Original Closing Date Term Loan A and the Term Loan A Interest Advances. "Term Loan A Commitment": with respect to each Lender, the commitment of such Lender with respect to the Original Closing Date Term Loan A hereunder, expressed as an amount representing the maximum principal amount of the Original Closing Date Term Loan A held by such Lender hereunder. The amount of each Lender's Term Loan A Commitment as of the Restatement Effective Date is set forth on Schedule 2.1. The aggregate amount of the Lenders' Term Loan A Commitments as of the Original Closing Date was $25,000,000. "Term Loan A Interest Advances": see Section 2.1(b). "Term Loan A Interest Reserve Commitment": with respect to each Lender, the Term Loan A Interest Reserve Commitment set forth on Schedule 2.1. "Term Loan B": collectively, the Restatement Effective Date Term Loan B and the Term Loan B Interest Advances. "Term Loan B Commitment": with respect to each Lender, the commitment of such Lender with respect to the Restatement Effective Date Term Loan B, expressed as an amount representing the maximum principal amount of the Restatement Effective Date Term Loan B to be held by such Lender hereunder on the Restatement Effective Date. The amount of each Lender's Term Loan B Commitment is set forth on Schedule 2.1. The aggregate amount of the Lenders' Term Loan B Commitments as of the Restatement Effective Date is $15,000,000. "Term Loan B Interest Advances": see Section 2.1(b). "Term Loan B Interest Reserve Commitment": with respect to each Lender, the Term Loan B Interest Reserve Commitment set forth on Schedule 2.1. "Transferee": as defined in subsection 9.6(f). "Voting Capital Stock": means with respect to any Person, securities of any class or classes of Capital Stock in such Person ordinarily entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable governing body of such Person. "Wells Fargo": means Wells Fargo Bank, N.A. "Wells Fargo Cash Collateral Account": means that certain Wells Fargo Bank Market Rate Account 40300005508. "Wells Fargo Deposit Accounts": means all deposit, checking and similar accounts (other than the Wells Fargo Account) maintained by Borrower and/or any of its Subsidiaries with Wells Fargo. "Wells Fargo Letter of Credit": means that certain Irrevocable Letter of Credit No. NZS49355 issued by Wells Fargo on August 26, 2003, in the amount of $1,000,000, on behalf of Borrower in favor of Alternative Financing & Leasing, LLC. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. GENERAL TERMS 2.1 Loans. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make (i) a loan to the Borrower on the Original Closing Date in an amount not to exceed the amount of the Term Loan A Commitment of such Lender then in effect (the "Original Closing Date Term Loan A"), and (ii) a loan to the Borrower on the Restatement Effective Date in an amount not to exceed the amount of the Term Loan B Commitment of such Lender then in effect (the "Restatement Effective Date Term Loan B"). The Borrower agrees to issue Notes to the Lenders representing the Loans under this Agreement in the form reasonably requested by Agent. Amounts paid or prepaid in respect of the Loans may not be reborrowed. Unless otherwise directed by the Agent pursuant to Section 2.1(b), the Lenders are under no obligation to make any additional loans to the Borrower hereunder after the Restatement Effective Date. The outstanding principal balance of Term Loan A as of the Restatement Effective Date is $24,875,156.25. (b) Upon the failure of the Borrower to pay interest pursuant to the terms of this Agreement when due after giving effect to any applicable grace period for such payment of interest (the amount of any such overdue unpaid interest, the "Past Due Interest"), and regardless of whether or not any other Default or Event of Default then exists or would result therefrom, the Agent shall be entitled, in its sole and absolute discretion, to cause the Lenders to make additional loans to the Borrower not to exceed the amount of such Lender's Term Loan A Interest Reserve Commitment and/or Term Loan B Interest Reserve Commitment, as applicable, the proceeds of which shall be used by the Borrower to pay such Past Due Interest; provided that such additional loans shall not exceed in the aggregate the Loan Interest Reserve then in effect and each such additional loan made in respect of (i) Term Loan A (all such additional loans, "Term Loan A Interest Advances") and (ii) Term Loan B (all such additional loans, "Term Loan B Interest Advances") shall be deemed part of the outstanding principal balance of the Term Loan A or Term Loan B, as applicable, in proportion to the underlying Loan upon which interest was payable and shall constitute Loan Obligations. The Borrower hereby irrevocably and unconditionally agrees to pay to the Agent, for the ratable benefit of the Lenders, all Interest Advances in accordance with the payment terms relating to the other portions of the Loans. Any Event of Default arising from the failure of the Borrower to pay interest pursuant to this Agreement when due (after the expiration of any grace period for such payment) shall be deemed cured by utilization of the Loan Interest Reserve; provided, that, the making of Interest Advances shall not be deemed to cure any other Default or Event of Default that may then exist or result therefrom. 2.2 Repayment of Loans; Evidence of Debt. (a) (i) The Borrower hereby unconditionally promises to pay to the Agent for the account of each Lender each Lender's pro rata share of the unpaid principal amount of the Loans in installments as specified on Schedule 2.2 on each date set forth on Schedule 2.2. Each such payment made pursuant to this subsection 2.2(a)(i) shall be applied prorata to the unpaid principal amounts of each of Term Loan A and Term Loan B based on the respective outstanding principal balances thereof. (ii) To the extent not otherwise paid pursuant to subsection 2.2(a)(i), the Borrower hereby unconditionally promises to pay to the Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date (or the then unpaid principal amount of such Loan, on the date that the Loans become due and payable pursuant to Section 7). (iii) In any event, to the extent not previously paid, all Loans shall be due and payable on the Maturity Date. (iv) The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.4. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Agent shall maintain the Register pursuant to subsection 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder, (ii) any assignments of Loans pursuant to subsection 9.6, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) both the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 2.2(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest and premium, if any) the Loans held by such Lender in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Agent by any Lender, and in any event within five (5) Business Days of any such request, the Borrower will (i) execute and deliver to such Lender a promissory note of the Borrower evidencing each Loan and Commitment of such Lender, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a "Note") and (ii) execute and deliver to the Agent new Notes and/or split or divide the Notes in exchange for then existing Notes in such smaller amounts or denominations as the Agent or such Lender shall specify in their respective sole and absolute discretion (and no Lender shall be required to return an existing Note to the Borrower until receipt of a new Note); provided, that the aggregate principal amount of such new, split or divided Notes does not exceed the aggregate principal amount of such existing Notes to be exchanged therefor 2.3 Prepayments. (a) The Borrower shall have the right at any time and from time to time to prepay the Loans in whole or in part subject to the requirements of this Section without penalty or premium; provided, that (i) if the Borrower has entered into an agreement for a Change of Control or the Borrower or any other Person otherwise has publicly announced its intention to consummate a transaction that would institute a Change of Control, in either case after the last day of the Subject Period (as defined below), the Borrower may only prepay the Loans at a prepayment amount equal to the Fixed Early Prepayment Amount, plus accrued and unpaid interest to the date of prepayment, and (ii) if the Borrower optionally prepays any portion of the Loans pursuant to Section 2.3(a) during the period commencing on the Restatement Effective Date and ending on the first anniversary thereof (the "Subject Period"), the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, an amount equal to the applicable Prepayment Premium Amount applicable to the amount so prepaid, which Prepayment Premium Amounts shall be due and payable on the respective dates of prepayment; provided, that: (I) the Borrower shall not be required to pay any such Prepayment Premium Amount unless the aggregate amount of all prepayments made during the Subject Period exceed $15,000,000 in total, in which case the Borrower shall be required to pay Prepayment Premium Amounts in accordance with the foregoing in respect of all prepayments of Loans made during the Subject Period (excluding the first $15,000,000 of such prepayments made during the Subject Period); and (II) if, during the Subject Period: (1) the Borrower shall have delivered to the Agent a term sheet, commitment letter or letter of intent describing the material terms of a proposed Specified Acquisition (the "Presented Terms"); (2) the Loan Obligations are either (x) prepaid in full in cash from the proceeds of any refinancing made by any financial institution other than CapitalSource Finance LLC and that is not an Affiliate of the Borrower (a "Third Party Financing Source") or (y) purchased in full by a Third Party Financing Source at par (plus accrued and unpaid interest, fees and other amounts then due and owing) (any transaction of the type described in this clause (2) is referred to as a "Third Party Refinancing"); and (3) (x) such Third Party Refinancing occurred within sixty (60) days after the Agent shall have notified the Borrower in writing that the Required Lenders intend to withhold consent to a Specified Acquisition based on the Presented Terms and (y) prior to the occurrence of such Third Party Refinancing, the related Third Party Financing Source shall have consented in writing to the consummation of such Specified Acquisition on terms substantially similar to the Presented Terms; then the Borrower shall not be required to pay a Prepayment Premium Amount in respect of such full prepayment. For purposes of the foregoing, a "Specified Acquisition" shall mean an acquisition that otherwise constitutes a Permitted Acquisition, the total cash purchase price (specifically excluding any Indebtedness or other obligations to be assumed or incurred in connection therewith and the value of any non-cash consideration, including any imputed value of any non-competition, non-solicitation and similar arrangements) of which exceeds $10,000,000. (b) In the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any Subsidiary in respect of any Prepayment Event, then, unless a Reinvestment Notice shall be delivered with respect to Net Proceeds from a Prepayment Event specified in paragraphs (A) or (B) of the definition of Prepayment Event, the Borrower shall, within three (3) Business Days after such Net Proceeds are received, prepay Loans in an aggregate amount equal to such Net Proceeds; provided, that, on each Reinvestment Prepayment Date, the Loans shall be repaid in an amount equal to the Reinvestment Prepayment Amount with respect to the Reinvestment Event. (c) Following the end of (i) the fiscal year of Borrower ending December 31, 2004, the Borrower shall prepay Loans in an aggregate amount equal to 25% of Excess Cash Flow for such fiscal year and (ii) each fiscal year of the Borrower thereafter, commencing with the fiscal year that begins on January 1, 2005, for which there is any Excess Cash Flow, the Borrower shall prepay Loans in an aggregate amount equal to 50% of Excess Cash Flow for such fiscal year. Each prepayment pursuant to this paragraph shall be made on or before the date on which financial statements are delivered pursuant to subsection 5.1(a) with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 90 days after the end of such fiscal year). (d) In the event and on each occasion that the Borrower or any Subsidiary after the Original Closing Date receives cash proceeds from the sale of Capital Stock or other equity securities, or otherwise receives a cash capital contribution from any third Person, or raises any private or public capital in cash (other than cash proceeds received in connection with (i) the exercise of options and warrants to acquire the common stock of the Borrower that are issued or outstanding on the date hereof or issued under a Plan, or pursuant to anti-dilution provisions in such options or warrants or applicable thereto or (ii) the issuance of common stock of the Borrower pursuant to that certain Securities Purchase Agreement dated as of March 24, 2004 among Borrower and the Persons named therein as "Purchasers"), the Borrower shall, within three (3) Business Days after the receipt thereof, prepay Loans in an amount equal to 50% of the net amount received. (e) Upon the occurrence of a Change of Control, the Borrower shall, within three (3) Business Days after the occurrence thereof, prepay all of the Loans at a prepayment price equal to the Fixed Early Prepayment Amount, plus accrued and unpaid interest, if any, to the date of prepayment. (f) In the event of a prepayment hereunder, the Borrower shall give at least three (3) Business Days' irrevocable notice to the Agent and the Lenders, specifying the date, the reason for the prepayment and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.9 and accrued interest to such date on the amount prepaid. Each prepayment of principal of the Loans shall be applied prorata to the unpaid principal amounts of each of Term Loan A and Term Loan B based on the respective outstanding principal balances thereof in the inverse order of their scheduled maturities. Amounts prepaid on account of the Loans may not be reborrowed. Partial prepayments under subsection 2.3(a) shall be in an aggregate principal amount of $250,000 or a whole multiple thereof. 2.4 Interest Rates and Payment Dates. (a) Each Loan shall bear interest at a rate per annum equal to the Applicable Interest Rate. (b) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest or other amount shall bear interest at a rate per annum equal to the Applicable Interest Rate plus 3%, in each case from the date of such non-payment until such overdue principal, interest or other amount is paid in full (as well after as before judgment). (c) Interest shall be payable in arrears on the first day of each calendar month (each an "Interest Payment Date"), provided that interest accruing pursuant to paragraph (b) of this subsection shall be payable from time to time on demand. Interest accrued under the Original Loan Agreement and unpaid as of the Restatement Effective Date shall continue to accrue after the Restatement Effective Date and be paid on the first Interest Payment Date after the Restatement Effective Date. 2.5 Computation of Interest. (a) Interest shall be calculated on the basis of a 360-day year and payable for the actual number of days elapsed. (b) Each determination of an interest rate, including without limitation, the Applicable Interest Rate and the Prime Rate, by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. 2.6 Pro Rata Treatment and Payments. Each payment (including each prepayment) by the Borrower on account of principal of, interest and premium, if any, on the Loans shall be made pro rata according to the respective Pro Rata Share of the outstanding principal amount of the Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Lenders (or, if the Agent so directs, directly to the account of the Agent at the office specified in subsection 9.2), for the account of the Lenders, at the offices of the Lenders notified from time to time to the Borrower by the Agent, in Dollars and in immediately available funds. The Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest and premium, if any, thereon shall be payable at the then applicable rate during such extension. The Borrower absolutely and unconditionally promises to pay, when due and payable pursuant hereto, principal, interest and all other amounts and Loan Obligations payable hereunder and under any other Loan Document, without any right of rescission and without any deduction whatsoever, including any deduction for set-off, recoupment or counterclaim, notwithstanding any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any property or improvements. 2.7 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes and income taxes and franchise taxes); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to the Borrower (with a copy to the Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.8 Taxes. (a) (i) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise or similar taxes (imposed in lieu of net income taxes), including branch profits tax and minimum tax imposed on the Agent or any Lender as a result of a present or former connection between the Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Agent or any Lender hereunder or under any Note (A) the amounts so payable to the Agent or such Lender shall be increased as necessary so that after making all required deductions of Non-Excluded Taxes or Other Taxes (including deductions of Non-Excluded Taxes or Other Taxes applicable to additional sums payable under this subsection) the Agent or such Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, and (B) the Borrower shall pay the full amount withheld to the relevant Governmental Authority in accordance with applicable law, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof (x) if such Lender fails to comply with the requirements of paragraph (b) of this subsection or (y) to the extent of any Non-Excluded Taxes that are in effect and would apply to a payment under this Agreement or any Note made to such Lender as of the date such Lender becomes a party to this Agreement or any Note, or, in the case of any other Lender which changes its lending office with respect to the Loans or any Note to an office outside the U.S., any Non-Excluded Taxes that are in effect and would apply to a payment to such Lender as of the date of the change of the lending office. (ii) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. (iii) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof, or, if the Borrower cannot, using reasonable efforts, obtain such receipts, other evidence of such payment by the Borrower reasonably satisfactory to the Agent or such Lender. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Agent or any Lender as a result of any such failure. (iv) The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) deliver to the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or Form W-8ECI (or successor applicable form) claiming that amounts received by the Lender under this Agreement are either exempt from United States federal withholding tax under an applicable tax treaty or are effectively connected income, as the case may be, on or before the date it becomes a party to this Agreement; (ii) deliver to the Borrower and the Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Agent. Such Lender shall certify that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Person that shall become a Lender or a Participant pursuant to subsection 9.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. (c) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this subsection 2.8 as a result of a change in law or treaty occurring after such Lender first became a party to this Agreement, and such Lender has a lending office in another jurisdiction, then such Lender will, at the request of the Borrower, change the jurisdiction of its applicable lending office if such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is, in such Lender's sole, reasonable discretion, determined not to be materially disadvantageous or cause unreasonable hardship to such Lender, provided that fees, charges, costs or expenses that are related to such change shall be borne by the Borrower on behalf of a Lender, and the mere existence of such expenses, fees or costs shall not be deemed to be materially disadvantageous or cause undue hardship to the Lender. (d) If and to the extent that any Lender is able, in its sole opinion, to receive any tax refund arising out of or in conjunction with any deduction or withholding which gives rise to an obligation on the Borrower to pay any Non-Excluded Taxes or Other Taxes pursuant to this subsection 2.8 then such Lender shall, to the extent that in its sole opinion it can do so without prejudice to the retention of the refund and without any other adverse tax consequences for such Lender, reimburse to the Borrower at such time as such refund shall have actually been received by such Lender such amount as such Lender shall, in its sole opinion, have determined to be attributable to the relevant deduction or withholding and as will leave such Lender in no better or worse position than it would have been in if the payment of such Non-Excluded Taxes or Other Taxes had not been required. 2.9 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, for the period from the date of such prepayment to the last day of such Interest Payment Date in each case at the applicable rate of interest for such Loans provided for herein over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.10 Fees. The Borrower agrees to pay to the Agent (a) for its own account the following non-refundable administrative fees: (i) $8,750, payable in full on the Restatement Effective Date and (ii) $40,000, payable in full on October 22, 2004 and each anniversary of such date thereafter; and (b) for the ratable benefit of the Lenders, on the Restatement Effective Date a fully-earned, non-refundable commitment fee in an amount equal to $150,000 (which amount equals the Term Loan B Commitment multiplied by one percent (1%)). Any fee accrued under the Original Loan Agreement and unpaid as of the Restatement Effective Date shall continue to accrue after the Restatement Effective Date and be paid when due hereunder. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Agent and each Lender that the following are, and after giving effect to the SMS Acquisition will be, true, correct and complete: 3.1 Financial Condition. (a) Since January 1, 2001, each of the Borrower and each Subsidiary have duly filed all forms, reports, schedules, proxy statements and documents required to be filed by it with the SEC. True and correct copies of all filings made by the Borrower and each Subsidiary with the SEC since such date and prior to the date hereof (the "SEC Reports"), whether or not under Requirement of Law and including any registration statement filed by the Borrower or a Subsidiary under the Securities Act, have been either made available or are publicly available to the Agent. As of their respective dates, the SEC Reports (other than preliminary material) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder applicable to such SEC Reports and none of the SEC Reports, at the time filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No other Person included in the Loan Parties is subject to periodic reporting requirements of the Exchange Act or is otherwise required to file documents with the SEC or comparable Governmental Authority or any national securities exchange or quotation service. (b) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2002 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by Ernst & Young LLP, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2003 and the related unaudited consolidated statements of income and of cash flows for the six-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the twelve-month period then ended (subject to normal year-end audit adjustments and the absence of footnotes). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. During the period from December 31, 2003 to and including the date hereof there has been no sale, transfer or other disposition by the Borrower or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at December 31, 2003, other than the SMS Acquisition and all acquisitions and sales by SMS prior to the Restatement Effective Date disclosed on Schedule 3.1(b) hereto. 3.2 Absence of Certain Changes. (a) Except (i) for liabilities incurred in connection with this Agreement or the transactions contemplated hereby, (ii) as disclosed by the SEC Reports or (iii) as set forth in Schedule 3.2 to this Agreement, since December 31, 2002 (a) none of the Borrower or any Subsidiary have suffered any change, condition, event or development that has had, or could reasonably be expected to have, a Material Adverse Effect, (b) each of the Borrower or any Subsidiary have conducted in all material respects their respective businesses only in the ordinary course consistent with past practice, except for the negotiation and execution and delivery of this Agreement and the SMS Acquisitions Documents and (c) the Borrower has not (i) incurred any Indebtedness or Guarantee Obligation in excess of $100,000, (ii) granted any Lien in respect of any material asset to any Person, (iii) made any Restricted Payment or investment in excess of $250,000 or (iv) entered into any transaction (including any merger or consolidation) with any Person, except, in each case, as would be permitted under this Agreement. 3.3 Corporate Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law, except in the case of the foregoing clauses (c) and (d), to the extent that the failure to be so qualified or to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.4 Corporate Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents and the SMS Acquisition Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person (including, without limitation, Board of Directors, stockholder, warrant holder or NASDAQ consents, waivers and approvals) is required in connection with the Recapitalization, the borrowings hereunder, the issuance of Notes hereunder or the consummation of the SMS Acquisition or with the execution, delivery, performance, validity or enforceability of the Loan Documents or the SMS Acquisition Documents to which the Borrower is a party, except consents, authorizations, filings and notices described on Schedule 3.4. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. Each of the Security Documents creates and grants to the Agent, for its own benefit and for the benefit of the Lenders, a legal, valid and duly perfected Lien in the Collateral identified therein prior and superior in right to all other Persons, except Liens permitted pursuant to subsections 6.3(f), (g), (h), (l) and (m) and the other Liens permitted under subsection 6.3 that have priority over the Agent's Lien by operation of law. Such Collateral is not subject to any other Liens whatsoever, except Liens permitted by Section 6.3 hereof. 3.5 No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower is a party and the borrowings hereunder will not violate any Requirement of Law or Contractual Obligation (other than as set forth on Schedule 3.4) of the Borrower or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than Liens created by the Security Documents). 3.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that, if reasonably likely to be adversely determined, which could reasonably be expected to have a Material Adverse Effect. 3.7 Contracts and No Default. Each of the Borrower and the Subsidiaries is in compliance with respect to all of its Contractual Obligations, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.8 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by subsection 6.3. 