Contract
Exhibit
10.1
EXECUTION
COPY
FIFTH
AMENDMENT AND WAIVER, dated
as
November 16, 2006 (“Amendment”), to CREDIT
AND SECURITY
AGREEMENT, dated
as
of June 29, 2004 (as amended from time to time, the “Credit Agreement”), among
INFOTECH
USA, INC.,
a New
Jersey corporation, as borrower (the “Borrower”), INFOTECH
USA, INC.,
a
Delaware corporation, and INFORMATION TECHNOLOGY
SERVICES, INC.,
a New York corporation, as guarantors (together with the Borrower, the
“Obligors”), and XXXXX
FARGO BANK, NATIONAL ASSOCIATION, acting
through its Xxxxx Fargo Business Credit operating division (the “Lender”). Terms
which are capitalized in this Amendment and not otherwise defined shall have
the
meanings ascribed to such terms in the Credit Agreement.
WHEREAS, the
Obligors have requested that the Lender waive as Events of Default violations
of
two of the financial covenants contained in the Credit Agreement, and modify
certain terms of the Credit Agreement, and the Lender has agreed to the
foregoing request, on the terms and conditions set forth herein;
NOW,
THEREFORE, in
consideration of the mutual promises contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Obligors and the Lender hereby agree as follows:
Section
One. Amendments. Effective
as of the date hereof, upon satisfaction of the conditions precedent set forth
in Section Five hereof, the Credit Agreement is hereby amended as
follows:
Section
1.1 Definitions.
The
definitions of the terms “Adjusted Book Net Worth Amount” and “Original Maturity
Date” set forth in Section 1.1 of the Credit Agreement is deleted in its
entirety and the following substituted in lieu thereof,
respectively:
“Adjusted
Book Net Worth Amount” means, with respect to any fiscal quarter of the
Obligors, an amount equal to the sum of: (a) $1,575,000; plus
(b) an
amount equal to 50% of the aggregate consolidated Net Income of the Obligors
for
all fiscal years, commencing with the fiscal year ending in September 2008
and
ending with the most recently completed fiscal year prior to such fiscal
quarter, provided,
that,
for purposes of this definition, if the consolidated Net Income of the Obligors
for any fiscal year is a negative number, such Net Income for such fiscal year
shall be deemed equal to zero.”
“Original
Maturity Date” means June 29, 2008.
Section
6.2(a).
Maximum
Debt to Book Net Worth Ratio.
Section
6.2(a) of the Credit Agreement is deleted in its entirety and the following
substituted in lieu thereof:
1
“(a)
Maximum
Debt to Rook Net Worth Ratio.
The Obligors will maintain a Debt to Book Net Worth Ratio of not more than
2.10
to 1.00, determined as of the end of each fiscal quarter.”
Section
6.2(b) Minimum
Book Net Worth.
Section
6.2(b) of the Credit Agreement is deleted in its entirety and the following
substituted in lieu thereof:
“(b)
Minimum
Book Net Worth. The Obligors
will have a Book Net Worth of not less than: (a) $1,900000, as of the end of
the
fiscal quarter ending in December 2006; (b) $1,800,000, as of the end of the
fiscal quarter ending in March 2007; (c) $1,725,000, as of the end of the
fiscal quarter ending in June 2007; (d) $1,575,000, as of the end of the fiscal
quarter ending in September 2007; and (e) the Adjusted Book Net Worth Amount,
as
of the end of each fiscal quarter ending after September 30, 2007.”
Section
6.2(c) Minimum
Net Income.
Section
6.2(c) of the Credit Agreement is deleted in its entirety and the following
substituted in lieu thereof:
“(c)
Minimum
Net Income.
