AMENDMENT TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made as
of August 18, 1997 between PNC BANK, NATIONAL ASSOCIATION ("Lender"), having an
office at Xxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000, and
INTELLIGROUP, INC., a New Jersey corporation ("Borrower"), having an office at
000 Xxxxx Xxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000.
WITNESSETH:
-----------
A. Lender and Borrower entered into a Loan and Security Agreement dated as
of January 22, 1997 (as amended hereby and as further amended, supplemented or
otherwise modified from time to time, the "Agreement"), pursuant to which, among
other things, Lender (i) agreed to make revolving loans to Borrower in the
maximum aggregate principal amount outstanding at any time of $7,500,000, and
(ii) at its option, may make equipment loans to Borrower in the aggregate
principal amount not to exceed $350,000, all upon the terms and subject to the
conditions set forth therein.
B. Borrower and Lender desire to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
1. Capitalized terms used in this Amendment shall have the same meanings
given them in the Agreement, unless otherwise defined herein.
2. The definitions of Borrowing Base, Borrowing Base Certificates and
Qualified Account set forth in Section 1.1 of the Agreement are hereby deleted.
3. The definition of "Revolving Credit Limit" set forth in Section 1.1 of
the Agreement is hereby amended to delete "the lesser of $7,500,000 or the
Borrowing Base" and substitute "$7,500,000" therefor.
4. The following definitions shall be added to Section 1.1 of the Agreement
as follows:
(a) A definition of "EBIT" is hereby added to read in its entirety as
follows:
"'EBIT' - for any period, the consolidated net income (or loss) of
Borrower and its consolidated subsidiaries for such period, before
deduction for taxes and interest expense and without giving effect to any
extraordinary gains or losses for such period, determined in accordance
with GAAP."
(b) A definition of "Eligible Equipment Collateral" is hereby added to
read in its entirety as follows:
"'Eligible Equipment Collateral' - (a) all Eligible Equipment
purchased with the proceeds of Equipment Loans, (b) all documents of title,
policies or certificates of insurance, insurance proceeds, chattel paper
and other documents and instruments
evidencing or pertaining to any such Eligible Equipment, (c) all claims of
Borrower against third parties for loss of or damage to, or otherwise
relating to, any such Eligible Equipment, (d) all books and records owned
by Borrower or in which Borrower has an interest, which contain information
identifying any of such Eligible Equipment or which would or may otherwise
be necessary or helpful in the actual and/or potential realization on any
of such Eligible Equipment, and (e) all accessions and additions to,
replacements and substitutions for, and proceeds and products of any of the
foregoing."
(c) A definition of "Euro-Rate" is hereby added to read in its
entirety as follows:
"'Euro-Rate' - with respect to any Revolving Loan bearing interest at
the Euro-Rate for any Euro-Rate Interest Period, the interest rate per
annum determined by Lender by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/16th of 1% per annum) (a) the rate
of interest determined by Lender in accordance with its usual procedures
(which determination shall be conclusive absent manifest error) to be the
eurodollar rate two (2) Banking Days prior to the first day of such
Euro-Rate Interest Period for an amount comparable to such Revolving Loan
and having a borrowing date and a maturity comparable to such Euro-Rate
Interest Period by (b) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage."
(d) A definition of "Euro-Rate Interest Period" is hereby added to
read in its entirety as follows:
''Euro-Rate Interest Period' - the period of one, two or three months
selected by Borrower commencing on the date of disbursement of a Revolving
Loan bearing interest at the Euro-Rate and each successive period selected
by Borrower thereafter, provided, that if a Euro-Rate Interest Period would
end on a day which is not a Banking Day, it shall end on the next
succeeding Banking Day, unless such day falls in the succeeding calendar
month in which case the Euro-Rate Interest Period shall end on the next
preceding Banking Day. In no event shall any Euro-Rate Interest Period end
on a day after the Revolving Credit Termination Date."
(e) A definition of "Euro-Rate Loans" is hereby added to read in its
entirety as follows:
"'Euro-Rate Loans' - Revolving Loans bearing interest at a rate based
upon the Euro-Rate."