3.9 Intellectual Property. As of the Restatement Effective Date, Schedule 3.9 contains an accurate and complete list of all material Intellectual Property which is used in the business of the Borrower or any of its Subsidiaries, other than off-the-shelf software that is commercially available. Unless otherwise indicated in the SEC Filings or on Schedule 3.9, as of the Restatement Effective Date, the Borrower (or the Subsidiary indicated) owns the entire right, title and interest in and to the Intellectual Property listed on such Schedule 3.9 (including, without limitation, the exclusive right to sue and license the same) free and clear of any Liens, other than Liens permitted by subsection 6.3 hereof (and without obligation to pay any royalty or other fee with respect thereto) and each item constituting part of the Intellectual Property which is owned by the Borrower or any of its Subsidiaries and listed on Schedule 3.9 has been, to the extent indicated in Schedule 3.9, duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other government entities, domestic or foreign, or a duly accredited and appropriate domain name registrar, as are indicated in Schedule 3.9 and such registrations, filings and issuances remain in full force and effect. As of the Restatement Effective Date, to the best knowledge of the Borrower, neither the Borrower's nor any of its Subsidiaries' use or practice of the Intellectual Property infringes any other Person's rights thereto. As of the Restatement Effective Date, no Intellectual Property set forth on Schedule 3.9 has been canceled, abandoned, or otherwise terminated and all renewal fees (if applicable) in respect thereof have been duly paid. Except as stated in Schedule 3.9, as of the Restatement Effective Date there are no pending or to the best knowledge of the Borrower, threatened proceedings or litigation or other adverse claims affecting or with respect to the Intellectual Property listed on Schedule 3.9. Schedule 3.9 lists all notices or claims pending as of the Restatement Effective Date or received by the Borrower or any of its Subsidiaries during the two years immediately preceding the Restatement Effective Date which claim, as applicable, infringement, contributory infringement, inducement to infringe, misappropriation, misuse or breach by the Borrower or any of its Subsidiaries with respect to any Intellectual Property or license thereof and, except as set forth on Schedule 3.9, as of the Restatement Effective Date there is, to the knowledge of the Borrower, no reasonable basis upon which any such claim may be asserted. As of the Restatement Effective Date, to the best knowledge of the Borrower, except as indicated on Schedule 3.9, no Person is infringing, misappropriating or misusing any of the Intellectual Property. 3.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation as of the Restatement Effective Date of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 3.11 Taxes. Except as set forth on Schedule 3.11: (a) Each of the Borrower and its Subsidiaries has timely filed or caused to be timely filed (including by way of permitted extensions) all income Tax Returns and all material other United States federal, state, county, local and foreign Tax Returns required to be filed by or with respect to it, and all such Tax Returns are complete and accurate in all material respects. Each of the Borrower and its Subsidiaries has timely paid all material Taxes for which it is directly or indirectly liable and any assessments made against it or any of its property and all other Taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, other than any taxes, fees or other charges the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the December 31, 2003 balance sheet of the Borrower. (b) There are no audits, examinations, actions, suits, proceedings, investigations, claims or assessments pending or, to the knowledge of the Borrower, threatened, against the Borrower or any of its Subsidiaries for any alleged deficiency in any Tax (a "Tax Controversy") and the Borrower has not been notified in writing of any proposed Tax Controversy against the Borrower or any of its Subsidiaries (other than a Tax Controversy set forth on Schedule 3.11 which is being contested in good faith). (c) For purposes of this Agreement, the term "Tax" means any United States federal, state, county or local, or foreign or provincial income, gross receipts, profits, capital gains, capital stock, occupation, severance, stamp, withholding, property, sales, use, license, excise, franchise, employment, payroll, value added, alternative or added minimum, ad valorem or transfer tax, or any other tax, levy, custom, duty or governmental fee or other like assessment or charge of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), together with all estimated taxes, deficiency assessments, additions to tax, interest or penalties imposed by any Governmental Authority, and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any person or other entity. The term "Tax Return" means any and all reports, returns or other information (including any attached schedules or any amendments to such reports, returns or other information) required to be supplied to or filed with any Governmental Authority with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. 3.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. If requested by any Lender or the Agent, the Borrower will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation U. 3.13 ERISA. (a) Schedule 3.13 sets forth as of the Restatement Effective Date a true and complete list of each "employee benefit plan" (as defined in Section 3(3) of ERISA) of the Borrower and its Subsidiaries in which current or former employees, agents, directors, or independent contractors of the Borrower or its Subsidiaries ("Employees") participate or pursuant to which the Borrower or any of its Subsidiaries may have a liability with respect to Employees (each, an "Employee Plan"). Except as disclosed in the SEC Filings or on Schedule 3.13, as of the Restatement Effective Date, neither the Borrower nor any of its Subsidiaries has any commitment to establish any additional Employee Plans or to modify or change materially any existing Employee Plan. The Borrower has made available to the Lenders with respect to each Employee Plan as of the Restatement Effective Date: (i) a true and complete copy of all written documents comprising such Employee Plan (including amendments and individual agreements relating thereto) or, if there is no such written document, an accurate and complete description of such Employee Plan; and (ii) the most recent financial statements, if any. (b) Each Employee Plan has been established and maintained in substantial compliance with its terms and the requirements of all Applicable Law, and all contributions required to be made to the Employee Plans have been made in a timely fashion. (c) Each Employee Plan which is intended to be "qualified" within the meaning of Section 401(a) of the Code has received a favorable determination letter or opinion letter from the Internal Revenue Service and, to the Borrower's knowledge, no event has occurred and no condition exists which could reasonably be expected to result in the revocation of any such determination letter or opinion letter. (d) Neither the Borrower nor any of its Subsidiaries currently maintains or contributes to, or has at any time maintained or contributed to or been obligated to contribute to, any plan, program or arrangement covered by Title IV of ERISA or subject to Section 412 of the Code or Section 302 of ERISA. (e) Neither the Borrower nor any of its Subsidiaries, nor, to the Borrower's knowledge, any other "disqualified person" or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in any transactions in connection with any Employee Plan that could reasonably be expected to result in the imposition of a material penalty pursuant to Section 502 of ERISA, material damages pursuant to Section 409 of ERISA or a material tax pursuant to Section 4975 of the Code. (f) There are no actions, suits, arbitrations, inquiries, investigations or other proceedings (other than routine claims for benefits) pending or, to the Borrower's knowledge, threatened, with respect to any Employee Plan, except for any of the foregoing that do not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (g) The Borrower and its Subsidiaries are in compliance in all material respects with the terms and provisions of the Immigration Reform and Control Act of 1986, as amended, and all related regulations promulgated thereunder (the "Immigration Laws"). As of the Restatement Effective Date, the Borrower and its Subsidiaries have never been the subject of any inspection or investigation relating to its compliance with or violation of the Immigration Laws, nor have they been warned, fined or otherwise penalized by reason of any such failure to comply with the Immigration Laws, nor is any such proceeding pending or to the Borrower's knowledge, threatened. (h) Except as set forth in the SEC Filings or on Schedule 3.13, the Borrower and its Subsidiaries are in compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions and wages and hours. 3.14 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 3.15 Subsidiaries. The following constitute all the Subsidiaries of the Borrower as of the Restatement Effective Date: Infocrossing Services, Inc., ETG, Inc., AmQUEST, Inc., AmQUEST Services, Inc. and, after giving effect to the SMS Acquisition, ITO Acquisition Corporation ("SMS"). --- 3.16 Environmental Matters. Except as set forth in the SEC Filings or on Schedule 3.16: (a) Hazardous Materials have not at any time been generated, use, treated or stored on, or transported to or from, any Borrower Property by the Borrower or any Subsidiary in a manner which has resulted or is reasonably likely to result in a material Environmental Claim, (b) Hazardous Materials have not at any time been Released or disposed of on any Borrower Property in a manner which has resulted or is reasonably likely to result in a material Environmental Claim, (c) the Borrower and each of its Subsidiaries are in compliance in all material respects with all applicable Environmental Laws and the requirements of any permits issued under such applicable Environmental Laws with respect to any Borrower Property, (d) there are no pending or, to the knowledge of the Borrower, threatened or unresolved past material Environmental Claims against the Borrower or any of its Subsidiaries or any Borrower Property, (e) there are no facts, conditions or circumstances that, to the knowledge of the Borrower, could reasonably be expected to form the basis of a material Environmental Claim, and (f) to the knowledge of Borrower, there are not now and never have been any underground storage tanks located on any Borrower Property. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Borrower Property" means any real property and improvements currently or formerly owned or leased by the Borrower or any of its Subsidiaries; (b) "Hazardous Materials" means (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or is reasonably likely to become friable, urea formaldehyde foam insulation, polychlorinated biphenyls, and radon gas; and (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any applicable Environmental Law; (c) "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance, code or rule of common law in effect and in each case as amended as of the Restatement Effective Date, applicable to the Borrower or its operations or Borrower Property as of the Restatement Effective Date, including any judicial or administrative order, consent decree or judgment relating to the environment, occupational safety and health or Hazardous Materials; and (d) "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings under any Environmental Law or any permit issued under any such Environmental Law (for purposes of this subclause (d), "Claims"), including without limitation (i) any and all Claims by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment; and (e) "Release" means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying or seeping into or upon any land or water or air, or otherwise entering into the environment. 3.17 Solvency. As of the Restatement Effective Date and without regard to any inter-company debt obligations between the Loan Parties: (a) the amount of the "present fair saleable value" of the assets of each of the Loan Parties will, as of such date, exceed the amount of all "liabilities of such Loan Party, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of each Loan Party will, as of such date, be greater than the amount that will be required to pay the liability of such Loan Party on its debts as such debts become absolute and matured, (c) each Loan Party will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) each Loan Party is then able and expects to be able to pay its debts as they mature. For purposes of this subsection 3.17, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. 3.18 Full Disclosure. No statement of fact made by or on behalf of any Person other than the Lenders in this Agreement, the Security Documents, the documents relating to the Recapitalization or in any certificate or schedule furnished to the Lenders pursuant hereto or thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Lenders in writing which has had or, as far as the Borrower can reasonably foresee, could reasonably be expected to have a Material Adverse Effect. 3.19 Equity Securities. (a) The outstanding equity securities of the Borrower and each of its Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable; and (b) neither the Borrower nor any of its Subsidiaries (i) has issued any rights which can be convertible into or exchangeable or exercisable for any of the equity securities of any such Subsidiary, or any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any such equity securities of any Subsidiary of the Borrower or any securities convertible into or exchangeable or exercisable for any such equity securities or (ii) is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of the equity securities of the Borrower or any of its Subsidiaries or other convertible rights or options or debt securities. 3.20 SMS Acquisition Documents. (a) All representations of the Borrower or any Subsidiary of Borrower set forth in the SMS Acquisition Documents were and are true and correct as of the date made or deemed made thereunder and as of the Restatement Effective Date, provided, that, any such representation or warranty that by its express terms is made as of a specific date, such representation and warranty shall have been true and correct as of such specific date. Without limiting the scope of the other representations and warranties contained herein and in the other Loan Documents, the representations and warranties made in the SMS Acquisition Documents hereby are incorporated herein by this reference, mutatis mutandis, and are deemed made by the Borrower to and for the benefit of Agent and Lenders as if expressly set forth herein. (b) Borrower has heretofore furnished to the Agent true and correct copies of all SMS Acquisition Documents. (c) Each of Borrower and, to Borrower's knowledge, each other party to the SMS Stock Purchase Agreement has duly taken all necessary corporate, partnership or other organizational action to authorize the execution, delivery and performance of the SMS Stock Purchase Agreement and the consummation of transactions contemplated thereby and by the other SMS Acquisition Documents. (d) The purchase transaction contemplated by the SMS Stock Purchase Agreement will comply with all applicable material legal requirements, and all material governmental, regulatory, creditor, shareholder, partner and other material consents, approvals and exemptions required to be obtained by Borrower and, to Borrower's knowledge, each other party to the SMS Stock Purchase Agreement in connection with the SMS Acquisition will be, prior to consummation thereof, duly obtained and will be in full force and effect. As of the date of the SMS Stock Purchase Agreement, all applicable waiting periods with respect to the SMS Acquisition will have expired without any action being taken by any competent Governmental Authority which restrains, prevents or imposes material adverse conditions upon the consummation thereof. (e) The execution and delivery of the SMS Stock Purchase Agreement did not, and the consummation of the SMS Acquisition will not, (i) violate any applicable statute or regulation of the United States (including any securities law) or of any state or other applicable jurisdiction, or any order, judgment or decree of any court or Governmental Authority binding on Borrower or, to Borrower's knowledge, any other party to the SMS Stock Purchase Agreement, or (ii) result in a breach of, or constitute a default under, any material agreement, indenture, instrument or other material document, except as set forth in the SMS Stock Purchase Agreement, or (iii) result in a breach of, or constitute a default under any judgment, order or decree, to which Borrower is a party or by which Borrower is bound or, to the Borrower's knowledge, to which any other party to the SMS Stock Purchase Agreement is a party or by which any such party is bound. (f) No statement or representation made in the SMS Stock Purchase Agreement by Borrower or, to Borrower's knowledge, any other Person contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading. 3.21 Strategix Earnout. The aggregate amount due and payable under the terms of the Strategix Earnout from and after the Restatement Effective Date through the fourth anniversary thereof shall not exceed $1,700,000. 3.22 Acxiom Collateral. As of the Restatement Effective Date, the aggregate value of Collateral attributable to assets (excluding the value of customer lists and goodwill) purchased by SMS from Acxiom Corporation is not more than $1,000,000. SECTION 4. CONDITIONS PRECEDENT TO CLOSING The making of the Loans hereunder and the agreement of each Lender to be a party to this Agreement is subject to the satisfaction, prior to or on the Restatement Effective Date, of the following conditions precedent: (a) Loan Documents. The Lenders shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, (ii) the Notes, executed and delivered by a duly authorized officer of the Borrower, (iii) the Stock Pledge Agreements, each executed and delivered by a duly authorized officer of the parties thereto, (iv) the Security Agreements, each executed and delivered by a duly authorized officer of the parties thereto and (v) each of the Deposit Account Control Agreements, each executed and delivered by a duly authorized officer of the party thereto. (b) Related Agreements. (i) The Lenders shall have received true and correct copies, certified as to authenticity by the Borrower, of (A) the Exchange Agreement and the other documents relating to the Recapitalization, and (B) the SMS Acquisition Documents, each on terms mutually acceptable to the Lenders and the Borrower, and such other documents or instruments as may be reasonably requested by the Lenders, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Borrower, or its Subsidiaries may be a party. (ii) The Lenders shall have received evidence satisfactory to them in their sole discretion that the closing conditions under each of the SMS Acquisition Documents have been satisfied. (c) Closing Certificate. The Lenders shall have received a certificate of the Borrower, dated the Restatement Effective Date, substantially in the form of Exhibit G, with appropriate insertions and attachments, including financial statements requested by the Lenders, confirming compliance with the conditions set forth in Section 4, satisfactory in form and substance to the Lenders, executed by the Chairman of the Board, the President or any Vice President of the Borrower. (d) Corporate Proceedings of the Borrower. The Lenders shall have received a copy of the resolutions, in form and substance satisfactory to the Lenders, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) the Loans contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Borrower Security Documents, certified by the Secretary or an Assistant Secretary of the Borrower as of the Restatement Effective Date, which certificate shall be in form and substance satisfactory to the Lenders and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) Borrower Incumbency Certificate. The Lenders shall have received a Certificate of the Borrower, dated the Restatement Effective Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document satisfactory in form and substance to the Lenders, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (f) SMS Acquisition. The SMS Acquisition shall have closed in the manner contemplated by the SMS Acquisition Documents and all conditions precedent to such closing shall have been satisfied without any amendment thereto or waiver thereunder unless specifically consented to by the Agent. (g) Due Diligence. Satisfactory completion of due diligence by the Lenders, including, without limitation, legal and tax due diligence, customer and vendor reference checks and calls, and a pre-closing audit and other due diligence of SMS as required by Agent in its sole discretion to determine the liquidity and the general financial and operational state of the Borrower and SMS, in each instance to the satisfaction of the Lenders in their sole and absolute discretion. (h) Corporate Proceedings of Subsidiaries. The Lenders shall have received a copy of the resolutions, in form and substance satisfactory to the Lenders, of the Board of Directors of each Subsidiary of the Borrower which is a party to a Loan Document authorizing (i) the execution, delivery and performance of the Loan Documents and the SMS Acquisition Documents to which it is a party and (ii) the granting by it of the Liens created pursuant to the Subsidiaries Security Documents to which it is a party, certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Restatement Effective Date, which certificate shall be in form and substance satisfactory to the Lenders and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Subsidiary Incumbency Certificates. The Lenders shall have received a certificate of each Subsidiary of the Borrower which is a Loan Party, dated the Restatement Effective Date, as to the incumbency and signature of the officers of such Subsidiaries executing any Loan Document, satisfactory in form and substance to the Lenders, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Subsidiary. (j) Corporate Documents. The Lenders shall have received true and complete copies of the certificate of incorporation and by-laws of each Loan Party, certified as of the Restatement Effective Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party. (k) Consents, Licenses and Approvals. The Lenders shall have received a certificate of a Responsible Officer of the Borrower stating that all consents, authorizations and filings referred to in subsection 3.4 (except for those described in Schedule 3.4) are in full force and effect, and each such consent, authorization and filing shall be in form and substance satisfactory to the Lenders in their sole and absolute discretion. (l) Fees. As of the Restatement Effective Date, all fees owed to the Agent, the Lenders and their respective Affiliates under this Agreement and all legal fees and expenses of counsel to the Agent and the Lenders incurred through such date shall have been paid in full. (m) Legal Opinions. The Lenders shall have received the following executed legal opinions: (i) the executed legal opinion of Latham & Watkins LLP, counsel to the Borrower and the other Loan Parties substantially in the form of Exhibit H; (ii) the executed legal opinion of Latham & Watkins LLP, special California counsel to the Borrower and, after giving effect to the SMS Acquisition, SMS; (iii) the executed legal opinion of Troutman Sanders LLP, special Georgia counsel to the Borrower and certain of its Subsidiaries; and (iv) the executed legal opinion of Bingham McCutchen LLP, counsel to ITO Holdings, with appropriate reliance language in favor of Agent and the Lenders; and Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Lenders may require in their sole and absolute discretion. (n) Pledged Stock; Stock Powers. The Agent shall have received the certificates representing the shares pledged pursuant to the Stock Pledge Agreements, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (o) Actions to Perfect Liens. The Lenders shall have received evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC-1, necessary or, in the opinion of the Lenders, desirable to perfect the first priority Liens created by the Security Documents shall have been completed. (p) Lien Searches. The Lenders shall have received the results of a recent search by a Person satisfactory to the Lenders, of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with respect to personal property of the Borrower, and the results of such search shall be satisfactory to the Lenders in their sole and absolute discretion. (q) Representations and Warranties. Each of the representations and warranties made by the Borrower and the Subsidiaries in or pursuant to the Loan Documents shall be true and correct in all material respects (or, with respect to any such representation or warranty that, by its terms, is qualified by materiality, Material Adverse Effect or similar qualification, such representation or warranty shall be true and correct in all respects), on and as of the Restatement Effective Date; provided that any such representations and warranties that by their express terms are made as of a specific date shall have been true and correct as of such specific date in all material respects (or, with respect to any such representation or warranty that, by its terms, is qualified by materiality, Material Adverse Effect or similar qualification, such representation or warranty shall be true and correct in all respects as of such specific date). (r) No Default. At the time of and immediately after giving effect to the making of the Loans and the consummation of the SMS Acquisition, no Default or Event of Default shall have occurred and be continuing. (s) No Material Adverse Effect. At the time of and immediately after giving effect to the making of the Loans and the consummation of the SMS Acquisition, no Material Adverse Effect shall have occurred. (t) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement, the other Loan Documents and the Exchange Agreement shall be satisfactory in form and substance to the Lenders, and the Lenders shall have received such other documents in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. (u) Closing. The Restatement Effective Date shall have occurred before April 15, 2004, unless otherwise agreed to by the Lenders in their sole and absolute discretion. (v) Registration Rights Agreement. The Lenders shall have received evidence satisfactory to Lenders in their reasonable discretion of the termination of that certain Amended and Restated Registration Rights Agreement dated June 27, 2003 by and among ITO Holdings, SMS and each other Person party thereto. (w) Insurance. The Lenders shall have received evidence of the compliance by the Borrower with subsection 5.5, satisfactory to the Lenders in their sole and absolute discretion. (x) Employment Agreements. The Lenders shall have received true and correct copies, certified as to authenticity by the Borrower, of all employment agreements between Borrower on the one hand and Patrick A. Dolan and James D. Cortens on the other hand, in each case satisfactory to the Agent in its reasonable discretion. (y) Minimum Contributed EBITDA. After giving effect to the SMS Acquisition, there shall be a positive effect on Consolidated EBITDA on a pro forma basis of no less than $4,000,000, which shall be determined and calculated in a manner acceptable to Agent. SECTION 5. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as any amount is owing to any Lender or the Agent hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 5.1 Financial Statements. Furnish to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young LLP or other independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments and the absence of footnotes); and (c) as soon as available, but in any event not later than 30 days after the end of each month, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such month and the related monthly unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such months and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous month and the figures from the budget, together with a narrative of the performance of the Borrower and its consolidated Subsidiaries for such period in the same form as delivered to the Board of Directors or the senior executives of the Borrower, certified by a Responsible Officer as being fairly stated in all material respects; all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 5.2 Certificates; Other Information. Furnish to each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 5.