As
of the
end of each period set forth below, the Obligors will have achieved Net Income,
on a cumulative quarterly basis, of not worse than the amount set forth below
opposite such period:
|
“Period
|
Minimum
Net
Income
|
||
|
A
|
fiscal
quarter ending in December 2006
|
$(220,000)
|
|
|
B
|
two
(2) fiscal quarters ending in March 2007
|
$(320,000)
|
|
|
C
|
three
(3) fiscal quarters ending in June 2007
|
$(400,000)
|
|
|
D
|
four
(4) fiscal quarters ending in September 2007
|
$(570,000)
|
As
of the
end of each fiscal quarter ending after September 30, 2007, the Obligors will
have Net Income on a cumulative quarterly basis of not less than
eighty percent
(80%) of the projected cumulative Net Income (or worse than one hundred percent
(100%) of the projected cumulative Net Loss) of the Obligors for such period,
as
set forth in the projections for such period delivered to the Lender. The
Obligors’ failure to deliver projections to the Lender pursuant to Section
6.1(d) that are acceptable to the Lender, in its sole discretion, shall
constitute an Event of Default.”
2
Section
Two.
Waivers.
The
Obligors have notified the Lender that: (a) the Obligor Book Net Worth as of
the
end of the fiscal quarter ended in September 2006 was $2,155,000 and (b) the
Obligors’ cumulative Net Income for the four fiscal quarters ended in September
2006 was $(2,142,000). The failure of the Obligors to have: (a) Book Net Worth
as of the end of the fiscal quarter ended in September 2006 of not less than
$3,200,000, in violation of Section 6.2(b) of the Credit Agreement; and (b)
cumulative Net Income for the four fiscal quarters ended in September 2006
in an
amount not worse than $(1,045,000), in violation of Section 6.2(c) of the Credit
Agreement, in each case constitutes an Event of Default under Section 7.1(b)
of
the Credit Agreement. The Events of Default expressly referred to in this
paragraph are herein collectively referred to as the “Designated
Defaults.”
Effective
as of the date hereof, upon the satisfaction of the conditions precedent set
forth in Section Five hereof, the Lender hereby waives the Designated Defaults
as an Events of Default. Nothing herein shall constitute a waiver by the Lender
of any other Default or Event of Default, whether or not the Lender has any
knowledge thereof, nor shall anything herein be deemed a waiver by the Lender
of
any Default or Event of Default which may occur after the date of this
Amendment.
Section
Three.
Amendment
and Waiver Fee.
In
consideration for the amendments and waivers provided herein, the Borrower
shall
pay to the Lender a non-refundable fee in the amount of $25,000 (the “Amendment
Fee”), which fee shall be fully earned on the date hereof and payable in three
(3) installments as follows: $5,000 on December 1, 2006; $10,000 on January
2,
2007; and $10,000 on February 6, 2007. The failure of the Borrower to pay any
installment of the Amendment Fee when due shall constitute an Event of
Default.
Section
Four.
Representations
and Warranties.
To
induce the Lender to enter into this Amendment, each Obligor warrants and
represents to the Lender as follows:
all
of
the representations and warranties contained in the Credit Agreement and each
other Loan Document continue to be true and correct in all material respects
as
of the date hereof, as if repeated as of the date hereof, except for such
representations and warranties which, by their terms, are only made as of a
previous date;
the
execution, delivery and performance of this Amendment by each Obligor is within
its corporate powers, has been duly authorized by all necessary corporate action
on its part, and each Obligor has received all necessary consents and approvals
(if any shall be required) for the execution and delivery of this
Amendment;
upon
its
execution, this Amendment shall constitute the legal, valid and binding
obligation of each Obligor, enforceable against each Obligor in accordance
with
its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors’ rights generally and (ii)
general principles of equity;
3
no
Obligor is in default under any indenture, mortgage, deed of trust, or other
material agreement or material instrument to which it is a party or by which
it
may be bound. Neither the execution and delivery of this Amendment, nor the
consummation of the transactions herein contemplated, nor compliance with the
provisions hereof will (i) violate any law or regulation applicable to any
Obligor, (ii) cause a violation by any Obligor of any order or decree of any
court or government instrumentality applicable to it, (iii) conflict with,
or
result in the breach of, or constitute a default under, any indenture, mortgage,
deed of trust, or other material agreement or material instrument to which
any
Obligor is a party or by which it may be bound, (iv) result in the creation
or
imposition of any lien, charge, or encumbrance upon any property of any Obligor,
except in favor of the Lender, to secure the Obligations, or (v) violate any
provision of the Constituent Documents of any Obligor;
no
Default or Event of Default has occurred and is continuing, except for the
Designated Defaults which are being waived pursuant to Section Two hereof;
and
since
September 30, 2006, no change or event has occurred which has had or is
reasonably likely to have a Material Adverse Effect.