(f) A definition of "Euro-Rate Reserve Percentage" is hereby added to
read in its entirety as follows:
"'Euro-Rate Reserve Percentage' - on any day, the maximum effective
percentage in effect on such day as prescribed by the Board of Governors of
the Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding
(currently referred to as "Eurocurrency liabilities")."
- 2 -
(g) A definition of "Interest Coverage Ratio" is hereby added to read
in its entirety as follows:
"'Interest Coverage Ratio' - for any period, the ratio of (a) EBIT for
such period, to (b) Interest Expense for such period."
(h) A definition of "Interest Expense" is hereby added to read in its
entirety as follows:
"'Interest Expense' - for any period, the consolidated interest
expense of Borrower and its consolidated subsidiaries for such period,
determined in accordance with GAAP."
(i) A definition of "Leverage Ratio" is hereby added to read in its
entirety as follows:
"'Leverage Ratio' - at any particular date of determination, the ratio
of (a) Total Liabilities on such date, to (b) Tangible Net Worth on such
date."
(j) A definition of "Operating Income" is hereby added to read in its
entirety as follows:
"'Operating Income' - for any period, the amount which, in conformity
with GAAP, would be set forth opposite the caption "operating income" or
any like caption of Borrower's consolidated income statement."
(k) A definition of "Prime Rate Loans" is hereby added to read in its
entirety as follows:
"'Prime Rate Loans' - Revolving Loans bearing interest at a rate based
upon the Prime Rate."
(l) A definition of "Total Liabilities" is hereby added to read in its
entirety as follows:
"'Total Liabilities' - at any particular date of determination, the
consolidated total liabilities of Borrower and its consolidated
subsidiaries on such date, determined in accordance with GAAP."
5. Section 2.3 of the Agreement is hereby amended to read in its entirety
as follows:
"2.3 Procedure for Revolving Loan Borrowings. Borrower may request to
borrow under the Revolving Line of Credit on any Banking Day prior to the
Revolving Credit Termination Date by giving Lender irrevocable notice prior
to 12:30 p.m. (eastern standard time) (a) on the Banking Day of the
proposed borrowing date, in the case of Prime Rate Loans, or (b) three (3)
Banking Days prior to the proposed borrowing date, in the case of Euro-Rate
Loans, specifying (i) the amount to be borrowed, (ii) the requested
borrowing date (which must be a Banking Day), (iii) whether the Revolving
Loans to be borrowed will be Euro-Rate Loans and/or Prime Rate Loans, and
(iv) in the case of Euro-Rate Loans, the relevant Euro-Rate Interest
Period. Borrower may select different interest rate options to
- 3 -
apply simultaneously to different Revolving Loans and may select up to
three (3) different interest periods to apply simultaneously to different
Euro-Rate Loans. Subject to the terms of this Agreement, not later than
3:00 p.m. (eastern standard time) on the borrowing date specified in such
notice, subject to the terms and conditions hereof, Lender shall make the
amount of such Revolving Loan available to Borrower by depositing such
amount in immediately available funds in the account of Borrower with
Lender. Each borrowing of Euro-Rate Loans under the Revolving Line of
Credit shall be in a minimum amount of $500,000 and each borrowing of
Prime Rate Loans under the Revolving Line of Credit shall be in a minimum
amount of $250,000. Subject to the terms of this Agreement, at the end of
any Euro-Rate Interest Period applicable to a Euro-Rate Loan, Borrower may
renew such Loan as a Euro-Rate Loan or convert such Loan to a Prime Rate
Loan. If no notice of conversion or renewal is received by Lender prior to
three (3) Banking Days before the end of such Euro-Rate Interest Period,
Borrower shall be deemed to have converted such Loan to a Prime Rate Loan.
All notices given by Borrower to Lender pursuant to this Section 2.3 may
be by telephone (confirmed immediately in writing). Lender shall give
Borrower prompt notice of the Euro-Rate determined in accordance with this
Agreement, and any such determination shall be conclusive absent manifest
error.