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefore no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 5.1(a), (b) and (c), (A) a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 5.10 with respect thereto, (ii) neither the Borrower nor any of its Subsidiaries has changed its name, its principal place of business, its chief executive office, the location of any material item of tangible Collateral, its jurisdiction of organization or its organization identification number, if any, without complying with the requirements of this Agreement and the Security Documents with respect thereto and (iii) the Borrower has observed or performed all of its covenants and other agreements contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; and (B) a certificate of a Responsible Officer evidencing the compliance by the Borrower and its Subsidiaries with the financial covenants contained in subsections 6.1 and 6.8, including a calculation thereof, as of the last day of the period covered by such financial statements; (c) not later than thirty days prior to the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to include a profit and loss statement, balance sheet and statement of cash flows and to be accompanied by a certificate of a Responsible Officer stating that such projections are based on estimates, information and assumptions reasonably believed by such Responsible Officer to be reasonable on the date of delivery thereof; (d) within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the SEC or any successor or analogous Governmental Authority; and (e) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence. (a) Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises material to the normal conduct of its business except as otherwise permitted pursuant to subsection 6.5; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 5.5 Maintenance of Property; Insurance. (a) Maintain in all material respects all property necessary and useful in the conduct of its business, in good operating condition and repair, ordinary wear and tear excepted. (b) Maintain with financially sound and reputable insurers having a rating of at least A- or better by Best Rating Guide, insurance against loss or damage by fire with extended coverage; theft, burglary, pilferage and loss in transit; public liability and third party property damage; larceny, embezzlement or other criminal liability; business interruption and such other hazards or of such other types as is customary for Persons engaged in the same or similar business. Without limiting the foregoing, in the event that any real estate owned or leased by any Loan Party on which is located any inventory or equipment of a Loan Party is determined to be located within an area that has been identified by the Director of the Federal Emergency Management Agency as a Special Flood Hazard Area ("SFHA"), such Loan Party shall purchase and maintain flood insurance on the improved real estate and any equipment and inventory located on such real estate. The amount of said flood insurance will be reasonably determined by the Agent, and such insurance shall, at a minimum (subject to customary deductibles), comply with applicable federal regulations as required by the Flood Disaster Protection Act of 1973, as amended. Such Loan Party shall also maintain flood insurance for its inventory and equipment which is, at any time, located in a SFHA. (c) Cause the Agent, for the ratable benefit of the Agent and the Lenders, to be named as secured party or mortgagee and loss payee as its interest may appear or additional insured, in a manner reasonably acceptable to the Agent on each policy of insurance of such Loan Party. Such Loan Party shall use commercially reasonable efforts to cause each policy of insurance of such Loan Party to contain a clause or endorsement requiring the insurer to give not less than thirty (30) days' prior written notice to the Agent in the event of cancellation of the policy for any reason whatsoever (other than non-payment of premiums, in which case not less than ten (10) days' prior written notice is sufficient). Each policy of such Loan Party for property insurance shall contain a clause or endorsement stating that the interest of the Agent shall not be impaired or invalidated by any act or neglect of any Loan Party or any of its Subsidiaries or the owner of any real estate for purposes more hazardous than are permitted by such policy. All premiums for such insurance shall be paid by such Loan Party when due, and certificates of insurance and, if requested by the Agent or any Lender, photocopies of the policies, shall be delivered to the Agent, in each case in sufficient quantity for distribution by the Agent to each of the Lenders. If a Loan Party fails to procure such insurance or to pay the premiums therefore when due, the Agent may do so, but at the Borrowers' expense and without any responsibility on the Agent's part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. (d) Such Loan Party shall promptly notify the Agent and the Lenders of any loss, damage or destruction to any of the Collateral in an amount in excess of $250,000, whether or not covered by insurance. To the extent that the Borrower or its Subsidiaries are not permitted to reinvest insurance and condemnation proceeds hereunder, the Agent is hereby authorized to collect all insurance and condemnation proceeds in respect of Collateral and directly after deducting from such proceeds the reasonable expenses, if any, incurred by the Agent in the collection or handling thereof, the Agent shall apply such proceeds to the payment of the Loans in the manner provided for in this Agreement. 5.6 Books and Records; Inspection of Property. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities. (b) Permit representatives of the Agent and Lenders (at the expense of the Loan Parties) to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its directors (or Persons serving a similar function), officers and independent public accountants, at such reasonable times during normal business hours and as soon as may be reasonably desired, upon reasonable advance notice to such Loan Party; provided, however, when an Event of Default exists, the Agent or any Lender may do any of the foregoing at the expense of the Loan Parties at any time during normal business hours and without advance notice. 5.7 Notices. Promptly give notice to the Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if reasonably likely to be adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $250,000 or more and not covered by insurance or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (e) any development or event which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 5.8 Environmental Laws. (a) Comply with, and ensure compliance by all of Borrower's tenants and subtenants on any Borrower Property, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all such tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except, in each case, to the extent that failure to do so could not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions that the Borrower or any of its Subsidiaries are required to complete and conduct under applicable Environmental Laws and promptly comply with all related lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that (i) the same are being contested, if deemed reasonably necessary to contest by the Borrower, in good faith by appropriate proceedings and (ii) such investigations, action or compliance could not be reasonably expected to have a Material Adverse Effect. 5.9 Further Assurances. Upon the request of the Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the Uniform Commercial Code or any other Requirement of Law which are necessary or advisable to maintain in favor of the Agent, for the benefit of the Lenders, a fully perfected Lien on the Collateral prior and superior in right to all other Persons except Liens permitted pursuant to subsection 6.3(f), (g), (h), (l) and (m) and other Liens permitted under subsection 6.3 that have priority over the Agent's Lien by operation of law. 5.10 Additional Collateral. (a) With respect to any assets acquired after the Restatement Effective Date by the Borrower or any of its Subsidiaries that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than (x) any assets described in paragraph (b) or (c) of this subsection and (y) immaterial assets a Lien on which cannot be perfected by filing UCC-1 financing statements), promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Agent such amendments to the relevant Security Documents or such other documents as the Agent shall deem necessary or advisable to grant to the Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Agent, and (iii) if requested by the Agent, deliver to the Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Agent. (b) With respect to any Person that, subsequent to the Restatement Effective Date, becomes a Subsidiary, promptly upon the request of the Agent: (i) execute and deliver to the Agent, for the benefit of the Lenders, a new pledge agreement or such amendments to the applicable Stock Pledge Agreement as the Agent shall deem necessary or advisable to grant to the Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Agent the certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to a Security Agreement, in each case pursuant to documentation which is in form and substance satisfactory to the Agent, and (B) to take all actions necessary or advisable to cause the Lien created by such Security Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Agent and (iv) if requested by the Agent, deliver to the Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Agent. (c) Notwithstanding the foregoing, no Foreign Subsidiary constituting a "controlled foreign corporation," as defined in Section 957 of the Code, shall be required to deliver any guaranty of the Loan Obligations or grant a security interest in any of its property to secure any such guaranty, and neither Borrower nor any of its Subsidiaries shall be required to pledge more than sixty-five percent (65%) (or other applicable greater percentage) of the voting equity securities of any such Foreign Subsidiary as security for the Loan Obligations, to the extent, in any such case, such guaranty or granting, or a pledge of additional equity securities, would result in material and adverse tax consequences to Borrower under Section 956 of the Code as determined by Agent in its good faith determination. (d) Notwithstanding anything to the contrary in this subsection 5.10, paragraphs (a) and (b) shall not apply to any property or Domestic Subsidiary created or acquired after the Restatement Effective Date, as applicable, to which the Agent has determined in its sole discretion that the collateral value thereof is insufficient to justify the difficulty, time and/or expense of obtaining a perfected security interest therein. (e) If the Borrower or any Subsidiary creates any initial or additional Lien pursuant to subsection 6.3(l) upon any of its property, assets or revenues to secure Indebtedness incurred under subsection 6.2(i), such Borrower or Subsidiary shall simultaneously (i) grant a first priority Lien on such property, assets or revenues to secure the Loan Obligations and (ii) shall enter into an intercreditor and subordination agreement with the to-be-holders of such Indebtedness and the Agent, for the benefit of the Lenders, in form and substance satisfactory to the Agent. If any Subsidiary that is not a Guarantor guarantees the payment of Indebtedness incurred under subsection 6.2(i) of the Borrower or any Subsidiary, then such Subsidiary shall simultaneously become a party to a Security Agreement and a Guarantor. 5.11 Wells Fargo Accounts. Borrower shall, and shall cause its Subsidiaries to, (i) within thirty (30) days after the Restatement Effective Date, (a) close the Wells Fargo Deposit Accounts or (ii) enter into a Deposit Account Control Agreement with Wells Fargo with respect to each Wells Fargo Deposit Account; and (b) no later than August 30, 2004 (i) close the Wells Fargo Cash Collateral Account or (ii) enter into a Deposit Account Control Agreement with Wells Fargo with respect to the Wells Fargo Cash Collateral Account. 5.12 Tax Returns. At the request of the Agent or the Required Lenders, the Borrower will deliver to the Lenders correct and complete copies of all United States federal, state, and foreign income Tax Returns (to the extent filed as of the date hereof or, if not filed, correct and complete copies of extensions thereof), examination reports, statements of deficiencies assessed against or agreed to by the Borrower and any of its Subsidiaries, or any other similar correspondence from a taxing authority, relating to taxable years 2000, 2001 and 2002. 5.13 Post Closing Deliverables. The Borrower shall deliver each item contained on Schedule 5.13 within the applicable time periods set forth therein. SECTION 6. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any amount is owing to any Lender or the Agent hereunder or under any other Loan Document, the Borrower shall not, and (except with respect to subsection 6.1) shall not permit any of its Subsidiaries to, directly or indirectly: 6.1 Financial Condition Covenants. (a) Leverage. Permit the Leverage Ratio at any time during any period set forth on Schedule 6.1(a) to be greater than the ratio set forth opposite such period specified on Schedule 6.1(a). (b) Minimum Consolidated EBITDA. Permit Consolidated EBITDA for any period of four consecutive fiscal quarters ending on the date set forth on Schedule 6.1(b) to be less than the amount set forth opposite such period specified on Schedule 6.1(b). (c) Fixed Charge Ratio. Permit for any period of four consecutive fiscal quarters ending on the date set forth on Schedule 6.1(c), the ratio of (a) Consolidated EBITDA for such period, minus Capital Expenditures (other than to the extent attributable to the incurrence of capital lease obligations or other Indebtedness) during such period minus taxes paid in cash during such period, to (b) Consolidated Fixed Charges for such period to be less than the amount set forth opposite such period specified on Schedule 6.1(c). 6.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower and its Subsidiaries under the Loan Documents; (b) Indebtedness of the Borrower to any Subsidiary which is a Loan Party and of any Subsidiary to the Borrower or any other Subsidiary which is a Loan Party; (c) Indebtedness of the Borrower and any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets pursuant to one or more Financing Leases in an aggregate principal amount not exceeding as to the Borrower and its Subsidiaries $4,000,000 at any time outstanding, provided that such Indebtedness shall be created substantially simultaneously with the capitalization or recapitalization of such fixed or capital assets on the balance sheet of the Borrower and its Subsidiaries; (d) Indebtedness of the Borrower or any of its Subsidiaries outstanding on the Restatement Effective Date and listed on Schedule 6.2(d) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or interest thereon (other than with respect to any reasonable fees) or shorten any maturity or average life to maturity thereof and otherwise on substantially similar terms to such existing Indebtedness; (e) Indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that (i) such indebtedness existed at the time such corporation became a Subsidiary and was not created in anticipation thereof, (ii) such indebtedness is in an aggregate principal amount not exceeding as to the Borrower and its Subsidiaries $5,000,000 at any time outstanding and (iii) immediately after giving effect to the acquisition of such Person by the Borrower no Default or Event of Default shall have occurred and be continuing; (f) Guarantee Obligations made in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of the Borrower or any other Loan Party which obligations are otherwise permitted under this Agreement; (g) Indebtedness of the Borrower or any of its Subsidiaries in respect of worker's compensation claims, performance, bid and surety bonds and completion guarantees, in each case, in the ordinary course of business; (h) Indebtedness of the Borrower or any of its Subsidiaries consisting of customary overdraft and similar protections in connection with deposit accounts; (i) Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $5,000,000 at any time outstanding to the extent, prior to any such creation, incurrence, assumption or sufferance, the Borrower, the Subsidiaries, the to-be-holders of such Indebtedness and the Agent, for the benefit of the Lenders, shall have entered into an intercreditor and subordination agreement in form and substance satisfactory to the Agent; (j) unsecured Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $1,000,000 at any time outstanding; (k) the Strategix Earnout; and (l) Indebtedness evidenced by the Wells Fargo Letter of Credit provided that all obligations of Borrower under the Wells Fargo Letter of Credit are terminated no later than August 30, 2004. 6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (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 materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the Restatement Effective Date listed on Schedule 6.3, securing Indebtedness permitted by subsection 6.2(d), provided that no such Lien is spread to cover any additional property after the Restatement Effective Date and that the amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 6.2(c) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens and the Indebtedness secured thereby shall be created or incurred substantially simultaneously with the capitalization or recapitalization of such fixed or capital assets on the balance sheet of the Borrower and its Subsidiaries, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired; (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 6.2(e), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such corporation or any other Loan Party after the time such corporation becomes a Subsidiary, and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens created pursuant to the Security Documents; (j) any interest or title of a lessor under any lease entered into by the Borrower or any of its Subsidiaries in the ordinary course of its business and covering only the assets so leased and any Lien arising from precautionary Uniform Commercial Code financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to and covering only equipment leased in accordance with any Loan Document (and such Lien does not apply to any additional property or assets of the Borrower or any Subsidiary); (k) Liens arising from judgments and attachments in connection with court proceedings provided that the attachment or enforcement of such Liens would not result in an Event of Default hereunder and such Liens are being contested in good faith by appropriate proceedings, adequate reserves have been set aside, no material property is subject to a material risk of loss or forfeiture, the claims in respect of such Liens are fully covered by insurance (subject to ordinary and customary deductibles) and a stay of execution pending appeal or proceeding for review is in effect; (l) Liens securing Indebtedness of the Borrower or any of its Subsidiaries permitted under subsection 6.2(i), provided, that, (a) such Lien shall only be permitted hereunder if the Leverage Ratio of the Borrower and its Subsidiaries calculated at the time of incurrence of such Indebtedness and after giving effect thereto and using Consolidated EBITDA for the most recently completed period of four consecutive fiscal quarters is less than 3.00:1.00; (b) the Borrower, the Subsidiaries, the to-be-holders of such Indebtedness and the Agent, for the benefit of the Lenders, shall have entered into an intercreditor and subordination agreement which subordinates such Liens to the Lien securing the Loan Obligations and otherwise is in form and substance satisfactory to the Agent; (c) the aggregate amount of Indebtedness secured by such Lien does not exceed (i) $2,500,000 if the Leverage Ratio at the time of such incurrence and after giving effect thereto is less than 3.0:1.0 and greater than or equal to 2.0:1.0 or (ii) $5,000,000 if the Leverage Ratio at the time of such incurrence and after giving effect thereto is less than 2.0:1.0; provided that for purposes of this subsection 6.3(l), the time of incurrence with respect to Indebtedness under any revolving credit facility shall be deemed to be the date such revolving credit facility was established and the amount incurred shall be the full committed amount of such revolving credit facility and (d) (i) no portion of the principal of such Indebtedness is stated to be payable or is required to be paid prior to the Maturity Date, (ii) the material terms, conditions and restrictive covenants contained in the instrument governing such Indebtedness, taken as a whole, are no less favorable to the Borrower or any of its Subsidiaries, as the case may be, than the terms, conditions and restrictive covenants contained in this Agreement and (iii) no Default or Event of Default shall be in effect at the time of or shall have occurred after giving effect to the incurrence of such Indebtedness; (m) Liens on the Wells Fargo Cash Collateral Account securing Indebtedness of the Borrower permitted by subsection 6.2(k); and (n) Liens consisting of precautionary UCC financing statement filings against SMS, Acxiom Corporation or Systems Management Specialists, Inc. with respect to specific items of leased equipment subject to leases that are obligations of SMS as of the Restatement Effective Date. 6.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except that, if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation and is a Loan Party); (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Loan Party; and (c) the Borrower or any Subsidiary thereof may merge with any Person organized or existing under the laws of the United States of America, any State thereof or the District of Columbia in connection with a Permitted Acquisition; provided that if such transaction involves the Borrower, the Borrower shall be the continuing or surviving corporation and, if such transaction involves any other Loan Party, the surviving person must be a Domestic Subsidiary and must become a Guarantor of the obligations of the Borrower hereunder. 6.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired; or (ii) in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale or other disposition of any property in the ordinary course of business, provided that (other than inventory) the aggregate book value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed 10% of consolidated total assets of the Borrower and its Subsidiaries as at the beginning of such twelve-month period; (c) the sale of inventory in the ordinary course of business; (d) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (e) as permitted by subsection 6.4(b); and (f) dispositions of equipment in exchange for other equipment of reasonably equivalent or greater value in the ordinary course of business. 6.6 Limitation on Amendments to Material Agreements. The Borrower will not, nor will it permit any Subsidiary to, amend, modify or waive any of its rights under its certificate of incorporation, by-laws or other organizational documents (other than to change its name) or amend any SMS Acquisition Document, except, in each case, for such amendments, modifications or waivers that could not be reasonably expected to effect any change materially adverse to the interests and rights of the Agent or the Lenders under any Loan Document. 6.7 Limitation on Dividends. Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary, except (i) any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor; (ii) the Borrower may declare and pay dividends with respect to its Capital Stock payable solely in additional Capital Stock; (iii) so long as no Default or Event of Default shall have occurred and be continuing, the Borrower may purchase its common stock or common stock options from present or former officers or employees of the Borrower or any Subsidiary upon the death, disability or termination of employment of such officer or employee, provided, that the aggregate amount of payments under this clause (iii) subsequent to the date hereof (net of any proceeds received by the Borrower subsequent to the date hereof in connection with resales of any common stock or common stock options so purchased) shall not exceed $500,000; and (iv) the Borrower may consummate repurchases of Capital Stock that are deemed to occur upon the non-cash exercise of permitted stock options and warrants. 6.8 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any Capital Expenditures (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for Capital Expenditures in the ordinary course of business not exceeding, for each fiscal year of the Borrower set forth below, the amount set forth opposite such fiscal year set forth below: Fiscal Year Amount ----------- ------ Fiscal Year 2004 $6,000,000 Fiscal Year 2005 $6,000,000 Fiscal Year 2006 $6,000,000 Fiscal Year 2007 $6,000,000 Fiscal Year 2008 $6,000,000 provided, that (i) if at the end of any fiscal year of the Borrower, the amount specified pursuant to this section for such Capital Expenditures during such fiscal year exceeds the aggregate amount of Capital Expenditures made or incurred by the Borrower and its Subsidiaries on a consolidated basis during such fiscal year (the amount of such excess being referred to herein as the "Excess Amount"), the Borrower and its Subsidiaries shall be entitled to make additional Capital Expenditures in the succeeding fiscal year (and only in such succeeding fiscal year) in an aggregate amount equal to the Excess Amount and (ii) Capital Expenditures made pursuant to this subsection 6.8 during any fiscal year shall be deemed made first, in respect of amounts permitted for such fiscal year as provided above (without giving effect to amounts carried over from the prior fiscal year pursuant to clause (i) above) and second, in respect of the Excess Amount carried over from the prior fiscal year pursuant to clause (i) above. 6.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except: (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $100,000 at any one time outstanding; (d) investments and advances by the Borrower in its Subsidiaries which are Loan Parties and investments and advances by such Subsidiaries in the Borrower and in other Subsidiaries which are Loan Parties; (e) investments in real property, equipment or other tangible assets useful in the Borrower's or the applicable Subsidiaries business made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment Deferred Amount; (f) investments, loans and advances consisting of pay-in-kind interest on employee loans existing as of the date hereof; (g) investments received in connection with the bankruptcy, reorganization or settlement of delinquent agreements or disputes with customers and suppliers, in each case, in the ordinary course of business; (h) Permitted Acquisitions (other than the SMS Acquisition) by the Borrower or any of its Subsidiaries to the extent the total cash purchase price (specifically excluding any Indebtedness or other obligations to be assumed or incurred in connection therewith and the value of any non-cash consideration, including any imputed value of any non-competition, non-solicitation and similar arrangements) of all such Permitted Acquisitions does not exceed $10,000,000 during the term of this Agreement; and (i) the SMS Acquisition on the Restatement Effective Date in accordance with the terms of the SMS Acquisition Documents. 6.10 Modifications of Debt Instruments. Amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any material Indebtedness, except for such amendments, modifications or waivers that could not reasonably be expected to effect any change materially adverse to the interests and rights of the Agent or the Lenders under any Loan Document. 6.11 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) not prohibited under this Agreement, (b) in the ordinary course of the Borrower's or such Subsidiary's business and (c) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 6.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 6.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 6.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, (b) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets securing such Indebtedness) and (c) any secured Indebtedness permitted under subsection 6.2(i), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 6.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the Restatement Effective Date or which are directly related thereto. 6.16 Limitation on Foreign Subsidiaries. Create, form, organize or permit to exist any Foreign Subsidiaries, including, without limitation, for purposes of consummating any acquisition. 6.17 Wells Fargo Accounts. Permit the aggregate amount on deposit in the Wells Fargo Account to exceed $800,000 at any time. SECTION 7. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in subsections 5.1, 5.4(a), 5.5, 5.6, 5.7, 5.9 or Section 6 hereof; or (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; or (e) The Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, that a default, event or condition described in clause (i), or (ii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i) and (ii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $250,000; or (f) (i) The Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $250,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby (other than by reason of the express release thereof pursuant to the Security Documents); or (j) The Borrower, any of its Subsidiaries or any of their respective executive managers shall be criminally indicted or convicted (x) of a felony or (y) under any law that could lead to a forfeiture of any material (as determined by Agent in its reasonable discretion) Collateral; or (k) The occurrence of any Material Adverse Effect; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, with the consent of the Required Lenders, the Agent may, or upon the request of the Required Lenders, the Agent shall, by notice to the Borrower declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Without limiting the foregoing, upon the occurrence and during the continuance of any Event of Default, the Agent may, and shall at the request of the Required Lenders, exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents, applicable law (including, without limitation, the Uniform Commercial Code) or otherwise. Notwithstanding anything to contrary contained in this Agreement, payments collected or received after the occurrence and during the continuation of an Event of Default shall be applied as follows: first, to payment of costs and expenses, including attorneys' fees, of Agent payable or reimbursable by Borrower or any other Loan Party under the Loan Documents; second, to payment of attorneys' fees of Lenders payable or reimbursable by Borrower or any other Loan Party under the Loan Documents; third, to payment of all accrued unpaid fees (including fees payable to Agent) and interest then due and owing on the Loan Obligations; fourth, to payment of principal of the Loan Obligations; fifth, to payment of any other amounts owing constituting Loan Obligations; and sixth, any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) each of the Agent and Lenders shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses second, third, fourth and fifth above. SECTION 8. THE AGENT 8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 8.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents 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 agents or attorneys in-fact selected by it. 8.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with 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 Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may 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 and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 8.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Agent shall have received such directions, 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 in the best interests of the Lenders. 8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Agent or any of its members, partners, officers, directors, employees, agents, attorneys-in-fact or Affiliates. 8.7 Indemnification. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Pro Rata Share in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 8.8 Agent in Its Individual Capacity. The Agent and its Affiliates may make loans to, make investments in, hold equity interest in, accept deposits from and generally engage in any kind of business with the Borrower as though the Agent were not the Agent hereunder and under the other Loan Documents. With respect to the Loans made by it, the Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 8.9 Successor Agent. The Agent may resign as Agent upon 10 days' notice to the Lenders and the Borrower. If the Agent shall resign as Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Agent hereunder. Effective upon such appointment and approval, the term "Agent" shall mean such successor agent, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Agent's resignation as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each Lender affected thereby, or (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Collateral, in each case without the written consent of all the Lenders or (iii) amend, modify or waive any provision of Section 8 without the written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower and the Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: The Borrower: Infocrossing, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attention: Nicholas J. Letizia, Esq., Senior Vice President and General Counsel Fax: (201) 840-7126 The Agent: CapitalSource Finance LLC 4445 Willard Avenue, 12th Floor Chevy Chase, Maryland 20815 Attention: Portfolio Manager Telephone: (301) 841-2700 FAX: (301) 841-2360 E-Mail: kelias@capitalsource.com ; provided that any notice, request or demand to or upon the Agent or the Lenders shall not be effective until received. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Agent and each Lender and their Affiliates for all their reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement, waiver or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent and each Lender and their Affiliates, provided, that, from and after the Restatement Effective Date, such reimbursement for legal fees shall be limited to the fees and disbursements of one primary counsel except as provided in clause (b) of this subsection 9.5, (b) to pay or reimburse each Lender and the Agent and their Affiliates for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Agent, (c) to pay, indemnify, and hold each Lender and the Agent and their Affiliates and the respective members, partners, directors, officers, employees, agents and advisors of such Person and such Person's Affiliates harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Agent and their Affiliates and the respective members, partners, directors, officers, employees, agents and advisors of such Person and such Person's Affiliates harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents, documents in connection with the Recapitalization, any Permitted Acquisition, the SMS Acquisition and any such other documents, including, without limitation, any of the foregoing relating to any Environmental Claims or noncompliance with Environmental Laws applicable to the operations of the Borrower, any of its Subsidiaries or any of the Borrower Property (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided that the Borrower shall have no obligation hereunder to the Agent or any Lender with respect to indemnified liabilities to the extent determined in the final non-appealable judgment of a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of the Agent or any such Lender. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 9.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender. (b) Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i) and (ii) of the proviso to subsection 9.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 9.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.7, 2.8 and 2.9 (Requirements of Law, Taxes and Indemnity) with respect to its participation in the Loans from time to time as if it was a Lender; provided that, in the case of subsection 2.8 (Taxes), such Participant shall have complied with the requirements of said subsection and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may at any time and from time to time assign to any Lender, any affiliate thereof or any other entity having total assets in excess of $5,000,000 (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Agent) and delivered to the Agent for its acceptance and recording in the Register, provided that, in the case of any such assignment to any Person other than an Affiliate of a Lender, the sum of the aggregate principal amount of the Loans being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans remaining with the assigning Lender are each not less than 5% of the aggregate principal amount of the Loans then outstanding (or such lesser amount as may be agreed to by the Borrower and the Agent). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). At the request of the Assignee and/or the assigning Lender, new Notes shall be executed and delivered by the Borrower for any assignment. Anything contained in the Loan Documents to the contrary notwithstanding, (i) CapitalSource Finance LLC and its Affiliates shall not be required to execute and deliver any Assignment and Acceptance in connection with any transaction involving its Affiliates or its or its Affiliates' lenders or funding or financing sources, (ii) no lender to or Affiliate, funding or financing source of CapitalSource Finance LLC or its Affiliates shall be considered a Lender hereunder, and (iii) there shall be no limitation or restriction on (A) the ability of CapitalSource Finance LLC, any of its Affiliates or any of its or its Affiliates' lenders or funding or financing sources to assign or otherwise transfer any Loan Document, Commitment or Loan Obligation to any Affiliate, lender or financing or funding source or (B) any such lender's or funding or financing source's ability to assign or otherwise transfer any Loan Document, Commitment or Loan Obligation; provided, however, CapitalSource Finance LLC shall continue to be liable as a "Lender" under the Loan Documents unless such Affiliate, lender or funding or financing source executes an Assignment and Acceptance and becomes a "Lender." (d) The Agent, on behalf of the Borrower, shall maintain at the address of the Agent referred to in subsection 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders the principal amount(s) of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Except as provided in the penultimate sentence of subsection 9.6(c), any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. Any assignment of any Loan or other obligation hereunder evidenced by a Note shall be effective only if effected by the surrender of the Note to the Borrower (or other acceptable affidavit of lost or misplaced Note from the applicable Lender). (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Agent) together with payment to the Agent of a registration and processing fee of $4,000, the Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 9.7 Adjustments; Set-off. (a) If any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Agent. 9.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 9.2 or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against Borrower in the courts of any other jurisdiction having jurisdiction; (e) agrees that any judicial proceedings against Agent or any Lender involving, directly or indirectly, the Loan Obligations, any Loan Document or any related agreement shall be brought only in courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; and (f) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 9.13 Acknowledgements. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 9.15 Confidentiality. Each of the Agent and the Lenders agrees to keep confidential all non-public information provided to it by the Borrower or any Subsidiary pursuant to this Agreement that is designated by the Borrower or such Subsidiary as confidential; provided that nothing herein shall prevent the Agent or any Lender from disclosing any such information (i) to the Agent, any other Lender or any affiliate of any thereof, (ii) to any Transferee or prospective Transferee that agrees to comply with the provisions of this Section or substantially equivalent provisions, (iii) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over it, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) that has been publicly disclosed other than in breach of this Section, (vii) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender. 9.16 Release of Collateral and Guarantee Obligations. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Borrower in connection with any disposition of property permitted by the Loan Documents, the Agent shall take such actions as shall be required to release its security interest in any Collateral being disposed of in such disposition, and to release any Guarantee Obligations under any Loan Document of any Person being disposed of in such disposition, to the extent necessary to permit consummation of such disposition in accordance with the Loan Documents. (b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted) have been indefeasibly paid in full in cash and all Commitments have terminated or expired, upon request of the Borrower, the Agent shall take such actions as shall be required to release its security interest in all Collateral, and to release all Guarantee Obligations provided for in any Loan Documents. Any such release of Guarantee Obligations shall be deemed subject to the provision that such Guarantee Obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made. 9.17 Continued Effect; No Novation. Notwithstanding anything contained herein, this Agreement is not intended to and does not serve to effect a novation of the Loans. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Original Loan Agreement which is evidenced by the notes provided for therein and secured by the Collateral. The Borrower acknowledges and confirms that the liens and security interests granted pursuant to the Loan Documents secure the indebtedness, liabilities and obligations of the Borrower to the Agent and the Lenders under the Original Loan Agreement, as amended and restated hereby, and that the terms "Loans", "Loan Obligations", "Obligations" and "Indebtedness" as used in the Loan Documents (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of the Borrower to the Agent and the Lenders) includes, without limitation, the indebtedness, liabilities and obligations of the Borrower under the Notes to be delivered hereunder, and under the Original Loan Agreement, as amended and restated hereby, as the same may be further amended, modified, supplemented or restated from time to time. The Loan Documents and all agreements, instruments and documents executed or delivered in connection with any of the foregoing shall each be deemed to be amended to the extent necessary to give effect to the provisions of this Agreement. Cross-references in the Loan Documents to particular section numbers in the Original Loan Agreement shall be deemed to be cross-references to the corresponding sections, as applicable, of this Agreement. [Remainder of page intentionally left blank; signature page follows] 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. INFOCROSSING, INC. By: /s/WILLIAM J. McHALE --------------------------------- Name: William J. McHale Title: Senior Vice President - Finance CAPITALSOURCE FINANCE LLC, as Agent and as a Lender By: /s/JOSEPH TURITZ --------------------------------- Name: Joseph Turitz Title: General Counsel SCHEDULE I Lenders' Addresses CapitalSource Finance LLC CAPITALSOURCE FINANCE LLC 4445 Willard Avenue, 12th Floor Chevy Chase, Maryland 20815 Attention: Portfolio Manager Telephone: (301) 841-2700 FAX: (301) 841-2360 E-Mail: kelias@capitalsource.com Wire Instructions: Bank: Bank of America, Baltimore, MD Account: 003939396662 ABA: 026009593 Account Name: CapitalSource Funding LLC - CFG Reference: Infocrossing SCHEDULE 2.1 LENDERS' COMMITMENTS
Term Loan A Commitment ======================================= ============================== ================================ =============== OUTSTANDING AMOUNT OF TERM LOAN A AS OF THE LENDER TERM LOAN A COMMITMENT RESTATEMENT EFFECTIVE DATE PRO RATA SHARE - --------------------------------------- ------------------------------ -------------------------------- --------------- CapitalSource Finance LLC $25,000,000 $24,875,156.25 100% - --------------------------------------- ------------------------------ -------------------------------- --------------- TOTALS $25,000,000 $24,875,156.25 100% ======================================= ============================== ================================ ===============
Term Loan B Commitment ================================================== ============================== ==================================== LENDER TERM LOAN B COMMITMENT PRO RATA SHARE - -------------------------------------------------- ------------------------------ ------------------------------------ CapitalSource Finance LLC $15,000,000 100% - -------------------------------------------------- ------------------------------ ------------------------------------ TOTALS $15,000,000 100% ================================================== ============================== ====================================
Term Loan A Interest Reserve Commitment ================================================== ============================== ==================================== LENDER TERM LOAN A INTEREST RESERVE PRO RATA SHARE COMMITMENT - -------------------------------------------------- ------------------------------ ------------------------------------ CapitalSource Finance LLC $621,878.91 100% - -------------------------------------------------- ------------------------------ ------------------------------------ TOTALS $621,878.91 100% ================================================== ============================== ====================================
Term Loan B Interest Reserve Commitment ================================================== ============================== ==================================== LENDER TERM LOAN B INTEREST RESERVE PRO RATA SHARE COMMITMENT - -------------------------------------------------- ------------------------------ ------------------------------------ CapitalSource Finance LLC $375,000 100% - -------------------------------------------------- ------------------------------ ------------------------------------ TOTALS $375,000 100% ================================================== ============================== ====================================
Schedule 2.2 Amortization of Loans December 1, 2004 $312,500 January 1, 2005 $312,500 February 1, 2005 $312,500 March 1, 2005 $312,500 April 1, 2005 $312,500 May 1, 2005 $312,500 June 1, 2005 $312,500 July 1, 2005 $312,500 August 1, 2005 $312,500 September 1, 2005 $312,500 October 1, 2005 $312,500 November 1, 2005 $312,500 December 1, 2005 $312,500 January 1, 2006 $312,500 February 1, 2006 $312,500 March 1, 2006 $312,500 April 1, 2006 $312,500 May 1, 2006 $312,500 June 1, 2006 $312,500 July 1, 2006 $312,500 August 1, 2006 $312,500 September 1, 2006 $312,500 October 1, 2006 $312,500 November 1, 2006 $312,500 December 1, 2006 $312,500 January 1, 2007 $312,500 February 1, 2007 $312,500 March 1, 2007 $312,500 April 1, 2007 $312,500 May 1, 2007 $312,500 June 1, 2007 $312,500 July 1, 2007 $312,500 August 1, 2007 $312,500 September 1, 2007 $312,500 October 1, 2007 $312,500 November 1, 2007 $312,500 December 1, 2007 $312,500 January 1, 2008 $312,500 February 1, 2008 $312,500 March 1, 2008 $312,500 April 1, 2008 $312,500 May 1, 2008 $312,500 June 1, 2008 $312,500 July 1, 2008 $312,500 August 1, 2008 $312,500 September 1, 2008 $312,500 October 1, 2008 $312,500 Maturity Date 100% of all Loans less amounts previously paid ------------------------ Schedule 6.1(a) Leverage Ratio Fiscal quarter ended Ratio --------------------- ----- December 31, 2003 3.65 to 1.00 March 31, 2004 3.50 to 1.00 June 30, 2004 4.50 to 1.00 September 30, 2004 3.75 to 1.00 December 31, 2004 3.00 to 1.00 March 31, 2005 2.50 to 1.00 June 30, 2005 2.25 to 1.00 September 30, 2005 2.00 to 1.00 December 31, 2005 2.00 to 1.00 March 31, 2006 2.00 to 1.00 June 30, 2006 2.00 to 1.00 September 30, 2006 1.50 to 1.00 December 31, 2006 1.50 to 1.00 March 31, 2007 1.50 to 1.00 June 30, 2007 1.50 to 1.00 September 30, 2007 1.50 to 1.00 December 31, 2007 1.50 to 1.00 March 31, 2008 1.50 to 1.00 June 30, 2008 1.50 to 1.00 September 30, 2008 1.50 to 1.00 Schedule 6.1(b) Minimum Consolidated EBITDA Fiscal quarter ended Amount December 31, 2003 $9,000,000 March 31, 2004 $9,500,000 June 30, 2004 $10,500,000 September 30, 2004 $12,000,000 December 31, 2004 $14,000,000 March 31, 2005 $16,000,000 June 30, 2005 $18,500,000 September 30, 2005 $20,000,000 December 31, 2005 $21,000,000 March 31, 2006 $22,000,000 June 30, 2006 $22,000,000 September 30, 2006 $22,000,000 December 31, 2006 $22,000,000 March 31, 2007 $25,000,000 June 30, 2007 $25,000,000 September 30, 2007 $25,000,000 December 31, 2007 $25,000,000 March 31, 2008 $25,000,000 June 30, 2008 $25,000,000 September 30, 2008 $25,000,000 Schedule 6.1(c) Fixed Charge Ratio Fiscal quarter ended Ratio --------------------- ----- December 31, 2003 0.90 to 1.00 March 31, 2004 0.95 to 1.00 June 30, 2004 1.50 to 1.00 September 30, 2004 1.50 to 1.00 December 31, 2004 1.50 to 1.00 March 31, 2005 1.25 to 1.00 June 30, 2005 1.25 to 1.00 September 30, 2005 1.25 to 1.00 December 31, 2005 1.25 to 1.00 March 31, 2006 1.25 to 1.00 June 30, 2006 1.25 to 1.00 September 30, 2006 1.25 to 1.00 December 31, 2006 1.25 to 1.00 March 31, 2007 1.25 to 1.00 June 30, 2007 1.25 to 1.00 September 30, 2007 1.25 to 1.00 December 31, 2007 1.25 to 1.00 March 31, 2008 1.25 to 1.00 June 30, 2008 1.25 to 1.00 September 30, 2008 1.25 to 1.00 Schedule 5.13 Post Closing Deliverables 1. Within thirty (30) days after the Restatement Effective Date, Borrower shall use commercially reasonable best efforts to procure a landlord waiver and consent, in form and substance reasonably acceptable to Agent, for each of its leased properties located in (a) Leonia, New Jersey; (b) Norcross, Georgia and (c) Brea, California, and in the event that Borrower fails to obtain any such landlord waiver and consent within the proscribed time period, Agent shall have the right, in its sole and absolute discretion, to charge Borrower a collateral agent's fee of $5,000 payable upon such failure and on the first day of each month thereafter. 2. Within thirty (30) days after the Restatement Effective Date, Borrower deliver a good standing certificate issued by the California Secretary of State for SMS reflecting its correct legal name: "ITO Acquisition Corporation". EX-10 6 ex102sms.txt GUARANTEE & SECURITY AGREEMENT EXHIBIT 10.2 GUARANTY AND SECURITY AGREEMENT THIS GUARANTY AND SECURITY AGREEMENT (this "AGREEMENT") is entered into as of April 2, 2004 between ITO ACQUISITION CORPORATION, a California corporation (the "OBLIGOR") and CAPITALSOURCE FINANCE LLC, in its capacity as agent (in such capacity, the "AGENT") for the ratable benefit of the lenders from time to time party to the Term Loan Agreement described below (the "LENDERS"). RECITALS WHEREAS, pursuant to that certain Amended and Restated Term Loan Agreement dated as of the date hereof (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified and in effect from time to time, the "TERM LOAN AGREEMENT") by and among Infocrossing, Inc., a Delaware corporation (the "BORROWER"), the Agent and the Lenders, the Lenders have agreed to make and hold loans (the "LOANS") upon the terms and subject to the conditions set forth therein; WHEREAS, the Obligor is a wholly-owned Subsidiary of Borrower and as such will derive substantial tangible and intangible benefits from the making and holding of the Loans to Borrower by the Lenders; WHEREAS, it is a condition precedent to the effectiveness of the Term Loan Agreement that the Obligor shall have executed and delivered this Agreement to the Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: 1. Definitions. (a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Term Loan Agreement, and the following terms which are defined in Article 9 of the Uniform Commercial Code (the "UCC") in effect in the State of New York on the date hereof are used herein as so defined: Accessions, Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Consumer Goods, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Manufactured Home, Proceeds, Software, Supporting Obligation and Tangible Chattel Paper. (b) In addition, the following terms shall have the following meanings: "BANKRUPTCY CODE": the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.ss.101, et seq.), as amended and in effect from time to time and the regulations issued from time to time thereunder. "CONTRACTS": all licenses or other agreements to which the Obligor is a party, as each may be amended, supplemented or otherwise modified from time to time, including, without limitation, (a) all rights of the Obligor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of the Obligor to damages arising out of or for breach or default in respect thereof and (c) all rights of the Obligor to exercise all remedies thereunder. "CONTROL": (i) with respect to Electronic Chattel Paper, "control" (within the meaning of Section 9-105 of the UCC) over such Electronic Chattel Paper, (ii) with respect to Deposit Accounts, "control" (within the meaning of Section 9-104 of the UCC) over such Deposit Accounts, (iii) with respect to Investment Property constituting certificated securities, uncertificated securities, securities accounts, securities entitlements, commodity accounts or commodity contracts (each as referred to in the UCC), "control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over such Investment Property, and (iv) with respect to Letter-of-Credit Rights, "control" (within the meaning of Section 9-107 of the UCC) with respect to such Letter-of-Credit Rights. "COPYRIGHT LICENSES": any written agreement, naming the Obligor as licensor, granting any right under any Copyright including, without limitation, any thereof referred to in Schedule 5(h) hereto. "COPYRIGHTS": (a) all registered United States copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright Office including, without limitation, any thereof referred to in Schedule 5(h) hereto, (b) all renewals thereof including, without limitation, any thereof referred to in Schedule 5(h) hereto and (c) all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing. "NOTES": all notes issued by the Borrower to the Lenders pursuant to the terms of the Term Loan Agreement. "PATENT LICENSE": all agreements, whether written or oral, providing for the grant by or to the Obligor of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in Schedule 5(h) hereto. "PATENTS": (a) all letters patent of the United States or any other country and all reissues and extensions thereof, including, without limitation, any thereof referred to in Schedule 5(h) hereto, (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any thereof referred to in Schedule 5(h) hereto and (c) all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing. "SECURED OBLIGATIONS": (a) the due and punctual payment by the Borrower of (i) the principal of, and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses, reimbursements, damages, indemnities and other liabilities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Agent and the Lenders under the Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Loan Documents, and (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of the Guarantors under or pursuant to the Loan Documents. "TRADEMARK LICENSE": means any agreement, written or oral, providing for the grant by or to the Obligor of any right to use any Trademark, including, without limitation, any thereof referred to in Schedule 5(h) hereto. "TRADEMARKS": (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any thereof referred to in Schedule 5(h) hereto, (b) all renewals thereof and (c) all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing. "WORK": any work which is subject to copyright protection pursuant to Title 17 of the United States Code. 2. Guaranty. (a) The Guarantee. The Obligor hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, to each Lender and to the Agent as hereinafter provided, the prompt payment and performance of the Secured Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof. The Obligor hereby further agrees that if any of the Secured Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the Obligor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time or payment or renewal of any of the Secured Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal. The Obligor agrees that this is a continuing guarantee of payment and not of collectibility, and is intended to be independent of and in addition to any other guaranty, indorsement, collateral or other agreement held by the Agent or the Lenders therefor or with respect thereto, whether or not furnished by the Obligor. (b) Notwithstanding any provision of this Agreement to the contrary, it is intended that the guaranty evidenced by this Agreement, and any interests, Liens and security interests granted by the Obligor as security for such guaranty, including, without limitation, the Liens and security interests granted hereunder, not constitute a "Fraudulent Conveyance" (as defined below) in the event that such guaranty or such interest is subject to the Bankruptcy Code or any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state. Consequently, the Obligor and the Agent agree that if such guaranty, or any such interests, Liens or security interests securing such guaranty, would, but for the application of this sentence, constitute a Fraudulent Conveyance, such guaranty and each such Lien and security interest shall be valid and enforceable only to the maximum extent that would not cause such guaranty or such interest, Lien or security interest to constitute a Fraudulent Conveyance, and such guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance under Section 548 of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, as in effect from time to time. (c) Obligations Unconditional. The obligations of the Obligor under Section 2 hereof are absolute, irrevocable and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Loan Documents, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Secured Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 2 that the obligations of the Obligor hereunder shall be absolute, irrevocable and unconditional under any and all circumstances. The Obligor agrees that it shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor of the Secured Obligations for amounts paid under this guaranty until such time as the Lenders have been paid in full. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of the Obligor hereunder which shall remain absolute, irrevocable and unconditional as described above: (i) at any time or from time to time, without notice to the Obligor, the time for any performance of or compliance with any of the Secured Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents shall be done or omitted; (iii) the maturity of any of the Secured Obligations shall be accelerated, or any of the Secured Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents shall be waived or any other guarantee of any of the Secured Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien granted to, or in favor of, the Agent or any Lender or the Lenders as security for any of the Secured Obligations shall fail to attach or be perfected; or (v) any of the Secured Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of the Obligor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of the Obligor). With respect to its obligations hereunder, the Obligor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents, or against any other Person under any other guarantee of, or security for, any of the Secured Obligations. (d) Reinstatement. The obligations of the Obligor under this Section 2 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Secured Obligations is rescinded or must be otherwise restored by any holder of any of the Secured Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Obligor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by the Agent or any Lender and each of their Affiliates and their respective members, partners, directors, officers, employees, agents and advisors of the Agent, each Lender and each of their Affiliates (each such Person being called an "INDEMNITEE") in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a Fraudulent Conveyance, preference, or similar payment under the Bankruptcy Code or any other bankruptcy, insolvency or similar law; provided that such indemnity shall not be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (e) Certain Additional Waivers. The Obligor further agrees that the Obligor shall have no right of recourse to security for the Secured Obligations until such time as all of the Secured Obligations have been paid in full and all of the Loan Documents have been terminated. (f) Remedies. The Obligor agrees that, to the fullest extent permitted by law, as between the Obligor, on the one hand, and the Agent and the Lenders on the other hand, the Secured Obligations may be declared to be forthwith due and payable as provided in Section 7 of the Term Loan Agreement (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 7) for purposes of this Section 2, notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Secured Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Secured Obligations being deemed to have become automatically due and payable), the Secured Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Obligor for purposes of this Section 2. (g) Continuing Guarantee. The guarantee in this Section 2 is a continuing guarantee, and shall apply to all Secured Obligations whenever arising. (h) California Waivers. In accordance with Section 2856 of the California Civil Code, the Obligor waives all rights and defenses (i) available to the Obligor by reason of Sections 2787 through 2855, 2899 and 3433 of the California Civil Code, including all rights or defenses the Obligor may have by reason of protection afforded to the Obligor with respect to any of the Secured Obligations, or to any other person liable for any of the Secured Obligations, in either case in accordance with the antideficiency or other laws of the State of California limiting or discharging the Obligor's indebtedness or obligations, including Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure; and (ii) arising out of an election of remedies by the Agent and the Lenders, even though such election, such as a nonjudicial foreclosure with respect to security for any Secured Obligation (or any obligation of any other person of any of the Secured Obligations), has destroyed the Obligor's right of subrogation and reimbursement against the Borrower (or any other person), by operation of Section 580d of the California Code of Civil Procedure or otherwise. No other provision of this Agreement shall be construed as limiting the generality of any of the covenants and waivers set forth in this Section 2. As provided in Section 20, this Agreement shall be governed by, and shall be construed and enforced in accordance with the laws of the State of New York. This Section 2 is solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Agreement or to any of the Secured Obligations. 3. Grant of Security Interest in the Collateral. To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or otherwise, of the Secured Obligations, the Obligor pledges and grants to the Agent, for the ratable benefit of the Lenders, a Lien on, a continuing security interest in, and a right to set off against, any and all right, title and interest of the Obligor in and to the personal property of the Obligor, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the "COLLATERAL") including, without limitation, the following: (a) all Accounts; (b) all money, cash and Cash Equivalents; (c) all Chattel Paper; (d) those certain Commercial Tort Claims set forth on Schedule 2(d) attached hereto; (e) all Contracts; (f) all Copyrights; (g) all Copyright Licenses; (h) all Deposit Accounts; (i) all Documents; (j) all Equipment; (k) all Fixtures; (l) all General Intangibles (including payment intangibles (as defined in the UCC)); (m) all Goods; (n) all Instruments; (o) all Inventory; (p) all Investment Property; (q) all Letter-of-Credit Rights; (r) all Patents; (s) all Patent Licenses; (t) all Software; (u) all Supporting Obligations; (v) all Trademarks; (w) all Trademark Licenses; (x) all Accessions; (y) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing; and (z) all other tangible and intangible property of the Obligor, including, without limitation, tort claims, rents, profits, income, benefits, substitutions, additions and replacements of and to any of the property of the Obligor described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon, insurance claims and all rights, claims and benefits against any Person relating thereto), other rights to payments not otherwise included in the foregoing, and all books, correspondence, files, records, invoices and other papers, including without limitation all tapes, cards, computer runs, computer programs, computer files and other papers, documents and records in the possession or under the control of the Obligor or any computer bureau or service company from time to time acting for the Obligor; provided, however, the Collateral shall not include any lease, license, contract, property right or agreement to which Obligor is a party or any of its rights or interests or other General Intangibles arising thereunder (i) if the grant of a security interest in such lease, license, contract, property right, agreement or other General Intangible would violate the agreement under which such rights arise except to the extent provided under the UCC, or (ii) to the extent that the pledge or assignment of such rights or agreement requires the consent of any third party unless such third party has consented thereto except to the extent provided under the UCC. The Obligor and the Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest created hereby in the Collateral constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising. 4. Provisions Relating to Accounts/Contracts. (a) Anything herein to the contrary notwithstanding, the Obligor shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account. Neither the Agent nor any Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Agent or any Lender of any payment relating to such Account pursuant hereto, nor shall the Agent or any Lender be obligated in any manner to perform any of the obligations of the Obligor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. (b) At any time after the occurrence and during the continuation of an Event of Default, the Agent shall have the right, but not the obligation, to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and the Obligor shall furnish all such assistance and information as the Agent may reasonably require in connection with such test verifications. Furthermore, at any time after the occurrence and during the continuation of an Event of Default, upon the Agent's request and at the expense of the Obligor, the Obligor shall cause independent public accountants or others satisfactory to the Agent to furnish to the Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts. At any time after the occurrence and during the continuation of an Event of Default, or after having provided written notice to the Borrower upon a determination by the Agent that that communication is reasonably necessary, the Agent in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Agent's satisfaction the existence, amount and terms of any Accounts. (c) Neither the Agent nor any Lender shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Agent or any such Lender of any payment relating to such Contract pursuant hereto, nor shall the Agent or any Lender be obligated in any manner to perform any of the obligations of the Obligor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. (d) (i) At any time after the occurrence and during the continuation of an Event of Default or (ii) in connection with any audit of the Contracts by the Agent or any other Person designated by the Agent, after having provided written notice to the Borrower, the Agent in its own name or in the name of others may communicate with parties to the Contracts to verify with them to the Agent's satisfaction the existence, amount and terms of any Contract. (e) At the Agent's request after the occurrence and during the continuance of an Event of Default, the Obligor shall deliver to the Agent all original and other documents in their possession or control (or as to which they have a right or ability to get) evidencing, and relating to, the agreements and transactions which gave rise to the Accounts. 5. Representations and Warranties. The Obligor hereby represents and warrants to the Agent, for the ratable benefit of the Lenders: (a) Legal Name and Location of the Obligor; Location of Collateral. As of the Effective Restatement Date, the Obligor's exact legal name and state of formation is (and for the prior four months has been) as shown on the signature pages to this Agreement. As of the Effective Restatement Date, the principal place of business and chief executive office of the Obligor is as set forth on Schedule 5(a) attached hereto. As of the Effective Restatement Date, the Obligor has not in the past four months changed its name, been party to a merger, consolidation or other change in structure or used any tradename except as set forth in Schedule 5(a) attached hereto. (b) Location of Collateral. As of the Effective Restatement Date, the location of all Collateral owned by the Obligor is as shown on Schedule 5(b) attached hereto. (c) Ownership. The Obligor is the legal and beneficial owner of its Collateral and has the right to pledge, sell, assign or transfer the same free and clear of any and all Liens other than Liens permitted by Section 6.3 of the Term Loan Agreement. (d) Security Interest/Priority. This Agreement creates a valid security interest in favor of the Agent, for the ratable benefit of the Lenders, in the Collateral of the Obligor and, when properly perfected by filing, shall constitute a valid first priority perfected security interest in such Collateral (except with respect to any Collateral subject to Liens permitted by Sections 6.3(f), (g), (h), (l) and (m) of the Term Loan Agreement), to the extent such security can be perfected by filing under the UCC and/or by filing in the United States Copyright Office or the United States Patent and Trademark Office, free and clear of all Liens except for Liens permitted by Section 6.3 of the Term Loan Agreement. The security interest created hereunder is enforceable as such against any and all creditors of and purchasers from the Obligor (other than purchasers and lessees of Inventory in the ordinary course of business and non-exclusive licensees of General Intangibles in the ordinary course of business and as otherwise provided for by law), subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. Except as set forth in the Term Loan Agreement, no authorization, approval or consent is required to be obtained from any Governmental Authority or other Person for the grant of the security interest herein, the perfection thereof or the exercise by the Agent of its rights and remedies hereunder. (e) Types of Collateral. None of the Collateral consists of, or is the Proceeds of, Farm Products, As-Extracted Collateral, Consumer Goods, Manufactured Homes or timber to be cut. (f) Accounts. (i) Each Account of the Obligor and the papers and documents relating thereto are genuine and in all material respects are what they purport to be, (ii) to Obilgor's knowledge, each Account constitutes a legally valid and binding obligation of the applicable account debtor, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing, (iii) each Account arises out of (A) a bona fide sale of goods sold and delivered by the Obligor (or is in the process of being delivered) or (B) services theretofore actually rendered by the Obligor, to the account debtor named therein, (iv) no Account of the Obligor relating to an amount in excess of $100,000 is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has been theretofore endorsed over and delivered to, or submitted to the Control of, the Agent and (v) no surety bond was required or given in connection with any Account of the Obligor or the contracts or purchase orders out of which they arose, other than as permitted by the Term Loan Agreement. (g) Inventory. No Inventory is held by the Obligor pursuant to consignment, sale or return, sale on approval or similar arrangement and such Inventory is of good and merchantable quality, free from any material defects. [No Inventory is subject to any licensing, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or other disposition of that Inventory or the payment of any monies to third parties upon such sale or other disposition. (h) Copyrights, Patents and Trademarks. (i) As of the Effective Restatement Date, to the best of the Obligor's knowledge, each Copyright, Patent and Trademark of the Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned. (ii) As of the Effective Restatement Date, except as set forth in Schedule 5(h) attached hereto, none of such Copyrights, Patents and Trademarks is the subject of any licensing or franchise agreement. (iii) As of the Effective Restatement Date, no holding, decision or judgment has been rendered against the Obligor by any Governmental Authority which would limit, cancel or question the validity of any Copyright, Patent or Trademark. (iv) No action or proceeding is pending against the Obligor seeking to limit, cancel or question the validity of any material Copyright, Patent or Trademark, or which, if adversely determined, would have a material adverse effect on the value of such Copyright, Patent or Trademark. (v) As of the Effective Restatement Date, all applications pertaining to the material Copyrights, Patents and Trademarks of the Obligor have been duly and properly filed, and all registrations or letters pertaining to such material Copyrights, Patents and Trademarks have been duly and properly filed and issued, and all of such material Copyrights, Patents and Trademarks are valid and enforceable. (vi) The Obligor has not made any assignment or agreement in conflict with the security interest in the Copyrights, Patents or Trademarks of the Obligor hereunder. (i) Contracts. (i) Each material Contract is in full force and effect and constitutes a valid and legally enforceable obligation of the parties thereto, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (ii) No consent or authorization of, filing with or other act by or in respect of any Governmental Authority is required in connection with the execution, delivery, performance, validity or enforceability of any of the Contracts by any party thereto other than those which have been duly obtained, made or performed, are in full force and effect and do not subject the scope of any such Contract to any material adverse limitation, either specific or general in nature. (iii) Neither the Obligor nor (to the best of the Obligor's knowledge) any other party to any material Contract is in default or is likely to become in default in the performance or observance of any of the terms thereof. (iv) The Obligor has fully performed in all material respects all its obligations under each material Contract. (v) The right, title and interest of the Obligor in, to and under each material Contract are not subject to any defense, offset, counterclaim or claim which would materially adversely affect the value of such Contract as Collateral, nor have any of the foregoing been asserted or alleged against the Obligor as to any material Contract. (vi) The Obligor has delivered, or made available, to the Agent a complete and correct copy of each material Contract requested by the Agent, including all amendments, supplements and other modifications thereto. (vii) No amount payable to the Obligor under or in connection with any Contract in excess of $100,000 is evidenced by any Instrument or Chattel Paper which has not been delivered to the Agent. (viii) None of the parties to any material Contract is a Governmental Authority. 6. Covenants. The Obligor covenants that, so long as any Loan remain outstanding or any other amount is due and owing to any Lender or the Agent under the Term Loan Agreement or under any other Loan Document, the Obligor shall: (a) Other Liens. Defend the Collateral against the claims and demands of all other parties claiming an interest therein and keep the Collateral free from all Liens, except for Liens permitted by Section 6.3 of the Term Loan Agreement. Neither the Agent nor any Lender authorizes the Obligor to, and the Obligor shall not, sell, exchange, transfer, assign, lease or otherwise dispose of the Collateral or any interest therein, except as permitted under the Term Loan Agreement or this Agreement. (b) Preservation of Collateral. Keep the Collateral in good order, condition and repair (other than any Collateral that has become obsolete or is not material to the Obligor) and not use the Collateral in violation of the provisions of this Agreement or any other agreement relating to the Collateral or any policy insuring the Collateral or any applicable statute, law, bylaw, rule, regulation or ordinance. (c) Instruments/Tangible Chattel Paper/Negotiable Documents. If any amount payable in excess of $100,000 under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if any property constituting Collateral with a value in excess of $100,000 shall be stored or shipped subject to a negotiable document, the Obligor shall ensure that such Instrument, Tangible Chattel Paper or negotiable document is either in the possession of the Obligor at all times or, if requested by the Agent to perfect its security interest in such Collateral, is delivered to the Agent duly indorsed in a manner satisfactory to the Agent. The Obligor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend acceptable to the Agent indicating the Agent's security interest in such Tangible Chattel Paper. (d) Change in Organizational Structure or Location. Not, without providing thirty (30) days prior written notice to the Agent and without filing such amendments to any previously filed financing statements as the Agent may reasonably require, (i) alter its corporate existence or, in one transaction or a series of transactions, merge into or consolidate with any other entity, or sell all or substantially all of its assets, (ii) change its state of incorporation or formation or (iii) change its registered legal name. (e) Inspection. Allow the Agent or its representatives to visit and inspect the Collateral as set forth in Section 5.6 of the Term Loan Agreement. (f) Perfection of Security Interest. The Obligor hereby authorizes the Agent to prepare and file such financing statements (including renewal statements) or amendments thereof or supplements thereto or other instruments as the Agent may from time to time deem reasonably necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC, which financing statements may be without the signature of the Obligor (to the extent such signature is not required under the laws of any applicable jurisdiction), and which may describe the Collateral as "all assets" or "all personal property" or words of like import. The Obligor shall also execute and deliver to the Agent such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments and restatements of existing documents, as the Agent may reasonably request) and do all such other things as the Agent may reasonably deem necessary or appropriate (i) to assure to the Agent its security interests hereunder, including (A) with regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of Schedule 6(f)(i) attached hereto, (B) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of Schedule 6(f)(ii) attached hereto, (C) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of Schedule 6(f)(iii) attached hereto and (D) with regard to Deposit Accounts, Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper, all agreements, assignments, instruments or other documents as requested by the Agent for the purpose of obtaining and maintaining Control, including any deposit account control agreements, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Agent of its rights and interests hereunder. To that end, the Obligor hereby irrevocably makes, constitutes and appoints the Agent, its nominee or any other person whom the Agent may designate, as the Obligor's attorney in fact with full power and for the limited purpose to sign in the name of the Obligor any such notices or similar documents which in the Agent's reasonable discretion would be necessary, appropriate or convenient in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable for so long as this Agreement is in effect and until this Agreement is terminated in accordance with Section 13(a) hereof. The Obligor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Agent without notice thereof to the Obligor wherever the Agent may in its sole discretion desire to file the same. In the event for any reason the law of any jurisdiction other than New York becomes or is applicable to the Collateral of the Obligor or any part thereof, or to any of the Secured Obligations, the Obligor agrees to execute and deliver all such instruments and to do all such other things as the Agent in its sole discretion reasonably deems necessary or appropriate to preserve, protect and enforce the security interests of the Agent under the law of such other jurisdiction (and, if the Obligor shall fail to do so promptly upon the request of the Agent, then the Agent may execute any and all such requested documents on behalf of the Obligor pursuant to the power of attorney granted hereinabove). If any Collateral having a value of $100,000 or more is in the possession or control of a warehouseman, bailee or any agent or processor of the Obligor and the Agent so requests, the Obligor agrees to (i) notify such agents in writing of the Agent's security interest therein, (ii) instruct them to hold all such Collateral for the Lenders' account and subject to the Agent's instructions and (iii) obtain an acknowledgment from such Person that it is holding such Collateral for the benefit of the Agent. The Obligor agrees to mark its books and records to reflect the security interest of the Agent in the Collateral. (g) Treatment of Accounts. Not grant or extend the time for payment of any Account, or compromise or settle any Account for less than the full amount thereof, or release any person or property, in whole or in part, from payment thereof, or allow any credit or discount thereon, other than as normal and customary in the ordinary course of the Obligor's business. (h) Covenants Relating to Copyrights. (i) Employ the Copyrights included in the Collateral for each material published Work with such notice of copyright as may be required by law to secure copyright protection. (ii) Not do any act or knowingly omit to do any act whereby any material Copyright included in the Collateral may become invalidated and (A) not do any act, or knowingly omit to do any act, whereby any material Copyright included in the Collateral may become injected into the public domain; (B) notify the Agent immediately if it knows, or has reason to know, that any material Copyright included in the Collateral may become injected into the public domain or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any court or tribunal in the United States or any other country) regarding the Obligor's ownership of any such Copyright or its validity; (C) take all necessary steps as it shall deem appropriate under the circumstances, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of each material Copyright owned by the Obligor including, without limitation, filing of applications for renewal where necessary; and (D) promptly notify the Agent of any material infringement of any material Copyright of the Obligor of which it becomes aware and take such actions as it shall reasonably deem appropriate under the circumstances to protect such Copyright, including, where appropriate, the bringing of suit for infringement, seeking injunctive relief and seeking to recover any and all damages for such infringement, unless, in the Obligor's reasonable good faith judgment, there is a valid business reason to taking or omitting to take any such action. (iii) Not make any assignment or agreement in conflict with the security interest in the Copyrights of the Obligor hereunder. (i) Covenants Relating to Patents and Trademarks. (i) (A) Continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such material Trademark in full force free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under such material Trademark, (C) employ such Trademark with the appropriate notice of registration, (D) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material Trademark may become invalidated. (ii) Not do any act, or omit to do any act, whereby any Patent may become abandoned or dedicated unless, in the Obligor's reasonable good faith judgment, there is a valid business reason to taking or omitting to take any such action. (iii) Notify the Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Patent or Trademark included in the Collateral may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court or tribunal in any country) regarding the Obligor's ownership of any material Patent or Trademark or its right to register the same or to keep and maintain the same. (iv) Unless, in the Obligor's reasonable good faith judgment, there is a valid business reason to taking or omitting to take any such action, take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of each Patent and each Trademark included in the Collateral, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (v) Promptly notify the Agent and the Lenders after it learns that any material Patent or Trademark included in the Collateral is infringed, misappropriated or diluted by a third party and promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as it shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark unless, in the Obligor's reasonable good faith judgment, there is a valid business reason to taking or omitting to so sue, seek, recover or take any such action. (vi) Not make any assignment or agreement in conflict with the security interest in the Patents or Trademarks of the Obligor hereunder. (j) New Patents, Copyrights and Trademarks. Promptly provide the Agent (i) with respect to Copyrights, a duly executed Notice of Security Interest in Copyrights, (ii) with respect to Patents, a duly executed Notice of Security Interest in Patents, (iii) with respect to Trademarks, a duly executed Notice of Security Interest in Trademarks or (iv) such other duly executed documents as the Agent may request in a form acceptable to counsel for the Agent and suitable for recording to evidence the security interest in the Copyright, Patent or Trademark which is the subject of such new application. (k) Insurance. Insure, repair and replace the Collateral of the Obligor as required in Section 5.5 of the Term Loan Agreement. All insurance proceeds shall be subject to the security interest of the Agent hereunder. (l) Covenants Relating to Contracts. (i) The Obligor will perform and comply with all its obligations under material Contracts and all its other contractual obligations relating to the Collateral. (ii) Except as otherwise provided in the Term Loan Agreement, the Obligor will not fail to exercise promptly and diligently each and every material right which it may have under each Contract except in the exercise of reasonable business judgment. (iii) The Obligor will deliver to the Agent a copy of each material demand, notice or document received by it relating in any way to any material Contract. (iv) In any suit, proceeding or action brought by the Agent or any Lender under any Contract for any sum owing thereunder, or to enforce any provisions of any Contract, the Obligor will save, indemnify and keep the Agent and such Lender harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the obligor thereunder, arising out of a breach by Obligor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such obligor or its successors from the Obligor except for any such expense, loss or damage which results from the gross negligence of the willful misconduct of the Agent or such Lender. (m) Commercial Tort Claims; Notice of Litigation. (i) Promptly forward to the Agent written notification of any and all Commercial Tort Claims in excess of $100,000, including, but not limited to, any and all actions, suits, and proceedings before any court or Governmental Authority by or affecting the Obligor or any of its Subsidiaries and (ii) execute and deliver such statements, documents and notices and do and cause to be done all such things as may be reasonably required by the Agent, or required by law, including all things which may from time to time be necessary under the UCC to fully create, preserve, perfect and protect the priority of the Agent's security interest in any Commercial Tort Claims. (n) Deposit Accounts. Not open any new Deposit Account without providing prior written notice to the Agent and simultaneously therewith executing and delivering to the Agent a deposit account control agreement in form and substance reasonably satisfactory to the Agent, unless the Agent (in its sole discretion) has waived such requirement of a deposit account control agreement. (o) At all times maintain the Collateral as personal property and not affix any of the Collateral to any real property in a manner which would change its nature from personal property to real property or a Fixture to real property. 