Section
Five. Conditions
Precedent. This
Amendment shall become effective upon the date on which all of the following
events shall have occurred; provided, however, that in the event that all of
the
following events shall not have occurred on or before November 16, 2006, then
this Amendment shall thereafter be null and void and cease to be of any force
and effect:
the
Lender shall have received this Amendment, duly executed by each
Obligor;
the
Lender shall have received an Officer’s Certificate, in the form Exhibit A
hereto, duly executed by an officer of Borrower;
the
Lender shall have received payment of all fees and disbursements incurred by
the
Lender in connection with the preparation, negotiation and closing of this
Amendment and the transactions contemplated to occur hereunder; and
except
for the Designated Defaults which are being waived pursuant to Section Two
hereof, no Default or Event of Default shall have occurred and be continuing,
and no event or development which has had or is reasonably likely to have a
Material Adverse Effect shall have occurred, in each case since the date of
the
financial statements referred to above.
Section
Six. General
Provisions.
Except
as
herein expressly amended, the Credit Agreement and all of the other Loan
Documents are ratified and confirmed in all respects and shall remain in full
force and effect in accordance with their respective terms.
All
references to the Credit Agreement in the Loan Documents shall mean the Credit
Agreement as amended as of the effective date hereof, and as amended hereby
and
as hereafter amended, supplemented and modified from time to
time.
This
Amendment embodies the entire agreement between the parties hereto with respect
to the subject matter hereof and supercedes all prior agreements, commitments,
arrangements, negotiations or understandings, whether written or oral, of the
parties with respect thereto.
4
This
Amendment shall be governed by and construed in accordance with the internal
laws of the State of New York, without regard to the conflict of laws principals
thereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF, the
Obligors and the Lender have signed below to indicate their agreement with
the
foregoing and their intent to be bound thereby.
INFOTECH
USA, INC.,
a New
Jersey corporation
By: /s/J.
Xxxxxx
Xxxxxxxxx
Name:
J.
Xxxxxx Xxxxxxxxx
Title:
Secretary
and Treasurer
INFOTECH
USA, INC.,
a
Delaware corporation
By: /s/J.
Xxxxxx
Xxxxxxxxx
Name:
J.
Xxxxxx
Xxxxxxxxx
Title:
Chief
Financial Officer, Vice President
and
Treasurer
INFORMATION
TECHNOLOGY SERVICES, INC.
By: /s/J.
Xxxxxx
Xxxxxxxxx
Name:
J. Xxxxxx
Xxxxxxxxx
Title:
Chief
Financial Officer, Vice President and
Treasurer
XXXXX
FARGO BANK, NATIONAL
ASSOCIATION, acting
through its Xxxxx Fargo
Business
Credit operating division
By: /s/Xxx
Xxxxxx
Name:
Xxx
Xxxxxx
Title:
Vice
President
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EXHIBIT
A
OFFICER’S
CERTIFICATE
|
TO:
|
Xxxxx Fargo Bank, National Association,
|
|
acting
through its Xxxxx Fargo Business Credit
|
|
operating
division
000
Xxxx 00xx
Xxxxxx
Xxx
Xxxx, XX
00000
|
To
induce
you to enter into that certain Fifth Amendment and Waiver, dated on or about
the
date hereof (the “Amendment”), to the Credit and Security Agreement dated as of
June 29, 2004 among INFOTECH USA, INC., A New Jersey corporation (“Borrower”),
INFOTECH USA, INC., a Delaware corporation, INFORMATION TECHNOLOGY SERVICES,
INC., a Delaware corporation and you, I DO HEREBY CERTIFY TO YOU, in my capacity
as Secretary and Treasurer of the Borrower, that each and every representation
and warranty set forth in Section Four of the Amendment is true and correct
as
of the date hereof.
IN
WITNESS WHEREOF, the undersigned has duly executed this Officer’s Certificate as
of November 16, 2006.
INFOTECH
USA, INC.
By: /s/J.
Xxxxxx
Xxxxxxxxx
J.
Xxxxxx
Xxxxxxxxx
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