6. Subsection 4.1(a)(i) of the Agreement is hereby amended to read in its
entirety as follows:
"(i) Each Revolving Loan shall bear interest, at the selection of
Borrower, at (A) a fluctuating rate per annum equal to the Prime Rate in
effect from time to time, each change in such fluctuating rate to take
effect simultaneously with the corresponding change in the Prime Rate,
without notice to Borrower, or (B) subject to Section 4.9 hereof, at a rate
per annum equal to two percent (2%) per annum above the Euro-Rate for the
Euro-Rate Interest Period in an amount equal to such Revolving Loan and
having a comparable maturity as determined at or about 11 a.m. (eastern
time) two Banking Days prior to the commencement of the Euro-Rate Interest
Period, each change in the Euro-Rate as the result of any change in the
Euro-Rate Reserve Percentage to take effect simultaneously with the
effective date of such change in the Euro-Rate Reserve Percentage."
7. Subsection 4.1(a)(ii) of the Agreement is hereby amended to read in its
entirety as follows:
"(ii) Each Equipment Loan shall bear interest at a fluctuating rate
per annum equal to one-quarter of one percent (1/4 of 1%) per annum above
the Prime Rate in effect from time to time, each change in such fluctuating
rate to take effect simultaneously with the corresponding change in the
Prime Rate, without notice to Borrower."
8. A new Section 4.9 is added to the Agreement and shall read in its
entirety as follows:
"4.9 Unavailability of Euro-Rate Loans; Funding Loss Indemnification.
(a) If Lender determines (which determination shall be final and
conclusive) that, by reason of circumstances affecting the interbank
eurodollar market generally, deposits in dollars (in the applicable
amounts) are not being offered to banks in the interbank eurodollar market
for the selected term, or adequate means do not exist for ascertaining the
Euro-Rate, then Lender shall give notice thereof to Borrower. Thereafter,
until Lender notifies Borrower that the circumstances giving rise to such
determination no longer exist, (i) the availability of Euro-Rate Loans
shall be suspended, and (ii) all Euro-Rate
- 4 -
Loans shall be converted at the expiration of the then current Euro-Rate
Interest Period(s) to Prime Rate Loans.
(b) If Lender shall determine (which determination shall be final and
conclusive) that any enactment, promulgation or adoption of or any change
in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by a governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any guideline, request
or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for Lender to make or maintain Euro-Rate Loans, Lender shall
notify Borrower. Upon receipt of such notice, until Lender notifies
Borrower that the circumstances giving rise to such determination no longer
apply, (i) the availability of Euro-Rate Loans shall be suspended, and (ii)
all current Euro-Rate Loans shall be converted to the Prime Rate Loans
either (A) on the last day of the then current Euro-Rate Interest Period(s)
if Lender may lawfully continue to maintain Euro-Rate Loans to such day, or
(ii) immediately if Lender may not lawfully continue to maintain Euro-Rate
Loans.
(c) If Lender shall determine (which determination shall be final and
conclusive) that any enactment, promulgation or adoption of or any change
in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by a governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any guideline, request
or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall have the effect of
requiring an increase in the amount of capital required or expected to be
maintained by Lender or any corporation controlling Lender, and Lender
determines that such increase is based upon its obligations hereunder, and
other similar obligations, Lender shall notify Borrower of the amount
allocable to Lender's obligations to Borrower hereunder. Borrower shall pay
such amount to Lender within ten (10) days after such notice is given. Any
such determination by Lender shall be conclusive absent manifest error.
(d) Borrower shall indemnify Lender against all liabilities, losses
and expenses (including, without limitation, any loss of margin, any loss
or expense incurred in liquidating or employing deposits from third parties
and any loss or expense incurred in connection with funds acquired by
Lender to fund or maintain Euro-Rate Loans) which Lender incurs or sustains
as a consequence of (i) any prepayment by Borrower of any Euro-Rate Loan
(other than on the last day of the Euro-Rate Interest Period relating
thereto) or (ii) any attempt by Borrower to revoke (expressly, by later
inconsistent notice, or otherwise) in whole or in part any notice given to
Lender to request, renew or repay any Euro-Rate Loan or to convert any
Prime Rate Loan into a Euro-Rate Loan. If Lender incurs or sustains any
such liability, loss or expense, it shall notify Borrower of the amount
determined by Lender to be necessary to indemnify Lender for such
liability, loss or expense (which determination may include such
assumptions, allocations of costs and expenses and averaging or attribution
methods as Lender deems reasonable). Borrower shall pay such amount to
Lender within ten (10) days after such notice is given. Any such
determination by Lender shall be conclusive absent manifest error.