7. Advances by the Lenders. On failure of the Obligor to perform any of the covenants and agreements contained herein, the Agent may, at its sole option and in its sole discretion, perform the same and in so doing may expend such sums as the Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Agent or the Lenders may make for the protection of the security hereof or which may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligor promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the default rate specified in Section 2.4 of the Term Loan Agreement. No such performance of any covenant or agreement by the Agent or the Lenders on behalf of the Obligor, and no such advance or expenditure therefor, shall relieve the Obligor of any default under the terms of this Agreement or the other Loan Documents. The Lenders may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by the Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP provided, that the Agent has given written notice to the Obligor of its intent to pay such sums. 8. Events of Default. The occurrence of an event which under the Term Loan Agreement would constitute a Default or Event of Default shall be a Default or Event of Default, as the case may be, hereunder. 9. Remedies. (a) General Remedies. Upon the occurrence of an Event of Default and during continuation thereof, the Agent and the Lenders shall have, in addition to the rights and remedies provided herein, in the Loan Documents or by law (including, but not limited to, levy of attachment, garnishment and the rights and remedies set forth in the UCC of the jurisdiction applicable to the affected Collateral), all rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Agent may, with or without judicial process or the aid and assistance of others, to the extent permitted by the UCC, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligor, take possession of the Collateral, (ii) dispose of any Collateral on any such premises, (iii) require the Obligor to assemble and make available to the Agent at the expense of the Obligor any Collateral at any place and time designated by the Agent which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which the Obligor hereby waives to the fullest extent permitted by law, at any place and time or times, sell and deliver any or all Collateral held by or for it at public or private sale, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). Neither the Agent's compliance with any applicable state or federal law in the conduct of such sale, nor its disclaimer of any warranties relating to the Collateral, shall be considered to adversely affect the commercial reasonableness of such sale. In addition to all other sums due the Agent and the Lenders with respect to the Secured Obligations, the Obligor shall pay the Agent and each of the Lenders all reasonable documented costs and expenses incurred by the Agent or any such Lender, including, but not limited to, reasonable attorneys' fees and court costs, in obtaining or liquidating the Collateral, in enforcing payment of the Secured Obligations, or in the prosecution or defense of any action or proceeding by or against the Agent or the Lenders or the Obligor concerning any matter arising out of or connected with this Agreement, any Collateral or the Secured Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the Bankruptcy Code, to the extent that the Borrower would be obligated to pay such costs and expenses pursuant to Section 9.5 of the Term Loan Agreement. To the extent the rights of notice cannot be legally waived hereunder, the Obligor agrees that any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Borrower in accordance with the notice provisions of Section 9.2 of the Term Loan Agreement at least ten (10) days before the time of sale or other event giving rise to the requirement of such notice. The Agent and the Lenders shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. To the extent permitted by law, any Lender may be a purchaser at any such sale. To the extent permitted by applicable law, the Obligor hereby waives all of its rights of redemption with respect to any such sale. Subject to the provisions of applicable law, the Agent and the Lenders may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or the Agent and the Lenders may further postpone such sale by announcement made at such time and place. (b) Remedies relating to Accounts. Upon the occurrence of an Event of Default and during the continuation thereof, whether or not the Agent has exercised any or all of its rights and remedies hereunder, the Agent shall have the right to enforce the Obligor's rights against any account debtor and obligor on the Obligor's Accounts. The Obligor acknowledges and agrees that the Proceeds of its Accounts remitted to or on behalf of the Agent in accordance with the provisions hereof shall be solely for the Agent's own convenience and that the Obligor shall not have any right, title or interest in such Accounts or in any such other amounts except as expressly provided herein. The Agent and the Lenders shall have no liability or responsibility to the Obligor for acceptance of a check, draft or other order for payment of money bearing the legend "payment in full" or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance. The Obligor hereby agrees to indemnify the Agent and the Lenders from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and attorneys' fees suffered or incurred by each Indemnitee (as defined in Section 2(d) above) because of the maintenance of the foregoing arrangements; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. In the case of any investigation, litigation or other proceeding, the foregoing indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Obligor, its directors, shareholders or creditors or an Indemnitee or any other Person or any other Indemnitee is otherwise a party thereto. (c) Access. In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default and during the continuance thereof, the Agent shall have the right to enter and remain upon the various premises of the Obligor without cost or charge to the Agent, and use the same, together with materials, supplies, books and records of the Obligor for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral. (d) Nonexclusive Nature of Remedies. Failure by the Agent or the Lenders to exercise any right, remedy or option under this Agreement, any other Loan Document or as provided by law, or any delay by the Agent or the Lenders in exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Agent or the Lenders shall only be granted as provided herein. To the extent permitted by law, neither the Agent, the Lenders, nor any party acting as attorney for the Agent or the Lenders, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct hereunder. The rights and remedies of the Agents and the Lenders under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Agent or the Lenders may have. (e) Retention of Collateral. The Agent may, after providing the notices required by Sections 9-620 and 9-621 of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, accept or retain the Collateral in satisfaction of the Secured Obligations. Unless and until the Agent shall have provided such notices, however, the Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason. (f) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Agent or the Lenders are legally entitled, the Obligor shall be liable for the deficiency, together with interest thereon at the default rate specified in Section 2.4 of the Term Loan Agreement together with the costs of collection and the reasonable fees of any attorneys employed by the Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 10. Rights of the Agent. (a) Power of Attorney. In addition to other powers of attorney contained herein, the Obligor hereby designates and appoints the Agent, on behalf of the Lenders, and each of its designees or agents, as attorney-in-fact of the Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default: (i) to demand, collect, settle, compromise, adjust, give discharges and releases, all as the Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof; (iii) to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Agent may deem reasonably appropriate; (iv) receive, open and dispose of mail addressed to the Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to the Collateral of the Obligor on behalf of and in the name of the Obligor, or securing, or relating to such Collateral; (v) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the goods or services which have given rise thereto, as fully and completely as though the Agent were the absolute owner thereof for all purposes; (vi) adjust and settle claims under any insurance policy relating thereto; (vii) execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, agreements, affidavits, notices and other agreements, instruments and documents that the Agent may determine necessary in order to perfect and maintain the security interests and liens granted in this Agreement and in order to fully consummate all of the transactions contemplated therein; (viii) institute any foreclosure proceedings that the Agent may deem appropriate; and (ix) do and perform all such other acts and things as the Agent may reasonably deem to be necessary, proper or convenient in connection with the Collateral. This power of attorney is a power coupled with an interest and shall be irrevocable and shall remain in full force and effect for so long as this Agreement is in effect and until this Agreement is terminated in accordance with Section 13(a) hereof. The Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Agent in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct. This power of attorney is conferred on the Agent solely to protect, preserve and realize upon its security interest in the Collateral. (b) Performance by the Agent of Obligations. If the Obligor fails to perform any agreement or obligation contained herein, after notice by the Agent to the Obligor the Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Agent incurred in connection therewith shall be payable by the Obligor pursuant to Section 9 hereof. (c) Assignment by the Agent. Upon the occurrence of an Event of Default, or as otherwise permitted under the Term Loan Agreement, the Agent may assign the Secured Obligations and any portion thereof and/or the Collateral and any portion thereof, and the assignee shall be entitled to all of the rights and remedies of the Agent under this Agreement in relation thereto. (d) The Agent's Duty of Care in Respect of Pledged Collateral. The Agent's sole duty with respect to the safe custody of the Collateral, while being held by the Agent hereunder, under Section 9-207 of the UCC, shall be substantially equal to that which the Agent accords its own property. Other than this duty, the Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligor shall be responsible for the preservation of all rights in the Collateral of the Obligor, and the Agent shall be relieved of all responsibility for Collateral upon surrendering it or tendering the surrender of it to the Obligor. It is understood and agreed that the Agent shall not have responsibility for cleaning up, repairing or otherwise preparing the Collateral for sale in the event of a public or private sale of Collateral pursuant to Section 8 hereof. 11. Application of Proceeds. Upon the acceleration of the Secured Obligations pursuant to Section 7 of the Term Loan Agreement, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Agent or any of the Lenders in cash or its equivalent, will be applied first, to the payment of costs and expenses of the Agent in connection with the collection or sale or otherwise in connection with this Agreement, any other Loan Document or any of the Secured Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Agent hereunder or under any other Loan Document on behalf of the Obligor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document, and second, in reduction of the Secured Obligations in the order set forth in this Agreement and the Term Loan Agreement, and the Obligor irrevocably waives the right to direct the application of such payments and proceeds and acknowledges and agrees that the Agent shall have the continuing and exclusive right to apply and reapply any and all such payments and proceeds in the Agent's sole discretion, notwithstanding any entry to the contrary upon any of its books and records. 12. Costs of Counsel. At all times hereafter, the Obligor agrees to promptly pay upon demand any and all reasonable costs and expenses of the Agent or the Lenders, (a) as required under Section 9.5 of the Term Loan Agreement and (b) subject to the limitations on the fees of counsel to the Agent and the Lenders set forth in Section 9.5 of the Term Loan Agreement, as reasonably necessary to protect the Collateral or to exercise any rights or remedies under this Agreement or with respect to any Collateral, including the costs and expenses of the Agent's counsel and of any experts or agents that the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, sale or collection of, or realization upon, any Collateral or (iii) the failure of the Obligor to perform or observe any covenant or agreement hereunder. All of the foregoing costs and expenses shall constitute Secured Obligations hereunder. 13. Continuing Agreement. (a) This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until the Secured Obligations have been paid in full (other than any contingent indemnification obligations set forth in the Loan Documents). Upon such payment in full this Agreement shall be automatically terminated and the Agent and the Lenders shall, upon the request and at the expense of the Obligor, forthwith release all of its liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligor evidencing such termination. (b) This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations. 14. Indemnity. Without limitation of its indemnification obligations under the other Loan Documents, the Obligor agrees to indemnify each Indemnitee (as defined in Section 2(d) above) against, and hold each Indemnitee harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, fees and disbursements of counsel and in-house documentation and diligence fees and legal expenses) which may be imposed on, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee; and provided further that the expense reimbursement obligations of the Obligor under this Section 14 shall be limited to the same extent as the expense reimbursement obligations of the Borrower set forth in Section 9.5 of the Term Loan Agreement. 15. Amendments; Waivers; Modifications. This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 9.1 of the Term Loan Agreement. 16. Successors in Interest. This Agreement shall create a continuing security interest in the Collateral and shall be binding upon the Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders and their successors and permitted assigns; provided, however, that the Obligor may not assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Term Loan Agreement. To the fullest extent permitted by law, the Obligor hereby releases the Agent and each Lender, and its successors and assigns, from any liability for any act or omission relating to this Agreement or the Collateral, except for any liability arising from the gross negligence or willful misconduct of the Agent, or such Lender, or its officers, employees or agents. 17. Notices. All notices required or permitted to be given under this Agreement shall be in conformance with Section 9.2 of the Term Loan Agreement. 18. Counterparts. This Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 19. Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 20. Governing Law; Submission to Jurisdiction; Venue. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. The Obligor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Obligor at the Borrower's address set forth in Section 9.2 of the Term Loan Agreement or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of the Agent or any Lender to bring proceedings against the Obligor in the courts of any other jurisdiction having jurisdiction; (e) agrees that any judicial proceedings against the Agent or any Lender involving, directly or indirectly, the Secured Obligations, any Loan Document or any related agreement shall be brought only in courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; and (f) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 21. Waiver of Jury Trial. THE OBLIGOR, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 22. Severability. If any provision of any of the Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 23. Entirety. This Agreement and the other Loan Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Loan Documents or the transactions contemplated herein and therein. 24. Survival. All representations and warranties of the Obligor hereunder shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans. 25. Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by the Obligor), or by a guarantee, endorsement or property of any other Person, then the Agent and the Lenders shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence and continuation of any Event of Default, and the Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Agent's and the Lenders' rights or the Secured Obligations under this Agreement, under any other of the Loan Documents. 26. Rights of Required Lenders. All rights of the Agent hereunder, if not exercised by the Agent, may be exercised by the Required Lenders. [remainder of page intentionally left blank] Guaranty and Security Agreement Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. OBLIGOR: ITO ACQUISITION CORPORATION, a California corporation By: /s/ William J. McHale --------------------- Name: William J. McHale Title: Vice President Accepted and agreed to as of the date first above written. CAPITALSOURCE FINANCE LLC, as Agent By: /s/ Joseph Turitz ---------------------- Name: Joseph Turitz Title: General Counsel EX-10 7 ex103sms.txt STOCK PLEDGE AGREEMENT EXHIBIT 10.3 AMENDED AND RESTATED STOCK PLEDGE AGREEMENT THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is entered into as of April 2, 2004 among INFOCROSSING, INC., a Delaware corporation (the "BORROWER"), AMQUEST, INC., a Georgia corporation (the "GUARANTOR"; and together with the Borrower, each individually a "PLEDGOR", and collectively the "PLEDGORS") and CAPITALSOURCE FINANCE LLC, in its capacity as agent (in such capacity, the "AGENT") for the lenders from time to time party to the Term Loan Agreement described below (the "LENDERS"). RECITALS WHEREAS, pursuant to that certain Amended and Restated Term Loan Agreement, dated as of the date hereof (as amended, modified, extended, renewed or replaced and in effect from time to time, the "TERM LOAN AGREEMENT"), among the Borrower, the Lenders and the Agent, the Lenders have agreed to make and hold Loans upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the Term Loan Agreement that the Pledgors shall have executed and delivered this Pledge Agreement to the Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Term Loan Agreement, and "SECURED OBLIGATIONS" shall have the meaning set forth in the Security Agreement. 2. Pledge and Grant of Security Interest. To secure the prompt payment and performance in full when due, whether by lapse of time or otherwise, of the Secured Obligations, each Pledgor hereby grants, pledges and assigns to the Agent, for the ratable benefit of the Lenders, and grants to the Agent, for the ratable benefit of the Lenders, a continuing first priority security interest in and Lien on any and all right, title and interest of such Pledgor in and to the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the "PLEDGED COLLATERAL"): (a) Pledged Shares. (i) 100% (or, if less, the full amount owned by such Pledgor) of the issued and outstanding shares of Capital Stock owned by such Pledgor of each Domestic Subsidiary set forth on Schedule 2(a) attached hereto, and (ii) 65% of the issued and outstanding shares of each class of Capital Stock (or, if less, the full amount owned by such Pledgor) of each Foreign Subsidiary set forth on Schedule 2(a) attached hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto (collectively, together with the shares of Capital Stock described in Sections 2(b) and 2(c) below, the "PLEDGED SHARES"), including, but not limited to, the following: (y) all Capital Stock representing a dividend on any of the Pledged Shares, or representing a distribution or return of capital upon or in respect of the Pledged Shares, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder of, or otherwise in respect of, the Pledged Shares; and (z) without affecting the obligations of the Pledgors under any provision prohibiting such action hereunder or under the Term Loan Agreement, in the event of any consolidation or merger involving the issuer of any Pledged Shares and in which such issuer is not the surviving corporation, all shares of each class of the Capital Stock of the successor corporation formed by or resulting from such consolidation or merger. (b) Additional Shares. 100% (or, if less, the full amount owned by such Pledgor) of the issued and outstanding shares of Capital Stock owned by such Pledgor of any Person which hereafter becomes a Domestic Subsidiary and 65% (or, if less, the full amount owned by such Pledgor) of the Capital Stock owned by such Pledgor of any Person which hereafter becomes a direct Foreign Subsidiary, including, without limitation, the certificates, if any, representing such shares. (c) Proceeds. All proceeds and products of the foregoing, however and whenever acquired and in whatever form. Without limiting the generality of the foregoing, it is hereby specifically understood and agreed that a Pledgor may from time to time hereafter deliver additional shares of Capital Stock to the Agent as collateral security for the Secured Obligations. Upon delivery to the Agent, such additional shares of Capital Stock shall be deemed to be part of the Pledged Collateral of such Pledgor and shall be subject to the terms of this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such additional shares. 3. Security for Secured Obligations. The security interest created hereby in the Pledged Collateral of each Pledgor constitutes continuing collateral security for all of the Secured Obligations, now existing or hereafter arising pursuant to the Loan Documents, owing from the Borrower or any other Loan Party to any Lender or the Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including, without limitation, liabilities incurred in connection with collecting and enforcing the foregoing. 4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that: (a) Each Pledgor shall deliver to the Agent (i) simultaneously with or prior to the execution and delivery of this Pledge Agreement, all certificates representing the Pledged Shares of such Pledgor and (ii) promptly upon the receipt thereof by or on behalf of a Pledgor, all other certificates and instruments constituting Pledged Collateral of a Pledgor. Prior to delivery to the Agent, all such certificates and instruments constituting Pledged Collateral of a Pledgor shall be held in trust by such Pledgor for the benefit of the Agent pursuant hereto. All such certificates shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in Schedule 4(a) attached hereto, accompanied by an irrevocable proxy coupled with an interest duly executed by such Pledgor in form and substance satisfactory to Agent. (b) Additional Securities. If such Pledgor shall receive by virtue of its being or having been the owner of any Pledged Collateral, any (i) certificate evidencing Capital Stock, including without limitation, any certificate representing a dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock splits, spin-off or split-off, promissory notes or other instrument; (ii) option or right, whether as an addition to, substitution for, or an exchange for, any Pledged Collateral or otherwise; (iii) dividends payable in securities; or (iv) distributions of securities in connection with a partial or total liquidation, dissolution or reduction of capital, capital surplus or paid-in surplus, then such Pledgor shall receive such certificate, instrument, option, right, or distribution in trust for the benefit of the Agent, shall segregate it from such Pledgor's other property and shall deliver it forthwith to the Agent in the exact form received together with any necessary endorsement and/or appropriate transfer power duly executed in blank, substantially in the form provided in Schedule 4(a), accompanied by an irrevocable proxy coupled with an interest duly executed by such Pledgor in form and substance satisfactory to Agent, to be held by the Agent as Pledged Collateral and as further collateral security for the Secured Obligations. (c) Financing Statements. For so long as this Pledge Agreement is in effect and until this Pledge Agreement is terminated in accordance with Section 15(a) hereof, each Pledgor authorizes the Agent to prepare and file such UCC or other applicable financing statements as may be reasonably requested by the Agent in order to perfect and protect the security interest created hereby in the Pledged Collateral of such Pledgor. 5. Representations and Warranties. Each Pledgor hereby represents and warrants to the Agent, for the ratable benefit of the Lenders, as follows: (a) Authorization of Pledged Shares. The Pledged Shares are duly authorized and validly issued, are fully paid and nonassessable and are not subject to the preemptive rights of any Person. All other shares of Capital Stock constituting Pledged Collateral will be duly authorized and validly issued, fully paid and nonassessable and not subject to the preemptive rights of any Person. (b) Title. Each Pledgor has good and indefeasible title to the Pledged Collateral of such Pledgor and will at all times be the legal and beneficial owner of such Pledged Collateral free and clear of any Lien, other than Liens permitted by Section 6.3 of the Term Loan Agreement. There exists no "adverse claim" within the meaning of Section 8-302 of the Uniform Commercial Code as in effect in the State of New York (the "UCC") as of the date hereof with respect to the Pledged Shares of such Pledgor. (c) Exercising of Rights. As of the Closing Date, the exercise by the Agent of its rights and remedies hereunder will not violate any law or governmental regulation of the United States or any state (assuming that the Agent's exercise of remedies complies with laws affecting the offering and sale of securities) or any material contractual restriction binding on or affecting a Pledgor or any of its property. (d) Pledgor's Authority. The execution, delivery and performance by each Pledgor of this Pledge Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate actions on the part of such Pledgor and pursuant to all necessary consents required therefor except as set forth in the Term Loan Agreement. This Pledge Agreement has been duly executed and delivered by each Pledgor and constitutes the legal, valid and binding obligation of such Pledgor, enforceable against such Pledgor in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity). No authorization, approval or action by, and no notice or filing with any Governmental Authority or with the issuer of any Pledged Shares or with any other Person is required either (i) for the pledge made by a Pledgor or for the granting of the security interest by a Pledgor pursuant to this Pledge Agreement or (ii) for the exercise by the Agent or the Lenders of their rights and remedies hereunder (except as may be required by laws affecting the offering and sale of securities). (e) Security Interest/Priority. This Pledge Agreement creates a valid security interest in favor of the Agent for the ratable benefit of the Lenders in the Pledged Collateral. The taking possession by the Agent of the certificates representing the Pledged Shares and all other certificates and instruments constituting Pledged Collateral will perfect and establish the first priority of the Agent's security interest in the Pledged Shares and, when properly perfected by filing or registration, in all other Pledged Collateral represented by such Pledged Shares and instruments securing the Secured Obligations (except with respect to any Pledged Collateral, including any Pledged Shares, subject to a Lien permitted by Section 6.3(l) of the Term Loan Agreement after the Closing Date) to the extent such security interest can be perfected by filing under the UCC. Except as set forth in this Section 5(e), no action is necessary to perfect or otherwise protect such security interest to the extent such security interest can be perfected by filing under the UCC. (f) No Other Shares. As of the Closing Date, no Pledgor owns any shares of Capital Stock other than as set forth on Schedule 2(a) attached hereto. (g) Partnership and Limited Liability Company Interests. Except as disclosed to the Agent as of the Closing Date, none of the Pledged Shares consisting of partnership or limited liability company interests (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a security governed by Article 8 of the UCC, (iii) is an investment company security, (iv) is held in a securities account or (v) constitutes a "security" or a "financial asset" as such terms are defined in Article 8 of the UCC. (h) No Conflicts. The execution, delivery and performance by each Pledgor of this Pledge Agreement and the consummation of the pledge contemplated hereby and the granting and creation of the security interest and Liens contemplated hereby do not and will not (1) conflict with or violate any provision of any applicable law, statute, rule, regulation, ordinance, license or tariff or any judgment, decree or order of any court or other Governmental Authority binding on or applicable to any Pledgor or any of their respective properties or assets; (2) conflict with, result in a breach of, constitute a default of or an event of default under, or an event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, require any consent not obtained under, or result in or require the acceleration of any indebtedness pursuant to, any indenture, agreement or other instrument to which any Pledgor is a party or by which it or any of their properties or assets are bound or subject except as set forth in the Term Loan Agreement; (3) if applicable, conflict with or violate any provision of the certificate of incorporation or by-laws of any Pledgor or any agreement by and between any Pledgor and its shareholders or equity owners or among any such shareholders or equity owners; or (4) result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of any Pledgor (except as contemplated herein). (i) [Reserved]. (j) Litigation and Compliance; Other Agreements. There is no action, suit, proceeding or investigation pending or, to each Pledgor's knowledge, threatened, before or by any court, arbitrator or Governmental Authority (1) against or affecting the Pledged Collateral, such Pledgor, this Pledge Agreement or the transactions contemplated by this Pledge Agreement, or (2) that questions or could reasonably be expected to prevent the validity of this Pledge Agreement or the right or ability of such Pledgor to execute or deliver this Pledge Agreement or to consummate the transactions contemplated by this Pledge Agreement or to create or grant the Liens and security interests contemplated by this Pledge Agreement. No Pledgor nor any entity whose securities constitute part of the Pledged Collateral is (i) a party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, which would materially adversely affect its ability to execute and deliver, or perform under, this Pledge Agreement, or (ii) in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement, document or instrument to which it is a party or to which any of its properties or assets are subject, which default, if not remedied within any applicable grace or cure period, could reasonably be expected to have or be a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have or be a Material Adverse Effect. (k) Full Disclosure. No statement of fact made by or on behalf of any Pledgor in this Pledge Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading. There is no fact presently known to any Pledgor which has not been disclosed to the Lenders in writing which has had or, as far as such Pledgor can reasonably foresee, could reasonably be expected to have a Material Adverse Effect. 6. Covenants. Each Pledgor hereby covenants, that so long as any Loans are outstanding or any other amount is due and owing to any Lender or the Agent under the Term Loan Agreement or under any other Loan Document, such Pledgor shall: (a) Books and Records. Mark its books and records (and shall cause the issuer of the Pledged Shares of such Pledgor to mark its books and records) to reflect the security interest granted to the Agent, for the ratable benefit of the Lenders, pursuant to this Pledge Agreement. (b) Defense of Title. Warrant and defend title to and ownership of the Pledged Collateral of such Pledgor at its own expense against the claims and demands of all other parties claiming an interest therein, keep the Pledged Collateral free from all Liens, except for Liens permitted by Section 6.3 of the Term Loan Agreement, and not sell, exchange, transfer, assign, lease or otherwise dispose of Pledged Collateral of such Pledgor or any interest therein, except as permitted under the Term Loan Agreement and the other Loan Documents. (c) Further Assurances. Promptly execute and deliver at its expense all further instruments and documents and take all further action that may be reasonably necessary and desirable or that the Agent may reasonably request in order to (i) perfect and protect the security interest created hereby in the Pledged Collateral of such Pledgor (including without limitation any and all action necessary to satisfy the Agent that the Agent has obtained a first priority perfected security interest in any Capital Stock); (ii) enable the Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral of such Pledgor; and (iii) otherwise effect the purposes of this Pledge Agreement (including, without limitation and if requested by the Agent, delivering to the Agent irrevocable proxies in respect of the Pledged Collateral of such Pledgor upon the occurrence and during the continuance of an Event of Default). Without limiting the foregoing, upon the exercise by Secured Party or any Lender or any of its or their Affiliates or agents of any right or remedy which requires any consent, approval or registration with, or consent, qualification or authorization by, any Person, each Pledgor shall execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments and other documents that Agent or any Lender or its or their Affiliates or agents may be required to obtain for such consent, approval, registration, qualification or authorization. Each Pledgor hereby appoints Agent, for the ratable benefit of the Lenders, as its attorney-in-fact (without requiring Agent to act as such), with full power of substitution, which appointment as attorney-in-fact is irrevocable and coupled with an interest, effective upon the occurrence and during the continuance of and Event of Default, to take all such actions, whether in the name of Agent, for the ratable benefit of the Lenders, or such Pledgor, as Agent in its discretion may consider necessary or desirable with respect to the foregoing (to the extent such Pledgor fails to so execute and/or file any of the foregoing within two (2) Business Days of Agent's request or the time when such Pledgor is otherwise obligated to do so). Each Pledgor will pay all costs associated with respect to the foregoing, including without limitation, the cost of filing any of the foregoing in all public offices or other locations wherever Agent deems filing to be necessary or desirable. Each Pledgor shall deliver to Agent any and all documentary tax stamps and other documents necessary to cause Agent, for the ratable benefit of the Lenders, to have a good, valid and perfected continuing first priority pledge of and Lien on the Pledged Collateral of such Pledgor (free and clear of any other Liens), including, without limitation, any necessary notations in the books or other records of such Pledgor. If such Pledgor fails to timely do so, Agent shall have the right (but not the obligation) to pay any taxes relating to the Pledged Collateral of such Pledgor and any costs to preserve the Pledged Collateral of such Pledgor, which payments shall be part of the Secured Obligations. No injury to, or loss or destruction of any of, the Pledged Collateral or any Material Adverse Effect shall relieve any Pledgor of any of the Secured Obligations. (d) Amendments. Not, except as provided herein or as may be permitted under the Term Loan Agreement, make or consent to any amendment or other modification or waiver with respect to any of the Pledged Collateral of such Pledgor or enter into any agreement or allow to exist any restriction with respect to any of the Pledged Collateral of such Pledgor. (e) Compliance with Securities Laws. File all reports and other information now or hereafter required to be filed by such Pledgor with the United States Securities and Exchange Commission and any other state, federal or foreign agency in connection with the ownership of the Pledged Collateral of such Pledgor. (f) Issuance or Acquisition of Capital Stock. Not without giving prior written notice to the Agent and executing and delivering, or causing to be executed and delivered within ten (10) days, to the Agent such agreements, documents and instruments as the Agent may reasonably require, issue or acquire any Capital Stock consisting of an interest in a partnership or a limited liability company that (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a security governed by Article 8 of the UCC, (iii) is an investment company security, (iv) is held in a securities account or (v) constitutes a "security" or a "financial asset" as such terms are defined in Article 8 of the UCC. 7. Advances by Lenders. On failure of any Pledgor to perform any of the covenants and agreements contained herein, after notice by Agent, the Agent may, at its sole option and in its sole discretion, perform the same and in so doing may expend such sums as the Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Agent or the Lenders may make for the protection of the security hereof or which may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Pledgors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the default rate specified in Section 2.4 of the Term Loan Agreement. No such performance of any covenant or agreement by the Agent or the Lenders on behalf of any Pledgor, and no such advance or expenditure therefor, shall relieve the Pledgors of any default under the terms of this Pledge Agreement or the other Loan Documents, provided that if such default shall no longer be continuing as a result of the performance of any covenant or agreement by the Agent or the Lenders, or an advance or expenditure therefor, upon reimbursement by any Obligor (as defined in the Security Agreement) of the Agent or the Lender, as applicable, for any sums expended therefor, such default shall be cured. The Lenders may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by a Pledgor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP provided that the Agent has given written notice to the applicable Obligor of its intent to pay such sums. 8. Events of Default. The occurrence of an event which under the Term Loan Agreement would constitute a Default or Event of Default shall be a Default or Event of Default, as the case may be, hereunder. 9. Remedies. (a) General Remedies. Upon the occurrence of an Event of Default and during the continuation thereof, the Agent and the Lenders shall have, in respect of the Pledged Collateral of any Pledgor, in addition to the rights and remedies provided herein, in the Loan Documents or by law, the rights and remedies of a secured party under the UCC or any other applicable law. (b) Sale of Pledged Collateral. Upon the occurrence of an Event of Default and during the continuation thereof, without limiting the generality of this Section and without notice, the Agent may, in its sole and absolute discretion, sell or otherwise dispose of or realize upon the Pledged Collateral, or any part thereof, in one or more parcels, at public or private sale, at any exchange or broker's board or elsewhere, at such price or prices and on such other terms as the Agent may deem commercially reasonable, for cash, credit or for future delivery or otherwise, in each case in accordance with applicable law. To the extent permitted by law, any Lender may in such event, bid for the purchase of such securities. Each Pledgor agrees that, to the extent notice of sale shall be required by law and has not been waived by such Pledgor, any requirement of reasonable notice shall be met if notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to such Pledgor, in accordance with the notice provisions of Section 9.2 of the Term Loan Agreement at least ten (10) days before the time of such sale. The Agent shall not be obligated to make any sale of Pledged Collateral of such Pledgor regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (c) Private Sale. Upon the occurrence of an Event of Default and during the continuation thereof, the Pledgors recognize that the Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any of the securities constituting Pledged Collateral and that the Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and that the Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933. Each Pledgor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above, shall be deemed to involve a "public sale" under the UCC, notwithstanding that such sale may not constitute a "public offering" under the Securities Act of 1933, and the Agent may, in such event, bid for the purchase of such securities. (d) Retention of Pledged Collateral. In addition to the rights and remedies hereunder, upon the occurrence and during the continuance of an Event of Default, the Agent may, after providing the notices required by Section 9-621 of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, retain all or any portion of the Pledged Collateral in satisfaction of the Secured Obligations. Unless and until the Agent shall have provided such notices, however, the Agent shall not be deemed to have retained any Pledged Collateral in satisfaction of any Secured Obligations for any reason. (e) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Agent or the Lenders are legally entitled, the Pledgors shall be jointly and severally liable for the deficiency, together with interest thereon at the default rate specified in Section 2.4 of the Term Loan Agreement, together with the costs of collection and the reasonable fees of any attorneys employed by the Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Pledgors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. (f) Right of Agent to Appoint Receiver. Without limiting and in addition to any other rights, options and remedies Agent and Lenders have hereunder or under the Loan Documents, the UCC, at law or in equity, upon the occurrence and continuation of an Event of Default to the extent permitted by law, Agent and Lenders shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction in any action taken by Agent and Lenders to enforce their rights and remedies in order to manage, protect and preserve the Pledged Collateral and continue the operation of the businesses of the Pledgors and their Subsidiaries and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership including the compensation of the receiver and to the payments as aforesaid until a sale or other disposition of such Pledged Collateral shall be finally made and consummated. 10. Rights of the Agent. (a) Power of Attorney. In addition to other powers of attorney contained herein, each Pledgor hereby designates and appoints the Agent, on behalf of the Lenders, and each of its designees or agents as attorney-in-fact of such Pledgor, irrevocably and with full power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default whether in the name of the Agent, any Lender or any Pledgor, as Agent may consider necessary or desirable for the purpose of exercising such actions: (i) to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Pledged Collateral of such Pledgor, all as the Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any of the Pledged Collateral of such Pledgor and enforcing any other right in respect thereof; (iii) to pay or discharge taxes, liens, security interests, or other encumbrances levied or placed on or threatened against the Pledged Collateral of such Pledgor; (iv) to direct any parties liable for any payment under any of the Pledged Collateral to make payment of any and all monies due and to become due thereunder directly to the Agent or as the Agent shall direct; (v) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Pledged Collateral of such Pledgor; (vi) to sign and endorse any drafts, assignments, proxies, transfer powers, verifications, notices and other documents relating to the Pledged Collateral of such Pledgor; (vii) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Agent may deem reasonably appropriate; (viii) execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, pledge agreements, affidavits, notices and other agreements, instruments and documents that the Agent may determine necessary in order to perfect and maintain the security interests and liens granted in this Pledge Agreement and in order to fully consummate all of the transactions contemplated herein; (ix) to exchange any of the Pledged Collateral of such Pledgor or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Collateral of such Pledgor with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Agent may determine; (x) to vote for a shareholder resolution, or to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Shares of such Pledgor into the name of the Agent or one or more of the Lenders or into the name of any transferee to whom the Pledged Shares of such Pledgor or any part thereof may be sold pursuant to Section 10 hereof; and (xi) to do and perform all such other acts and things as the Agent may reasonably deem to be necessary, proper or convenient in connection with the Pledged Collateral of such Pledgor. This power of attorney is a power coupled with an interest and shall be irrevocable for so long as this Pledge Agreement is in effect and until this Pledge Agreement is terminated in accordance with Section 15(a) hereof. The Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Agent in this Pledge Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct. This power of attorney is conferred on the Agent solely to protect, preserve and realize upon its security interest in Pledged Collateral. (b) Performance by the Agent of Pledgor's Obligations. If any Pledgor fails to perform any agreement or obligation contained herein, after notice by Agent to Pledgor, the Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Agent incurred in connection therewith shall be payable by the Pledgors on a joint and several basis pursuant to Section 13 hereof. (c) Assignment by the Agent. The Agent may from time to time assign the Secured Obligations and any portion thereof and/or the Pledged Collateral and any portion thereof, and the assignee shall be entitled to all of the rights and remedies of the Agent under this Pledge Agreement in relation thereto. (d) The Agent's Duty of Care in Respect of the Pledged Collateral. The Agent's sole duty with respect to the safe custody of the Pledged Collateral, while being held by the Agent hereunder, under Section 9-207 of the UCC (as defined in the Security Agreement), shall be substantially equal to that which the Agent accords its own property. Other than this duty, the Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Pledgors shall be responsible for the preservation of all rights in the Pledged Collateral of such Pledgor, and the Agent shall be relieved of all responsibility for Pledged Collateral upon surrendering it or tendering the surrender of it to the Pledgors. It is understood and agreed that the Agent shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. (e) Voting Rights in Respect of the Pledged Collateral. (i) So long as no Default or Event of Default shall have occurred and be continuing, to the extent permitted by law, each Pledgor may exercise any and all voting and other consensual rights pertaining to the Pledged Collateral of such Pledgor or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Term Loan Agreement; and (ii) Upon the occurrence and during the continuance of a Default or Event of Default, all rights of a Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to paragraph (i) of this Section shall cease immediately and without notice to any Pledgor or action by or on behalf of Agent or any other Person and all such rights shall thereupon become vested solely and exclusively in the Agent for the ratable benefit of the Lenders automatically without any action by any Person which shall then have the sole right to exercise such voting and other consensual rights. (f) Dividend Rights in Respect of the Pledged Collateral. (i) So long as no Default or Event of Default shall have occurred and be continuing and subject to Section 4(b) hereof, each Pledgor may receive and retain any and all dividends (other than dividends constituting Pledged Collateral which are addressed above) or interest paid in respect of the Pledged Collateral to the extent they are allowed under the Term Loan Agreement. (ii) Upon the occurrence and during the continuance of a Default or Event of Default: (A) all rights of a Pledgor to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to paragraph (i) of this Section shall cease immediately without any notice to such Pledgor or action by or on behalf of Agent or any other Person and all such rights shall thereupon be vested solely and exclusively in the Agent which shall then have the sole right to receive and hold as Pledged Collateral such dividends and interest payments; and (B) all dividends and interest payments which are received by a Pledgor contrary to the provisions of paragraph (A) of this Section shall be received in trust for the benefit of the Agent, shall be segregated from other property or funds of such Pledgor, and shall be forthwith paid over to the Agent as Pledged Collateral in the exact form received, to be held by the Agent as Pledged Collateral and as further collateral security for the Secured Obligations. (g) Release of Pledged Collateral. The Agent may release any of the Pledged Collateral from this Pledge Agreement or may substitute any of the Pledged Collateral for other Pledged Collateral without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Pledge Agreement as to any Pledged Collateral not expressly released or substituted, and this Pledge Agreement shall continue as a first priority lien on all Pledged Collateral not expressly released or substituted. 11. Rights of Required Lenders. All rights of the Agent hereunder, if not exercised by the Agent, may be exercised by the Required Lenders. 12. Application of Proceeds. Upon the acceleration of the Secured Obligations pursuant to Section 7 of the Term Loan Agreement, any payments in respect of the Secured Obligations and any proceeds of any Pledged Collateral, when received by the Agent or any of the Lenders in cash or its equivalent, will be applied in the order set forth in Section 7 of the Term Loan Agreement, and each Pledgor irrevocably waives the right to direct the application of such payments and proceeds and acknowledges and agrees that the Agent shall have the continuing and exclusive right to apply and reapply any and all such payments and proceeds in the Agent's sole discretion, notwithstanding any entry to the contrary upon any of its books and records. 13. Costs of Counsel. At all times hereafter, the Pledgors agree to promptly pay upon demand any and all reasonable costs and expenses of the Agent or the Lenders, (a) as required under Section 9.5 of the Term Loan Agreement and (b) subject to the limitations on the fees of counsel to the Agent and the Lenders set forth in Section 9.5 of the Term Loan Agreement, as reasonably necessary to protect the Pledged Collateral or to exercise any rights or remedies under this Pledge Agreement or with respect to any Pledged Collateral, including the costs and expenses of the Agent's counsel and of any experts or agents that the Agent may incur in connection with (i) the administration of this Pledge Agreement, (ii) the custody, preservation, sale or collection of, or realization upon, any Pledged Collateral, and (iii) the failure of a Pledgor to perform or observe any covenant or agreement hereunder. All of the foregoing costs and expenses shall constitute Secured Obligations and Secured Obligations hereunder. 14. Indemnity. Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor jointly and severally agrees to indemnify the Agent, each Lender, and each of their Affiliates and their respective members, partners, directors, officers, employees, agents and advisors of the Agent, each Lender and each of their Affiliates (each such Person being called an "INDEMNITEE") against, and hold each Indemnitee harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, fees and disbursements of counsel and in-house documentation and diligence fees and legal expenses (subject to any applicable limitation on the fees of counsel to the Agent and the Lenders set forth in Section 9.5 of the Term Loan Agreement)) which may be imposed on, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Pledge Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Pledged Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. 15. Continuing Agreement. (a) This Pledge Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until the Secured Obligations have been paid in full (other than any contingent indemnification obligations set forth in the Loan Documents). Upon such payment in full, this Pledge Agreement shall be automatically terminated and the Agent and the Lenders shall, upon the request and at the expense of the Pledgors, forthwith release all of its liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination. (b) This Pledge Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations. 16. Amendments; Waivers; Modifications; No Waiver of Defaults. This Pledge Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 9.1 of the Term Loan Agreement. 17. Successors in Interest. This Pledge Agreement shall create a continuing security interest in the Pledged Collateral and shall be binding upon each Pledgor, its successors and assigns and shall inure, together with the rights and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders and their successors and permitted assigns; provided, however, that none of the Pledgors may assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Term Loan Agreement. To the fullest extent permitted by law, each Pledgor hereby releases the Agent and each Lender, and its successors and assigns, from any liability for any act or omission relating to this Pledge Agreement or the Pledged Collateral, except for any liability arising from the gross negligence or willful misconduct of the Agent, or such Lender, or its officers, employees or agents. 18. Notices. All notices required or permitted to be given under this Pledge Agreement shall be in conformance with Section 9.2 of the Term Loan Agreement. 19. Counterparts. This Pledge Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart. 20. Headings. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Pledge Agreement. 