- 5 -
9. A new Section 6.5 is hereby added to the Agreement to read in its
entirety as follows:
"6.5 Release of Collateral.
(a) Concurrently with the delivery of the financial statements
referred to in Subsections 8.5(a) and 8.5(b) hereof with respect to the
fiscal year and fiscal quarter, respectively, of Borrower ending on
December 31, 1997, upon Borrower's request Lender shall release its lien on
and security interest in the Collateral (other than Eligible Equipment
Collateral), provided that the conditions to release described in
Subsection 6.5(b) hereof have been satisfied, in the sole discretion of
Lender. Any such request by Borrower shall be made in writing and
accompanied by a certificate of the chief financial officer of Borrower
stating that the conditions to release described in Subsection 6.5(b)
hereof have been satisfied.
(b) Lender shall not be required to release its lien on and security
interest in the Collateral (other than Eligible Equipment Collateral)
unless all of the following conditions have been satisfied, in the sole
discretion of Lender:
(i) the Operating Income for the fiscal year of Borrower ending
on December 31, 1997 shall have been equal to or greater than eighty
percent (80%) of the Operating Income for the fiscal year of Borrower
ending on December 31, 1996;
(ii) the Operating Income for the three-month period ending on
December 31, 1997 shall have been equal to or greater than eighty-five
percent (85%) of the Operating Income for the three-month period
ending on September 30, 1997;
(iii) the Operating Income for the six-month period ending on
December 31, 1997 shall have been equal to or greater than ninety
percent (90%) of the Operating Income for the six-month period ending
on June 30, 1997;
(iv) Borrower shall have at all times been in compliance with the
financial covenants contained in Sections 9.18, 9.19, 9.22 and 9.23
hereof;
(v) Borrower shall have provided Lender evidence that is
reasonably satisfactory to Lender that the SAP National Logo Partner
Agreement dated April 29, 1997, between Borrower and SAP America, Inc.
(the "SAP Agreement") is in full force and effect and that the term of
the SAP Agreement has been renewed or extended for at least one year
beyond its current termination date;
(vi) there shall have been no material adverse change in
Borrower's condition (financial or otherwise), results of operations,
assets or operations since December 31, 1997; and
(vii) no Event of Default, or any event which, with the giving of
notice, the lapse of time, or both, or the occurrence of any other
condition, would constitute an Event of Default, shall have occurred
and be continuing.
10. Subsection 7.10 of the Agreement is hereby amended to delete the last
sentence thereof.
- 6 -
11. Subsection 8.5(b) of the Agreement is hereby amended (a) to add "and by
March 31, 1998 with respect to the fourth fiscal quarter of 1997" after "fiscal
year of Borrower" in the third line thereof, and (b) to delete "to the extent
that they relate to dates or periods on or before June, 1998, reviewed by an
independent certified public accountant reasonably satisfactory to Lender and"
after "as applicable)," in the tenth line thereof.
12. Subsection 8.5(d) of the Agreement is hereby amended to read in its
entirety as follows:
"(d) Intentionally Omitted."
13. Subsection 8.5(e)(ii) of the Agreement is hereby amended to add ", 9.22
and 9.23" after "9.19" in the second to last line thereof.
14. A new Subsection 8.5(e)(iii) is hereby added to the Agreement to read
in its entirety as follows:
"(iii) Concurrently with the delivery of the financial statements
referred to in Subsection 8.5(a), a certificate of the independent
certified public accountant that audited such financial statements, and
concurrently with the delivery of the financial statements referred to
in (b) hereof, a certificate of the chief financial officer of Borrower, in
each case indicating the Interest Expense for all periods necessary to
determine Borrower's compliance with Section 9.22 hereof."