21. Governing Law; Submission to Jurisdiction; Venue. THIS PLEDGE AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Each Pledgor hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Pledge Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 9.2 of the Term Loan Agreement or at such other address of which the Agent shall have been notified pursuant thereto; (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against a Pledgor in the courts of any other jurisdiction having jurisdiction; (v) agrees that any judicial proceedings against Agent or any Lender involving, directly or indirectly, the Secured Obligations, any Loan Document or any related agreement shall be brought only in courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; and (vi) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 22. Waiver of Jury Trial. EACH PLEDGOR, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 23. Severability. If any provision of any of this Pledge Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 24. Entirety. This Pledge Agreement and the other Loan Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Loan Documents or the transactions contemplated herein and therein. 25. Survival. All representations and warranties of the Pledgors hereunder shall survive the execution and delivery of this Pledge Agreement, and the other Loan Documents, the delivery of the Notes and the making of the Loans. 26. Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Pledged Collateral (including, without limitation, real and other personal property owned by a Pledgor), or by a guarantee, endorsement or property of any other Person, then the Agent and the Lenders shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence and during the continuation of any Event of Default, and the Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Agent's and the Lenders' rights or the Secured Obligations under this Pledge Agreement or under any other of the Loan Documents. 27. Joint and Several Obligations of Pledgors. (a) Each of the Pledgors is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under the Term Loan Agreement, for the mutual benefit, directly and indirectly, of each of the Pledgors and in consideration of the undertakings of each of the Pledgors to accept joint and several liability for the obligations of each of them. (b) Each of the Pledgors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Pledgors with respect to the payment and performance of all of the Secured Obligations arising under this Pledge Agreement and the other Loan Documents, it being the intention of the parties hereto that all the Secured Obligations shall be the joint and several obligations of each of the Pledgors without preferences or distinction among them. (c) Notwithstanding any provision to the contrary contained herein, or in any other of the Loan Documents the obligations of each Guarantor under the Term Loan Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. Stock Pledge Agreement Each of the parties hereto has caused a counterpart of this Pledge Agreement to be duly executed and delivered as of the date first above written. BORROWER: INFOCROSSING, INC. By: /s/ William J. McHale ------------------------------------ Name: William J. McHale Title: Senior Vice President - Finance GUARANTOR: AMQUEST, INC. By: /s/ William J. McHale ------------------------------------ Name: William J. McHale Title: Senior Vice President - Finance Accepted and agreed to as of the date first above written. CAPITALSOURCE FINANCE LLC, as Agent By: /s/ Joseph Turitz -------------------------- Name: Joseph Turitz Title: General Counsel EX-10 8 ex105sms.txt EMPLOYMENT AGREEMENT - CORTENS EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of April 2, 2004, by and between Jim Cortens ("Executive") and Infocrossing, Inc., a Delaware corporation (the "Company"). RECITALS WHEREAS, the Company and ITO Holdings, LLC, a California limited liability company ("Holdings"), have entered into a Stock Purchase Agreement dated as of March 3, 2004 (as such agreement may hereafter be amended, the "Stock Purchase Agreement") pursuant to which the parties thereto have agreed that the Company will acquire all of the outstanding common stock of ITO Acquisition Corporation, a California corporation (the "Corporation"), and pursuant to which the Corporation will become a wholly-owned subsidiary of the Company; WHEREAS, Executive is the President of the Corporation and holds limited liability company member interests in Holdings, with respect to which interests Holdings will make distributions to Executive of its proceeds from the sale of the Corporation to the Company; WHEREAS, the covenants provided herein, including Executive's non-competition and non-solicitation covenants set forth in Section 8, and in that certain Employee Confidentiality and Invention Assignment Agreement dated as of the date hereof by and between the Company and Executive (the "Confidentiality Agreement"), are necessary in order for the Company to fully acquire the Corporation's business and goodwill and are material, significant and essential to effecting the acquisition of the Corporation and the other transactions contemplated by the Stock Purchase Agreement; and WHEREAS, the Company desires to employ Executive and to enter into this Agreement embodying the terms of such employment, effective as of the closing the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement (the "Closing"); and WHEREAS, Executive desires to enter into this Agreement and to accept employment with the Company, effective as of the Closing, subject to the terms and conditions of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein and for other good and valuable consideration, the adequacy and receipt of which are, hereby acknowledged, the parties hereto agree as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company commencing immediately after, and on the date of, the Closing (the "Effective Date'), on the terms and conditions set forth in this Agreement. 2. Position and Duties. (a) Position. During the term of his employment by the Company, Executive shall serve as the Executive Vice President of the Company and shall report directly to the President and Chief Operating Officer of the Company. (b) Duties. Executive will generally be responsible for managing the operations, sales and marketing, the pre-sales, account management and human resource functions of the Company under the direction of the President and Chief Operating Officer of the Company. Executive shall have such other duties and authority consistent with the foregoing and consistent with the position of Executive Vice President as shall be assigned to him from time to time by the Board of Directors. Executive's duties and authority shall not be reduced or changed except by the prior written consent of Executive and any reduction or change by the Company of Executive's duties and authority without Executive's prior written consent shall constitute a material breach of this Agreement by the Company. Executive shall devote his full business time, attention, skill and best efforts to the performance of his duties under this Agreement and shall not engage in any other business or occupation while employed by the Company. Notwithstanding the foregoing, nothing herein shall preclude Executive from: (i) engaging in charitable activities and community affairs, and (ii) managing his personal investments and affairs; provided, however, that the activities set out in clauses (i) and (ii) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder. The Company agrees that Executive shall perform a majority of his duties at the Company's corporate offices in Brea, California. (c) Stock Options. On the Effective Date, Executive shall be granted an option for 200,000 shares of the Company's common stock (the "Inducement Option") pursuant to the Company's 2002 Stock Option and Stock Appreciation Rights Plan, as amended (the "Plan"), which option (i) shall have an exercise price equal to the per share "Fair Market Value" (as defined in the Plan) of the stock on the Effective Date, (ii) shall have a term of ten (10) years from the Effective Date, without regard to any termination of Executive's employment with the Company, and (iii) shall be fully vested and exercisable as of the Effective Date. The Company has obtained the approval by the Compensation Committee of its Board of Directors for the Inducement Option. The Inducement Option shall be governed by the terms and conditions of a Stock Option Agreement in form and substance acceptable to Executive. Thereafter, on each anniversary of the Effective Date on which Executive is employed by the Company, beginning with the first anniversary of the Effective Date, Executive shall be granted an option for 50,000 shares of the Company's common stock pursuant to the Plan, subject to such terms and conditions as may be determined by the Committee that administers the Plan. 3. Compensation. (a) Base Salary. During the term of Executive's employment, the Company shall pay Executive an annual base salary of Two Hundred Fifty Thousand Dollars ($250,000) (the "Annual Base Salary") payable in accordance with the Company's regular payroll practices, but not less frequently than twice per month. The Annual Base Salary shall be reviewed at least annually by the Board of Directors and may be adjusted upwards (but not downwards) in the sole discretion of the Board of Directors. (b) Additional Compensation. In addition to the Annual Base Salary Executive shall receive such additional compensation and annual bonus payments as the Board of Directors may award Executive from time to time in its sole and absolute discretion. (c) Withholding. The Company shall deduct and withhold from any compensation payments payable to Executive all social security and other federal, state and local taxes and charges in the minimum amounts (or such greater amounts as Executive may from time to time request) which currently are or which hereafter may be required by law to be so deducted and withheld, including withholding pursuant to bonus withholding rates, as applicable. 4. Benefits: Vacation and Expense Reimbursement. (a) Benefits. During the term of Executive's employment, Executive shall be entitled to participate in all fringe benefits (including without limitation, group medical and dental insurance) and other benefit plans which are available from time to time to executive employees of the Company, subject in each case to the generally applicable terms and conditions of the applicable plan or program. In addition, Executive shall be covered by the Company's disability insurance plans and policies for senior executives as they may be maintained by the Company from time to time. (b) Vacation: Holidays and Sick Leave. During the term of Executive's employment, Executive shall be entitled to four (4) weeks of paid time off ("PTO") per year under the same terms and conditions as other employees of the Company. In addition, Executive shall be entitled to all paid Company holidays and other benefits as are generally provided to other executives of the Company in accordance with Company policies in effect from time to time. (c) Automobile. The Company shall provide Executive with the use of a current model automobile owned or leased by the Company and the Company shall pay for and/or reimburse Executive for all maintenance and repairs thereon as well as for gasoline, tolls and parking expenses for business use of such automobile for the Company, upon submission of such documentation as may be reasonably required by the Company. (d) Expense Reimbursement. Executive shall be authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement and the Company shall reimburse him for all business expenses incurred in connection with carrying out the business of the Company upon presentation of expense statements or such other supporting information as the Company may customarily require of its executives. Because it is anticipated that Executive will perform some or a substantial amount of his duties in the Company's corporate office located in New Jersey, the Company will advance and pay to Executive all of Executive's reasonable travel expenses, in accordance with the Company's expense reimbursement policies, to and from New Jersey and California, including hotel and meals while traveling on Company business. 5. Confidentiality Agreement. Concurrently with the execution of this Agreement, Executive shall execute the Company's standard Employee Confidentiality and Invention Assignment Agreement (the "Confidentiality Agreement"). 6. Termination of Executive's Employment. (a) Termination of Employment. Executive's employment may be terminated (i) by the Company, at any time, for any reason or for no reason (including, without limitation, due to the Disability (as defined below) of Executive) and (ii) by Executive at any time with or without Good Reason (as defined below). In addition, Executive's employment shall terminate upon the death of Executive. (b) Definitions. (i) Disability. For purposes of this Agreement, a "Disability" shall occur in the event that there is a determination by the Company, upon the advice of an independent qualified physician, reasonably acceptable to Executive, that Executive has become physically or mentally incapable of performing his duties under this Agreement and such disability has disabled Executive, or can reasonably be anticipated to disable Executive, for a cumulative period of one hundred eighty (180) days within a twelve (12) month period. (ii) Good Reason. For purposes this Agreement, "Good Reason" shall mean, without Executive's prior written consent: (A) the occurrence of any material breach of this Agreement by the Company which remains uncured for a period of more than thirty (30) days after written notice of such breach and of Executive's intention to terminate his employment for "Good Reason" if such breach is not remedied; (B) a failure to pay any amount due hereunder within ten (10) business days following written demand for payment, which demand shall state that Executive intends to resign for Good Reason if such payment is not made within such ten (10) business day period; (C) the assignment to Executive of duties or responsibilities materially inconsistent with Executive's current position, duties or responsibilities, as contemplated by this Agreement, sufficient to constitute a substantial diminution of status within the Company which duties or responsibilities are not reassigned within thirty (30) days after written demand from Executive, which demand shall state that Executive intends to resign for Good Reason if such duties and responsibilities are not reassigned; or (D) a relocation of the office of the Company to which Executive is required to report to a location outside of a fifty (50) mile radius of the then existing location of such office or a requirement that Executive relocate his residence from Orange County, California. 7. Compensation Upon Termination of Employment. (a) Generally. Except as otherwise provided in Section 7(b) and Section 7(c), if the Company terminates Executive's employment for any reason (including, without limitation, as a result of Executive's death or Disability) or Executive terminates his employment for Good Reason, the Company shall: (i) immediately upon such termination, pay to Executive (A) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (B) an amount equal to the value of Executive's accumulated PTO, (C) an amount equal to any unpaid bonus or additional compensation to which Executive is entitled, and (D) an amount equal to the pro rata value of any bonus or additional compensation accrued through and including the date of termination; (ii) pay to Executive as severance one-twelfth of the Annual Base Salary in effect as of the date of the termination of Executive's employment each month after such termination (such monthly payments, the "Monthly Severance Payments"), in accordance with the Company's regular payroll practices and payroll schedule for a period of nine (9) months (the "Severance Period"); provided, however, that, if Executive enters into an employment relationship with any other party during the Severance Period, the Monthly Severance Payments shall immediately be reduced by fifty percent (50%) for the remainder of the Severance Period; provided further, that, if Executive's employment is terminated as a result of Executive's Disability, the Monthly Severance Payments shall be reduced by the amount, if any, paid to Executive during the Severance Period under any disability insurance policy purchased by the Company on behalf and for the benefit of Executive; and (iii) make all payments necessary to provide Executive with continuation coverage under the Company's group health plan until the earlier to occur of (A) the expiration of the Severance Period, or (B) in the event Executive enters into an employment or consulting relationship with any other party during the Severance Period, the date on which Executive becomes eligible to participate in the group health plan of such other party. Executive's right to receive the severance benefits described in Section 7(a)(ii) and Section 7(a)(iii) shall be subject to (x) Executive's execution of a full and complete release in favor of the Company and its officers, directors, shareholders and affiliates (and the respective officers, directors and shareholders of such affiliates), in form and substance reasonably acceptable to the Company, releasing the Company and such other parties from any and all claims of Executive in connection with his employment by the Company, and (y) to the extent applicable, Executive's compliance with the provisions of Section 8 of this Agreement. Except for the salary, PTO and severance payments described in this Section 7(a), the Company shall not be obligated to make any further payments to Executive hereunder. (b) Compensation Upon Termination by Company in Event of Misconduct. In the event that the Company terminates Executive's employment as a result of Misconduct (as defined below), the Company shall, immediately upon such termination, pay to Executive (i) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (ii) an amount equal to the value of Executive's accumulated PTO, and (iii) an amount equal to any unpaid bonus or additional compensation to which Executive is then entitled. Upon the payment of the amounts described in the previous sentence, the Company shall not be obligated to make any further payments to Executive hereunder. For purposes of this Section 7(b), "Misconduct" shall mean (1) any act of theft, fraud, embezzlement, falsification of Company or customer documents, misappropriation of funds or other assets of the Company or other acts of dishonesty or misconduct involving the property or affairs of the Company or the carrying, out of Executive's duties; (2) a conviction (by trial, upon a plea or otherwise) or the admission of guilt of any felony or misdemeanor involving moral turpitude or other act of dishonesty, fraud or deceit; or (3) the repeated material violation of any written policy or procedure of the Company. (c) Compensation Upon Termination by Executive Without Good Reason. If Executive terminates his employment without Good Reason, the Company shall, immediately upon such termination, pay to Executive (i) any unpaid Annual Base Salary at the rate then in effect accrued through and including the date of termination, (ii) an amount equal to the value of Executive's accumulated PTO, and (iii) an amount equal to any unpaid bonus or additional compensation to which Executive is then entitled. Upon the payment of the amounts described in the previous sentence, the Company shall not be obligated to make any further payments to Executive hereunder. 8. Non-Competition and Non-Solicitation. (a) Non-Competition. Except as provided below, upon the termination of Executive's employment with the Company Executive shall not directly or indirectly, for a period of twelve (12) months after such termination of Executive's employment, engage in (whether as an employee, consultant, agent, proprietor, principal, partner, major stockholder, corporate officer, director or otherwise), manage or control, any person, firm, corporation or business that competes with the Company's business at the time of termination. Notwithstanding the foregoing, Executive shall not be prohibited from owning shares of a business that competes with the Company's business if the shares are listed on a national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended, and the investment in such shares does not exceed two percent (2%) of the outstanding shares of such class of shares. The foregoing covenant shall not apply (i) if the Company terminates Executive's employment other than for Misconduct or Executive's Disability or (ii) if Executive terminates his employment with the Company for Good Reason. Executive further acknowledges that his agreement pursuant to this Section 8(a) is given, in part, in connection with and in consideration of the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement. (b) Non-Solicitation. Executive agrees and acknowledges that for a period of twelve (12) months after the termination of Executive's employment with the Company for any reason, Executive shall not, either directly or indirectly, personally, or on behalf of or in conjunction with any person or firm, divert or take away any client or customer of the Company or solicit, induce, facilitate, recruit, encourage or cause any employee, consultant, contractor, agent or representative of the Company, to leave their employment or engagement with the Company for any reason. Executive further acknowledges that his agreement pursuant to this Section 8(b) is given, in part, in connection with and in consideration of the Company's acquisition of the Corporation pursuant to the Stock Purchase Agreement. (c) Understanding of Covenants. Executive hereby represents that he (i) is familiar with the foregoing covenants not to compete and not to solicit; (ii) is fully aware of and agrees specifically to his obligations thereunder, including, without limitation, the reasonableness of the length of time and scope of these covenants: (iii) acknowledges that the remedies set forth herein for violation of such covenants are in addition to any remedies that the Company may have in law or in equity; and (iv) understands that he will also be executing simultaneously with this Agreement, the Confidentiality Agreement and that the obligations set forth in that agreement are in addition to those set forth in this Section 8. 9. Remedies. The parties hereto agree that the Company would suffer irreparable harm from a breach by Executive of any of the covenants or agreements contained in Section 8 of this Agreement. Therefore, in the event of the actual or threatened breach by Executive of any of the provisions of Section 8 of this Agreement, the Company may, in addition and supplementary to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violation of the provisions thereof. 10. Representation of Executive. Executive hereby warrants and represents that he is not bound by any other agreement or subject to any other restriction which would either prevent him from entering into this Agreement or from performing his duties as contemplated hereunder. 11. Indemnification. The Company shall, to the maximum extent permitted by the General Corporation Law of the State of Delaware, indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive's performance as an officer or employee of the Company or in any other capacity, including serving as a fiduciary, in which Executive serves at the request of the Company, except for acts or omissions not in good faith or which involve gross negligence, intentional misconduct or a knowing violation of law, for any breach of Executive's duty of loyalty or any other fiduciary duty to the Company; or for any transaction from which Executive derived an improper personal benefit. If any claim is asserted against Executive for which Executive reasonably believes in good faith he is entitled to be indemnified hereunder, the Company shall, at its option, (i) assume the defense thereof; or (ii) pay Executive's reasonable legal expenses (or cause such expenses to be paid), if the Company does not so assume the defense; provided, however that Executive shall reimburse the Company for such amounts if Executive shall be found by a final, non-appealable order of a court of competent jurisdiction or any arbitrator or mediator (whose judgment Executive has agreed to be bound by) not to be entitled to indemnification. 12. Arbitration and Equitable Relief. (a) Executive and the Company each agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof shall be settled by arbitration to be held in Orange County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator shall apply California law to the merits of any dispute or claim, without reference to rules of conflict of law. The arbitration proceedings shall be governed by California arbitration law and by the Rules. (c) The Company shall pay the costs and expenses of such arbitration, and each party shall separately pay his or its attorneys' fees and expenses. (d) Executive has read and understands this Section 12. Executive understands that by signing this Agreement, Executive agrees to submit any future claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof to binding arbitration, and that this arbitration clause constitutes a waiver of Executive's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/executive relationship, including but not limited to, the following claims: (i) employment; breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation; (ii) any and all claims for violation of any federal state or municipal law, regulation, statute or ordinance, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the California Fair Employment and Housing Act, and the California Labor Code Section 201, et seq.; and (iii) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination. (e) By signing this Agreement, the Company agrees to submit any future claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof to binding arbitration, and further agrees that this arbitration clause constitutes a waiver of the Company's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the relationship between the Company and Executive. (f) Adherence to this Section 12 regarding Arbitration shall not limit the right of the parties hereto to obtain any provisional remedy including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their respective rights and interests pending arbitration, particularly if necessary to avoid irreparable harm. 13. Successors and Assigns. This Agreement may not be assigned by Executive; provided, however, that Executive's rights to payments hereunder shall, upon his death, inure to the benefit of Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall inure to the benefit of and be binding on the successors and assigns of the Company. 14. Modification or Waiver. No provision of this Agreement may be modified, waived, or discharged unless agreed to in writing by both parties hereto. The failure of a party to insist upon strict adherence to any term, condition or other provision of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term, condition or other provision of this Agreement. 15. Notices. All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or delivered by a recognized delivery service or mailed, postage, prepaid, by express, certified or registered mail, return receipt requested, and addressed to the Company or Executive, as applicable, at the address set forth below (or to such other address as shall have been previously provided in accordance with this Paragraph 14): If to the Company: Infocrossing, Inc. 2 Christie Heights Leonia, NJ 07605 Attention: Chairman of the Board If to Executive: Jim Cortens 1866 Port Taggart Place Newport Beach, California 92660 16. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of California without regard to its conflict of laws provisions. 17. Severability. Whenever possible, each provision and term of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or term of this Agreement shall be held to be prohibited by or invalid under such applicable law, then such provision or term shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provisions or term or the remaining provisions or terms of this Agreement. 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 19. Entire Agreement. This Agreement and the Confidentiality Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof. 20. Acknowledgement of Executive. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO CONSULT TAX AND LEGAL COUNSEL IN REGARD TO THIS AGREEMENT, THAT HE HAS READ AND UNDERSTANDS THIS AGREEMENT, THAT HE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT HE HAS ENTERED INTO IT FREELY AND VOLUNTARILY AND BASED ON HIS OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS, UNDERSTANDINGS, OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. [Remainder of Page Intentionally Left Blank] [Signature Page to Employment Agreement] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. EXECUTIVE THE COMPANY /s/ JIM CORTENS - --------------------------- Jim Cortens By: /s/ ZACH LONSTEIN ----------------------------------- Name: Zach Lonstein Title: Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----