15. A new Subsection 8.5(i) is hereby added to the Agreement to read in its
entirety as follows:
"(i) Accountant's Reports. Promptly upon receipt thereof, true and
complete copies of all reports submitted to Borrower by an independent
certified public accountant in connection with each annual, interim or
special audit of the books of Borrower or its subsidiaries made by such
accountant, including, without limitation, any management letter commenting
on the internal controls of Borrower or its subsidiaries."
16. Section 9.5 of the Agreement is hereby amended to delete "$250,000" in
the fourth line thereof and to substitute "$750,000" therefor.
17. Section 9.20 of the Agreement is hereby amended to delete "$750,000" in
the third line thereof and to substitute "$1,500,000" therefor.
18. A new Section 9.22 is hereby added to the Agreement to read in its
entirety as follows:
"9.22 Interest Coverage Ratio. Cause or permit Borrower's Interest
Coverage Ratio for any period of four consecutive calendar quarters to be
less than 3.00 to 1.00, as determined at the end of each fiscal quarter of
Borrower."
19. A new Section 9.23 is hereby added to the Agreement to read in its
entirety as follows:
"9.23 Leverage Ratio. Cause or permit Borrower's Leverage Ratio at any
time to be more than 1.00 to 1.00, as determined at the end of each fiscal
quarter of Borrower.
- 7 -
20. In order to induce Lender to enter into this Amendment, Borrower hereby
represents and warrants to Lender that:
(a) no Event of Default, or any event which, with the giving of
notice, the lapse of time, or both, or the occurrence of any other
condition, would constitute an Event of Default, has occurred and is
continuing;
(b) the Agreement, the Notes and each of the other Loan Documents,
after giving effect to this Amendment and the transactions contemplated
hereby, continue to be in full force and effect and to constitute the
legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms;
(c), the representations and warranties made by Borrower in or
pursuant to the Agreement or any Loan Document, or which are contained in
any certificate, document or financial or other statement furnished at any
time under or in connection herewith or therewith, are each true and
correct in all material respects on and as of the date hereof, as though
made on and as of such date;
(d) Borrower has not amended its Certificate of Incorporation or
Bylaws subsequent to January 22,1997; and
(e) Borrower has delivered to Lender a true, complete and correct copy
of the SAP Agreement (including all amendments thereto).
21. This Amendment shall become effective upon the satisfaction of the
following conditions:
(a) Lender shall have received such executed and delivered documents
and instruments from Borrower and others as it may request in connection
with the transactions contemplated hereby (including, without limitation, a
good standing certificate and UCC-1, judgment, federal tax lien and other
searches with respect to Borrower).
(b) Borrower shall have paid all expenses of Lender, including,
without limitation, reasonable counsel fees, in connection with the
preparation, execution and delivery of this Amendment and any other
documents and instruments to be executed and delivered pursuant hereto or
in connection herewith, and the transactions contemplated hereby.
22. This Amendment may be executed in several counterparts, each of which,
when executed and delivered, shall be deemed an original, and all of which
together shall constitute one agreement.
23. This Amendment shall be governed by and construed and interpreted in
accordance with the laws of the State of New Jersey, without giving effect to
principles of conflicts law.
24. From and after the effectiveness hereof, all references to the
Agreement in the other Loan Documents shall mean the Agreement as amended and
modified by this Amendment.
25. Borrower expressly ratifies and confirms the waiver of jury trial and
other provisions of Section 15.9 of the Agreement.
- 8 -
26. Except as amended and otherwise modified by this Amendment, the
Agreement and the other Loan Documents shall remain in full force and effect in
accordance with their respective terms.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATTEST: INTELLIGROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxxx
----------------------- ---------------------------
Xxxxxx X. Xxxxxxx, Xxxxx Xxxxxx, President and
Secretary Chief Executive Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------
XXXXXX X. XXXXXXXXXX,
Vice President
